How to Survive a Recession

LESSON 37: Advertise More - and Directly to Your Customer

The power of advertising often goes unappreciated during recessions. Most businesses cut back their advertising dollars during difficult economic times. In some industries this makes sense. For example, if your business sells big-ticket industrial items such as semiconductor fabrication machines to technology companies, the value of your advertising dollar is likely to be negative since the entire technology sector tends to stop buying during recessions.

If your business sells consumer products or services, a recession is an opportunity to increase market share, develop brand awareness, and continue to generate recurring revenues by focusing on lower-priced value products. The value of advertising, whether direct, through mass media, the Internet, or public relations, is directly related to what you sell and to whom. Once you have determined your customers are likely to continue buying during a recession (even in reduced volume), it is time to increase your targeted advertising.

The key is maximum efficiency in the use of your advertising dollar. Recessions cause customers across the board to reduce their purchasing levels, so revenue dollars become scarce. You will probably lose the casual customer, and customers that are on the lower end of your price range, simply because the economy will erode their purchasing power.

You must focus your advertising on your core customer base and that of your direct competitors through highly targeted and personalized marketing. Untargeted mass media ads should be replaced with highly targeted direct ads, mailings, business networking, and guerilla campaigns aimed at attracting specific sub-groups of customers. As you shift your advertising budget away from mass market campaigns (which will generate increasingly lower returns) and increase high-return targeted advertising, you draw a defensive line around your existing profitable customers and begin to erode your competitors’ core customer base.

Even if your sales do not rise, they are likely to drop at a lower rate than if you had cut your advertising spend. When economic prosperity returns, you will be in an advantageous position with a large group of profitable and loyal customers, strong brand recognition, and the ability to grow more rapidly by using this core group to leverage broader mass-market campaigns to increase market share.

Many companies make the mistake of cutting their advertising budgets across the board in an effort to survive financially, leaving their core market open to you. However, beware of competitors with deep pockets. They may immediately counter by dropping prices, increase advertising, ignite a price war, and reduce the profitability of both players in an effort to outlast you. Highly targeted direct advertising can help keep your message is “below the radar” of the competition for awhile. It also helps to target small niches that would be unprofitable for large scale competitors to serve, and to provide superior customer service to maintain customer loyalty.