It seems illogical to increase your advertising budget when everyone else is cutting back or sales are softening, but during all past economic downturns, the clever companies that increased spending ended up better off after the crisis.

Times are tough and advertising budgets are being slashed

The chart below illustrates that companies are severely curtailing their spending. It’s been brutal for advertising outlets and media, and for the creative industry overall. It’s a natural reaction for companies to pull back on marketing and
advertising during down times. Nonetheless, it’s short-sighted and often motivated by a defensive mindset that may help the bottom line in the short term, but weakens it in the long run.

Source:http://www.comradity.com/comradity/2009/10/when-ig...

Clever companies are spending more

A quick google search online will uncover many articles and blogs dedicated to this topic. It’s no wonder, since times are difficult all over. And all the articles agree that companies that enter a recession or depression with a reasonably healthy balance sheet, and who increase marketing instead of recoiling, fare far better during and after the economic slow down. In fact, often these companies become industry giants because of it.

The concept is relatively easy to grasp; even when times are tight, people don’t completely stop spending. They simply look for better bargains. When companies slow or stop their ad spending, they vanish from the consumer’s mind too. And even if they don’t disappear completely, subconsciously, consumers begin to entertain doubts about them; they perceive the brands as weak or fading, and will often gravitate to the competitor who is maintaining or increasing their ad spending. It’s simple really - if two people are talking to you, and one stops and leaves the room….you’re only going to listen to and be influenced by the one who stays and continues talking.

Some Depression-Era Examples

Proctor and Gamble is the quintessential prototype. Founded in late 1837, it has successfully navigated many economic turmoils throughout its history. During the Great Depression, Proctor and Gamble won even more business and consumer mindshare by increasing their advertising when competitors cut back. They embraced new advertising outlets such as radio, and pioneered novel marketing concepts, essentially creating the entertainment genre of soap operas. This philosophy continues today: P&G does not reduce advertising budgets during tough times. If anything, they increase them.

Chevrolet ousted Ford as the automotive industry leader. Even though Ford outsold Chevy 10 to 1, by 1931, due to increased advertising (and Ford’s lack of it), Chevrolet became the dominant car maker. Though I’m sure if you consider today’s landscape, they’re not a great example… but that’s another story. 

Camel Cigarettes was the market leader in tobacco, but faced increased competition from Lucky Strike and Chesterfield cigarettes. Camel countered with more advertising, and it’s aggressive response paid off, as they regained the top position in 1935. Advertising turned the tide.

Some Recession Examples

But success stories aren’t limited to the depression - many of today’s most successful companies were founded and thrived during deep recessions because they were smart fiscally and marketed wisely.

The moral of the story

Provided you’ve managed your business well and planned for the eventual rocky future times like today ñ the time to act is now. Spend wisely, but spend more during these tough times and you can catapult ahead of your competition. Be sure to fight the urge to recoil and circle your financial wagons. Don’t cut your marketing budgets, and don’t stop advertising. You can’t sell something if no one knows it’s for sale.

Remain steadfast, but be cunning and think creatively - look for opportunities that offer you more bang for your marketing buck. As you keep investing in advertising when others are not, the chart above shows, desperate media outlets will offer you aggressive deals to get your ad dollars - so you’ll win even more as you can get more for less. Keep advertising and you’ll be the voice that your consumers hear and remember - so that when things turn around, you’ll be the leader of the pack.

References:

1.   http://money.cnn.com/galleries/2009/smallbusiness/0901/gallery.founded_in_a_recession.smb/index.html
2.  http://www.imediaconnection.com/content/20821.asp
3.  http://www.insidecrm.com/features/businesses-started-slump-111108/
4.  http://www.thebigmoney.com/articles/judgments/2009/02/26/survivors?page=full
5.  http://www.inc.com/magazine/20080501/starting-up-in-a-down-economy.html