Live

Watch CBSN Live

Don't Cut Ads in a Downturn: Wharton

As a child, I spent a lot of time in the woods -- either in the Appalachians or in the swamps of the Southeast. I remember what woodsmen used to tell us. When you hear the rattlesnake rattle, just don't run willy-nilly because you might end up with Mrs. Rattlesnake instead of her husband.

The same principle applies during bad times with business. When you are facing revenue downfalls and are forced to make cuts, just don't rush to make them because you could end up in an even bigger pickle.

Experts at the Wharton School at the Univesity of Pennsylvania issue the same kind of warning in a new report urging executives not to slash their advertising budgets when tough times hit. "The reaction is to cut, cut and advertising is one of the first things to go," says Marketing Professor Peter Fader.

One example is a McGraw-Hill study of 600 companies from 1980 to 1985. Those that didn't cut their ad budgets during the 1981-82 recession had significantly higher sales after the recession ended. In fact, they had sales that were 256 percent higher than those that aggresively chopped ad expenditures.

More recently, the Martin Agency in Richmond, Va. did not specifically have the current recession in mind when it came up with the "Save Money, Live Better" slogan for Walmart, but it seems spot on these days.

The point, however, is not to cut advertising but to consider changing the message when appropriate. For instance, LG Electronics, the maker of large flat screen TVs, is backing away form it's "Life's Good" slogan since obviously that may no longer be the case. It's a wise choice, says Wharton Marketing Professor John Zhang.
Advertising, like sales, is the lifeblood of any firm. If you cut them, you get weaker. Or get nailed by Mrs. Rattlesnake.

View CBS News In