Managing Recession Risks
Recessions or slowdowns, like any storm, often hit without a warning. Companies, both large and small, suddenly find themselves dumbstruck. Innumerable brand building strategies are pushed into the re-consideration stage and a huge chunk of companies decide to discard or reduce advertising and communication budgets to sustain profitability due to what seems to be an ideal strategy for cost cutting. The Association of National Advertisers (ANA) conducted a survey to analyse the impact of this current recession on marketing. The results concluded that 77% of surveyed marketers plan to reduce their advertising campaigns’ marketing budgets (Source: Advertising Age).
But, we ask if this indeed is the right strategy to counter the risks associated with recession or a slowdown?? We wouldn’t know the concluding figures until the end of this recession. But some insights can be derived through past experiences. Let’s take the example of the recession that hit us in 1991-1992.
Taylor Nelson Sofres, a market research firm from UK conducted a comparative analysis of expenditure on branding and market share of 127 brands in 46 product categories. It concluded that the highest-performing brands were those that also substantially raised their advertising expenses; ironically the brands that cut their marketing expenditure lost market shares (Financial Times, 2001).
It is said that during a slowdown, the buyers and consumers transform into more risk aversion nature as they lose confidence. Also, lesser consumers come forward to buy products or services as compared to the better times. The only straight forward, way to increase consumer confidence is to introduce re-assurance advertising campaigns. Increasing the media budgets as opposed to several other marketers, gives rise to the reach and awareness of a company’s offerings thereby helping with consumer acquisition.
Real time example
To provide a real-time example of success achieved through increasing media budgets, the case of Oriflame, a Swedish direct-selling company suits the best. Oriflame sells natural cosmetics in 52 countries worldwide. When the recession hit, the company faced several economic challenges in many of its markets. The company boldly responded by increasing the publishing frequency of its products’ catalogue to increase awareness and reach. As on 2001, it produced a total of approximately 30 million copies of its catalogues and in 37 different languages. The sales of the company responded positively (Financial Times, 2001).
Sources:
Financial Times, 2001, Mastering Risk (Volume 1: Concepts), Pearson Education Limited, Great Britain
Advertising Age, URL: http://adage.com/cmostrategy/article?article_id=134526
Recessions or slowdowns, like any storm, often hit without a warning. Companies, both large and small, suddenly find themselves dumbstruck. Innumerable brand building strategies are pushed into the re-consideration stage and a huge chunk of companies decide to discard or reduce advertising and communication budgets to sustain profitability due to what seems to be an ideal strategy for cost cutting. The Association of National Advertisers (ANA) conducted a survey to analyse the impact of this current recession on marketing. The results concluded that 77% of surveyed marketers plan to reduce their advertising campaigns’ marketing budgets (Source: Advertising Age).
But, we ask if this indeed is the right strategy to counter the risks associated with recession or a slowdown?? We wouldn’t know the concluding figures until the end of this recession. But some insights can be derived through past experiences. Let’s take the example of the recession that hit us in 1991-1992.
Taylor Nelson Sofres, a market research firm from UK conducted a comparative analysis of expenditure on branding and market share of 127 brands in 46 product categories. It concluded that the highest-performing brands were those that also substantially raised their advertising expenses; ironically the brands that cut their marketing expenditure lost market shares (Financial Times, 2001).
It is said that during a slowdown, the buyers and consumers transform into more risk aversion nature as they lose confidence. Also, lesser consumers come forward to buy products or services as compared to the better times. The only straight forward, way to increase consumer confidence is to introduce re-assurance advertising campaigns. Increasing the media budgets as opposed to several other marketers, gives rise to the reach and awareness of a company’s offerings thereby helping with consumer acquisition.
Real time example
To provide a real-time example of success achieved through increasing media budgets, the case of Oriflame, a Swedish direct-selling company suits the best. Oriflame sells natural cosmetics in 52 countries worldwide. When the recession hit, the company faced several economic challenges in many of its markets. The company boldly responded by increasing the publishing frequency of its products’ catalogue to increase awareness and reach. As on 2001, it produced a total of approximately 30 million copies of its catalogues and in 37 different languages. The sales of the company responded positively (Financial Times, 2001).
Sources:
Financial Times, 2001, Mastering Risk (Volume 1: Concepts), Pearson Education Limited, Great Britain
Advertising Age, URL: http://adage.com/cmostrategy/article?article_id=134526
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