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:
- 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.
- 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.
- 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.
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.
Pat LaPointe is Managing Partner at MarketingNPV – specialty advisors on marketing metrics and measuring marketing investments, and publishers of MarketingNPV Journal available online free at www.MarketingNPV.com.