Commentary
Eat Pizza, Stay Thin -- But Sacrifice Credibility
- by Pat LaPointe , Op-Ed Contributor, September 15, 2009
I'm sitting in a presentation at a meeting of a group of mid-level marketers representing some of America's biggest ad budgets. The speaker, who is representing a media source (monopoly, government-owned), is telling us that spending more on marketing in a recession is a good way to improve ROI. His argument: most marketers pull back in a recession, so if you maintain or increase your spending, your message will get through to more prospective customers, more often, with less clutter. He's citing some examples of where this was the case.
If you believe this, I have a few lots in Florida I'd like to discuss with you. Waterfront. Tons of wildlife.
I know a few people who are big fans of pizza. Given the choice, they would eat pizza for breakfast, lunch, and dinner == and probably do on occasion. Interestingly, these people tend to be thin, with very low body fat and excellent muscle tone. So, by extrapolation, I can conclude that eating pizza makes them thin. Let's all go eat more pizza.
Anyone who has studied the question of increasing spend in a recession (and done so objectively) will tell you that the evidence supporting higher spending in recessions is weak at best. There are many anecdotes and some success stories, but not enough clear evidence to convince even a moderately smart CFO that the reward outweighs the risks.
The unfortunate fact is that the definitive study on this question has never been done. No one has ever surveyed a broad sampling of marketers in different industries and different competitive scenarios, and had some randomly increase spend while holding others in control at lower levels. There are no legitimate studies that tell us how X% of marketers that increased spend had successful outcomes. And even those that have attempted to do a meta-study of all the many narrowly focused probes on the topic conclude that there are no general rules of thumb that hold up across industries and companies.
If you think I'm saying that spending more is NOT a good strategy, you're missing the point. Spending more MIGHT be the perfect strategy. Or it might be the last bad choice of your career. Success during recessionary (or slow recovery) times has less to do with level of spending than it does three simple factors:
1. How strong is your product/service value proposition relative to your competitors or the alternatives your prospect may have? If it's VERY strong, you might gain ground by spending more. If not, you might waste money just trying to buy share of voice in support of a solution which isn't all that compelling.
2. How responsive are your prospects to marketing spend? If they are very likely to respond to marketing stimulus, maybe more spend is good. But if marketing is just one of many things that cause them to buy, you may find that it would take a disproportionate increase in spend to achieve any noticeable shift in outcomes.
3. How strong is your company balance sheet? Chances are, if you spend more, your competitors will try to match you to prevent losing share. It would be naïve to think you could get away with anything that would steal share without seeing some sort of blunting response. If you have the cash to withstand an escalation of a competitive war on marketing spend, go for it. But check with your CFO before you propose a strategy that might create far more risk that the company can undertake at this time.
There are a few other considerations, but these are the really important ones.
If you worry about the consequences of eating too much pizza, you're now better equipped to challenge broad assertions about spending more. And you're more likely to preserve your credibility for the really important issues in the future.
I disagree with your point that "the evidence supporting higher spending in recessions is weak at best. There are many anecdotes and some success stories, but not enough clear evidence to convince even a moderately smart CFO that the reward outweighs the risks."
In a US recessions study of 600 companies from 1980-1985, McGraw-Hill Research’s Laboratory of Advertising Performance reported that B2B firms that maintained or increased their advertising expenditure during the 1981-1982 recession averaged significantly higher sales growth, both during the economic downturn and
three years following, than those that eliminated or decreased advertising.
There are a plethora of similar studies reporting the same findings, including one from Forrester Research.
As one who agrees 200% with Pat on this one (and I rail on it any time i see some charlatan post the "must spend now" argument), I encourage readers to look more closely at the ONE study that keeps coming up every time this topic is raised, as it was by the first commenter - the infamous McGraw Hill study.
(By the way, the definition of "plethora" is "overabundance; excess"....we'll await the previous poster's addition of many many many more recession-spending studies with bated breath.)
The McGraw study is faulty on many fronts. Firstly, the sample set was arbitrary in volume, selection, and survivor bias. Why B2B only, for example?
Secondly, the study looked at financial statements, which are not reliable sources of advertising spend - there is no required "advertising" line in an SEC filing. In addition, the financial statements do not speak to any below-the-line marketing spend whatsoever.
Thirdly, cause and effect was never proved via stripping out other company-specific factors. There's more, but i'll stop here.
And, by the way, ever wonder where all the studies are from the 1990-1991 recession? And where are all the studies from the 2001 recession? Some plethora.
Hopefully Pat's excellent points will not be lost.
Spend when you see ROI. The economic weather may or may not have impact. But spend when there is ROI. It's not that hard (for Direct Marketers).
Pat,
A point that eludes you here and that Carolyn touches on in her comment is one of proportion.
When marketers pull back in a recession, the remaining marketers enjoy a proportionately larger piece of the pie by default, simply by maintaining spending levels.
In fact, a logical case can be made for increasing market share in a recession via a proportionately lesser pull back. The math is simple. Market share and relative exposure can each be increased merely by cutting less than the next guy.
But the real issue is one of message quality, not media cost. A poorly crafted message will always fall on blind eyes and dear ears, regardless of how much you spend.
There are lots of examples of marketers proving to be their own worst enemies by throwing money at bad ideas. Case in point: an auto industry that keeps telling us how "cheap" their cars are.
The bottom line is the same as it's always been: It's what you say that counts.