Economic Downturn Essay
Recession may be defined as a slump in a country’s economic activity. The prime consequences of such a scenario maybe increase in unemployment decrease in the money spent by consumers and businesses and a fall in the stock prices. The GDP falling in two consecutive quarters are usual indicators of a recession of the economy (http://financial-dictionary. thefreedictionary. com/recession). There are multiple factors which lead to such a crisis. Mortgage is an important sector which signals recession.
Families or individuals are led into low-interest schemes but once the slump begins it becomes difficult to re-pay. The slowdown is inter-related to other sectors as well and will lead to secondary effects on construction and housing sector. People start losing their jobs and the willingness to spend money decreases. Output of the suppliers tends to eventually become less and stocks in the go-downs may pile up. Another factor is the price of crude oil or refined products. The production costs tend to go higher and the increase in price decreases consumption.
The value of the dollar in the global market plays an important role and decrease in its value adds to the downturn (http://www. moneyweek. com/news-and-charts/economics/three-reasons-why-the-us-faces-recession-in-2008. aspx). Many developing countries rely on trade of manufactured
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Creativity in recession As per Soter T. (2002), the advertising industry faces a decline in a recession. There is very less to look forward to, concerned to the fact that the client is hesitant to advertise. Most projects are either put on hold or downscaled or even at times shelved. In a recession, usually people tend to be ingenious and work better to make the budget effective for the work required. Agencies see this as an opportunity that even though the budgets are tighter, there is honesty in what can be done and what cannot be done.
Client put their constraints and the creative teams work becomes better in a way because they would not present what the budget is not capable of accommodating. In an article by Iezzi T. (2008), Peter Nicholson and Nick Law agree to the fact that the clients are being more conservative about their advertisements and prefer ads which are considered safe and sure-shot are being played on. The testing which usually is done to gain insight becomes a decision maker. Most importantly, the message in the advertisement becomes packed with as many messages as possible.
Clients are being realistic and looking at campaigns which are measurable. Boulding J. (2009) talks about the recession time as hard for the agencies and the companies. He says that now is the time for the brave, those companies who are ready for a change in the organisations, share values and aspirations of the agencies they are dealing with. The catch is for the marketers to engage with their customers and not only make them loyal but alongside build the goodwill of the company keeping the values intact, however the environment maybe.
Beale C. (2008) mentions that advertising agencies are not only facing reduced income but if going at the same rate of cutting budgets, the chances are that the agencies will try and give a lift to the brands they consider under-invested after the downturn is over. Till the economy is still in recession the agencies must focus on their creative standards even if the clients are not demanding it. She says, now is the time for the industry to rediscover how important creativity is and invest in creative products.
During a recession, clients look for consultants and management experts for advice on what to do in the downturn, not to lose market share and this should give the advertising industry to offer something different which can do magic to the brands in a gloomy scene. The advertising industry needs to have confidence in their creativity and transform the brands future to survive the recession by leveraging what they do best – creativity. A study of the 1989-91 recession showed brands like Jif Peanut Butter and Kraft Salad Dressing had increased their advertising spend and had a significant growth of sales by 57% and 70% respectively.
When all the beer brands were cutting costs, Coors Light and Bud light increased theirs only to experience a sales growth of 15% and 16% respectively. In the fast food arena, Pizza Hut managed to increase their sell by 61% while McDonalds dropped by 28% because of reduction in the advertising spend. The lesson drawn from this is that for the brands to cope up with recession, they should have a balanced advertising budget. The brands should look at sales promotion or reduced prices for boosting the sales but not as a permanent solution to beat the recession (http://www. foliomag. com/2008/how-convince-advertisers-keep-advertising-recession).
Another example is of the US recession of 1981-82, a study of 600 companies was carried out and it was observed that business-to-business firms which kept up or increased their advertising spend in the downturn had a noticeable increase in sales during the recession and even three years after it, compared to those who decreased or stopped their advertising (http://www. impaqt. com/insights/documents/SearchandtheRecession_Whitepaper_2008. pdf). An article in Campaign UK (2008) highlights that in a recession client demands are never-ending which leads to jobs being put at risk and the agencies’ ability to service the client effectively.
