Does Advertising Pay During Recession?

DOES ADVERTISING PAY DURING RECESSION?				the recession.
by				HOLDING /INCREASING ADVERTISING BUDGET
Mrs. A.Bharathy				FOR BETTER PAYOFF
Research Scholar ( Dravidian University) &				In spite of the clutter, great advertisements have
Lecturer, Dept. of Management				broken the clutter and have worked wonders to build
Pondicherry University Community College ,				brands and their market shares during recession /
Pondicherry				slowdown. Some of the examples are interesting.
				Vodafone's series of Zu Zu commercials released
Advertising it is said creates magic in the market				during the second IPL-20 cricket matches in South
place and on the other hand it bears the unfair				Africa were so much a hot favourite among the
burden of being directly linked to sales performance.				viewers that the man of the series trophy must
Though it performs a multitude of functions from				have been given to it. Ariel's advertisement series
creation of awareness , to building brand				featuring Madhavan and Vidhya Balan very well
comprehension, to enhancing band image, to boosting				communicated the various services provided by it to
the morality of the workforce etc..This paper "Does				the consumers. This went a long way in brand recall
advertising pay during recession?" deliberates on the				and increasing its sales in the Indian market in spite of
much debated board room question especially during				recession.
recession. A question that has been raised many				Though Online Travel and Finance categories saw a
times over the years by agencies and clients alike				slowdown, there was an upsurge from Insurance
since the 1920's "Does your company view				clients. Even in the recession, insurance companies -
advertising as an expense or an investment?" and				Bharti AXA, ICICI Prudential, Metlife - stepped up
"How have others succeeded during a soft				their advertising. Also, new categories emerged in the
economy?" This paper brings to fore through an in				recession - Auto became more active and increased
depth analysis of the past and present data to				their spends . The overall spends, despite the
augment the credibility of using advertising as a tool				recession, went up in India in year 2008. Education is
for reaching out to one's target market during				a category that was stable and growing, consumer
recession or not.				electronics grew with Nokia spending significant
				marketing dollars online.
				Another example is General Motors' Chevrolet
				division, which faced mounting inventories in 1975 due
Advertising the magic wand in the market place is				to the recession and high fuel prices. The company
important for brand building and its successful				abandoned its traditional practice of setting its
marketing. It is important for tangible products like				advertising expenditures as a fixed percentage of
mobile phones, refrigerators , television and				sales. While volume fell 10 percent because of the
computers. It is equally important for services like				economic slowdown, Chevrolet maintained its ad
hotels, holiday resorts , airlines and even state				budget and actually increased advertising for its
tourism .The same is true for ideas and causes. All				fuel-saving economy models. Ford Motor Company,
marketers want consumers to buy their brand. Firms				on the other hand, slashed advertising by 14 percent
advertise with just this objective in mind .But it is				in an attempt to shore up profits. That may have
here that one has to remember "Isn't it not an unfair				achieved its goal, but it permitted Chevrolet to
burden on advertising?" when the final sale is				increase its market share by 2 percent.
dependent on many other factors and there is no				According to ADEX (a division of TAM media
direct relationship between the firm's sales and				research) an overview of the ad spends in our
advertising expenditure. This is in contrast to				country in 2008 indicates
distribution and personal selling or even customer				- 26 per cent rise in TV ad volumes during 2008*
service , where one can establish a direct relationship				compared to same period in 2007.
between any of them and sales.				- 'Food & Beverages' was the Top sector in TV
				advertising during 2008*.
Hence the role of advertising is limited to awareness				- 'Cellular Phone Service' category had maximum TV
creation or providing information and favourable				ad volumes during 2008*.
attitude development to say so. While its role is				- 'HUL' maintained its first rank in both the years
limited, the marketer has to compare the costs of				2008* and 2007.
different elements of his /her communication mix.				Data for 2008* available till 27th Dec '08
One yardstick is cost per thousand of people. This is				- During 2008*, TV advertising has recorded growth
lowest in advertising. However, we must bear in mind				of 26 per cent compared to 2007.
that people are generally biased against advertising				- Cellular Phone Service', 'Social Advertisements',
and many still believe it is a waste of organizational				'Toilet Soaps' and 'Cars/Jeep' categories maintained
resources , particularly in a country like India. The				their respective ranks in 2008* and 2007.
very concept of advertising is highly debated even in
normal economic circumstances , say				Other companies across the globe that have taken
				advantage of advertising during a recession to
"Money spent on advertising is a waste!"				establish strong market positions while developing
"Advertising is an economical waste!"				brand equity include such diverse company names as
"Advertising misleads consumers!"				Bristol Myers, Campbell Soup, Coca-cola, Gillette,
				Pillsbury, Apollo Hospitals, Paramount Airways, Procter
So it is very natural that companies feeling the heat				and Gamble, R.J. Reynolds, Rubbermaid, Levi Strauss,
of reduced revenues and eroding net worth during				Stroh Brewery, United Airlines and Welsh
recession , one of the first things that CEO's decide				Foods-among others.
to " Save Money" is to put forth their axe on the
advertising budget. Now this primarily depends upon
whether the company views advertising as an
expense or an investment?

