Recession Creates Opportunities for Small-to Midsize Ad Agencies

The U.S. has experienced nine recessions since World War II, which means we’ve lived in recessionary times one year out of every six.

A recessionary period is actually a great time to promote your agency an increase your market share and profits.

In a recession, clients usually significantly cut their marketing budgets, even though it is the most important tool a business has during this difficult time. Ad agencies tend to do the same, having a hunker down and wait mentality.

We are in a severe recessionary period with no end in sight. This leaves many businesses and ad agencies wondering where they can cut costs. Studies and experience prove marketing should be last on their list.

A series of six studies conducted by the research firm of Meldrum & Fewsmith showed conclusively that advertising aggressively during recessions not only increases sales but increases profits and market share.

This fact has held true for all post-World War II recessions studied by American Business Press starting in 1949.

  1. Kraft salad dressings and Jiff peanut butter both raised marketing budgets during the last recession and increase sales by 70% and 57%, respectively.
  2. Pizza Hut increased their marketing budget and increased sales by 61%.
  3. Taco Bell increased sales by 40% by increasing their advertising expenditures.
  4. Wal-Mart smothered competitors with Every Day Low Prices during the 2000-2001 post-bubble slowdown.
  5. During the 1989-91 recessionary period, most of the beer industry cut budgets, but Coors Light and Bud Light increased theirs and saw sales jump 15% and 16% respectively.

Agencies know that advertising in an economic downturn is not a drain on their clients profits but can actually significantly contribute to and increase in profits and market share.

McGraw-Hill Research in a study of U.S. recessions showed that business-to-business firms that maintained or increased their advertising expenditures during the 1981-1982 recession averaged significantly higher sales growth, both during the recession and for the following three years, than those that eliminated or decreased advertising. By 1985, sales of companies that were aggressive recession advertisers had risen 256% over those that didn’t keep up their advertising.

RMR & Associates provides this list of brands that creatively changed their messaging to reflect the new customer mindset and counter a recession:

  • A-1 Steak Sauce’s message that “A-1 Steak Sauce isn’t just for sirloin anymore.” Indeed, its ability to enhance flavor applied equally to hamburger.
  • Dow, maker of Ziploc food bags, shifted funds from Glass Plus cleaner to help introduce a new line of Ziploc freezer bags that protect the freshness of leftovers.
  • Quaker Oats capitalized on two successful recession messages. First it reversed a long-term decline in sales by increasing spending for the message that its grain products are inexpensive sources of protein. Then it stressed value as actor Wilfred Brimley promised, “A bowl costs you one nickel and four pennies.” That message worked so well that Quaker allotted half its budget to it. Result? Powerful sales.
  • Lipton successfully promoted its Cup-a-Soup line as not only conventional but inexpensive.
  • Wendy’s met the recession with a head-on message: “Look, I know you have less to spend these days, but that doesn’t mean you have to eat less.”
  • Ikea had a similar idea: “What recession? Sure the country’s going through a recession. That doesn’t mean you have to.” It worked.

The information above is the kind of data that agencies use to demonstrate to their clients, the importance of advertising in a down market. But this “do as I say, not as I do” mentality raises suspicion.

If agencies are hunkered down during a recessionary period, if they aren’t promoting themselves, if they aren’t using the tools they recommend to clients, then why should anyone else.

One major advertiser summed it up best.

“When times are good, you should advertise. When times are bad, you must advertise.”

A recessionary period is a great time to promote your agency an increase your market share and profits. Do the opposite of what your competition is doing. Develop a simple agency promotional plan that you can consistently implement using a combination of traditional and social media. Treat your agency as if it was your most important client.

Additional articles of interest:

About Michael Gass

Consultant | Trainer | Author | Speaker

Since 2007, he has been pioneering the use of social media, inbound and content marketing strategies specifically for agency new business.

He is the founder of Fuel Lines Business Development, LLC, a firm which provides business development training and consulting services to advertising, digital, media and PR agencies.

Comments

  1. Michael-

    Nice post and great data. When times are tough I think marketing can help show your customers that your company or brand does not back down in the face of adversity. Even keeping your current marketing budget would be a great strategy. The best brands have a consistent message and consistently market that message. What will be interesting is to watch how marketing will change during this downturn. While in the past successful brands increased their marketing efforts in “traditional” media forms, but what tools will help businesses in today’s Internet, Social Media, Web 2.0 world?

