Keating Magee
Research and Historical Precedence
Penn State’s Smeal College of Business conducted the most recent and definitive study on marketing in a recession in 2005 – “Turning Adversity into Advantage: Does Proactive Marketing During a Recession Pay Off?” The researchers interviewed 150 senior marketing executives from a variety of industries and used the 2001-2002 recession as the context. They found that “for well-positioned companies, an economic recession should not prompt marketing cutbacks, but rather an aggressive increase in marketing spending to achieve superior business performance.” 2 Companies that enter the recession with a “pre-established strategic emphasis on marketing; an entrepreneurial culture; and a sufficient reserve of under-utilized workers, cash, and spare production capacity are best positioned…to strengthen their competitive advantage.” 3
Similarly, a McGraw-Hill study examined close to 600 businesses from 1980 to 1985 and found that “business-to-business firms that chose to maintain or raise their level of advertising expenditures during the 1981-1982 recession had significantly higher sales after the economy recovered. Specifically, companies that advertised aggressively during the recession had sales 256% higher than those that did not continue to advertise.” 4 The chart below demonstrates the post-recession success of businesses that did not cut advertising during the recession. Year one represents 1980 and year five represents 1985, while the numbers on the y-axis represent the percentage of sales growth. 5
These results are not new – research studies throughout the past sixty years have found similar results.
- In 1947, Buchen Advertising began tracking advertising spends versus sales trends and was able to measure these figures before, during and after the recessions of 1949, 1954, 1958 and 1961. It found that sales and profits decreased for companies that reduced advertising, and discovered after the recession these same companies continued to see slower recoveries than those who had retained their ad budgets. 6
- A jointly-sponsored ABP/Meldrum & Fewsmith study of the 1970 recession showed that "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.” A follow-up 1979 study revealed “that companies that did not cut advertising expenditures during the 1974-75 recession experienced higher sales and net income (during those two years and the two years following) than those companies that cut in either or both recession years.” 7
- Cahner’s Publishing Company and the London-based Strategy Planning Institute released a January 1982 report that demonstrated that businesses that spent more in recessionary periods tended to gain a greater share of market. 8
- During the recessionary period of 1989-1991, MarketSense compared 101 household name brands. JELL-O, Crisco, Hellmann’s, Green Giant and Doritos cut back spending and experienced decreased sales by as much as 26 to 64%. However, Jif peanut butter raised ad support and sales increased 57%; Kraft salad dressing increased spending and experienced a rise of 70%. In the beer category, spending dropped 1% overall, while Bud Light and Coors Light, spending ahead of the category, saw sales increases of 15% and 16% respectfully. Pizza Hut’s sales rose 61% and Taco Bell’s rose 40% due to strong advertising support.
- A Yankelovich/Harris study surveyed 505 executives in 2001 and concluded, “Advertising in a down economy clearly creates a competitive advantage.” Of the respondents, 86% of the executives felt that a company advertising in a down economy keeps them top-of-mind when making purchasing decisions, and they felt more positive about that company’s dedication to its products and services. 9
2 “Research: Proactive Marketing During a Recession.” Penn State Smeal College of Business. March 29, 2005.
3 Ibid.
4 “The Importance and Value of B2B Advertising during Times of Economic Uncertainty.” American Business Media – Association of Business Information Companies; 2008.
5 Ibid.
6 “When the Going Gets Tough, the Tough Ramp Up.” Alf Nucifora. San Diego Daily Transcript. 5.2.01
7 Ibid.
8 Ibid.
9 “The Importance and Value of B2B Advertising during Times of Economic Uncertainty.” American Business Media – Association of Business Information Companies; 2008.
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