Wednesday, October 20, 2010

Don't Cut Your Advertizing Budget During Recession

If you are a marketing or an advertising manager, you have probably experienced cuts in your marketing budget. Obviously, when there is a decrease in sales or an economical downturn, the first expenses to be cut are marketing’s and advertising’s. As a matter of fact, once I had a business to business class, where the professor explained it was always doubtful when a company is used to advertise constantly and at some point stop it. You may be suspicious that something goes wrong while a company don’t advertise anymore while it was used to.

A new study by Thinkvine analyzed the effects of turning off all advertising entirely for a year on one unnamed brand. It then studied the effects of turning it back on the next year at prior levels. Here’s what they found:
  • For about 16 weeks, sales volume was about the same.
  • By the end of year one, however, sales volume was about 20% lower without advertising than with it.
  • Turning the advertising back on in year two, reversed the sales decline as the brand began growing again at the same rate before the advertising was stopped.
  • However, the advertising was not able to close the gap in sales compared with what it would have achieved had it maintained media spending for both years.

Different brands respond differently to media cuts, but for many – getting back sales and share lost from cutting budgets can be a lengthy and an expensive process.
ThinkVine CEO, Damon Ragusa, said it best:

“The cost of getting back what you lose is often greater than the savings of not advertising.”

Of course, it is important to cut some of your budget as company is experiencing trouble. Nevertheless, keeping a high advertising pressures allow you to get a great start while the economical signs are back in the green. This study materialize the fact it is hard to build brand equity, and if you have built it, you may loose it fast. This is the reason why Coca Cola spends so much money in advertizing even though they have been for decades the highest equity in brands.