You’re a business owner. Your mind is going through a battle right now. The situation that we are all in right now makes your head spin. Coronavirus (Covid-19), and the effect on your business.
Is Coronavirus (Covid-19) changing how you do business? For some business owners there is no choice. Other companies may have to adjust their business strategy. Right now you can see that some people are freaking out, hoarding Goods and we have social distancing recommendations. A lot of people’s 1st instinct is to freeze up, grab what they can, and hunker down.
So this got me thinking about history, and things that might have happened like this before. I think most people can agree that this is really an unknown and unprecedented event, but we have had things that are similar, and as of right now, far more severe in the past.
So I went out and did a little research and gave myself a little history lesson to see what things were done in the past and what the results were. Specifically in regards to businesses, marketing and advertising.
I found some interesting resources and summed up some things that we should all think about.
Advertising During A Recession
The United States economy is no stranger to recessions. The country has experienced an estimated 47 of them since 1790. Yet, at the same time, some of the best-known companies in the world have their roots in tough economic times.
Companies that enter a recession or depression, and who increase marketing instead of retracting, typically end up doing better during and after the economic downturn. In fact, several of these companies have become industry titans because of it.
Think about it… even when times are tight, people don’t completely stop spending. They simply look for better bargains, sales and deals. When companies slow down or stop their ad spend, they vanish from the consumer’s mind. Even when a business doesn’t completely disappear, subconsciously, customers may begin to have doubts about them; they perceive the brands as weak or fading, and will often gravitate to the competitor who is maintaining or increasing their advertising spend.
Think about it this way… You’re in a room with two people. While they are talking with you, one stops talking and leaves the room. Who are you going to listen to now? The one that stays in the room and continues talking with you or the one that has left the room?
Advertising During The Great Depression
In the late 1920s two companies, Kellogg and Post dominated the market for packaged cereals. At the time cereal had been around for decades but it really hadn’t gotten full adoption as a main breakfast meal like eggs and bacon, oatmeal and other things like that.
So when the Depression hit nobody knew what the demand for cereal would turn out to be.
Post did the predictable thing it rained in all of its expenses, cut back on all advertising and stopped all it’s research and development.This was a frequent response of a lot of businesses at the time, but not all of them.
Kellogg doubled its advertising budget, and moved aggressively with broadcast advertising and heavily pushed its new cereal, Rice Krispies.
By 1933, when the economy was still horrible, Kellogg’s profits had risen almost 30% and it had become the industry dominant player.
Kellogg wasn’t the only one either. several companies benefited from aggressive marketing while their rivals cut back.
Proctor and Gamble: P&G has made progress in recessions and that is no accident. When their competitors were slashing advertising budgets, P&G actually increased their spending. While the Depression caused problems for many, P&G came out of it on top.
Camel Cigarettes – in 1920 Camel was the top selling tobacco product.
American Tobacco Company then came back with the Lucky Strike. By 1929 Lucky Strike had taken over the Camel brand for the number 1 spot.
Two years later in the heart of the Depression, Chesterfield also overtook
Camel. During the Great Depression, Camel took action with a massive increase in ad spending and by doing so demonstrated the power of advertising during depressed times. By 1935, Camel was back on top.
Additional Business Examples In Economic Downturns
Imported Automobiles: The 1973-75 recession was triggered by the energy crisis. Since Toyota was experiencing strong sales, when the economic downturn hit, the temptation was to drop their ad budget, which they resisted. By sticking with its long-term strategy, Toyota surpassed Volkswagen as the top imported carmaker in the U.S. by 1976.
FedEx Corp: FedEx also started its business in 1973 during the gas energy recession. In spite of relying on fuel heavy trucks and planes to ship packages around the country, it succeeded and grew. Not only because it could deliver overnight, but because it communicated that it could do so, and convinced businesses that it was the better option.
Microsoft Corp: Founded in 1975 during the continuing economic unrest, Bill Gates continued to invest in marketing. This helped Microsoft to survive and thrive. It’s hard to deny that Microsoft spends heavily on marketing in good times and bad.
