Wednesday, September 24, 2008

Why A Recession Is A Great Time To Increase Marketing Budgets

With A Smaller Pie, Brands Have To Insure A Bigger Piece Of The Action

By David Miranda

It is generally common practice that when a recession looms, companies have a knee jerk cost-cutting reaction, as is manifested with reduced headcounts and smaller budgets. This process, in itself, negatively affects morale and momentum of the marketing effort. The short term impact will indeed improve the P&L, but at what price? Typically, when the recession subsides, those companies that were fast to cut expenses are also typically slow to increase funding at the onset of a growth cycle.

Of course, it makes perfect sense to bean counters. We all have heard the mantras, "we must live within our means"; "we must be more productive and do more with less"; "we need to do the necessary belt-tightening", etc, etc. etc.

Here are the facts.

In a recession, people (and businesses) still spend, albeit less; creating a smaller demand "pie" to go around. If a company, therefore, wants to maintain or grow revenue; there is no other choice than to aggressively go after a bigger piece of the pie. Simply put, stealing share from others. Those that cut their marketing budgets during a recession are conceding business to more agressive competitors and, by the way, the best time to steal share is in a recession.

Coming out of a recession who would you guess is better positioned in an upturn - the company that cut its marketing ranks and budgets or the company that became more aggressive?

Spending during the boom times? No brainer.

Spending more during a recession? A bigger no brainer.