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Slowdown prompts ad cuts, but does it make sense long term?

When the economy goes sour, businesses are often forced to run leaner and trim costs. And, usually one of the first places they look is their advertising budget.

However, the advertising industry says that strategy in the long run carries a heavy price tag. It says advertise more, not less, during lean economic times, and they have numbers to back up their claim.

One example is a Yankelovich Partners and Harris Interactive business-to-business study that found 85% executives believed advertising during hard times provided many returns, especially keeping them on the minds of buyers. In short, advertising when it is not easy builds customer loyalty and gives the company an advantage when the economy eventually turns around.

Greater opportunities

While an ailing economy presents challenges, it also creates opportunities. When the competition cuts back, it leaves a less cluttered playing field on which to operate. Advertisers have more of the floor to themselves, and their message cuts through more clearly, says Philip Shirley, president and CEO of the advertising firm GodwinGroup in Jackson.

“There is study after study that shows advertising in difficult economic times pays,” Shirley says. “Real growth companies hold steady with their advertising when others cut back, gaining exposure and market share. It’s a short-term investment that yields long-term benefits.”

Shirley said GodwinGroup is currently having one of its best years, though he admits he is watching the economy closely. But for now, his firm’s clients largely realize that now is the best time to tell their story.

“Our clients understand that difficult times are when their clients most want to hear from them,” he adds. “The customers are saying, “Okay, I’m loyal to you; now, talk to me.’ Customers want to know you’re still there, still thinking of them.”

Liza Looser, CEO of The Cirlot Agency in Jackson, says dropping your marketing efforts in bad times is too costly to contemplate.

“Advertising and marketing creates momentum,” she says, “and if you stop it, you stop the ball rolling.”

She says studies show that if a company stops its advertising/marketing efforts, it takes twice the effort — and expense — to get it restarted.

“Cut marketing, and people don’t hear from you,” she adds. “Your losing the investment you have already made, and are going to find it harder and more expensive to pick it back up.”

Going virtual

While advertising professionals say companies should maintain and even increase their marketing budgets during hard times, they do believe that this often requires a shift in attack.

Shirley says he is seeing a shift to promotional opportunities, such as sponsoring sporting events, as well as utilizing social network marketing. Both allow the advertiser to reinforce their shared values with their customers.

One media that both Shirley and Looser point to is the Internet. The current economic downturn is the first since the web gained its immense popularity. Online advertising, they say, is a great, inexpensive way for companies of all sizes and types to stay in front of buyers.

“I hesitate to call the Internet ‘new media,’ because it is certainly not new any more,” Shirley says. “It is no longer an option — it’s a given. Before, you might have a campaign with print and radio and TV ads, and maybe some Internet. Not any more. The Internet is now the centerpiece of campaigns.”

Small businesses’ dilemma

The bottom line is, well, the bottom line. All businesses feel the pinch when the economy goes awry, but for small businesses it is especially problematic. Many small enterprises do not have a large advertising budget during the best of times, and faced with either making payroll or running an ad, advertising is going to get the heave-ho.

However, many advertising professionals say it doesn’t have to be that way, and some in the media and in the advertising industry have developed creative strategies and alternatives to assist them.

One Jackson television station has come up with an innovative, and even fun, way for small businesses to get some online “face time.” 16 WAPT TV recently launched a contest called The Best of 16 WAPT A-List. The contest allowed small businesses to promote themselves on www.wapt.com at no cost. Offered to entrepreneurs in 80 different categories, winning businesses, chosen by www.wapt.com surfers, received a number of free promotional opportunities, including free business cards, e-mail marketing service and downloadable logos.

(Voting ended May 11. Winners will be announced the week of May 19-23.)

“The biggest obstacle many small business owners in our viewing area face when looking to advertise is cost,” says 16 WAPT president and general manager Stuart Kellogg.

Another example of programs aimed at helping small businesses get their message out in good and bad times is from The Cirlot Agency. A couple of years ago, the firm developed “Your Ad Department,” which offers resources and a tutorial, a kind of “Advertising 101,” for small businesses.

Looser said there are many alternatives small businesses can choose when looking at advertising when money is tight. She recommends writing an article for the newspaper, disseminating press releases in lieu of “placed” information (a/k/a paid ads), mass e-mails, blogs and trading web site banners with non-competing entities.

“All of these can be done at little or no cost,” she adds.

Contact MBJ staff writer Wally Northway at wally.northway@msbusiness.com.

About Wally Northway

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