More support for recessionary marketing

In April last year I wrote in the National Business Review about the value of increasing marketing activities during a recession (that article can be read at www.nbr.co.nz, search for “Up recessionary ad spend to win customers”). In summary, I reported on a major review conducted by the World Advertising Research Centre that concluded that it is the companies that continue advertising during a recession that clearly succeed in the long-term.

Writing back then, readers could be excused for thinking the conclusions arose from academic abstractedness.  A case of “all very well in theory, but…”.  Alternatively, some may have observed the self-interest that the advertising community has in such pro-advertising results. The research review was of course conducted by the World Advertising Research Centre, which is hardly likely to trumpet research that undermines the worth of advertising.

But a year down the track sees yet more information coming to light about marketing in a recession.  Certainly, when New Zealand started its early run of finance company failures, preceding even the Lehman Brothers September 2008 bankruptcy, many brands ducked and ran for cover.  We saw spending cuts and cash hoarding, accountants crunching numbers, senior management drawing up lists of expendable items, and middle managers’ palms getting very sweaty indeed.  Marketing, research and advertising budgets were among the first on the chopping block.  As well as seeing some clients reduce research spend, Synovate New Zealand has even seen some clients lose their jobs. But was this a rational response, or knee-jerk reaction?  According to the aforementioned study from the World Advertising Research Centre, marketing cutbacks would not have been the recommended action.

So now that we can review the 2009 financial results of the world’s biggest brands, it’s interesting to see who prospered and who did not.  For example, most financial firms (perhaps unsurprisingly) lost a lot of value and a conservative, 'rational' response to the recession might be understood. For example, UBS alone lost half of its brand value.

Yet other the performance of other market segments indicates that a “knee-jerk reaction” of cut-backs would not have been wise. BlackBerry raised its brand value by 7% (proving the CrackBerry is addictive); Wrigley jumped 10% (job interviews require minty breath); the massive clothing chain Zara increased by 14% (must look good, especially for job interviews) and Heinz lifted its value 9% (canned food offers comfort and value). Even brands that are considered less “essential” did well – Apple went up 12%, Nintendo posted a 5% increase and Ferrari, possibly the least necessary item of the lot (albeit very manly and cool), held its value. So what gives?

“People look for a sense of certainty in a recession, and for an anchor when times are unstable,” says Steve Garton, Synovate’s Global Executive Director of Media. “The recession was a great opportunity for brave advertisers to provide this certainty, yet so many failed to grasp the golden opportunity,” he adds.

Consider the following - Hyundai had laid off many workers at the beginning of 2009, but jumped onboard when General Motors quit its long-term role as exclusive automotive sponsor of the Academy Awards. While the move is not characteristic of budget conscious advertising spend, Hyundai’s results in the first six months of 2009 saw market share in the US rise to 4.3%, up from 3.1% a year earlier.

Instead of thanking their mothers in their acceptance speech, Hyundai management should have cited a clever marketing team. “Brands that discovered what their customers wanted could use advertisement as a means to carve out a larger market share, at exactly the time when consumers were also more open to considering new brands,” says Garton.

And for brands willing to put their best foot forward, results from a Synovate survey released in October 2009 show that in Asia at least, there were many willing takers. In a study with more than 20,000 of the region’s most affluent consumers, ownership of laptops jumped from 40.8% to 48% from Q2 2008 to Q2 2009, with digital cameras going from 58.7% to 63.5% and LCD/plasma TVs rising from 32.2% to 36.5%. In Korea for example, luxury watch ownership among those surveyed rose from 13.6% to 16.5%.

“The affluent groups do not want to give up their lifestyle, no matter the condition of the economy,” says Kyungeun Chang, Managing Director of Synovate in Korea. “This is an insightful finding for marketers, as they should not eliminate their advertising budgets but instead target them to effectively to reach this group which is still spending as usual.”

In other words, don’t hide in the closet and wait for hell to freeze over during a financial crisis – get out and advertise.

Jonathan Dodd