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Do Profits Come Easier During Recessions?
The answer is YES.. but in a round about way. During recessions a lot of companies scale back marketing efforts to preserve cash. Turns out, this is a huge mistake.
The following facts demonstrate the folly of those who stop yelling from the mountain top when they need to most. They're from John Forde, marketing genius and direct response expert (originally published during the 2001 tech bubble burst).
Take a look at the lessons of history:
* In April 1927, the Harvard Business Review found companies that advertised most during recessions had the biggest sales increases.
* Companies that had higher sales and net income during the recession of 1974-75 didn't touch ad budgets. What's more, they also beat non-advertisers in the two years after the recession ended.
* According to McGraw-Hill, companies that increased ad budgets during the 1981 recession trounced competitors not just during the downturn, but for three years following.
* Kellogg pushed their ads through the Great Depression. Post didn't. Guess who dominated the cereal market for the next 50 years. Can you say Corn Flakes?
* Stanley Tools launched its biggest ad campaign during the 1974 recession. Their consumer product division took off. They grew at twice the rate of competitors every year thereafter.
* Chevy pushed car sales in 1975. Ford scaled back by 14%, afraid of higher gasoline prices. Chevy picked up 2% of the auto market. It took Ford five years to regain the lost ground.
* In recessions of 1949, '54, '58, and '61, companies tracked for ad spending cutbacks saw sales and profits fall off. Those who kept ad budgets, saw profits increase… and kept an edge in the years that followed.
* Consumer spending has increased during every post- WW II recession, according to The American Association of Advertising Agencies.
* Coca Cola increased their worldwide marketing budget $350 million for 2001. So far, net income is up 22%. IBM increased ad budgets 17% last spring.
Sales are up 8.9%.
Here's the big take-away. When recessions hit, mental real estate opens up, says Forde. A lot of your competitors scale back their marketing efforts because they're scared. Some companies go out of business. Competing marketing messages grow quiet. However, people still need solutions. And they're still willing to buy.
If you've been around a while, you noticed the last recession in 2001. Here's the kicker. Since then, a lot of new people have joined the ranks of the marketing trade. According to some sources, 40% of these marketers weren't even practicing back in 2001!!! So, that whole group is learning everything from scratch… without the “recession wisdom.” Do you think it will be tough to beat them with head-to-head promos, ads, collateral and campaigns?
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