Editor's note: This article was written by David Slavick, Co-Founder and Partner, Ascendant Loyalty, in response to the different approaches to ad spending by P&G and Coca-Cola during the pandemic with inspiration from this article.
I have always been somewhat of a history buff. I am especially intrigued by business history and the great industrialists of the past. You can learn a lot just by reading quotes from business leaders of our past. Take this quote from a true business icon and visionary Henry Ford: “A man who stops advertising to save money is like a man who stops a clock to save time.”
By: David Slavick, Ascendant Loyalty
Many leaders of industry that followed Mr Ford, took this philosophy to heart and put it into practice. Even today despite the truly crippling effect of the pandemic, yet what still appears to be that we have avoided a recession, the economy has sustained itself in the U.S. with Real GDP (Gross Domestic Product) increasing 5.7 percent in 2021 (from the 2020 annual level to the 2021 annual level). This in contrast to a decrease of 3.4 percent in 2020. What drives GDP? Simply demand for goods and services coupled with demand and spendable income. That plus a commitment to advertising!
The intriguing historical fact proven over decades of research is that maintaining historical YoY or even increasing advertising during recessions drives up market share. These results may surprise you. So here is a little history lesson to which everyone in business should pay close attention.
In fact, studies have proven that in every recession (dating back to at least the early 1970’s) that the most successful firms increase their marketing investment during recessions.
In the 1970 Recession: “Sales and profits can be maintained and increased in recession years and immediately following by those who are willing to maintain an aggressive marketing posture, according to a study by American Business Press (ABP) and Meldrum & Fewsmith.” 1
After the 1974-1975 recession, ABP/Meldrum & Fewsmith again found that “Companies which did not cut marketing expenditures experienced higher sales and net income during those two years and the two years following than those companies which cut in either or both recession years.” 2
Studying the 1981-1982 recession, McGraw-Hill Research’s Laboratory of Advertising Performance analyzed the performance of 600 industrial companies during that period. Its results show that “business-to-business firms that maintained or increased their marketing expenditures during the 1981-1982 recession averaged significantly higher sales growth both during the recession and for the following three years than those which eliminated or decreased marketing.” 3
In 1993 Management Review polled AMA member firms about their advertising spend during the 1990-1991 recession. It found that “fortune follows the brave.” Noting that “firms that increased their budgets and took on new people were twice as likely to pick up market share.” 4
Upon reflection, it is hard for me to believe that there have been so many recessions during my business career. It’s all part of the ups and downs of business. Many have figured out that you must remain in the game during these tough times, or you could end up out of the game altogether or spending incrementally more post-recession to catch up. There is no doubt in my mind that business operators still doing well right now after two plus years of truly transformative change were indeed stepping up their games. The visionaries inspired by Henry Ford are stealing share from the weak and will continue to achieve revenue and profit growth that the weak will never see.
Now all of this doesn’t mean you can just throw money into advertising, marketing, and promotion to achieve profitable growth. You still must watch every dollar. You must be disciplined in your tracking systems. (You do have tracking systems, right?) This is the time to make sure you track every lead in your CRM system. If you maintain an accurate database of past and present prospects, there are marketing programs out there to help you bring back to life some of those leads you thought were dead. Most everyone who couldn’t buy yesterday will need to buy from you sometime soon.
Many of you may already have found that direct mail is a great advertising medium to use during this near recessionary period, and for many good reasons. First and foremost, there is a lot less competition in the mailbox right now from the credit card companies. The United States Postal Service recently reported that mail volume has decreased every quarter for the past two years, which is good news for you. You see, the price of postage has only increased slightly during that time, so you get a bigger piece of the consumer’s attention for a great price. Direct mail with advanced digital print capabilities that leverage data insight at the unique customer level can and should be personal — a targeted message, offer or multiple offers, cross-category merchandising can bring them back to your store or website. You can’t achieve this with mass media.
You’ll also find that your call center associates can be very effective right now. Shoppers are asking for personalized service. A survey of 1,000 US adults by Epsilon and GBH Insights found that 80% of respondents want personalization from retailers. Who better to provide it than that well-trained friendly voice on the other side of the line, (or at the store level)? Pre-set offers, surprise and delight accommodations, easy return policies, bonus points for loyalty members based on threshold spend or class/category purchased can all be enabled through your CRM/Loyalty system integrated with your points of consumer interaction.
You can bet studies will be done in the future about the companies that made it through this recession and those that didn’t. Take a lesson from the business history books and make sure your business is on the positive side of those studies. Good luck and good selling!
- “How Advertising in Recession Periods Affects Sales,” American Business Press, Inc., 1979.
- ABP/Meldrum & Fewsmith study, 1979.
- McGraw-Hill Research. Laboratory of Advertising Performance Report 5262 New York: McGraw-Hill, 1986.
- Greenburg, Eric Rolfe. “Fortune Follows the Brave,” Management Review, January 1993.