Saint Bernadine - Advertising in a Crisis

Advertising in a Crisis

May 21st, 2020

We’re now living in uncertain times. COVID-19 has impacted businesses in unprecedented ways. When one faces economic uncertainty, a natural instinct is to find opportunities to spend less. Advertising often falls under that category. However, there’s a large amount of research suggesting that companies that continue to advertise during an economic downturn fare better than those who reduce their budget. Through these studies, one result is clear: if you keep advertising when everyone else stops, your message is more likely to be noticed, and subsequently remembered when things return to normal. Now, not all businesses are in the position to take this advice. But for those who are still viable, and have budgeted for advertising, here is how it can be beneficial to maintain or increase spend.

The evidence goes back many years: Roland S. Vaile, author of Marketing in The American Economy, conducted a study that found that companies who spent more on marketing were better off following the recession of 1923. Vaile compared magazine advertising for individual firms in similar lines of businesses. This trend continued into the Great Depression—the moment when Kellogg’s became the leading cereal manufacturer. Ready-to-eat cereal had been around for decades, but oatmeal and cream of wheat were far more popular. Post and Kellogg’s had very different marketing approaches. James Surowecki writes for The New Yorker:

Post did the predictable thing: it reined in expenses and cut back on advertising. But Kellogg doubled its ad budget, moved aggressively into radio advertising, and heavily pushed its new cereal, Rice Krispies. (Snap, Crackle, and Pop first appeared in the thirties.) By 1933, even as the economy cratered, Kellogg’s profits had risen almost thirty per cent and it had become what it remains today: the industry’s dominant player.

The sensible move cost Post the chance of becoming the industry leader. Who are the Post and Kellogg’s of the current moment? No one knows exactly what the post-virus world will look like, but the trends that have been developing in the 21st century seem to be accelerating. We as a culture have steadily moved towards online shopping, with Amazon replacing the local mall, and that has only continued during the crisis. The retailers that are currently thriving are the massive ones. But with less smaller companies advertising, that creates more room for competitors. A 2008 study by Bain & Company found that twice as many companies rose in business during recessions than the surrounding periods of economic calm. Walgreens is used as an example:

Walgreens, the Chicago-based drugstore chain. In the midst of this last recession, the company focused on expanding its lower cost, generic drug business. Earnings and sales for the fourth quarter of 2001 grew by 10.7% compared with the same period in 2000. Not only has Walgreens gained market share on its key competitors, but at a time when many drug retailers face capital constraints and a shortage of pharmacists, it plans to build 475 new stores and two new distribution centers this year.

Moments of crisis define a company’s reputation. Now is not the time to panic and retreat. Instead of flight, think fight! You could be the success story talked about in years’ time. This is an imperative moment in your company’s history—what will be decided is up to you.

Links: New Yorker - Hanging Tough Bain & Company - Taking Advantage of Downturn

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