				ADVERTISING DURING RECESSION
THE KEY ISSUES AND OPPORTUNITIES
The question of advertising during a recession is one				Statistics from the past US recessions show that it is
that has been asked many times over many years.				short . On an average , they are mild. During a
Interestingly, the answer still does not seem clear				recession GNP typically declines by about 3%. The
enough to marketers.				exception of course is the unusually severe 1973 to
The answer to the question is that advertising during				1975 recession , when the GNP declined by 4.3
a recession provides a unique window of opportunity				%.Further we see that recessions are selective.
for investment purposes to:				Recessions impact some industries, products and
1) Build equity;				regions of the country hard and bypass others
2) solidify your customer base;				entirely. Studies reveal that among the industries and
3) Gain new customers; and				products most affected are: automobiles, home
4) Make inroads on your competitors who have cut				furnishings, large appliances, travel and airlines,
their advertising during the recession period. This				convenience foods, aluminum, steel, petrochemicals
window of opportunity is created by the				and synthetic fibers. Relatively unaffected are: liquor
understanding that advertising is an investment, not				and wine, tobacco, small appliances, packaged goods,
an expense.				computer and service industries.
However, it is easily understood why many people
do not view advertising as an investment, but treat it				It is here that one should ponder on the bird
as an expense. It is because advertising frequently				strategy , just as a high flying bird, however high it
does not represent a fixed cost, like capital				flies, comes down to rest for a while before it
expenditures, which are investments. Given the				begins to fly high again , so also recession is just a
above stated opportunities it is logical to deduce that				phase in the economic cycle of the world. In this
advertising in times of recession should not be axed.				present scenario of recession 2008 going on as
ADVERTISING DURING RECESSION IS NOT AN				depression 2009 many of the business houses are
OPTION				strategising on measures like cost cutting , downsizing
These are challenging times for businesses. Many local				, revamping business on core competency and the
operations -- big and small -- are struggling to face				like – cutting down one's advertising budget
the difficult losses sustained during this year. And				seems to be in top priority in the wish list of
companies everywhere are faced with tight budgets				many a corporate.But actual studies confirm that
and tough decisions. Small retail stores are struggling				advertising aggressively during recession not only
to stock their shelves, meet the cost-cutting tactics				increases sales but increases profits. As Sir John
of competitors, and draw in now-frugal consumers				Hegarty , Chairman and Worldwide Creative
whose purchases they scrutinize more so now than				Director , Bartle Bogley Hegarty says " Recession
ever. But the reality stands that everyone still needs				is good for advertising" . However the key
petrol for his or her cars. Families need to eat.				ingredient for advertising success in recessionary
Children returning to schools need clothes and				times would be:
supplies. And, people still need supplies from light bulbs
to gardening tools. Businesses, large and small, who				"Thinking has to be inventive , especially when the
sit back and weather the storm with the belief that,				going gets tough" as
once the economy picks up, so will business are
missing out on tremendous opportunities. Companies				- Dabur's Sitaram says if we keep our ad spends
must show the consumer that they are stable				intact in this time and keep coming out with
enough to withstand hard times. Now is the time for				innovations we can gain the market share. Their
smart companies to seize market share and position				strategy is to deliver value and create delight.
themselves to lead the inevitable economic				"Select the most compelling offers and advertising
turnaround. Business owners must remember what it				must bring them to center stage in the most
was like to start a new business, gain name				persuasive, inviting and memorable ways"
recognition and entice customers. Withdrawing from				- Sandeep Singh , Deputy Managing Director , Toyota
the public until the economy picks up and cash-flow				Kirloskar Motor , says getting in direct touch with the
increases will mean having to reinvent the company				customers and offering them special prizes on a new
all over again. A cost that will weigh far more than a				car coupled with innovative awareness campaign.
few quarters with lower than average profits.
				"The way for companies to maintain their market
PESSIMISM OF ADVERTISING DURING RECESSION				share is simple: to advertise"

