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Advertising During an Economic Downturn

Boerne, Texas, Chamber of Commerce

While the White House staff, and legislators, along with the Obama transition team and business leaders throughout the United States make every effort to shore up our beleaguered economy, small and mid-sized businesses have some tough decisions to make.

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Along with these choices comes the potential for significant rewards.

You may be tempted during this economic crisis to reduce or even eliminate your advertising investments because you believe there is a decline in demand for your products or services.

Instead, history reveals that spending in a down-turning economy can lead to real sales increases, a growth in market share and meaningful market value gains. Look at what the big advertisers are doing: Procter & Gamble, Kellogg and Kraft Foods have been increasing their advertising spending throughout the last two quarters of this year.

Findings of a recent study published by the American Association of Advertising Agencies demonstrate that advertising, in general, contributes to financial performance for up to three years in the future. In addition, increased advertising in an economic downturn or recession has greater benefits than increased spending during a period of economic expansion.

These benefits stem from both an increased share of voice and share of mind among consumers, as well as enhanced perceptions from your stakeholders.

According to the study, “a presence in the market during tough times can act as a beacon of strength for customers and employees, and also for shareholders and investors.”

Advertising represents a firm asset that could produce future earnings and as these earnings come to fruition, investors reward opportunistic firms with increased market value. Companies forced to take shelter during a downturn send a message to consumers, employees and stakeholders and open the door for competitors to prey on those weaknesses.

An increased presence in advertising venues serves as an important reminder to potential customers too.

We all know that the first step toward activating a purchase is driving awareness, and awareness consistently rises and falls with advertising volumes. Driving and maintaining that awareness is central to your company’s brand performance and vitality.

Because the natural tendency of businesses is to reduce ad spending during a downturn, there may not be a better time than this to advertise. Smart companies, looking for growth, can take advantage of the communications vacuum left behind by more timid companies.

This is also a great time to tweak your message and communicate value propositions to consumers. If you have a value proposition that is worth talking about, consumers in today’s economy offer an increased predisposition to hearing that message and acting on it.


As Harvard Business School professor John A. Quelch noted recently, "It is well documented that brands that increase advertising during a recession, when competitors are cutting back, can improve market share, and return on investment at lower cost than during good economic times."

G. Michael Maddock and Raphael Louis Vitón
Business Week

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