A Closer Look at the Purging Powers of a Recession in the Advertising Industry.
By Denisse Cobian, Communications Specialist
As the old cliché goes, there truly is a silver lining to every sadistic and depressing rain cloud. It may sound like a cruel joke for those of you suffering from the newly announced 9.5% unemployment rate, but this economic slump will actually provide a much needed purging of many obsolete business practices. The new economy that emerges will be stronger and more capable of keeping up with the 21st century’s vast advances. How am I so confident of this, you ask? Well, dear reader, the fact is that business, like history, repeats itself.
Consider the economic downturn of the 70’s that so much resembles today’s. A study of the 1974-75 recession revealed that companies who did not cut their advertising budgets went on to increase their sales by more than 200% only two years later! On the other hand, sales from those companies who did cut their advertising budgets had gone up by only 50% in that same time (Warschawski, MediaWeek, August 2008). This may seem a drastic contrast, but it actually makes perfect sense.
During a recession, while many businesses cut spending, the usual marketing clutter and noise from competitors is minimized. The resulting market setting leaves those businesses who do continue to advertise with a greater share of voice and a more captive audience. What many businesses forget is that recession or no recession, consumer behavior is still the same- consumers will continue make purchasing decisions based on brand preferences heavily rooted in advertising.
Advertising is necessary to remind consumers of a brand’s presence in the market, and losing share of mind will drastically affect sales in every industry. The end result of haphazardly cutting ad spending is losing even more customers than a recession alone would have lost. Furthermore, once the recession is over, these already faltering companies will be faced with having to spend more time and money in an attempt to regain the consumers they lost.
Flash forward to today. In an attempt to reduce costs, over 3000 car dealerships have stopped advertising all together- a move which is invariably to their detriment. I see the same sad and predictable story unfold itself on my drive to work down the 405 every day when I pass 3 empty lots where car dealerships used to be. Yes, a recession means businesses and advertisers have to tighten their proverbial belts and spend less, but they must also learn to spend smarter to get the same (or better!) results at lower costs.
In this new and fast-evolving 21st century world heralded by the development of technology like the iPhone and Twitter®, advertisers must adapt their budgets and tactics to the shifting expectations of both businesses and consumers. Savvy marketers are beginning to appreciate the value of highly personal marketing. Now easily accessible through the web of social media networks, more and more companies are lurking in the micro-blogosphere, waiting, listening, and making direct contact with individual consumers.
Twitter, for instance, is the reigning marketing buzz word. Many businesses currently employ the search feature to look for those users already talking about their company. The most proactive companies use these mentions (rants or raves) as opportunities to send coupons, free meal vouchers, or simply to thank consumers for their support. Personal attention delivered to a businesses’ “Tweeps” (Twitter-People) usually results in the ever -coveted “retweet” (RT), AKA free word of mouth marketing. Other networks, such as Facebook, Myspace, and the highly anticipated Google Wave are also excellent tools for businesses to make personal connections with their valued consumers.
… And herein lays the promised silver lining to our dark cloud. Our gloomy recession will actually serve the advertising industry by eliminating outdated marketing strategies! This purging will help reinvigorate the industry and make it collectively stronger once Uncle Sam finds his way out of this financial hole. Marketing strategies are being put to the ultimate test in a climate where retention and effectiveness are now expected to be proven before a media planner is willing to invest.
Media such as newspapers and magazines that are on a steady decline find themselves pitted against newer nontraditional media like digital signage and especially the infamous internet (which most newspapers are realizing is no longer just a threat, but the Grim Reaper of their print existence). This, however, is not a reaping of the industry as a whole; it is a weeding of the weak. All platforms will have to evolve to prove their relevance in the market, or lose their presence in it.
In the calm after the storm, only the most proficient and well adapted marketing and business practices will be left standing. The new marketplace will be one filled with innovators and free thinkers who will take the advertising industry to levels of creativity and efficiency it has never seen! Survival of the fittest by any means necessary may seem a callous and borderline Machiavellian take on today’s business challenges, but we must admit that after the recession’s storm has passed, the advertising industry will emerge a stronger beast.