Surviving the recession

To an extent nearly everyone in an internet business is dependent on advertising for our respective businesses' income. It doesn't much matter what form that revenue is in, Cost per click (CPC) / Cost per action (CPA) marketing, building websites for businesses to promote themselves, selling domains, on-line journalism, renting hosting space or replacing routers, it's advertisers who are ultimately paying the bill.

Since this recession started I've noticed that my parking CPC revenue is down 30% and others have mentioned similar percentages.

I've heard that during past recessions companies who maintained or increased their marketing spend do better than their competitors.

In a study of U.S. recessions, McGraw-Hill Research analyzed 600 companies covering 16 different SIC industries from 1980 through 1985. The results showed that business-to-business firms that maintained or increased their advertising expenditures during the 1981-1982 recession averaged significantly higher sales growth, both during the recession and for the following three years, than those that eliminated or decreased advertising. By 1985, sales of companies that were aggressive recession advertisers had risen 256% over those that didn't keep up their advertising.

Aggressively competitive companies had only a slight advantage over their competitors in the years before the recession. Their sales growth was mild as the recession hit, but while competitors cut back their spend in years one, two, or both, they continued to invest in advertising and promotion.

All these firms continued to grow throughout the recession, but after the recession ended the difference really showed. Those who had reduced stayed at more or less the same slow growth rate but the aggressive advertisers left them behind at a much faster rate. "By the end of 1985 the companies that didn't cut back had grown a whopping 256%."

MarketSense compared 101 household name brands during the recessionary period 1989-1991. Jell-O, Crisco, Hellman's, Green Giant and Doritos saw sales drop by as much as 26-64%. Jiff peanut butter raised ad support and sales went up 57%; Kraft salad dressings saw a rise of 70%. In the beer category, overall spending was down 1% while Bud Light and Coors Light, each spending ahead of the category, saw sales increases of 15% and 16% respectfully. Pizza Hut sales rose 61% and Taco Bell's 40% thanks to strong advertising support, with McDonald's volume down approximately 28%". Investopedia

All Business Reports:

During our last economic downturn, while aggressive marketers such as Proctor and Gamble took advantage of reduced media rates to expand their advertising program, K-Mart decided to decrease advertising during September and October, 2001.

The result? K-Mart sales dropped a resounding 5% during October. By late fall the company had lost far more in sales than it had saved in marketing expense.

At least a dozen other studies ranging from 1923 through 1991 show nearly identical results. Meldrum & Fewsmith showed in a series of six studies that, for all post World War II recessions, those firms that kept advertising aggressively increased profits as well as gross sales during the recession.


This is an abbreviated version of my original blog post.

Bruce Clement is a keen domain name investor and commentator. You are free to copy this article under the http://creativecommons.org/licenses/by-nd/3.0/ licence as long as you publish it unchanged and link either to Bruce's blog Domaining .nz at http://domainingnz.blogspot.com/ or to his hub site at http://www.clement.co.nz/

Tags: economy recession