Recession Marketing Strategies



The dreaded "R" word. How long will the recession last? What is a recession anyway? If we are in recession, should you cancel your marketing plans, batten down the hatches, hunker down and ride it out? Or should you beef up your marketing efforts and try to get as much business as possible? These are questions that businesses have been asking for decades.


Traditionally a recession is defined as two consecutive quarters of decreasing Gross Domestic Product, which measures all the goods and services produced by capital and workers located in the country regardless of ownership. In addition, during such a period the unemployment rate goes up and consumer confidence goes down. The US has experienced nine recessions since World War II, which means living in recessionary times one year out of every six. (The UK has fared slightly better, with this being our fifth recession in the same period.) We should be used to recessions, but the mere mention of the word in any official capacity sends shivers up the spine of even the toughest businessperson. The good news about a recession economy is that customers spend more at the end of each of our recessions, on average 9 percent more, that they had spent at the beginning, according to Philip Geier, Chairman Emeritus, Interpublic Group, a major, international advertising agency.

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History also reveals that businesses that recognized the fact that growth does occur during recessions and took advantage of it were able to make gains in their market share despite economic hard times. With media rates softening and competitors sitting tight and cutting their marketing budgets, an aggressive business can experience great strides in a recession.

Over the years hundreds of studies have been conducted to prove companies should maintain advertising during a recession. In the 1920’s US advertising executive Roland S. Vaile tracked 200 companies through the recession of 1923. He reported in the April 1927 issue of the Harvard Business Review that the biggest sales increases throughout the period were rung up by companies that advertised the most.

After World War II, Buchen Advertising, Inc. decided to plot the sales of a large number of advertisers through successive recessions. In 1947, it began measuring the annual advertising expenditures of each company. When they correlated the figures with sales and profit trends before, during and after the recessions of 1949, 1954, 1958 and 1961, they found that almost without exception sales and profits dropped off at companies that cut back on advertising. Their studies also revealed that after the recessions ended, those companies continued to lag behind the ones that had maintained their advertising budgets.

In 1979 another study by ABP/Meldrum & Fewsmith, covering the recession of 1974-75 and post-recession years, showed similar findings. They found that “companies which did not cut advertising expenditures during the recession years (1974-1975), experienced higher sales and net income during those two years and the two years following than companies which cut ad budgets in either or both recession years.”

The findings of six more recession studies to date by the group present formidable evidence that cutting advertising in times of economic downturns can result in both immediate and long-term negative effects on sales and profit levels. Meldrum & Fewsmith’s former Senior VP, J. Welsey Rosberg reports, “I have yet to see any study that proves timidity is the route to success. Studies consistently have proven that companies that have the intelligence and guts to maintain or increase their overall marketing and advertising efforts in times of business downturns will get the edge on their timid competitors." There are many examples of businesses benefiting from increased ad budgeting in a recession. A MarketSense study during the 1989-91 recessionary period shows brands such as Jif Peanut Butter and Kraft Salad Dressing increased their advertising and experienced sales growth of 57% and 70% respectively. During that time, most of the beer industry cut budgets, but Coors Light and Bud Light increased theirs and saw sales jump 15% and 16% respectively. Among fast food chains, Pizza Hut sales rose 61% and Taco Bell's 40% thanks to strong advertising support, reducing McDonald's sales by some 28% MarketSense concluded the study by reporting.

"The best strategy for coping with a recession is balanced exploitation of ad spending for long-term consumer motivation, plus promotion for short term sales boosts."


Here are some strategies you can use to help your business thrive in recession economy:

Don't cut your advertising budget, increase it. Let your competition cut theirs. When you increase your spending, you increase your share of voice. If your competitors cut back, your message grows even stronger.

Develop a strategic marketing plan so you don't waste money advertising the wrong message in the wrong place to the wrong audience.

Reassure your customers. Implement marketing strategies that allow buyers to feel they are minimizing risk by doing business with you.

Achieve greater media efficiency by taking advantage of softer rates and special promotions.

Start sponsoring. This type of awareness advertising gives your business valuable exposure to targeted, core audiences.

Keep your friends. You know who your loyal customers are. Keep in touch with them and let them know what you have to offer.

Maintain continuity to sustain awareness. Advertising works cumulatively so you have to remind people frequently about your brand or they'll forget you.

