Studies tout ads as recession strategy

Apr 16, 2001  •  Post A Comment

Dismayed dot-commers and worried wunderkinder, both in Hollywood and on Madison Avenue, may be reeling from the economy’s sudden lurch downward, but downturns, recessions and even worse are nothing new.
Studies of previous recessions have turned up one indisputable fact: “Reducing expenditures for advertising during a recession can be an expensive mistake,” as O. Burtch Drake, president and CEO of the American Association of Advertising Agencies (AAAA), puts it in the introduction to the recently rereleased “Advertising in a Recession,” a 68-page pamphlet that collects the experiences of advertisers during recessions dating back to the early 20th century. “The advertiser who does not cut back can move ahead during the recession and afterward, capturing share from those who, hesitant and unsure, do cut back.”
So what should buyers of TV spots be doing? “Seize the opportunities of a buyer’s market,” is the advice of the AAAA pamphlet. “Before the market bottoms out, lock in long-term deals. When the economy strengthens again, your deal will stand below market rates.”
And what should the sellers of TV time reply? When money is tight, consumers spend more time at home watching television-which is just what happened in Thailand in 1998, during the so-called Asian Meltdown, when viewing levels rose 35 percent during the recession there, and such local TV advertisers as Warner Lambert, Pepsi Co. and Johnson & Johnson saw spending in Bangkok for their products increase by anywhere from 20 percent to 90 percent in one quarter.
In fact, historically, consumer spending has increased during every post-World War II recession, rising even as the overall economy was contracting, according to the studies collected in the AAAA pamphlet.
In the 1960-61 U.S. recession, for example, personal consumer spending was up 0.84 percent, measured from the economy’s peak to its bottom; in the 1974-75 recession, consumer spending was up by 12.28 percent from the peak to the bottom; and in the 1990-91 recession, consumer spending was up by 11.04 percent during a similar period.
Moreover, a study of the last recession, in the early 1990s, by the WPP Group’s Center for Research and Development found that “Aggressive marketers may well find recessionary periods offer a unique opportunity to build share, and position themselves advantageously for the market’s recovery.” How those “aggressive marketers” have done it in the past offers clear guidance for what to say and do this time around. Three typical examples from the AAAA pamphlet follow:
* A 1993 study of 127 brands advertising on television in Britain found that brands that increased their advertising spending by an average of 7 percent increased their market share by an average of 1.1 percent; those that cut back ad spending (by an average of 8 percent) lost an average of 1.6 percent of market share.
* In the recession of the mid-1970s, Chevrolet increased its ad budget, while Ford cut back by 14 percent. The result: Chevy’s market share rose by 2 points.
* During the Great Depression of the 1930s, Kellogg continued advertising while Post did not. The result: Kellogg’s half-century domination of the dry-cereal market.
Are today’s ad execs listening to the lessons of the past? Not according to one recent report of a study from Meyers Reports in New York, which found that only 20.2 percent of surveyed ad execs plan to increase advertising spending this year, compared with 47.6 percent who indicated last December that they were going to increase spending. In fact, according to the report, more than a third of the surveyed executives said they planned to decrease spending, compared with just 12.8 percent who planned decreases last December.