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Why Now's Not the Time to Skimp on Advertising

  • Why Now's Not the Time to Skimp on AdvertisingThe Find: In a downturn everyone's instinct is to cut costs, but here's why spending more on ads may actually be the smart play when the economy heads south.
  • The Source: An article in Knowledge@Wharton.
The Takeaway: It's tough times out there for managers and many are sure to be eying the advertising budget and sharpening their knives. It's an understandable response but one that the experts at Wharton say might be a wasted opportunity. Remember, everyone else is your industry has the same idea and their budgetary slash and burn tactics may leave an opening in the business jungle in which your company can thrive.

Wharton marketing professor Peter Fader notes that "as companies slash advertising in a downturn, they leave empty space in consumers' minds for aggressive marketers to make strong inroads." If there's less advertising overall competing for consumers' attention, than your message is more likely to be heard. Plus, there's another bonus for those advertising during a slump:

According to Wharton marketing professor Leonard Lodish, with demand slack for advertising services, the cost of these services goes down, making advertising expenditures all the more defensible in a bad business climate. "If your company has something to say that is relevant in this environment, it's going to be more efficient to say it now than to say it in better times."
That's two good reasons to think twice before cutting your ad budget. Want a third? Research shows that companies that advertise consistently through a downturn do better when the economy recovers than those that cut back. One study during the '81-'82 downturn found that companies that advertised aggressively during the recession had sales 256% higher than those that did not continue to advertise.

The Question: Advertising budget: cut, expand or hold steady?

(Image of advertising billboard by Mr Fix It, CC 2.0)