Why Slashing Your Advertising Budget in a Recession Is Not a Good Idea

The current economy has already drawn comparisons to the Great Depression, even though we are nowhere near that bad of a situation. Thank goodness. Experts say we are heading for a bad recession, just not as bad as the Great Depression, which saw unemployment rates of around 25 percent. The unemployment rate was at 6.1 percent in September, obviously not near to the Great Depression percentage.

In the slowing economy, businesses are laying off and firing people due to the anticipation of financial difficulty, and not because of actual difficulty. The New York Times’ Brad Stone and Claire Cain Miller aren’t trying to make people nervous or panicked by saying “a pall of anxiety seems to be spreading over the land.”

Financial services and automakers are tightening their advertising budgets and online businesses are starting to take a hard look at their budgets. Online businesses rely heavily on advertising for their income.

But tightening the advertising budget is not the answer. History has shown that lowering advertising during hard economic times just results in less business once the economy recovers.

Even during the Great Depression major companies knew that. Chevy, Camel cigarettes and Proctor & Gamble (which helped foster soap operas during this time) kept advertising because they realized they needed to just to maintain brand loyalty. They also created much brand loyalty during this time, as people saw stability in these brands that kept advertising.

Why You Shouldn’t Slash Your Advertising Budget
People are still buying stuff. People still have money to spend; they just aren’t spending it on extravagant items right now. Then again, all those CEOs that the government has bailed out from the investment companies and failed banks have millions to spend. AIG CEO Martin Sullivan got a cool $47 million after ruining that company. Stanley O’Neal at Merrill Lynch got a nice severance package of $66 million right before the company was taken over by Bank of America. So, see, there are still some people buying!

Seriously, though, people are still buying essentials. People that have been saving money for big-ticket items might even be more apt to buy them with all of the price slashing that many big companies are intending for the holiday season. All is not lost.

People are staying at home more, reading magazines and watching TV. That means they’re seeing more advertising. Family-oriented items for the house are still going to sell and those companies make a profit.

Advertising is a way to show consumers that companies are healthy. Many people don’t watch the stock market and they don’t watch the news. What they do figure out about the economy comes from advertising – those companies they continually see must be doing well, they figure, and those companies that can’t afford to advertise, don’t.

By keeping your advertising budget where it is you’ll garner more consumer trust. You’ve been there through good times and bad, and you’re a stable company so it’s best to invest your products and services. Isn’t this the kind of brand image companies want? The companies that keep on advertising during hard times are the ones that fit this image.