Marketing is perceived as a “nice to have”, especially in leaner economic times. When faced with tough decisions about where to cut, marketing is usually first in line before programs that are seen as more critical to economic development health. But this view may be shortsighted.
Research shows that companies that consistently advertise even during more conservative economic times perform better in the long run. A McGraw-Hill Research study looking at 600 companies from 1980 to 1985 found that those businesses which chose to maintain or raise their level of advertising expenditures during the 1981 and 1982 recession had significantly higher sales after the economy recovered. Specifically, companies that advertised aggressively during the recession had sales 256% higher than those that did not continue to advertise.
Further, this is a unique opportunity that is not available in a healthier economy: As reflected in a Kellogg School of Management study, increasing advertising spending during economic expansion often yields no improvement in market share, because 80% of your competitors are also increasing their spending. Conversely, the Association of National Advertisers found that at least half of businesses reduce their adverting spend during an economic downturn.
When it comes to the Canadian economic development profession, a recent survey found a widening gap between EDOs that chose to increase or decrease marketing spending during the economically tumultuous conditions of 2009. According to the study, 62% of those that increased their marketing spending in 2009 planned to continue increased spending in 2010. In contrast, only 25% of those that cut back in 2009 planned to increase 2010 spending. Almost 30% of 2009 decreasers planned to further decrease budgets in 2010.
According to the Place Marketing Group:
“While some EDOs see little choice but to slash marketing spending, it is a step that risks a loss of future growth opportunities. Experts agree that those who maintain spending often emerge the strongest when things pick up. Cuts in marketing will show the most and help the least.”
The reality is that even under the bleakest economic conditions, clients and customers don’t stop making decisions. Given their own budget challenges, these decisions are likely being made with greater discernment and consideration. For economic developers, this means that dropping out of the race of promoting your municipality to save money in the short term puts you at a disadvantage compared to peers who choose to maintain marketing and communication efforts.
So what about your community? Are you spending for long-term success or cutting for short-term savings?