Thursday, April 17

Advertising Empty: Recession Creates Cuts

While The Wall Street Journal speculates that the economy might be hurting Google, others are already pointing to across-the-board cuts in advertising and public relations. Even some advertising messages have changed, skewing toward sales and savings, as an admission that times are tough.

“Advertising and the economy seem to go hand in hand,” Bob Liodice, president of the Association of National Advertisers, told Reuters. “Really, the fact that the economy is weakening is going to have an impact on the industry in the short term.”

There is some truth to that. Companies frequently find that advertising budgets are the first to be cut amidst worries of an economic downturn. The reason, which was also attributed to the 9.3 percent drop in Google ad clicks, is because people are more likely to window shop and less likely to buy.

But does that really mean companies need to cut corners on communication? It depends on the company, but not always if one recalls the wisdom of Bruce Barton, co-founder of BDO, which later merged with Batten Co. to become BBDO.

“In good times, people want to advertise; in bad times, they have to,” he said.

This might be especially true when some economic reports remain mixed. But even if the reports weren’t mixed, cutting communication budgets isn’t always the most prudent choice.

Hundreds of companies and products have been successfully launched during recessions, most notably Trader Joe’s, MTV, and the iPod. (Copywrite, Ink. is also a recession-born company, 1991.)

In almost every case, these companies increased their presence in the marketplace while everyone else cut back. Doing so increases market share, especially against larger competitors, strengthening the company’s position when the economy turns around. They also did not resort to distress advertising, sweeping discounts, or “I feel your pain” advertising, recognizing short-term messages sometimes erode long-term brands.

Of course, that is not to say that most communication and advertising plans don’t need some refinement (most do, whether there is a recession or not). And I don’t necessarily think such refinement means jumping on the rally cry of social media. Social media is better used as an augmentation tool rather than a replacement tool as some suggest.

Keep that in mind when reading those who suggest social media is the most viable solution during a downturn, a concept that seems to be largely based on the logic of Forrester Research a few months ago.

Silicon Ally Insider Henry Blodget provides a better balance. Social media remains mixed because it requires more nurturing than traditional communication.

As I mentioned in March, there are two kinds of people who have a higher propensity to get into car accidents: those who never think they will and those who always think they will. The idea is to hit the middle.



Valeria Maltoni on 4/18/08, 4:58 AM said...

Times of difficulty are the best ones to regroup and focus on the right things. What information does your company hold onto that is best utilized? What new strategies should you pursue? All food for thought... and execution.

Anonymous said...


I would think that companies engage in PR and Advertising campaigns because it brings business. When we hit an economic down turn I would think marketing communication would get even more aggressive. When business slows down I would think that’s when you need to reinforce the marketing and communications budgets. Just guessing – I would presume that if economic downturn = less advertising/pr then those that manage to maintain strong campaigns come out ahead.

About this site on 4/20/08, 11:45 AM said...

It's entirely true that the US economy is experiencing a downturn. millions are losing homes and perditions are for very tough times ahead, perhaps even depression. Such concerns are guaranteed to have a direct effect on advertisers.

Some argue that this downturn is in fact a long overdue correction brought on by an economy which has for to long that has been supported by excessive amounts of consumer debt and over spending.

If this is true then we are simply returning to a more normal, realistic and sustainable economic situation.

There is however another side to this coin. The so called "great depression 1929 - 33)was difficult, even devastating for many, it was also a time when that created millionaires. Adversity for some created opportunities for others.

It's important in such times to see where potential and opportunities might exist and to be prepared to explore how best to benefit from them whenever possible.

Rich on 4/21/08, 1:16 PM said...

@Valeria Even better is to think of these things before difficult times in order to take action instead of having to react. But yes, absolutely.

@Kevin You would be surprised how pervasive the notion of "build it and they will come" has become. Many companies short change communication before anything else.

@Marvin How absolutely true. The flip side of the coin is mentioned less but it exists all the same. My grandfather, who lived through the Great Depression, often mentioned how different the experience was for him and his brother.


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