Now Is The Time For Lowest-Cost Market Share Gains In A Generation
Posted on November 12, 2009 by The Growthwire Team
Source: The New Yorker
October’s economic reports are giving us encouraging signals, but we expect a rebound in consumer spending to lag anywhere from several months to several more quarters. Your competitors are likely to remain on the sidelines, until clearer signals emerge, leaving the field wide open for a once-in-a-generation growth opportunity.
A large, consistent body of business research conducted on the recessions of the 1970′s, 1980′s, 1990′s and early millennium suggests that firms that start advertising aggressively now should be rewarded by above-average growth during the remaining downturn and, depending on how long they are advertising while competitors aren’t, above-average growth after the downturn ends.
Why will these firms grow while their competitors suffer? As explained in depth in this article, recessions cause two things to happen that don’t happen in good times. First, the overall advertising ‘noise’ in the market place decreases significantly. Some firms go out of business and most others take a very defensive posture and reduce their marketing spend. The net effect is a massive, collective loss of the mind-share once held by firms in your local marketplace. The second effect is a significant decrease in brand-loyalty. During recessions, many consumers adopt bargain-seeking behavior that causes them to break habits and seek the best possible value.
Together, these two forces create a unique opportunity for the firms that continue to market and address consumer’s value concerns. This isn’t some pie-in-the-sky theory: it’s a fact that is backed by over forty years of cold hard marketing science. These studies have shown that companies who increase their marketing during recessions grow their revenue over 250% faster than their competitors. The market share gains won during recessions last, on average, 3-5 years after the recession!
Firms as diverse as Dominos, Kellogg, Miracle Whip, UPS, IBM, Hewlett-Packard, Coors, Zippo, Disney, Super 8 and Wrigley are the Fortune 500 examples widely cited. At Cumulus Media, we’ve also witnessed this story first-hand among small businesses all over country. In fields where the economy was hit hardest – mortgage lending, real estate brokerage, & construction, we’ve witnessed 3-4 digit percentage growth. In more mainstream fields like retail, professional services, and healthcare, figures in the 2-3 digit growth range are common.
What happens to the other, less aggressive firms? According to the research, those that hold their marketing at pre-recession levels tend to emerge from recessions with flat revenue and lower profitability. Firms that decrease marketing tend to lose revenue and usually suffer significant net losses. These declines are usually more severe than the drop in consumer spending, by itself, would indicate (because the non-marketers lose significant market share). Both of these groups find it difficult to quickly regain their momentum after the recession ends.
While committing your business to a marketing increase during a recession may feel like jumping off a cliff, the unique circumstances of late 2009 make this strategy more compelling than ever. Businesses that start marketing aggressively before all signs (and their competitors) that the economy is back on track, will have a significant head start over those less bold.
What do you plan to do between now and the rebound in consumer spending?