They are ready to spend only if the advertising response is measurable and accurate. It has been noticed that clients tend to favour digital agencies over traditional ones but the silver lining in the cloud is that, whichever form of communication the clients use, there will be creativity in a new form. According to Razeghi A. J. (2008), a recession exposes the unmet objectives and it is easier to find new prospects for product development and use this time to come up with and put across the most disruptive ideas.
Creativity is at an all time high because everyone is more aware, thinks and is focused. Some of the most successful innovations included identifying an unmet need and fulfilling it. The biggest mistake that companies do in a downturn is that they stop listening to what the market is saying by cutting down on research and development. The slump is a door to being creative and step out in the market and taking the risk. Consumers are spending less and every decision is taken with care, thus if the product is not extraordinary it may delay the decision making process.
The straight solution what companies think is to reduce price, but the companies need to think that how long it took to get that price from the consumer. Even if the sales are going down, a brand is at stake and if creativity is absent, price reductions can kill the brand. For example: Vlasic a known pickle company slashed the prices of their products and loaded them in oversized the jars to be sold at Wal-Mart for $2. 97 (this was the reduced price which was less than a quarter from the actual price of Vlasic pickles). The product caught attention as the big jars seemed value for money to consumers.
The problem was – it became a cheap and big jar of pickles and Vlasic was reduced to an advertisement of everyday low prices which was a diversion from the original brand. The most important of the tips which marketers should follow is to not cut advertising budget but to increase it as the competitors cut back, your message will be heard. The marketing plan should have a proper strategy in terms of where the brand should be present and not waste the resources. Customers should be reassured that they feel at least risk and more importantly retain the loyal customers.
Direct marketing is a good means to keep them updated. With the downturn the cost of a 15 sec slot is lesser than usual and brands should be creative to make use of this opportunity to maximise impact. Some brands may even look at sponsorship for generating brand awareness and making sure the target audience notices it, will also help reinforce the brand in the mind of the consumer. Lastly, as mentioned before, not to cut down on prices or save production costs at the cost of the brand quality and value (http://www. foliomag. com/2008/how-convince-advertisers-keep-advertising-recession). Conclusion
To sum it all up, we can learn the lesson from previous recessions that this is the worst time to cut costs for the advertising and marketing spend. The accounts main beliefs always consider advertising as expenditure and not an investment. Market share which takes a lot of effort and money to build is difficult to regain, if lost. Reducing the price is not the only solution to the problem and companies should not compromise on their profits. Companies may offer temporary promotional prices to boost sales but it is important that they maintain their market share as per the brand positioning by investing money instead of cutting costs.
This is where creativity plays an important role and marketers should make use of this recession as an opportunity to gain more in the same advertising budget. The brands presence even during a recession marks an impression on the consumer mind and the chances of brand recall are higher during and after the recession. The downturn can be seen as an advantage to brands that are looking to increase market share using quantifiable, result-oriented methods which give best return on investment (ROI). Even though creativity flourishes in the economic downturn, it is still in the confines of playing safe as money is at stake.
Some may take the risk but a majority will be averse to the idea. It may give way to different faces of advertising but in the end it depends on the brands. There will still be a number of brands which will have to cut budgets but to make that a positive they should invest more time and effort in understanding the brand and marking its way forward. In today’s world, there are innumerable ways to reach the consumer and through the creative and innovative ways of interaction, a brand can still come across as personal and give the consumers a reason to buy.
Advertising should be creative, engaging and entertaining for the consumers to notice it. The economic downturn is a good way to not only be creative but also build a relationship with the potential and loyal consumers. To come out as a success in a downturn, it is vital that the marketers know what they are doing and what they want and then make it work to maximum capacity as there is no limit to creativity and innovation irrespective of the economic times.