Though it seems to make sense to cut expenditures in lean economic times, 80 years of data proves that cutting marketing to save money is a losing proposition.
Way back in 1927, the Harvard Business Review published a report tracking 200 companies from the 1923 recession on. The results were clear. The companies that didn’t cut back on marketing – those that advertised the most during that period – enjoyed the biggest sales increases.
Another later study measuring the effects of business-to-business advertising looked closely at the recessions of 1949, 1954, 1958 and 1961. In these tough times, sales and profits dropped for companies that reduced their advertising. In addition, when the recovery came about (as it always will) those same companies lagged behind those that did NOT cut back.
That was proven again by McGraw-Hill Research when examining the financial performance of 600 companies in 16 industries during the recession of 1981-1982. The report, published in Laboratory of Advertising Report 5262, showed that sales for companies which aggressively marketed during the recession rose 256% over those that cut back – and stayed growing for up to three years AFTER the economic downturn.
A Cahners Publishing Company study in 1980 and a Center for Research and Development study in 1990 both concluded that those companies which maintain or increase their advertising during recessionary times stand to gain the most market share during that period (an average of 1.5 points.)
Coopers & Lybrand and Business Science International put it this way in their joint report published by Penton Media in 1993: “Businesses that maintain aggressive marketing programs during a recession, outperform companies that rely more on cost cutting measures. A strong marketing program enables a firm to solidify its customer base, take business away from less aggressive competitors, and position itself for future growth during the recovery.”
There is a book of such research findings entitled Advertising in a Recession by Bernard Ryan, Jr., published in 1999. But these examples will probably suffice to tell the story.
The word “recession” has its origins in the Latin for “move backward.” In an economic recession, when those around them “move backward,” smart marketers do just the opposite. They STEP FORWARD.