Advertising during the downturn: Zig when everyone else is zagging and other advice from the experts
The recent Wall Street crisis combined with the slow economy means people are trying to squeeze the most out of each dollar. And when it comes to spending, the numbers aren't looking good for retailers. According to The Commerce Department, consumer spending fell off a cliff in September to its lowest level in two years. But it's not only consumers who are cutting back – businesses are reevaluating their finances and trimming their advertising budgets. And, overall nationally, they've been doing so all year.
During the first half of this year, advertising expenditure nationwide fell by 1.6 percent, compared to the same time last year – the steepest quarterly drop since 2001, according to TNS Media Intelligence reports. The second half of '08 was bolstered by the summer Olympics and political elections.
"When the economy is good, people will spend a lot more money on advertising," says Senior Ad Consultant Don Fitzgibbons of Jim Doyle & Associates. "But when the economy is bad, people are quick to pull their advertising dollars if they aren't seeing immediate results."
A national and international advertising consultant, Fitzgibbons, who refers to himself as the "Guru of Ads," works with Traverse City-area TV stations to increase results for their advertisers. He has worked with stations in more than 100 markets, including an almost 10-year stint with TV 7&4.
Fitzgibbons estimates that 65 percent of local ads fail, and says during a poor economy some business owners become frustrated and pull their ads quickly.
Why do more than half of local ads not work? "The 'Blah, blah, blah' factor," he says.
"'Blah, blah, blah' is the stuff you have heard or seen 10,000 times in your lifetime and thus has no meaning. For TV, it's the row of cars at the car dealership or the shot that pans a furniture showroom. For scripts, they are words like 'serving all your needs' and 'the friendly staff.'"
Not all companies can afford to hire an ad consultant, so Fitzgibbons has this advice for a business with a small advertising budget: Don't spread your advertising dollar all over the place.
"If you have a budget of less than $3,000 a month, you need to advertise in one medium only and clobber it. This means one program on one TV station or one newspaper. If you try to be all things to all people, you will always fail."
A company with a monthly budget of $5,000 to $10,000, however, can probably afford to advertise in two different media.
Charlie Ferguson, general manager of Northern Broadcast, Inc., which includes radio stations WKLT, The New 106.7 YOU-FM, and FOX FM, says right now there is a general reluctance toward long-term commitments.
He says he understands during tough times businesses may have to decrease their advertising dollar, but has this warning for those thinking of slashing their advertising budget altogether: "They shouldn't do it! In the past downturns, many businesses stopped advertising. After awhile they figured out that not advertising caused their business to stagnate completely and it cost a lot of extra dollars to get it rolling again."
Getting the most out of their advertising dollar is crucial for smaller companies, so Ferguson says if you aren't getting the results you want, it's time for change.
"Change the approach, change the media and make sure your advertising speaks to the customer's needs and wants instead of the business owners. Sometimes just reaching a new group of potential customers can make a huge difference for a business."
While some companies may be cutting their advertising expenses, some businesses are actually increasing it because of the slow economy. Phil Callighan is a senior account executive at Knorr Marketing. He says his company has seen several new clients specifically because of declining sales. However, he cautions that sometimes businesses unfairly blame a poor economy as the sole reason for a decrease in sales.
"Often a business may suffer from poor branding or from poor sales promotions that did not present a compelling reason for someone to come into a store."
Callighan adds that now may actually be the best time to increase your advertising dollar if your competitors are slashing their budget.
"There will be less advertising clutter in the marketplace, increasing the ability of your advertising to be seen and remembered."
Karl Bastian, partner of Greenlight Marketing, agrees and says sometimes in advertising you need to "zig when everyone else is zagging." He says his company is currently working closely with a manufacturing business that has decided to step up its advertising presence because its competition is down.
However, he realizes that this is outside the norm and that during a tough economy, marketing is usually the first to go because it is seen as expendable. But companies that are consistent and keep up with advertising, he says, will rebound quicker than those that don't.
Emily Mitchell, principal with Nielsen Design Group, estimates that, on average, companies spend two to five percent of their annual gross income on communications and marketing, which includes advertising. But she says a company on a tight budget can be effective by spending only half percent if they do it right.
"Every business has an identity. It exists in the market place by default, so you need to make sure that you have a good, strong identity that the public recognizes and can relate to."
Along with less "clutter," Eric Campbell, partner of Tandem Design, says another positive reason for advertising right now is the potential for discounted rates.
"We also find when the economy slows, businesses are placing less ads and overall ad revenue decreases, thus the traditional media outlets are much more willing to negotiate placement rates. So, we can usually strike some pretty good deals for our clients."
Cheryl Lohner of Create a Buzz Marketing, points out that not all advertising has to cost money. "Remember, advertising and promotion go hand-in-hand."
She says there are four easy ways companies can advertise for free:
1. Current and past customers: Your best prospects are those that have already done business with you. E-mail them through a monthly publication.
2. Use the Internet: Post articles about your company on free article sites such as 'e-zinearticles.com' and start a blogging site.
3. Volunteer: There are a number of nonprofit organizations that could use your help. It will give others a chance to know you and your services.
4. Word of mouth: There is no stronger form of marketing than positive word of mouth. However, a bad reputation or service experience can travel even faster than positive stories. BN