Against the tide.(SPECIAL REPORT: SUCCEEDING IN CHALLENGING TIMES)(economic development)

We are operating in unchartered waters: consumer demand is falling and business revenues are declining. The stock market is a volatile bear. About the only things rising are bad things: unemployment and bankruptcies.

Conventional wisdom suggests that businesses go into a survival strategy by cutting costs across the board. But beware of any conventional wisdom that tells you to swim with the current, for only the dead fish do so. Live fish swim against the tide, upstream.

What does this mean? That there is a hidden opportunity for you to grow and gain market share in this down economy. How? There is compelling research evidence that companies that increase their advertising expenditures during economic downturns gain market share during the recession and for several years afterwards. Here are some examples.

In a study of U.S. recessions, McGraw-Hill Research analyzed 600 companies between 1980 and 1985. It found that firms that maintained or increased their advertising expenditures during the 1981-1982 recession averaged significantly higher-sales growth both during the recession and for the following three years. By 1985, sales of companies that were aggressive recession advertisers had risen 256 percent over those that didn't keep up their advertising. (1)

"In a study by the American Association of Advertising Agencies in 2004, nearly 2,700 firms across three industries--consumer, industrial and service--were analyzed on ad spending and financial performance in both expanding and receding economic periods ... according to the study, increased advertising in an economic downturn or recession has greater benefits than increased spending in a period of economic expansion". (2)

A jointly-sponsored ABP/Meldrun and Fewsmith study of the 1970 recession showed "sales and profits can be maintained and increased in recession years and in the years immediately following by those who are willing to maintain an aggressive marketing posture while others adopt the philosophy of cutting back on promotional efforts when sales appear to be harder to get." (3)

A follow-up 1979 study by ABP/Meldrun and Fewsmith confirmed "that companies that did not cut advertising expenditures during the 1974-1975 recession experienced higher sales and net income (during those two years and the two years following) than those companies that cut in either or both recession years." (3)

MarketSense studied the 1989-1991 recessionary period: "Jif peanut butter raised ad support and sales went up 57 percent; Kraft salad dressings increased advertising and saw a rise of 70 percent. In the beer category, overall spending was down 1 percent while Bud Light and Coors Light, each spending ahead of the category, saw sales increases of 15 percent and 16 percent respectively. Pizza Hut sales rose 61 percent and Taco Bell's 40 percent, thanks to strong advertising support ..." (3)

Bruce Barton, member of the Advertising Hall of Fame put the exclamation mark on these observations with his statement: "In good times people want to advertise, in bad times they have to."

If you are a franchisor or franchisee, find a marketing company that can help you profile and segment your customers. Based on the results, they would design an integrated multi-channel advertising program for your system as appropriate. It may include print, Internet and mobile phone elements. Make sure they first test the proposal in a few markets to determine its effectiveness before rolling it out. Effectiveness here means return on investment, the amount of dollars in sales generated by each dollar spent on advertising. ROI should be calculated for each campaign along with a complete campaign evaluation to see what improvements can be made for the next period.

The opportunities are there, hidden in plain view by the flood of bad economic news. You can gain market share from the competition: go against the tide and step up your advertising during the economic downturn.

Note: Sources compiled by Mercer Island Group, a Seattle area strategy consulting firm.

Sources of Information

(1) www.integratedresourcemgmt.com/a dvertising.html

(2) Empower Media Marketing Blog Article: "Investing in Advertising During Economic Downturns," February 22, 2008

(3) www.sddt.com/commentary/article.cf m?commentary_ID= 22 & SourceCode = 20010502tbi

Godfred P. Otuteye, CFE

President and CEO

Money Mailer LLC

Godfred Otuteye, CFE, is president and CEO of Money Mailer, LLC. He can be reached at 714-889-3839 or gotuteye@moneymailer.com.