The three most commonly believed myths for not				- Take, for example, the real estate and
advertising during a recession are:				development industry. Despite a decrease in revenue,
"People don't buy much during recession , so our				The Ritz Carlton continues to rise, realtors continue
advertising would be wasted";				to show property , Why? Because these businesses
" All the companies are reducing their advertising				continue to advertise. Construction is beginning to
budgets and hence the competition doesn't demand				pick up, the availability and need for owner occupied
doing so much of advertising"; and				homes has not waned.
"The money saved on advertising helps us to pay
dividends to stockholders."				So finally we can say that advertising does pay
Myth 1 :" People don't buy much during recession , so				during recession but in selecting advertising, you can
our advertising would be wasted". Wrong - People				ask yourself two key questions: Does it say the
don't buy much during recession and hence we				right, bright thing about the product, service or offer?
should do more aggressive advertising to get people				Does it say it in the right, bright way — in words
to buy .The pessimism among advertisers is mainly a				and pictures that feature the product, instead of
myth, hardly warranted by facts. Also some of the				subordinate the product, and that are appropriate to
recent studies have shown that recessions have only				the brand?
about 2% reduction in people's disposable income but				You must also, of course, run the advertising with
despite that people tend to sit back and maintain				the right, bright media plan, so you can reach your
liquidity .For eg: Study done by McGraw-Hill's showed				target audience in the most effective and
that a 13 page advertising during recession increased				cost-effective ways. When you have such
company's recognition from 32 to 45%. For 1980-85				advertising, your clients can invest in it with the
recession all those companies which did not reduce				knowledge that it is far more likely to succeed. In
their advertising budgets increased sales by 16 to				fact, the clients can know that their advertising is
80% & most important was the fact that the				doing as much for them as advertising can do. Why?
increase in sales was not a temporary thing but				Once the advertising is saying the right thing in the
permanent.				right way in the right places, you've done everything
Myth 2: " All the companies are reducing their				you can to maximize its effect.
advertising budgets and hence the competition				As this is the time to be aggressive and not do
doesn't demand doing so much of advertising".				what many business people do , which is the fastest
Wrong – This is just the right time for you to				and easiest route to cutting overhead by slashing
take charge and go one up against your competition				their advertising budget. These advertising secrets
and so if your competition is not doing advertising				are especially valuable in tough times — and
during recession – you have an opportunity to				extraordinarily profitable in good times. As I emphasis
bring about a dramatic improvement in market				" recession is good for advertising"
position. for eg: In 1975 GM and Ford used two				References:
different strategies and where GM kept with the
same budget and Ford reduced budgets – so				-
while GM increased the sales and Ford's sales went				1. - "Advertisement an expense or an investment" ,
down by 14%.				article by Manik Kinra , CEO , Creadivity
Myth 3: "The money saved on advertising helps us to				2. - "Recession is good for advertising", The Hindu
pay dividends to stockholders." Wrong -attempting to				Businessline , on 16 April 2009 , article by Sir John
regain a favorable position lost during a recession				Hegarty , Chairman and worldwide Creative Director ,
costs more in the long run than to retain it by				Bartle Bogley Hegarty
continuing to advertise. There is likely to be a fast				3. - "Business News" , July 2009 , in Nanayam
erosion of the consumer franchise that the advertiser				Vikatan
has taken years, even decades, to build. It is near				4. - "Marketing in a slow down" , The Economic
impossible to regain the old customers once they				Times, 19 February 2009 , article by Vinay Kamath et
have adopted competitive brands. And, of course,				al
firms can more readily explain a drop in dividends if				5. - "The Secrets of Successful Creative Advertising."
the money was used as an investment to protect				Book written by Tom Attea
market share.				6. - "Advertising management" book written by
				Novee , Bovel , Thill and Wood
Now this leaves behind a question "wouldn't				7. - Adex India (A division of TAM Media Research)
continuing or increasing advertising budget during				8.
recession isn't by itself a mechanism of controlling

Dr Sport

Does Advertising Pay During Recession?