Download Advertising Strategies in a Slowdown

Advertising Strategies In a
Slowdown
Here’s What Some Advertisers Say In a
Slowdown/Recession
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“We’re cutting back on our advertising during
the current slowdown.”
“Business is awful and I’m cutting back my
expenses.”
“I can’t keep my advertising up while I’m laying
people off.”
Here’s What Research Tells Us About
Advertising in a Slowdown
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Don’t cut back advertising, you’ll lose market
share.
If you lose market share, it takes a long time
and a lot more money to gain it back.
Increase advertising during a recession and gain
market share now and five years out as
competitors cut back.
References
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1927 - Roland Vaile in the Harvard Business
Review reports biggest sales increases by
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companies that advertise the most.
1949-54, 1958-61 - Buchen Advertising study
showed sales and profits dropped when
advertising was reduced and continued to lag
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for several years after recessions ended.
1974-75 - ABP/Meldrum & Fewsmith study
showed companies that did not cut
advertising had higher sales for two years
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and for two years after
recession ended.
1. Advertising in a Recession,Bernard Ryan, Jr., AAAA, NY, 1999
References
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1981-82 - McGraw-Hill Research Laboratory of
Advertising study showed firms that maintained or
increased ad expenditures averaged significantly higher
sales growth during the recession and for the following
three years.
1990 - WPP Groups, Center for Research & Development
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study found that recessionary periods offer a unique
opportunity for companies to build share and position
themselves advantageously for a recovery.
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1. Advertising in a Recession,Bernard Ryan, Jr., AAAA, NY, 1999
References
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Autos
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1975 - Chevrolet increased advertising for fuel-saving
models, Ford reduced advertising by 14%. Chevy’s
market share increased 2% and Ford did not regain
share points for five years.
1978-79 - Ford learned their1 lesson and did not cut
back because “the import advertisers aren’t cutting
back” and Ford increased spending to maintain
market share, especially against Chrysler, which cut
back advertising and lost market share.
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1. Advertising in a Recession,Bernard Ryan, Jr., AAAA, NY, 1999
Examples*
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1989 Vs. 91 - Jell-O, Crisco, Hellman’s, Green
Giant, and Doritos saw sales drop by as much as
24-26% after reducing advertising.
1989 Vs. 91 - Jif raised advertising and sales
went up 57%, Kraft salad dressing raised
promotion and sales went up 70%.
1989 Vs. 91 - Bud Light and Coors Light both
spent ahead of category and sales went up 15%
and 16%.
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* Advertising in a Recession, Bernard Ryan, Jr., AAAA, NY, 1999
2010 Example *
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Procter & Gamble, the world's largest advertiser, stepped
up global ad spending by $1 billion over the 12-month
period ending June 30, 2010. The bulk was in the last six
months, fueled by support for new product innovations
and an investment in Olympic-themed marketing in
February.
For the fiscal year concluding June 30, global ad spend
was as much as $8.7 billion, leading to a 20% jump in
impressions, the company said. P&G's ad spending was
about 10% of sales -- its usual range -- but higher
revenues led to the dollar increase.
* Media Post.
http://www.mediapost.com/publications/?fa=Articles.showArticle&art_aid=133193
What Strategies Work?
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TvB, 1990*
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A market needs stimulation, particularly when it is
weak.
Recession periods provide an opportunity for
increasing market share by being aggressive.
Increasing media expenditures does not hurt the
short-term bottom line and enhances long-term
profitability.
Budget-cutters hurt their chances to improve
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market share in recessionary or expansion
periods.
Advertising in a Recession: Taking an Aggressive Stance,” TvB, New York, 1990
What Strategies Work?
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DDB Needham, 1990*
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The best advertising and marketing strategies
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Consumers are looking for reassurance during
recessions, craft marketing strategies that allow buyers
to feel they are minimizing risk because risks are
uppermost in consumers’ minds.
Brand equity is particularly valuable in reducing
consumers’ uncertainty and seeking of security.
Conduct research on consumer attitudes and motivations
for buying discretionary and luxury items.
* Advertising in Recessionary Times, DDB Needham, Chicago, 1990.
What Strategies Work?
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The wisest spending strategies*
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Continue to finance advertising and gain a
significant competitive advantage.
Adopt an aggressive marketing strategy because
of a softer competitive arena.
