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In an ailing economy many companies cut their spend on advertising and promotion. But it’s a major mistake. Recently, the Financial Times ran a campaign with bill-boards stripped back to the bare boards but with just a small panel of copy which asked: “Global downturn. What’s the first mistake businesses make?”

Readers are referred to a page on the Financial Times web site www.ft.com/budgets which presents highlights from independent studies. They provide evidence that advertising during a downturn provides increased share of voice, increased market share and greater success and profitability at the end of a recession.

McKinsey study:

• Companies who increased their spend in a recession were the only ones whose profits rose substantially when the economy recovered.

Patrick Barwise, London Business School Professor of Management & Marketing:

• The advantages of maintaining or increasing marketing effort are greater than the short-term benefits of reducing spend.

Hillier analysis of 1,000 companies on the PIMS (Profit Impact on Market Strategy) database after the early 1990s recession:

• The companies who had cut their marketing budgets saw ROCE (return on capital employed) decline by 0.8% after the recession.
• Those who increased their marketing activity saw an increase of 4.3%.

McGraw-Hill research, analysing 600 companies from 1980-1985:

• The sales of companies who had kept advertising during the 81-82 recession had risen 256% over those who had not.

In every recession of the past 90 years independent studies show that the businesses who increase their advertising spend are the ones who survive the tough times and thrive afterwards.

Source: The Financial Times

11/12/2009

12/05/2010