Sunday, December 21, 2008

Cutting Advertising Could Backfire In Recession

Research Agrees

Roland S. Vale conducted the very first study on aggressive advertising during recessionary times in 1927. Vale found that advertising could help a company maintain or even increase profits during a recession.

The results still hold true today.

While it is tempting to cut costs during times of trouble, its long-term consequences may outweigh its short-term benefits.

Companies with an aggressive advertisement budget during the early 1980s recession increased sales and profits by up to 256 percent in 1985. Sales and profits were up during the recession and for three years after an upturn of the economy. In addition, performance took a dive at firms that slashed advertising and other marketing investments, according to a McGraw-Hill Research analysis of 600 companies.

“An overwhelming majority of American executives (86 percent) agreed that companies that advertise in a down economy stay more top-of-mind when purchase decisions are made, and create more positive impressions about the commitment to their products and services,” according to Guy Consterdine, an independent media consultant.


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