The Importance & Value of B2B advertising during times of economic uncertainty

1. The Importance & Value of B2B advertising during times of economic uncertainty 2009

2. Introduction • History has shown that companies who either steadily continued or aggressively increased their advertising efforts during times of economic uncertainty: • Experienced overall growth of their businesses at the expense of their competition, who chose a more timid approach during times of economic uncertainty, and either cut back on or cut out their advertising budgets all together. • Experienced continual growth post the period of economic uncertainty (tracked post uncertainty for three years in most cases), and they gained a stronger position in their market and in the eyes of the buyer. • A survey conducted by BtoB Magazine amongst 162 B-to-B marketers has demonstrated that the importance of advertising during times of economic uncertainty has clearly resonated with marketers and is reflected in their planned spending in 2009.

3. 2009 ‘BtoB’ Survey Despite the current economic conditions, 29% of marketers indicate they will increase spending in 2009. Over 40% say that their 2009 budgets will remain the same as 2008. *Poll of 162 business-to-business marketers participating in a BtoB webcast during October 2008

4. ‘BtoB’ Survey Amongst marketers who plan to increase spending, business-to-business’s three key media platforms will each benefit *BtoB online survey of 684 business-to-business marketers conducted during the last week of January and first week of Feb. 2008

5. Yankelovich/Harris Study1 • In spite of a down economy, virtually all executives acknowledge the importance of keeping abreast of new products and services in their industry, and continuing to invest for the future. • Advertising in a down economy clearly creates a competitive advantage. The vast majority of executives agree that when they see a company advertising in a down economy: • It makes them feel more positive about the company’s commitment to its products and services1 • More importantly, it also keeps those companies top-of-mind when purchase decisions are made1 1 2001 Yankelovich Harris Study

6. Yankelovich/Harris Study % of execs who agree with below statements

7. Yankelovich/Harris Study % of execs who agree with below statements

8. Yankelovich/Harris Study Conclusions • More than 95% of executives maintain a high interest in learning about and investing in a new products and services even in a down economy • Over 85% of executives believe advertising in a down economy is extremely important • Executives react favorably to companies that advertise in a down economy: the companies stay top-of-mind and are viewed more positively • Executives are not about to let their guard down even during an economic downturn: they must stay current on what is new in the industry and must position their organizations for the future.

9. Proactive Marketing for better business performance • “The greater the proactive marketing of a firm during a recession, the better its a) Market performance and b) Business performance”1 • “Research on firm performance in hostile environments suggests that risk-taking may be necessary for survival and growth” • “Firms that invest aggressively in marketing send a reassuring signal of confidence to concerned customers about their staying power and provide an incentive for customers to switch from brands/firms that they perceive as weak” • During a recession, “reduction in input costs, combined with the increased marketing effectiveness of the proactive firm should result in improved business performance.” 1 Pennsylvania State University: ISBM Report, Raji Sriniva, Gary Lilien, and Arvind Rangaswamy, 2002

10. Proactive Marketing for better business performance • “Results confirm business press accounts of companies such as Dell, Microsoft, and BMW that view recessions as opportunities and exploit that perceived opportunity with aggressive marketing programs” • “Proactive marketing has a strong direct effect on market performance even during the recession and an indirect effect (through market performance) on business performance” • Surprisingly, “firms do not have to wait until a recession is over to realize benefits from the marketing investments they make during a recession”

11. Conclusions of Previous Studies • McGraw Hill Research’s Laboratory of Advertising Performance (LAP) analyzed the performance of 600+ business-to-business firms: those firms which maintained or increased their advertising expenditures “averaged significantly higher sales growth” during and for the three years following the recession compared to those which eliminated or decreased advertising • Firms which maintained or increased their advertising budgets during the recessionary period “could boast an average sales growth of 275 percent over the preceding five years” 1 • American Business Press Study: “Sales and profits can be maintained and increased in recession years and [in the years] immediately following by those who are willing to maintain an aggressive marketing posture, while others adopt the philosophy of cutting back on promotional efforts when sales appear to be harder to get.”2 1 McGraw Hill Laboratory of Advertising Performance (LAP): 1985 2 American Business Press: 1974 – ‘75

12. Conclusions of Previous Studies • Buchen Advertising Inc. tracked a ‘large number’ of business to business companies: sales and profits dropped off, “almost without exception”, at companies which cut back on advertising. Post recession, those companies continued to “lag behind” companies which maintained their advertising budgets.1 - Harvard Business Review report of 200 companies: largest sales increases reported by companies that advertised the most during the recessionary year.2 1Buchen Advertising Inc. 1949, ’54, ’58, ‘61 2 Harvard Business Review: 1923

13. Summary • Advertising aggressively in a recession can not only boost sales and market share, it can also open a lead on the more timid competition. It can skillfully reposition a product to take advantage of new purchasing concerns, give the image of corporate stability within a chaotic business environment, and give an advertiser the chance to dominate the advertising media.

14. Summary When times are good, you should advertise. When times are bad, you must advertise.