Role of Advertisement in Recession
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Transcript of Role of Advertisement in Recession
RECESSION
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Advertise in Recession???YESNO
Role of Advertisement in Recession
Rishi AggarwalIIT ROPAR
RECESSIONRecession is shrinking of the economy for two consecutive quarters (=6months) with a decrease in the GDP (=Gross Domestic Product) or “significant decline in economic activity lasting more than a few months.”
The Recession Cycle
In a Recession Consumers are Seeking
1. Offers that provide reassurance and confidence
2. Purchases that minimize risk
3. Familiar brands that reduce uncertainty
4. Purchases that offer extra value
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The practice of bringing to the public's notice the good qualities of something in order to induce the public to buy or invest in it.
Advertising is an easy, effective and quicker idea to attract consumers, introduce new schemes or awareness, eliminate barriers to the sale and to establish yourself as a brand.
Two Basic Advertising PrinciplesIn Good Times and Bad
1. Create desire for your product, – or find people who already have the
desire
2. Find out what people don’t like about doing business with you, and eliminate those reasons or barriers to the sale.
When times are good, you should advertise. When times are bad, you must advertise.
Entrepreneur Magazine January, 2009
What Do These Brands Have In Common?
They all expanded their sales, profits and market share in a recession, and most went on to dominate their category.
They maintained or increased their advertising and promotions while their competitors were cutting back!
They focused on opportunity, not fear.
We’ve had 22 recessions from 1902-2009
DateDuration
Sept. 1902-Aug. 1904 23
May 1907-June 1908 13
Jan. 1910-Jan. 1912 24
Jan. 1913-Dec. 1914 23
Aug. 1918-March 1919 7
Jan. 1920-July 1921 18
May 1923-July 1924 14
Oct. 1926-Nov. 1927 13
Aug. 1929-March 1933 43
May 1937-June 1938 13
Feb. 1945-Oct. 1945 8
Nov. 1948-Oct. 1949 11
July 1953-May 1954 10
Aug. 1957-April 1958 8
April 1960-Feb. 1961 10
Dec. 1969-Nov. 1970 11
Nov. 1973-March 1975 16
Jan. 1980-July 1980 6
July 1981-Nov. 1982 16
July 1990-March 1991 8
March 2001-Nov. 2001 8
Recessions occur about every 5-6 years, and last on average 8-16 months.
National Bureau of Economic Research
“The greatest enemies of achievement are fear, doubt and vacillation.”– John Patterson, founder of NCR
Recessions are Always Followed by Expansions and Prosperity
National Bureau of Economic Research
Advertising in a down economy clearly creates a competitive advantage. The vast majority of executives agree that when they see a company advertising in a down economy:
It makes them feel more positive about the company’s commitment to its products and services. More importantly, it also keeps those companies top-of-mind when purchase decisions are made
• The ResearchSeveral researches are conducted to study the effect of advertisement on recession.
The researches are conducted by:
Harvard Business Review “Advertising as an Anti-Recession Tool”
Jan-Feb 1980
“Advertising should be regarded not as a drain on profits but as a contributor to profits…as a means of achieving objectives. Ad budgets should be related to the company’s goals instead of last year’s sales.”
1980 to 1985
1980 1981 1882 1983 1984 19850
50
100
150
200
250
300
350
400
100 96 88 89106
119100
137159
195
283
375
Eliminated or Decreased Advertising in both '81 & '82Maintained or Increased Advertising in both '81 & '82
Sales Indices 1980-1985 (1980= baseline of 100). ‘81 and ‘82 were recession years
“Firms that are able to increase advertising during recessions are likely to have stronger future earnings.
The researchers studied data from five recessionary periods since 1971, sampling data from more than 3,000 firms listed on the public stock exchange.
April 19, 2009
The available research indicates that:It’s the decisions made and actions taken during a recession that make the biggest difference in the future growth or decline of a company.
“Riding it out” may equate to driving it down.
25%
75%
25% of companies see an opportunity to expand market share in a recession . 70% of these companies will maintain their growth for 5 years after the recession. The majority in this category reach a new and sustained high.75% of companies will cut staff,
advertising, customer service, R&D, product launches, and acquisitions. Following the recession less than 30% of those will ever regain the market share and profitability lost during the recession. The majority in this category reach a new and sustained low.
During the 1920s, Fords were outselling Chevrolets by 10 to 1. In spite of the Depression, Chevrolet continued to expand its advertising budget, and by 1931 Chevrolet took the lead.
1933 Ad
1927
Models
2001 computer market down 12%, Dell up 11%
2000 20010
20
40
60
80
100
120
IndustryDell
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