Advertising Strategies In a Slowdown

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Advertising Strategies In a Slowdown
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Heres What Some Advertisers Say In a
Slowdown/Recession

• Were cutting back on our advertising during the
  current slowdown.
• Business is awful and Im cutting back my
  expenses.
• I cant keep my advertising up while Im laying
  people off.

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Heres What Research Tells Us About Advertising
in a Slowdown

• Dont cut back advertising, youll 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.

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References

• 1927 - Roland Vaile in the Harvard Business
  Review reports biggest sales increases by
  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 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 and for two years after
  recession ended.

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1. Advertising in a Recession,Bernard Ryan, Jr.,
AAAA, NY, 1999
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References

• 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 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
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References

• Autos
• 1975 - Chevrolet increased advertising for
  fuel-saving models, Ford reduced advertising by
  14. Chevys market share increased 2 and Ford
  did not regain share points for five years.
• 1978-79 - Ford learned their lesson and did not
  cut back because the import advertisers arent
  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
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Examples

• 1989 Vs. 91 - Jell-O, Crisco, Hellmans, 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
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2010 Example

• 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. PG'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/publication
s/?faArticles.showArticleart_aid133193
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What Strategies Work?

• TvB, 1990
• 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
  market share in recessionary or expansion
  periods.

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Advertising in a Recession Taking an Aggressive
Stance, TvB, New York, 1990
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What Strategies Work?

• DDB Needham, 1990
• The best advertising and marketing strategies
• 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.
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What Strategies Work?

• The wisest spending strategies
• 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.
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What Strategies Work?

• Special media buying opportunities
• 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.
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What Strategies Work?

• New product strategies
• 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.
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What Strategies Work?

• Cahners Report
• 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,
Cahners Advertising Research Report 2000.
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What Strategies Work?

• 1994 McCann-Erikson International Report
• 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, PG, the Olympics
• Give out samples.
• Attack the private label.
• Innovate
• Control distribution.
• Command a premium price.

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Game Theory

• 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 dont 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.

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Game Theory

• 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.

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Ephron

• Erwin Ephron, a leading expert on advertising
  buying and planning, writes
• Spending scarce ad dollars now to lift profits
  tomorrow is a tough sell because todays 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 its not how much
  you spend, its how much more than the
  competition you spend that makes the difference.

Recession fears call for strategy,
Advertising Age, March 2001
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Erwin Ephron

• Effective strategies in a slowdown
• Lower weekly weight rather than cutting weeks.
• Move weight to TVs lower priced time periods.
• Take advantage of a brands seasonal purchase
  patterns and move some national dollars into spot
  areas.

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Effective Strategies

• Keep weight (rating points, impressions) the
  same, switch to a new media mix.
• 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.

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Summary

• 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 its not how much you spend,
  its how much more than the competition you spend
  that wins.