Why companies advertise in a recession

Mariam Rehman
August 27, 2020

For the most part, 2020 brings a lot of uncertainty. 

As former RBA Governer Glenn Stevens has said, the probability of a recession in Australia is 100 percent; only the timing is uncertain. 

Now is the time to grapple onto innovative techniques. It’s about budgeting and strategising in areas that will scale your company. All with the end goal of mitigating risks, whilst still growing. 

It’s not impossible to do. 

But it’s also not simple. 

Though there are many reasons to be reluctant on scaling your company now, the below case studies urge us to think creatively and innovatively, amongst a bad economy.

During the great recession, Cadbury reported a 30% increase in profits during 2008, Amazon sales grew by 20% in 2009 and even Lego’s profits soared by 63% in 2009. 

Companies both medium and large thrived during the great recession. It’s important to note how they used these situations to think outside of the box and strategised with an end goal in mind. Not correctly (because there’s no one correct way) but rather, creatively. 

  1. Budget then Invest

Prior to making any investment, strategy is key to growing profits. 

Just spending isn’t the key. It’s calculated spending that matters. 

The government tries to encourage spending at a time like this by reducing interest rates and providing investing incentives. These incentives are what keeps consumers spending. You aren’t at a loss. 

Your expenditure also pushes the economy in the right direction. In saying this, you need to be strategic. Having emergency funds is a must, but so is investing in advertising and strategy to keep the growth going. 

Investing at a time when most of your competitors are going quiet also puts your company at an advantage.

According to research conducted by McGraw-Hill Research that studied 600 business-to-business (B2B) companies, they found that companies who continued to advertise during the 1981-1982 recession had a 256% growth by 1985 over their competitors that limited their spending during the recession.

During this period, you are usually at an advantage as many businesses do not invest in advertising. As consumers are not wanting to spend, it is imperative to personalise and customise advertisements to your target consumer. Marketing and advertising methods vary and change according to the context. 

So just because a campaign worked for you last year, it won’t necessarily mean it will work again. 

  1. Think through the eyes of your consumers

Consumers are becoming ad-savvy. The introduction to skipping ads and ad-blocking continues to scare companies in investing money into this area.  

Understanding the way users react to advertisements is probably one of the most underrated areas of expertise. This expertise, is called UX. Knowing what platforms your users are on and how they would react when seeing your advertisement increases the chance of your ad being noticed. 

Sub par branding reduces return on investment. And turns your investment into an expense. 

Tip: UX strategy is a method that identifies your target users, and how they interact with your platforms in order to make a transaction or inquiry in a simplistic way. Take it back to basics and understand what your consumers would be doing during a time where they don’t want to be spending too much and how you can campaign to take care of these needs. 

Whether you like to lay low during this tough time, or aim for the stars, see whether advertising is in your best interested now. 

Not only does it keeps cash flow consistent but ignites your brand - making it unforgettable. 

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