In a declining market, monitor market share, not
just sales volume. Everyone will lose some sales
volume as market shrinks, but those who can
maintain or increase market share will emerge
much stronger.
Advertising in Recessionary Times, DDB Needham, Chicago, 1990.
What Strategies Work?
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Special media buying opportunities*
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Enlist cooperation of media sellers. Share you budget
information and be open to “fire sales.”
Some of the best deals are available in a slump.
After the realities of slower markets set in, some price
benefits may dissipate, so take advantage of deals when
they are offered, not after price floors are reached -because they will rise from there.
Negotiate options or continuation rights and get
guarantees of favorable prices or terms. Consider
sacrificing short-term gains for long-term gains.
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*Advertising in Recessionary Times, DDB Needham, Chicago, 1990.
What Strategies Work?
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New product strategies*
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Slowdowns are not bad times to introduce new
products and be first mover against weakened
competition.
A product that has the necessary components for
success - benefits that are unique and relevant,
properly priced, and ably marketed - is likely to be
successful whenever it is marketed.
*Advertising in Recessionary Times, DDB Needham, Chicago, 1990.
What Strategies Work?
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Cahner’s Report*
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Maintain your planned level of advertising while your
competitors are cutting back.
Maintain continuity to sustain awareness. Advertising
works cumulatively. People forget rapidly without
frequent reminding.
Concentrate to dominate. Dominance is the product
of impact and frequency. It can be achieved by
concentrating advertising… The law of diminishing
returns is very much in force...
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*The Role of Advertising in Uncertain Times, Cahner’s Advertising Research Report # 2000.
What Strategies Work?
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1994 McCann-Erikson International Report*
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Accentuate the positive. In the 1989-93 recession Heinz
increased marketing support to 9% of worldwide sales and
reduces prices on key brands.
Think corporate. Guinness and Cadbury developed strong
corporate campaigns to reassure consumers in purchase
decisions.
Increase spending, increase share of voice.
Achieve media efficiency.
Market to your constituency.
* McCann-Erikson Research & Information Consultancy BrandTrack #3, 1994
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Keep your friends with data-based CRM marketing.
Hang in there with your agency. All 18 leading brands
reviewed their long-standing relationships with their
agencies and stayed with them.
Start sponsoring. Kellogg, cycling events, Haagen-Dazs, art
exhibits, Nescafe radio programs, P&G, the Olympics
Give out samples.
Attack the private label.
Innovate
Control distribution.
Command a premium price.
Game Theory
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In 1928 John von Neumann, 25, invented game
theory while playing poker.
He played the mathematical probabilities until
someone bluffed and won.
He suddenly realized that to win, you don’t play
based on your knowledge of probabilities, but on
your knowledge of your competitors’
psychological needs and behavior patterns.
The new science of game theory was born.
Game Theory
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Game theory suggests that your strategic moves
should not be made according to the
probabilities of success in an actual situation,
but according to what moves your competitors
make.
Game theory suggests that you assess the
probabilities of the moves your competitor will
make and then assess the probable success of
your counter moves.
Ephron
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Erwin Ephron, a leading expert on advertising
buying and planning, writes: *
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Spending scarce ad dollars now to lift profits
tomorrow is a “tough sell” because today’s stock
markets “take no prisoners.”
But because a higher share of voice will result in a
higher market share, hard times present the
perfect “now-or-never” opportunity.
Share of voice as driver means it’s not how much
you spend, it’s how much more than the
competition you spend that makes the difference.
* “Recession fears call for strategy,” Advertising Age, March 2001
Erwin Ephron
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Effective strategies in a slowdown:
– Lower weekly weight rather than cutting
weeks.
– Move weight to TV’s lower priced time
periods.
– Take advantage of a brand’s seasonal
purchase patterns and move some national
dollars into spot areas.
Effective Strategies
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Keep weight (rating points, impressions) the
same, switch to a new media mix.
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Increase reach.
Invest less -- save money in more efficient media.
Optimizers are available to help you plan an
effective and efficient media mix using online
advertising.
Summary
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If you cut back advertising in a slowdown, you will lose
market share.
Market share once lost is difficult to gain back.
Brand equity can reassure consumers.
Game theory suggests that what matters is how you
anticipate what your competitors do.
Ephron advises that it’s not how much you spend, it’s
how much more than the competition you spend that
wins.