Advertising Strategies In a Slowdown

1. Advertising Strategies In a Slowdown

2. Here’s What Some Advertisers Say In a Slowdown/Recession • “We’re cutting back on our advertising during the current slowdown.” • “Business is awful and I’m cutting back my expenses.” • “I can’t keep my advertising up while I’m laying people off.”

3. Here’s What Research Tells Us About Advertising in a Slowdown • Don’t cut back advertising, you’ll lose market share. • If you lose market share, it takes a long time and a lot more money to gain it back. • Increase advertising during a recession and gain market share now and five years out as competitors cut back.

4. References • 1927 - Roland Vaile in the Harvard Business Review reports biggest sales increases by companies that advertise the most. • 1949-54, 1958-61 - Buchen Advertising study showed sales and profits dropped when advertising was reduced and continued to lag for several years after recessions ended. • 1974-75 - ABP/Meldrum & Fewsmith study showed companies that did not cut advertising had higher sales for two years and for two years after recession ended. 1 1 1 1. Advertising in a Recession,Bernard Ryan, Jr., AAAA, NY, 1999

5. References • 1981-82 - McGraw-Hill Research Laboratory of Advertising study showed firms that maintained or increased ad expenditures averaged significantly higher sales growth during the recession and for the following three years. • 1990 - WPP Groups, Center for Research & Development study found that recessionary periods offer a unique opportunity for companies to build share and position themselves advantageously for a recovery. 1 1 1. Advertising in a Recession,Bernard Ryan, Jr., AAAA, NY, 1999

6. References • Autos • 1975 - Chevrolet increased advertising for fuel-saving models, Ford reduced advertising by 14%. Chevy’s market share increased 2% and Ford did not regain share points for five years. • 1978-79 - Ford learned their lesson and did not cut back because “the import advertisers aren’t cutting back” and Ford increased spending to maintain market share, especially against Chrysler, which cut back advertising and lost market share. 1 1 1. Advertising in a Recession,Bernard Ryan, Jr., AAAA, NY, 1999

7. Examples* • 1989 Vs. 91 - Jell-O, Crisco, Hellman’s, Green Giant, and Doritos saw sales drop by as much as 24-26% after reducing advertising. • 1989 Vs. 91 - Jif raised advertising and sales went up 57%, Kraft salad dressing raised promotion and sales went up 70%. • 1989 Vs. 91 - Bud Light and Coors Light both spent ahead of category and sales went up 15% and 16%. 1 * Advertising in a Recession, Bernard Ryan, Jr., AAAA, NY, 1999

8. 2010 Example * • Procter & Gamble, the world's largest advertiser, stepped up global ad spending by $1 billion over the 12-month period ending June 30, 2010. The bulk was in the last six months, fueled by support for new product innovations and an investment in Olympic-themed marketing in February. • For the fiscal year concluding June 30, global ad spend was as much as $8.7 billion, leading to a 20% jump in impressions, the company said. P&G's ad spending was about 10% of sales -- its usual range -- but higher revenues led to the dollar increase. * Media Post. http://www.mediapost.com/publications/?fa=Articles.showArticle&art_aid=133193

9. What Strategies Work? • TvB, 1990* • A market needs stimulation, particularly when it is weak. • Recession periods provide an opportunity for increasing market share by being aggressive. • Increasing media expenditures does not hurt the short-term bottom line and enhances long-term profitability. • Budget-cutters hurt their chances to improve market share in recessionary or expansion periods. 2 Advertising in a Recession: Taking an Aggressive Stance,” TvB, New York, 1990

10. What Strategies Work? • DDB Needham, 1990* • The best advertising and marketing strategies • Consumers are looking for reassurance during recessions, craft marketing strategies that allow buyers to feel they are minimizing risk because risks are uppermost in consumers’ minds. • Brand equity is particularly valuable in reducing consumers’ uncertainty and seeking of security. • Conduct research on consumer attitudes and motivations for buying discretionary and luxury items. * Advertising in Recessionary Times, DDB Needham, Chicago, 1990.

