Advertising Spend During a Downturn

Back in 1990 Stephen King published a study on advertising spend during a downturn.His conclusion: that businesses which cut advertising would be long-term losers.
During recession, the data showed that only a third of companies cut their advertising spend – by an average 11 per cent – while two thirds increased it; Around 60 per cent of those increasing spending did so modestly, by an average 10 per cent; the remaining 40 per cent made a big increase, average 49 per cent. All the businesses saw a reduction in their ROI during the recession, albeit it was slightly greater (-2.7 per cent) for the big spenders, than for those who cut their advertising (-1.6 per cent). This caused King to note: “…businesses yielding to the natural inclination to cut spending in an effort to increase profits in a recession find that it doesn’t work.”
King summed up these findings as follows: “In general, virtually all businesses see reduced profits when their market is in recession. But businesses that cut their advertising expenditures in a recessionary period lose no less in terms of profitability than those who actually increase spending by an average of 10 per cent.

About Costas Kataras

Futurist,Strategist,Speaker; Author of "Nice Capitalism" ;Purveyor of the "Nice Way" strategy, for a sustainable future for Brands,Corporations and Society.
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