Down economy? Think twice before cutting the marketing budget. « Blog

Down economy? Think twice before cutting the marketing budget.

April 22nd, 2009

There’s a nice little write up in the latest New Yorker that summarizes a perspective we’ve shared with clients recently: A bad economy can be a great time for brands to snag market share.

Coming from a marketing firm, it sounds pretty self serving. But consider an economic downturn a “buyer’s market” when it comes to marketing. Media rates are softer, inventory is looser and value-adds abound. Combine that with a reduction in competing noise, and your marketing dollar just became much more potent. If nothing else, this economy is a good time to optimize your marketing spend, focusing on opportunities that give you the biggest bang for the buck.

Hanging Tough
by James Surowiecki
The New Yorker
April 20, 2009

In the late nineteen-twenties, two companies—Kellogg and Post—dominated the market for packaged cereal. It was still a relatively new market: ready-to-eat cereal had been around for decades, but Americans didn’t see it as a real alternative to oatmeal or cream of wheat until the twenties. So, when the Depression hit, no one knew what would happen to consumer demand. Post did the predictable thing: it reined in expenses and cut back on advertising. But Kellogg doubled its ad budget, moved aggressively into radio advertising, and heavily pushed its new cereal, Rice Krispies. (Snap, Crackle, and Pop first appeared in the thirties.) By 1933, even as the economy cratered, Kellogg’s profits had risen almost thirty per cent and it had become what it remains today: the industry’s dominant player.

You’d think that everyone would want to emulate Kellogg’s success, but, when hard times hit, most companies end up behaving more like Post. They hunker down, cut spending, and wait for good times to return. They make fewer acquisitions, even though prices are cheaper. They cut advertising budgets. And often they invest less in research and development. They do all this to preserve what they have. But there’s a trade-off: numerous studies have shown that companies that keep spending on acquisition, advertising, and R. & D. during recessions do significantly better than those which make big cuts.

Read the rest of the article HERE.