Why Market In A Downturn


We hear you – times are tough!

A lot of you are weathering the storm and have cut budgets. Some of you have popped your head in the sand and are waiting for the Dow to go up. We understand, however there are a lot of investors sitting on the sidelines looking for good stocks to buy. How will they know about your company if the volume is on mute?

When the going gets tough, the tough don’t skimp on their ad budgets.

Recession actually provides opportunities for marketers, for it is a chance to invest to gain market share and market leadership, and attack timid rivals. This can also improve the stock market valuation of the company.

Studies have shown that the worst thing to do in a market downturn is to be silent!

Here are facts from marketing experts on why economic downturns reward the aggressive advertiser and penalize the timid ones:

Wharton Business School Professor Peter Fader, says:

“Companies that slash advertising leave empty space in consumers’ minds for aggressive marketers to make strong inroads. Today’s economy provides an unusual opportunity to differentiate yourself.”

  • Wharton Professor Leonard Lodish notes that with demand for advertising down the cost of advertising goes down making it more defensible.
  • Companies that consistently advertise – even during a downturn – perform much better in the long run.
  • A McGraw-Hill Research study of 600 companies through a 5 year recession showed companies that advertised aggressively had sales 256% higher than those that did not continue to advertise.
  • Value is an important message to build into marketing campaigns during a downturn.
  • For companies that cut deeply into advertising in a down period the cost to regain share of voice in the market once the economy turns around cost 4-5 times as much as the cuts saved.

I also found a fantastic well-rounded report providing evidence, from many reputable sources, of marketing benefits in a downturn economy by Guy Consterdine:

The following are experts from Guy Consterdine, and are verbatim from his full article:

  • The Ehrenburg-Bass Institute (EBI) “The financial markets rewarded companies willing to market. Their stock market valuations (market-to-book ratios) had risen by the end of the recession, relative to their competitors.”
  • A study for American Business Media (ABM) asked business decision makers on their marketing views during a downturn: 1.) 99% agreed that “Even in a down economy, it’s important to keep abreast of new products and services for your business.” 2.) 97% agreed that “In a down economy, it’s important to continue to invest to remain competitive in the future” 3.) 86% agreed that when you see a company advertising in a down economy, it keeps them top-of-mind when you make purchase decisions.
  • ABM study: during an economic downturn, a strong advertising/marketing effort enables a firm to solidify its customer base, take business away from less aggressive competitors, and position itself for future growth during the recovery.
  • London Business School on the optimum advertising strategy in a downturn concluded that the most successful companies maximize long-term shareholder value by maintaining their advertising investment when the economy slows down giving them a higher ‘share of voice’ when weaker competitors cut back.

Again, the above are verbatim excerpts from Consterdine’s article, and support the myth that cutting marketing during an economic downturn is advisable! The opposite is suggested.

Do your research and make sure the value is there before you buy!

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