  2. Well said. The sources are also very appreciated. I think businesses need to be wary of putting too much of their budget into one place. As with any campaign, “traditional” media needs to be used with SM in order to create brand and corporate continuity and transparency. The consumer wants, ok – needs to feel they cab trust who they are doing business with. SM can help achieve that goal.

  3. Mark, Jon, thank you both for your kind words and for taking the time to add your comments. I really believe we’ve seen the “perfect storm” in the advertising industry. The worst economic crisis and longest expected recession since the great depression. Couple that with the rising popularity of social media that has dramatically accelerated due to the crisis. My prediction is that it changes advertising as we know it. When we get through the downturn I don’t believe it’s going to be business as usual. There is a paradigm shift in advertising that is impacting the way new business is acquired.

  4. Michael, I love reading all of your posts. This one in particular strikes a cord with me as I have been preaching it to prospects and clients since October. There is some great data here that I look forward to sharing as I reposition my agency for the coming year.

  5. Steven,

    I’m glad that you enjoy FUEL LINES and that you find my posts helpful. That makes the time and effort worth it. I wish your agency much success in this new year.

  6. Nice article. What too many leaders forget is regardless of the economy, the brand does not stop. If you have customers and employees you have a brand, the key question is whether you are going to choose to manage it or not? Your brand (product or organization) is not dependent on a marketing spend and it is not an initiative – myopic leaders can’t get past their brand being a marketing strategy and look at it as a cost rather than an investment in what the company does everyday.

  7. Thanks for your additional insights Patrick.

  8. Christopher says:

    great article except for one minor detail: I was the creative director on the A-1 Steaksauce spot, and:

    The impetus for the spot had noting whatsoever to do with economics, it had to do with broadening the brand’s consumer base. They figured out that A-1 tastes good on burgers, so why not market it that way? Indeed, the spot was shot almost two years ago, well before the recession hit full force.

    That’s not to say that Kraft won’t be happy if sales go up in this bad economy, but it wasn’t motivated by the current economic climate.

    -c

  9. Christopher thanks for taking the time to comment and for the correct info regarding the A-1 Steaksauce spot.

  10. You need fresh material, Michael! And a headline that matches the body. There were no real insights on why this crisis represents an opportunity for small to mid agencies, other than it’s an opportunity to scramble as we’ve never scrambled before to keep the lights on!

    Your Tweets have become bait & switch frauds. Very disappointing.

  11. Greg,

    I try to be a help to small to midsize ad agencies. I’ve poured a lot into my blog and followers have been very encouraging. I’ve written over 300 posts and do my best to provide new info to my readers averaging five posts a week.

    After reviewing your agency’s blog and you Twitter profile my first reaction was to send a few zingers back your way. But, I’m not going to do that. I realize my material isn’t for everyone and I’m not trying to please everybody. I’ll have a strong appeal to some and no appeal to others.

    That being said, you are always free to change the channel.

    P.S. I really do like your agency’s website. Nicely done.

    http://www.weidert.com

  12. Great post! Thanks for sharing.

  13. This general theme of this post is to increase marketing during a recession (which has been proven before as smart — though counter intuitive to many); however the post then seemed to confuse advertising with marketing. The fact is, the effectiveness of advertising continues to decrease as it is viewed by most consumers as an interruption (Seth Godin has made a career of point this out).

    Where this post could have really hit home is to encourage agencies to use the economic downturn as a time to re-invent themselves BEYOND ADVERTISING to actually deliver an integrated strategy to deliver engagement and conversion that leads to sales. While agencies focus on the means (ads), clients focus on the ends (sales results).

    Agency partners should recall there are 3 steps in the sales funnel: (1) Awareness, (2) Consideration, and (3) Purchase. Ads only play a role in creating brand or product awareness — and even then, are not always as effective as social media and word of mouth when conversion is measured.

    Smart brands engage customers (B2B, B2C) in a dialog — not a monologue. Smart agencies are showing their clients how to do this, adding metrics, and focusing on sales results. The other (less smart) agencies continue to focus on one part of the sales funnel (Awareness) and then spend their clients’ money interrupting people.

    Blog post offering a client’s perspective on how to select an agency: http://tinyurl.com/yj9ok6l

    Happy trails 🙂

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