11. What Strategies Work? • The wisest spending strategies* • Continue to finance advertising and gain a significant competitive advantage. • Adopt an aggressive marketing strategy because of a softer competitive arena. • In a declining market, monitor market share, not just sales volume. Everyone will lose some sales volume as market shrinks, but those who can maintain or increase market share will emerge much stronger. Advertising in Recessionary Times, DDB Needham, Chicago, 1990.

12. What Strategies Work? • Special media buying opportunities* • Enlist cooperation of media sellers. Share you budget information and be open to “fire sales.” • Some of the best deals are available in a slump. • After the realities of slower markets set in, some price benefits may dissipate, so take advantage of deals when they are offered, not after price floors are reached -- because they will rise from there. • Negotiate options or continuation rights and get guarantees of favorable prices or terms. Consider sacrificing short-term gains for long-term gains. 3 *Advertising in Recessionary Times, DDB Needham, Chicago, 1990.

13. What Strategies Work? • New product strategies* • Slowdowns are not bad times to introduce new products and be first mover against weakened competition. • A product that has the necessary components for success - benefits that are unique and relevant, properly priced, and ably marketed - is likely to be successful whenever it is marketed. *Advertising in Recessionary Times, DDB Needham, Chicago, 1990.

14. What Strategies Work? • Cahner’s Report* • Maintain your planned level of advertising while your competitors are cutting back. • Maintain continuity to sustain awareness. Advertising works cumulatively. People forget rapidly without frequent reminding. • Concentrate to dominate. Dominance is the product of impact and frequency. It can be achieved by concentrating advertising… The law of diminishing returns is very much in force... 4 *The Role of Advertising in Uncertain Times, Cahner’s Advertising Research Report # 2000.

15. What Strategies Work? • 1994 McCann-Erikson International Report* • Accentuate the positive. In the 1989-93 recession Heinz increased marketing support to 9% of worldwide sales and reduces prices on key brands. • Think corporate. Guinness and Cadbury developed strong corporate campaigns to reassure consumers in purchase decisions. • Increase spending, increase share of voice. • Achieve media efficiency. • Market to your constituency. * McCann-Erikson Research & Information Consultancy BrandTrack #3, 1994

16. Keep your friends with data-based CRM marketing. • Hang in there with your agency. All 18 leading brands reviewed their long-standing relationships with their agencies and stayed with them. • Start sponsoring. Kellogg, cycling events, Haagen-Dazs, art exhibits, Nescafe radio programs, P&G, the Olympics • Give out samples. • Attack the private label. • Innovate • Control distribution. • Command a premium price.

17. Game Theory • In 1928 John von Neumann, 25, invented game theory while playing poker. • He played the mathematical probabilities until someone bluffed and won. • He suddenly realized that to win, you don’t play based on your knowledge of probabilities, but on your knowledge of your competitors’ psychological needs and behavior patterns. • The new science of game theory was born.

18. Game Theory • Game theory suggests that your strategic moves should not be made according to the probabilities of success in an actual situation, but according to what moves your competitors make. • Game theory suggests that you assess the probabilities of the moves your competitor will make and then assess the probable success of your counter moves.

19. Ephron • Erwin Ephron, a leading expert on advertising buying and planning, writes: * • Spending scarce ad dollars now to lift profits tomorrow is a “tough sell” because today’s stock markets “take no prisoners.” • But because a higher share of voice will result in a higher market share, hard times present the perfect “now-or-never” opportunity. • Share of voice as driver means it’s not how much you spend, it’s how much more than the competition you spend that makes the difference. * “Recession fears call for strategy,” Advertising Age, March 2001

20. Erwin Ephron • Effective strategies in a slowdown: • Lower weekly weight rather than cutting weeks. • Move weight to TV’s lower priced time periods. • Take advantage of a brand’s seasonal purchase patterns and move some national dollars into spot areas.

21. Effective Strategies • Keep weight (rating points, impressions) the same, switch to a new media mix. • Increase reach. • Invest less -- save money in more efficient media. • Optimizers are available to help you plan an effective and efficient media mix using online advertising.

22. Summary • If you cut back advertising in a slowdown, you will lose market share. • Market share once lost is difficult to gain back. • Brand equity can reassure consumers. • Game theory suggests that what matters is how you anticipate what your competitors do. • Ephron advises that it’s not how much you spend, it’s how much more than the competition you spend that wins.