Statistics on Advertising during a Recession

I think Seth Godin outlined Marketing’s Catch 22 best in his book The Purple Cow – (and I am paraphrasing here) – when times are tough the tendency is to conserve capital vs. when times are good the tendency is to not be aggressive.

As marketers we are so often faced with the dilemma of having to cut advertising in times of economic softness. But here is some real data that you can use to illustrate why that is a bad idea.

McGraw-Hill Research study of over 600 Businesses found that:

1981-1982 – business that maintained or increased their ad spend during this time

  • Averaged higher sales growth during the recession and in the following 3 years!

By 1985 – sales of the businesses that maintained or increased their ad spend during that recession

  • Sales had risen 256% over those that had cut back on advertising

Likewise in 2001 – another study found that aggressive recession advertisers

  • Increased market share 2 ½ times the average for all businesses in the post-recession

In 2002 – the Strategic planning institute illustrated that during economic expansion

  • Although 80% of businesses increased their advertising spend there was NO improvement in market share
  • Why? – because everyone has increase ad spending!

Full Disclosure: I got these stats from a paper called Innovating through a Recession by Professor Andrew J. Razeghi at the Kellogg School of Management at Northwestern University. Not only did I thank him for writing this paper, blogged about it, tweeted it but I also invited him to do a podcast with me so stay tuned. Meantime, I highly recommend you read his paper.

10 comments to Statistics on Advertising during a Recession

  • Michael A. Stelzner

    Paul;

    These findings make a lot of sense. I think the bigger question is this:

    Were these companies successful because they advertised OR where they advertising because they were already successful?

    Mike

  • Paul Dunay

    @ Michael

    Thanks for commenting Michael

    I think the idea here is that the companies that maintained or increased their marketing expenditure actually gained market share. It is one of the most effective ways of beating your competitors and in essence made them more successful in the long run (even if that meant more % market share)

    I think the real challenge for marketers is that we are in the middle of a biggest transformation ever – so if you are going to make changes to your marketing plans – *what* to keep and what to shut off isn’t as clear as it has been in the past.

    p

  • Tracey

    I have a hunch (but no data yet to back it up) that marketing/ad spend during a recession is actually more critical than during good times. During a recession, a solid company can steal marketshare from the companies that are sinking, and come out of the recession much stronger.

    Of course, this is still a hard sell to my CEO.

  • Experiential Marketing Podcaster

    That is some very interesting data. Specifically the 1985 results:

    By 1985 – sales of the businesses that maintained or increased their ad spend during that recession
    * Sales had risen 256% over those that had cut back on advertising

    @Tracey makes an excellent point previous to my comment.

    Now off to read the paper by Andrew J. Razeghi.

  • Paul Dunay

    @ tracey

    Totally agree – especially the convincing the CFO part 😉

    thanks for commenting

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  • Paul Dunay

    @ Papia – sorry papia I dont do advertising on my blog

  • Doug Kessler

    We trot these kind of statistics out every recession and most marketers either just don’t buy it or simply haven’t got the budget to do anything about it.

    Instead, they use recession as a way to feel better about under-investing — at least the other guys are doing it too.

  • Alan Lee

    Paul,

    Thanks for the link! I am in favor of businesses focusing on marketing during turbulent times to gain market share. Tough times don’t last and businesses should use this period to prepare themselves for the upturn. This paper provides me with good statistics to back my case when I present to clients!

  • Bruce Clay SEO

    Great post. Obviously marketing and ad expenditure during a recession is more critical than during good times. During a recession it becomes more important to focus on the right strategy that brings money into your business whether that is focusing on certain keywords for search engine optimisation and pay per click or other more traditional advertising methods.

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