Should I Stop Advertising?

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People are asking me if they should cancel their advertising until things get better. In a word, “No!” I say, “If you are not advertising already, now is the time to get started!”

The closest historical event to the current COVID-19 pandemic is the Great Depression.

The Great Depression was the worst economic downturn in the history of the industrialized world, lasting from 1929 to 1939. It began after the stock market crash of October 1929, which sent Wall Street into a panic and wiped out millions of investors.

Over the next several years, consumer spending and investment dropped, causing steep declines in industrial output and employment as failing companies laid-off workers. By 1933, when the Great Depression reached its lowest point, some 25% of Americans were unemployed, and nearly half the country’s banks had failed.

The country’s industrial production dropped by half. Bread lines, soup kitchens, and rising numbers of homeless people became more and more common in America’s towns and cities. Farmers couldn’t afford to harvest their crops and left them rotting in the fields while people elsewhere starved. In 1930, severe droughts in the Southern Plains brought high winds and dust from Texas to Nebraska, killing people, livestock, and crops. The “Dust Bowl” inspired a mass migration of people from farmland to cities in search of work. It took a world war to put Americans back to work.

Here is a story about how two competitors, Kelloggs and Post, who were competing for the same market, decided to take two different paths when responding to the Great Depression.

Before the Great Depression, most Americans preferred oatmeal or cream of wheat over the ready-to-eat cereals from Kellogg and Post. The two companies fought each other with promotions, merchandising, and massive amounts of advertising to dominate the new emerging packaged cereal market.

But when the economy collapsed, Kellogg and Post decided to take very different paths.

Post did the predictable thing: It slashed expenses and cut back on advertising.

But Kellogg doubled its advertising budget. The company started to spend more aggressively on radio advertising, and they promoted their brand new cereal, Rice Krispies. (Snap, Crackle, and Pop first appeared in the 1930s.)
It didn’t take long for Kellogg’s new advertising strategy to pay off.

By 1933, even as the economy reached the lowest point, Kellogg’s profits had risen almost 30 percent, and Kellogg became what they are today, the market leader.

There are many other examples throughout history where one competitor cut back when times were hard, and the other became more aggressive. The company that stayed in the fight always comes out ahead.

Economist Roland Vaile found in 1927, that firms that kept ad spending stable or increased it during the recession of 1921-22 saw their sales hold up significantly better than those who didn’t.

Another study of advertising during the 1981-82 recession found that sales at firms that increased advertising or held steady grew precipitously in the next three years, compared with only slight increases at firms that had slashed their budgets.

A McKinsey study of the 1990-91 recession found that companies that remained market leaders or became serious challengers during the downturn had increased their acquisition, R. & D., and ad budgets, while companies at the bottom of the pile had reduced them.

There is abundant evidence that the smarter strategy is to keep advertising.

  • When you cut back your advertising, you make more room in the consumer’s mind for your competitor’s message. They can reposition their brand without you in the way.
  • In many cases, advertising prices decline; it becomes a “buyer’s market.”
  • When you cut back on your advertising, your brand image begins to face from memory. You begin to lose your mindshare, the portion of the market that thinks of you first. Loss of mindshare leads to loss of market share.

When everyone is advertising, it’s hard to separate yourself from the pack; when your competitor cuts back, the return on your advertising investment rises.

When the founder of Wal-Mart, Sam Walton was asked, “What do you think about the recession?” He said, “I thought about it and decided not to participate.”

Don’t make a costly mistake by cutting back on your advertising. Hang in there. The companies that stay in the market are the ones that see long-lasting gains in sales and market share.

Please let me know if I can help.

Spike SanteeShould I Stop Advertising?

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