Communicate in a ‘recession’ or be a victim of ‘depression’

Principle has not changed; it pays to advertise during hard times

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THE FOLKSY STATEMENT- “OUT of sight, out of mind”- is the best argument among couples that being apart too long would be detrimental to a relationship. This is also a compelling argument for branded products to remain on the shelf- and be visible at all times- to solidify customer loyalty.

Being within sight- and within reach- are also time-tested marketing principles, which the uninitiated or the backslider can ignore at their own peril. And yet, this truism- to advertise, publicize or perish- is soon forgotten when hard times strike, and the knee jerk response of companies is to cut down on such essential functions as advertising and public relations.

In the late 70’s and early 80’s, there were already persuasive arguments in favour of advertising during a recession. In fact, in a section in my MRR (Management Research Report, the equivalent of a master’s thesis) at the Asian Institute of Management, I argued in favour of advertising in the midst of a recession that was already felt then in the early 80’s.

It was supposed to be a compelling logic for organizations to seize the communication initiative when hard times strike. I cited a study made by the Laboratory of Advertising Performance (LAP) of McGraw-Hill Research covering the period 1974-1975.


Advertising equals sales

In the study findings, McGraw-Hill vice president for research, Dr. David Forsyth, cited the “common experience of companies that continued advertising”: In 1974-1975, their sales grew 15 percent higher than those who cut advertising. By 1978, companies that continued advertising had sales of 132 percent above 193 sales levels. Those who trimmed advertising managed a mere 79 percent over 1973 levels.

These figures are, of course, dated. The latest figures from the same McGraw-Hill Research analyzed 600 companies in the US between 1980 and 1985. The results showed that business-to-business firms 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.

And in 1985, the sales of companies that were “aggressive recession advertisers “were 256 percent higher than those which “did not keep up their advertising.” This is a higher figure compared to the 132 percent advantage in 1978.

There is a more encouraging fact, established by a study of another research firm – Meldrum & Fewsmith. The findings are conclusive: Aggressive advertising did not only grow revenues; it even increased profits.

More recently, as pointed out by Dave Donelson, author of “Creative selling: Boost Your B2B Sales,” we should not be perturbed by post-Sept. 11 jitters. “The best way to combat paralysis is to get on with the business of living,” he said. And the business of living includes the “for-profit businesses” as we know them.

Donelson continued, as he zeroed in on advertising: “Numerous studies, including one by the AAA (Association of Accredited Advertising Agencies) of the recessions from 1948 to 1982, show that consumer spending actually grows from the quarter when the economy peaks to the quarter in which it bottoms.” That’s one to really think about.


Preference, awareness

A more comprehensive study is one conducted by the Cahners Research and the Strategic Planning Institute (PIMS). The institute stated: “As awareness increases, preference increases.”

The study, mind you is not without basis. It was based on a survey made in July- September of 2001, covering 88,000 businesses in the US and based on the responses of 23, 341 businesses. The survey sought to correlate preference levels of awareness.

There is direct relationship (researchers call it “correlation”) between awareness and customer preference. Susan Mulcahy, PIMS vice president for research, shared these key insights: As awareness increases from 25 percent to 35 percent, the preference increases from 10percent to 15 percent. As awareness grows from 35 percent to 45 percent, the leap in preference is greater- from 15 percent to 23 percent.

And the largest jump occurs when awareness is 85 percent to 95 percent: preference rises to 56 percent to 71 percent. Such awareness can only be “driven” by the communication discipline of advertising and public relations.

In the same 2001 study, the marketing expenditures of the surveyed companies are channelled to the following: print advertising, 33 percent; sales/promotion materials, 22 percent; television, 11 percent; trade shows, 10 percent; and others include Web advertising, direct mail (print and e-mail), seminars, newsletters and billboards.


Principles the same

What is the message of these figures? The principle has not changed- whether in the ‘70s or the ‘80s- and, in a post 9/11 era. It pays to advertise during hard times or even a recession.

Where does the practice of public relations- or, more specifically, publicity-come in? At the turn of the century, companies have taken the wiser step of using a mix of advertising and public relations to increase sales, expand market share, and build a corporate brand.

A new discipline also emerged: “below the line of advertising.” It is obvious that the phrase was coined by advertising people- showing that the discipline with clout, is still advertising. That this influence may change through time is arguable.

So, how does one make of the audacious statement of Al Ries and Jack Trout, which is also the title of their book: “The Rise of PR and the Fall of Advertising’? Did the tandem sound the death knell of advertising? Far from it, they quickly add. They just underscored the increasing value of PR.

PR, Ries and Trout say, “builds a brand”; while advertising” maintains the brand”.

Vivian Lines, Asia Group president of Hill and Knolton, told a group of PR professionals recently: “Both PR and advertising build brands.”

Advertising builds recall with its complete control of form and content; PR uses the power of third party endorsement. Actually, even this attempt at drawing the lines is still open to challenge.

Dr. Atichart Suntharos, executive vice president, strategic planning of Lowe Lintas & Partners states: “Branding is even more critical in times of crisis. There’s also a need to gain insight into consumer’s changing values.” It may be said that this agency man is biased, but his message is compelling.

And harder to ignore is this advice: In good times, communicate to stand apart; in a recession, communicate to gain unbeatable advantage.

Speaking of a recession, a celebration author once distinguished it from a depression: “In a recession, your neighbour loses his job; in a depression, you lose yours!”

It may be good to consider communicating- via advertising or public relations- or else, you will be overtaken by our own “recession” or “depression”!