If you want to stay in business, tell your customers.

By Laurie Martin.
Laurie Martin has spent many years in advertising, marketing, major event management and publishing in Australia and New Zealand. He currently consults on marketing communications strategy and is a member of Mainstreet Australia and the Leongatha Business Association.

If you were born in Australia after 1988 and have lived here all your life, you probably have no memory of an economic recession. The expected, but as yet unquantifiable, recession (or even depression) we will face in Australia as a result of the Covid19 pandemic will test practitioners in governments and businesses.

The key to minimising the long term impact on the economy in general and individual businesses and brands in particular will be to recognise the vital role marketing can and must play right now.

As this economic downturn is being driven by a health issue requiring people to avoid close personal contact and stay isolated, the impact on bricks and mortar retail will be significant to say the least. But eventually this pandemic will end. It will be at this time that the healthiest brands and businesses will begin to thrive and prosper.

With limited local experience of surviving and thriving during and after a recession, it helps to review experiences from other, developed economies such as the USA that have endured economic recession in more recent times.

In a recent Forbes article, it was pointed out that, rather than reducing advertising and promotion during a weaker economy, those advertisers that maintained or grew their ad spending increased sales and market share during the recession and afterwards.

Not all commercial operations invest in their brands during a recession which actually helps those competitors who do.

Given reduced competitive pressure, it is possible for owners to reposition brands or introduce new products more economically. During the GFC lead “great recession” of 2009 in the USA, Amazon grew sales by 28% through innovation and new products including new kindle products. On Christmas day in 2009, Amazon customers were reported as buying more e-books than printed books placing Amazon as an innovator and lower cost alternative in the minds of consumers.

With reduced overall advertising spend, the price of advertising media also drops making brand advertising cheaper.

By continuing to promote, brands project an image of corporate stability ­– a quality that is appreciated by consumers in an economically challenged world.

In the 1990-91 recession in the USA, McDonalds decided to drop its advertising and promotion budget. Pizza Hut and Taco Bell took advantage of the reduced advertising pressure from McDonalds. The result was increased sales of 61% for Pizza Hut, 40% for Taco Bell and a decline of 28% for McDonalds.

Cutting back on ad spending can result in the brand losing its consumer “share of mind” with the potential of losing current, and possibly future, sales. Maintaining or increasing spending in the face of competitive cut backs will increase “share of voice” for a brand which typically leads to in an increase in “share of market.”

In the 1920’s, Post was the category leader in the USA’s ready-to-eat cereal category. During the Great Depression, Post made significant cuts to its advertising budget while rival Kellogg’s doubled its advertising spend and introduced a new product (Rice Krispies). Kellogg’s profits grew by 30% and the company became the category leader, a position it has maintained for decades.

Economic recessions provide savvy marketers with the opportunity to promote their brands more economically and to greater effect than they will otherwise enjoy in the competitive conditions of  “normal” economic times.

So if you intend to stay in business, doesn’t it make sense to let your customers know?

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