4As study proves it pays to keep advertising

Faced with a likely recession, Canadian agencies are pulling out all the stops to dissuade clients from clipping ad budgets.

Faced with a likely recession, Canadian agencies are pulling out all the stops to dissuade clients from clipping ad budgets.

One of the facts that agency executives like to point out is that strong brands remain so because they continue to market themselves whatever the economic indicator.

‘I’m a big believer in the tried-and-true motto of when times get tougher that’s when you really have an opportunity to build your brand,’ says Dom Caruso president and CEO of Toronto’s MacLaren McCann.

‘As your competitors cut back, it’s easy to make your voice competitively even louder. Then when things do start to turn around in terms of the economy at large, you’ve got a leg up on the competition.’

While it’s also an approach that clients would like to take, Caruso says most have to deal with running their businesses quarter by quarter. Faced with declining revenue it is sometimes impossible to think long-term.

‘When a client doesn’t take that advice, it’s not because they don’t believe it, it’s because they just don’t have much of a choice,’ he says.

Still, there is a growing body of evidence that statistically backs up the shortsightedness of reducing marketing.

One study in particular, Advertising in a Recession by Bernard Ryan, published in 1999 by the American Association of Advertising Agencies (4As) makes a strong case for this. The book is less a dissertation than an account of what numerous studies from the 1920s to 1999 have concluded. ‘To put it simply, the literature and experience reviewed here tell us that reducing expenditures for advertising during a recession can be an expensive mistake,’ the author concludes.

The book cites reams of examples where leading marketers faced with declining sales continued or increased advertising expenditures. All upped their market share over the long term at the expense of competition that cut back.

Gerry Frascione, president of BBDO Canada in Toronto, has read the study. ‘It demonstrates the importance for brand leaders, for market leaders, to sustain their level of investment during (tough) economic times because when they come out of economic downturns they will be in a stronger position as a result of maintaining their level of investment,’ he says.

‘That’s what we’ve been talking about with clients.’

But Jani Yates, EVP at the Institute of Canadian Advertisers, adds one caveat in relation to the current downturn: The case studies cited in the 4As document do not take into account terrorist attacks in the U.S. that have likely exacerbated the economic situation.

‘We are looking at a situation that has a completely different twist than a straight recession,’ she says. ‘What you’re seeing is things that would be recession-like being amplified because we have this crisis right now.’

In other words, marketers trying to glean insight from such documents need to use common sense.

Case in point: Studies indicate that deep discounting in a downturn dilutes strong brands. But were airlines to simply follow this dictum following the attacks, most would already be grounded. In the short term they have a pressing need just to get people back onto the planes. And the quickest solution is to discount.

‘You have to use your judgment in terms of what you’re advertising and how you do it,’ Yates says.

Some nuggets from

Advertising in a Recession:

‘[Six hundred] business-to-business firms [studied] that maintained or increased their advertising expenditures during the 1981-1982 recession averaged significantly higher sales growth both during the recession and for the following three years than those which eliminated or decreased advertising.’

McGraw-Hill Research’s Laboratory of Advertising Performance

‘Conducted during the first halves of 1991 and 1992, [a Billett/AGB study] revealed that those highest-performing brands that increased their ad spend by an average of 7% brought increases of 1.1%, on average, in market share. But the lowest performing brands, which reduced ad spend by 8% on average, suffered an average loss of 1.6% of market share.’

1993 Billett Consultancy/Taylor Nelson AGB study

‘Some of the best [media] deals occur in the slump. As demand sinks, sellers are forced to deal with the unexpected revenue shortfalls in emergency fashion. Discounting is often deepest when the supplier sees a sudden loss of advertising support

1990 DDB Needham White

Paper on advertising in a recession