Tue, Nov 10 2009
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Published January 13, 2009 04:05 pm - With corporate managers under enormous pressure to control costs and maintain liquidity in the current credit crisis, advertising budgets often appear to be a dispensable luxury in the struggle to survive. Not advertising puts businesses at risk EDITOR’S NOTE: The following article was published Nov. 26 in Knowledge@Wharton.
With corporate managers under enormous pressure to control costs and maintain liquidity in the current credit crisis, advertising budgets often appear to be a dispensable luxury in the struggle to survive. Executives who succumb to that temptation, however, put the long-term future of their companies at risk, according to Wharton faculty and advertising experts. “The first reaction is to cut, cut, cut, and advertising is one of the first things to go,” says Wharton marketing professor Peter Fader , adding that as companies slash advertising in a downturn, they leave empty space in consumers' minds for aggressive marketers to make strong inroads. Today's economy “provides an unusual opportunity to differentiate yourself and stand out from the crowd,” says Fader, “but it takes a lot of courage and convincing to get senior management on board with that.” According to Wharton marketing professor Leonard Lodish , with demand slack for advertising services, the cost of these services goes down, making advertising expenditures all the more defensible in a bad business climate. “If your company has something to say that is relevant in this environment, it's going to be more efficient to say it now than to say it in better times,” says Lodish. Research shows that companies that consistently advertise even during recessions perform better in the long run. A McGraw-Hill Research study looking at 600 companies from 1980 to 1985 found that those businesses which chose to maintain or raise their level of advertising expenditures during the 1981 and 1982 recession had significantly higher sales after the economy recovered. Specifically, companies that advertised aggressively during the recession had sales 256% higher than those that did not continue to advertise. For companies that do stay the course and continue to advertise into a recession or increase their promotional activities, the key is to craft messages that reflect the times and describe how their product or service benefits the consumer. For example, companies might be tempted to emphasize price in a recession, but that only works for companies like Costco and Walmart that are built around a core strategy of providing low prices year after year, says Lodish. He points to the current Walmart campaign, “Save Money. Live Better,” as a successful approach to the recession. Dean Jarrett, senior vice president of marketing at The Martin Agency in Richmond, Va., which developed the Walmart ads, acknowledges the campaign began in 2007 before it was clear a harsh recession was building. “We can't claim we knew a recession was coming, but “Save Money. Live Better” is dead on-point with who they are and what they want to be.” Eileen Campbell, chief executive of the Millward Brown Group advertising firm in New York City, says that while companies should probably not dwell on the recession and scare consumers into hoarding their pennies under a mattress, certain products require a straight-up approach — such as financial services. “If you are in the financial services category, to behave as you did a year ago is silly.” At the same time, however, many consumers are weary of negativity generated by the recession and would be receptive to a more upbeat message, she adds. “If you can put a positive spin on how you can genuinely help without invoking doom and gloom, I think that's going to be more compelling.” In Control of Your Pushups Wharton marketing professor Patti Williams cites Gold's Gym — the Texas-based gym chain — as an example of a company that has found a way to navigate the economic slump while promoting a product that might seem discretionary or self-indulgent in hard times. One television spot shows legs working a stair climber as words pop up across the screen changing from “First floor” to “12th floor” to “Kilimanjaro” to “Olympus.” Finally the words, “The Corporate Ladder,” appear. “This is about being goal-oriented as opposed to a general fitness or vanity play,” she says. “It links to the economy because people are less likely to be spending on flashy things and more likely to be thinking practically and pragmatically. Certainly people are going to be spending less in this downturn, but they will spend something.” Williams agrees that advertisers should approach the 'R-word' (recession) with extreme caution. “Along with this economic downturn comes a lot of emotional response, such as anxiety. It is characterized by a sense that you lack control, that you don't know what's coming and you are at the whim of circumstance. To the extent that advertisers feel their clients or consumers are experiencing anxiety, ads should try to empower consumers and help them think of ways to be in control in a world where they feel out of control.” The Gold's Gym spots address this concern, she suggests. “'You can't control the economy but you can control how many pushups you do, and take control where you can, and we can help you.' That's a powerful message.” 
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