If Times Are Good, Promote. If Times Are Bad, Promote HarderBy: Andy Marken
Most economists agree that it will take quite a while to stimulate the economy, regardless of what the Bush administration does. This has led management to cut back their promotional budgets.
On the surface it appears logical. After all, inflation and fewer sales mean lower net income. In addition, the paring of this "discretionary expense" is relatively simple and has very little negative impact as far as management is concerned.
But before you wade into your promotional budget with a massive red pencil, ask yourself a prudent question: How much should I cut from the promotional (advertising, sales support and PR) budget?
To answer this, also ask yourself:
Investing in Long-term Objectives
Advertising is an investment in both immediate sales and long-term objectives. It helps you retain your share of market/image among your customers and prospects. It reinforces customers' commitment in doing business with you.
Professional marketers and retailers look at advertising not as an expense, but as an integral part of their total marketing mix. This means that, if it is at all possible, they maintain an aggressive advertising policy. They know that promotion has a favorable effect on sales and income.
Today, there is a volume of data which indicates that during recessions or other "difficult" times, the firms that trim their advertising budgets suffer--and suffer hardest.
Additional research conducted to determine a method of predicting sales from advertising found that companies that accelerate advertising spending during market slumps perform better in both the short- and long-term. For instance, researcher Vernon Van Diver studied over 10,000 companies in about 800 business papers to find a relationship between advertising behavior and subsequent sales.
He found two interesting patterns:
Other researchers such as Charles Mill, of BPA, and Wes Rosberg, of Meldrum & Fensmith Advertising, have drawn conclusions similar to Van Diver's. Certain relationships between advertising and sales have been proven time and time again:
Using these principles, Van Diver conducted an additional study of 100 businesses. He made predictions six months or more before earnings and sales were disclosed. On the average, his predictions were within one percent of the actual figures.
In a similar study, it was found that over a one year period organizations that did not cut back ad spending enjoyed handsome increases in both sales and net profits the next year. Sales were up an average of 55 percent and net profit was up 40 percent over the base year.
Advertisers who cut back ad expenditures experienced no real growth during the period and their net profits could not keep pace with that of consistent advertisers.
A Competitive Edge
Company management should exploit opportunities which lead to an ever-greater competitive edge. If you want to be an industry player, present yourself as one. Don't wait to place advertising until it seems like all of the marketing variables are right.
By waiting, you provide the competition with the same opportunities and as a result, you all start out on an even footing.
A better alternative is to move forward on your publicity while the competition is pulling in its horns. In good times and bad, make your choices based on the following conclusions:
© Copyright 2003, G.A.Marken, Marken Communications
The author assumes full responsibility for the contents of this article and retains all of its property rights. MarcommWise publishes it here with the permission of the author. MarcomWise assumes no responsibility for the article's contents.