Advertising Cuts in Recession Can Be Costly

"The man who stops advertising to save money is like the man who stops the clock to save time."

That observation by a successful business owner is well worth remembering, especially during troubled economic times. Banks and other businesses that are blinded by the possibility of recession and cut advertising budgets will be overtaken by businesses that see beyond economic fears and maintain their advertising investment.

When the economy slumps, advertising is often seen as the easy target for budget cuts, yet the value of maintaining advertising budgets in a recession has been proved.

Studies conducted during each recessionary period since World War I, including the most recent in 1981-82, undeniably demonstrate that companies that maintain or increase ad expenditures outperform those that reduce them.

A Time to Adjust

Astute marketers view an economic downturn as a time to adjust to changing consumer buying patterns and to take advantage of new competitive opportunities. During such periods, these marketers continue to build their consumer franchise with targeted advertising, resulting in long-term profitability at the expense of their competitors.

Consumers do not stop spending in a recession, they merely become more discerning purchasers, especially of nonessential or luxury items. In these times, advertising becomes more effective because buyers are exploring every available alternative to find value.

Consumers' ears perk up with buzzwords like "quality," "value," and "more for your money." Two competitors may be equal in terms of quality and value, but the one that makes consumers aware of these benefits will come out ahead.

Furthermore, the overall cautious behavior of consumers during a recession will not affect purchases of essential items. Advertising will continue to motivate consumers, build brand awareness, and help businesses avoid costly inventory buildup.

Some marketers view recession as an opportunity to overtake the market share of less enlightened competitors that have cut their advertising budgets. Companies such as Colgate-Palmolive Co. and General Motors Corp. have used recessions to increase sales, expand their customer base, and seize market leadership. Small-business operators can successfully use these tactics in their own markets as well.

Marketers who cut advertising budgets often fail to realize the long-term effects of their actions. Studies show that it costs more to regain a position lost during a recession than to maintain advertising levels.

A bank or other company whose name, product, or image is forgotten or tarnished because of recessionary budget cuts may face a lengthy decline - and one that could continue long after a recession is over. In fact, some never regain lost ground.

It is true that danger lurks behind a recession. But an opportunity exists for bank managers behind the danger - opportunity that can only be seized by managing advertising expenditures as a long-time investment to increase market share, increase sales and ultimately maximize profitability.

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