Making the Strategic Argument for Advertising During Difficult Economic Times

Dr. Jay Handelman – Associate Professor of Marketing, Queen’s University
Presented to the CARF Workshop - Advertising In a Recession – April 6, 2008

In uncertain economic times, advertising budgets are sometimes cut to help companies weather any difficulties ahead. Dr. Jay Handelman suggests that rather than automatically making cuts, in an unsettled economy the place of advertising in the marketing mix should be reviewed from a strategic perspective. When considered in this light, advertising is not an expense but an investment and a source of innovation. He advises that advertising continue to be used to help build the value of the product to the consumer.

He points out that advertising can affect most of the non-monetary elements that create value for the consumer, and that these items can be reinforced even during tough economic times. The value of the product resides in the mind of the consumer, not in the corporate boardroom.

Even during a recession, Handelman says that the elements that create brand value can be manipulated by advertising in various ways to maintain the perceived value of the brand and to help the brand hold its price.

To support the cause of continuing to advertise during difficult economic times, Dr. Handelman suggests that advertisers:
1. Talk like a CFO – Protect the selling price by using advertising to keep the breakeven number of units down.

Breakeven units = Fixed Costs / Selling Price/unit Variable cost/unit

Companies that protect the selling price during a recession means the breakeven point goes down.

2. Manage for the upturn, not the recession – Customers are still there even if they may be taking a “time out” on purchasing. They are still there and what a company does during a recession will impact longer-term consumer perceptions.

3. Economic slow-downs can be times of opportunity and companies should not suspend innovation. Handelman reminded the audience that brands like FedEx (1973), Walkman (1979), CNN (1980) and the iPod (2001) were all introduced during tough economic times. He suggested that marketers study social networks to get insight into what the customer is thinking.