Should advertising spend be cut during the recession?According to the Institute of Practitioners in Advertising Q4 Bellwether report, published in January 2009, 75% of UK companies in their survey are looking to make cut backs in advertising spending. All categories of marketing and advertising related expenditure was reduced in the last quarter of 2008, including online advertising, market research and PR. Some 20% of companies indicated, however, that they would be increasing advertising and marketing budgets in 2009. In previous recessions, advertising agencies have made a strong case for maintaining advertising levels, or even increasing it to gain market share. One study in 1990 (written by Stephen King) supported the case for increasing advertising spend on the basis that businesses which cut advertising spend did not see increased profitability, but organisation which increased advertising spend enjoyed higher market share, but also higher longer term profitability after the recovery.
There can be little doubt that companies, faced with the prospect of a sustained downturn in sales, will look to cut costs where they can. Lets assume the apparent market reality of flat, or declining spend on advertising. In this context, the question should be less about whether advertising spend should be cut, and perhaps more about how existing budgets can be directed to better effect. But how do you achieve that? Market research, of course!
The value of market research is not data collection or even insight, but how intelligence gathered about a market can be turned into better business decision making. These benefits mean market research should be indispensable to any organisation in the good times, but arguably, its even more important during challenging market conditions. In the good times brands which are not the best in the market, or companies which are not well run, still benefit from a buoyant market. Woolworths is a case in point. The store had been struggling for some years, undermined by superior competitor offerings and an increasingly tired, undifferentiated brand. It was not in great shape, but it nonetheless, struggled on. By the time the credit crunch had arrived its financial footing was already shaky, and as the recession gathered pace it was unable to weather the storm. However sad the demise of such an old brand is, the fact remains Woolworths was not well prepared for the recession.
Market research can make a significant difference to performance at the margins, between closely matched competitors. But in a recession, there is an overwhelming need to ensure basic performance around product, delivery and price are maintained.
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