Recession Proof Business Studies
You would think with examples like these everyone would want to emulate Kellogg’s and other top companies’ success, but when the hard times hit most companies end up behaving like Post. Businesses cut costs, decrease budgets and hold out for better times to come.
When businesses do things like this there is a trade-off. Maintain a Short term liquidity or take advantage of opportunity.
There have been several studies that have shown that companies that keep spending on advertising, acquisitions and R&D during recessions or depressions do significantly better than those which make big cuts.
1927 Roland Vaile Study: Published in the Harvard Business Review. This study compared the financial performance of companies that cut their advertising budgets during a recession to those who held their spending stable or even increased it. The result, the biggest sales increases were recorded by companies that advertised the most.
American Business Press and Meldrum & Fewsmith: This 1970 recession showed that “Sales and profits can be maintained and increased in recession years and in the years immediately following by those who are willing to maintain an aggressive marketing posture, while others adopt the philosophy of cutting back on promotional efforts when sales appear to be harder to get.”
American Business Press and Meldrum & Fewsmith: 1974-75 recession study observed that businesses 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.”
McGraw-Hill Study: During the 1981-82 recession, this study showed businesses that maintained or increased their ad spending during the recession averaged higher sales growth during the recession and in the following three years.
McKinsey Study: This 1990-91 recession research showed similar end results as the previous studies.
How Do We Sum This Up?
Over-all the studies during the recessions in 1985, 1990-91 and 2001 showed sales for companies that remained aggressive during the recession enjoyed sales that were 2.5 times the average of all other businesses.
Basically, companies that keep their name in front of the public and either maintain or increase their name recognition can profit even during the worst of times.
There is no denying that recession’s and other economic downturns create an enormous opportunity for businesses that want to increase their awareness and market opportunities.
You could also think about it this way. When everyone is advertising it’s harder to cut through all the noise and get your voice out in the market. It’s easier to separate yourself from the pack in a down market and make the awareness of your brand higher than any of your other competitors when you’re the one being seen and heard at every chance available.
Tailor Your Message: Business Strategy And Tactics
So should you keep putting out the same message that you have always used? In some markets that may be fine, but in others you may want to tailor your message and connect with your audience differently.
Take advantage of this time to “talk to people” you would never usually talk to but to also tailor cost-saving messages just for them. You know that money, and saving it, is in the front of their mind. Now might be the right time for your future customers to see an advertisement on how they can get a quality item for less.
This is your chance to talk openly about costs, and how you can help. Take advantage of this time and show the community how you care. Once the recession is over, you’ll have gained a whole new customer base that won’t go back to the competition.
Speak Directly to Bargain Hunters
Don’t be afraid to address the bad economy in your advertising. Customers are looking for good deals. Some national advertisers are a prime example of this.
Travelocity aired a simple commercial to announce its Silver Lining Sale. In the first three seconds, you see the words, “We know times are tight.”
Wal-Mart continually runs effective ad campaigns in poor economic climates. The commercials don’t say, “Hey, come on out. We’ve got electronics, clothes, sporting goods, prescriptions and more at a low cost.” Instead, the ads focus on very specific items and how much you’ll save over a year by purchasing these items directly from Wal-Mart.
In a bad economy, there are many opportunities to expose your business to new customers that aren’t always possible in a good economy. Every one of them can be explored to help you solidify your place in business and stand out from your competitors.
A Long Term Position
Standing out in the marketplace is hard enough when you and your competition are battling it out in the ad world. As your competition cuts back on ad spending, your advertising can cut through that clutter.
If you’re not the company they think of when they spend, your sales will decrease. While your competition is cutting back, you have the chance to be the company consumers spend with now, while gaining their future business as you continue to advertise in good times and bad.
The Bottom Line On Advertising
The bottom line is this… you know your business best. You are the only one that knows if you have a financial runway that can be used or if you need to do a short term cash saving play.
Just remember history… and what has happened during past economic downturns. You can see the businesses that stayed top of mind, gained awareness, and actually increased their advertising ended up having financial success.
Remember, You can’t sell something if no one knows it’s for sale.