Step up public relations efforts. Be sure to maintain a media presence with smart, effective PR programs.

Don't "cheapen" your advertising by trying to save on creative or production costs. Your customers will notice and worry about quality. This is a time to stress quality and value.

Rather than being frightened by recession, step up and give it your best. Be smart and remember this advice from Ed McCabe, founding partner of Scali, McCabe, Stoves advertising agency: "All great enterprises move forward in a recession, and the weaklings move backward. The dumbbells cut back on advertising. The smart people don't."

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Companies should bear eight factors in mind when making their marketing plans for 2008 and 2009:


1. Research the customer. Instead of cutting the market research budget, you need to know more than ever how consumers are redefining value and responding to the recession. Price elasticity curves are changing. Consumers take more time searching for durable goods and negotiate harder at the point of sale. They are more willing to postpone purchases, trade down, or buy less. Must-have features of yesterday are today's can-live-withouts. Trusted brands are especially valued and they can still launch new products successfully, but interest in new brands and new categories fades. Conspicuous consumption becomes less prevalent.

2. Focus on family values. When economic hard times loom, we tend to retreat to our village. Look for cozy hearth-and-home family scenes in advertising to replace images of extreme sports, adventure, and rugged individualism. Zany humor and appeals on the basis of fear are out. Greeting card sales, telephone use, and discretionary spending on home furnishings and home entertainment will hold up well, as uncertainty prompts us to stay at home but also stay connected with family and friends.

Now may be the time to drop your weaker distributors and upgrade your sales force.

3. Maintain marketing spending. This is not the time to cut advertising. It is well documented that brands that increase advertising during a recession, when competitors are cutting back, can improve market share and return on investment at lower cost than during good economic times. Uncertain consumers need the reassurance of known brands, and more consumers at home watching television can deliver higher than expected audiences at lower cost-per-thousand impressions. Brands with deep pockets may be able to negotiate favorable advertising rates and lock them in for several years. If you have to cut marketing spending, try to maintain the frequency of advertisements by shifting from 30-second to 15-second advertisements, substituting radio for television advertising, or increasing the use of direct marketing, which gives more immediate sales impact.

4. Adjust product portfolios. Marketers must reforecast demand for each item in their product lines as consumers trade down to models that stress good value, such as cars with fewer options. Tough times favor multi-purpose goods over specialized products, and weaker items in product lines should be pruned. In grocery-products categories, good-quality own-brands gain at the expense of national brands. Industrial customers prefer to see products and services unbundled and priced separately. Gimmicks are out; reliability, durability, safety, and performance are in. New products, especially those that address the new consumer reality and thereby put pressure on competitors, should still be introduced, but advertising should stress superior price performance, not corporate image.

5. Support distributors. In uncertain times, no one wants to tie up working capital in excess inventories. Early-buy allowances, extended financing, and generous return policies motivate distributors to stock your full product line. This is particularly true with unproven new products. Be careful about expanding distribution to lower-priced channels; doing so can jeopardize existing relationships and your brand image. However, now may be the time to drop your weaker distributors and upgrade your sales force by recruiting those sacked by other companies.

6. Adjust pricing tactics. Customers will be shopping around for the best deals. You do not necessarily have to cut list prices, but you may need to offer more temporary price promotions, reduce thresholds for quantity discounts, extend credit to long-standing customers, and price smaller pack sizes more aggressively. In tough times, price cuts attract more consumer support than promotions such as sweepstakes and mail-in offers.

7. Stress market share. In all but a few technology categories where growth prospects are strong, companies are in a battle for market share and, in some cases, survival. Knowing your cost structure can ensure that any cuts or consolidation initiatives will save the most money with minimum customer impact. Companies such as Wal-Mart and Southwest Airlines, with strong positions and the most productive cost structures in their industries, can expect to gain market share. Other companies with healthy balance sheets can do so by acquiring weak competitors.

8. Emphasize core values. Although most companies are making employees redundant, chief executives can cement the loyalty of those who remain by assuring employees that the company has survived difficult times before, maintaining quality rather than cutting corners, and servicing existing customers rather than trying to be all things to all people. CEOs must spend more time with customers and employees. Economic recession can elevate the importance of the finance director's balance sheet over the marketing manager's income statement. Managing working capital can easily dominate managing customer relationships. CEOs must counter this. Successful companies do not abandon their marketing strategies in a recession; they adapt them.

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