Why Increasing Your Ad Budget During a Recession is a Good Idea
Jul 23 2020

Why Increasing Your Ad Budget During a Recession is a Good Idea

By: McKenna Smith

Another economic recession is on everybody's mind as businesses attempt to navigate their way through the novel coronavirus and is effects. However, according to Forbes.com, when the economy does take a dive, businesses should still be willing to advertise, and here's why.

Typically, in a recession, businesses reduce their ad spending budget in an attempt to cut costs. In the 2008 recession, ad spending was down in the U.S. by 13 percent. Yet a number of studies point to the advantages of increasing ad spending in an uncertain economy.

Businesses that maintained or increased their ad-spending budgets subsequently boosted both sales and market shares during the last economic turndown and afterwards.

Here's a few reasons companies should continue advertising—even in a recession:

1. The cost of advertising is usually reduced during an economic decline, and this creates a "buyer's market" for brands.

2. If the "noise level" is low for a particular category or product, it can create an opening for new competition to emerge or old competitors to assert themselves.

3. Consumers can look to brands that maintain advertisements as a sign of stability in unreliable times.

4. Finally, if the brand is no longer advertising, it loses the so-called "share of mind" of its consumers, and that has the potential to damage current and future sales.

There are several examples of companies who are under economic duress but have successfully increased their profits by using this advertising strategy, namely cereal giant Kellogg. During the Great Depression, the company increased their ad spending, while their rival cut back. The company's profits grew by 30 percent, and the brand has been the industry leader for decades.

Companies can additionally employ other marketing strategies, including short-term incentives or an adjustment of the company's message to combat economic decline.


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