Smart companies spend more in advertising during recession. Since during economic recessions, people don’t stop spending but they look for a better bargains, advertising and promotion become essential for business growth.
During recessions, SMEs around the world generally tend to cut their marketing budgets. However, studies across multiple industry verticals have indicated that companies should do the exact opposite if they wish to successfully ride out of recession.
Evidence gathered by the PIMS (Profit Impact of Market Strategy) database collected from around 4,000 small and medium sized companies across the world shows that the companies who dare to increase marketing spends tend to grow considerably during the recession, continuing their success-story even after the recession is over. It is also well documented that small and medium enterprises which increase advertising during economic downturn, when their competition seem to be cutting back, have the golden opportunity to receive return on investment at a lower cost than during a comfortable economic scenario.
Jay levinson in his book ‘ Guerilla Marketing’ has remarked - ‘stopping ones marketing to save money is like stopping ones watch to save time’.
Here are some inspiring examples of companies that have started their journey during economic recessions, but have succeeded in becoming major industrial giants at the later date by consistently investing on advertising and promotions even during economic slowdowns.
Bill Gates started Microsoft Corp in 1975 during an economic recession and continuous investment in marketing helped it survive and thrive - overthrowing the earliest technological giant IBM.
CNN also began its journey in the regressive economic times of 1980. Through its continuous quality reporting and strong marketing and advertising strategy, it transformed itself into the foremost 24-hour news network.
In a more recent example, Method is an online design and innovation consultancy company which started in the 2000 during the dot-com bust in the US, used Guerrilla Marketing and pure entrepreneur advertising techniques to market themselves in its initial days. It has grown itself remarkably ever since to be a successful online company.Eric Ryan, one of its founding members is quoted in Inc magazine saying "Starting a business in a recession is like vacationing in the off-season,"
Adding to the list of smart companies, GE, Disney, HP and Microsoft have a common binding marketing and advertising policy. They were all start-ups promoting themselves creatively and aggressively at different junctures of history marking economic unrest. Companies, that are confident in their economic policies, see recession as a blessing in disguise.
Study of the recession market by McGraw-Hill Research, analyzed 600 companies in 16 different industries, proving the ever-instating fact that businesses that maintained or increased their advertising expenditures during a recession averaged a rise by 256% both during the recession and the following three years. Recession advertising allows small and medium sized enterprises around the world to play offence in a defensive market scenario.
Smart companies do not wait for public demand for their products to rise, while on the contrary they advertise extensively to create that demand even in the most difficult of times. Interesting statistics developed from a paper called “Innovating through a Recession” by Professor Andrew J. Razeghi at the Kellogg School of Management at Northwestern University state that aggressive recession advertisers have increased their market share by 2-and-a-half times in the post-recession market.
Critical anecdotal and empirical evidence supports the argument that advertising is the primary factor as far as growth or downfall of the companies is concerned during the times of economic recession and the time following the recession, reiterating that SME advertising will not reduce during recession.
Sitash and Manik are Co Founders of Jade Magnet. Jade Magnet is a creative crowdsourcing platform for design requirements for start-ups and SMEs and have already worked with over 1200 projects for around 500 brands.
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