The Importance and Value of B2B Advertising During Times of Economic Uncertainty

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2009 - 2010

Introduction

History has shown that companies who either steadily continued or aggressively increased their advertising efforts during times of economic uncertainty: Experienced overall growth of their businesses at the

expense of their competition, who chose a more timid approach during times of economic uncertainty, and either cut back on or cut out their advertising budgets all together.

Experienced continual growth post the period of economic uncertainty (tracked post uncertainty for three years in most cases), and they gained a stronger position in their market and in the eyes of the buyer.

A survey conducted by BtoB in May/Jun 2009 amongst 495 B-to-B marketers has demonstrated that the importance of advertising during times of economic uncertainty has clearly resonated with marketers.

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‘BtoB’ Magazine Survey: 2009

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Remain the Same 30.2%

Increase Budget26.1%Decrease

Budget43.7%

Despite the current economic conditions, over 50% of business-to-business marketers indicate they will hold or increase their Marketing budgets during 2009.

‘BtoB’ Magazine Survey: 2nd Half 2009

In the second half of 2009, 78.6% of business-to-business marketers will increase or hold their marketing budgets compared to the first half of the year.

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Remain Flat vs.1st Half '09

46.3%

Increasevs. 1st Half '09

32.3%

Downvs. 1st Half '09

21.4%

‘BtoB’ Magazine Survey: 2010

Moving forward into 2010, over 50% of business-to-business marketers will increase their spending vs. 2009.

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Remain Flat vs.

200936.7%

Increasevs. 200953.0%

Decrease vs. 200910.3%

‘BtoB’ Magazine Survey: ‘Marketers’ Outlook’

Each of the three key business-to-business platforms (Print, Online, and Events) will benefit from the increase in marketing spending in 2010

IncreaseNo Change

Decrease

Print 27.9% 52.6% 19.4%Online 68.7% 28.8% 2.6%Events 37.6% 49.9% 12.5%Broadcast 7.6% 79.5% 12.9%Radio 6.9% 79.7% 13.4%Direct Mail 37.7% 49.1% 13.2%Telemarketing

20.7% 69.0% 10.3%

Outdoor 5.0% 81.3% 13.8%

“For the following media, what do you anticipate your spending will be in 2010 over 2009?”

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Yankelovich/Harris Study 1

• In spite of a down economy, virtually all executives acknowledge the importance of keeping abreast of new products and services in their industry, and continuing to invest for the future.

• Advertising in a down economy clearly creates a competitive advantage. The vast majority of executives agree that when they see a company advertising in a down economy:• It makes them feel more positive about the

company’s commitment to its products and services

• More importantly, it also keeps those companies top-of-mind when purchase decisions are made

1 2001 Yankelovich Harris Study 1 2001 Yankelovich Harris Study

Percentage of executives who

agree with below

statements

Yankelovich/Harris Study (Continued)

Even in a down economy, it’s important to keep abreast of

new products and services for your business

In a down economy, it’s important to continue to invest

to remain competitive in the future.

Q305 (Base: Total Respondents, n=505): Please tell me whether you strongly agree, somewhat agree, somewhat disagree, or strongly disagree with each of the following statements.

Percentage of executives who

agree with below

statements

When you see a company advertising in a down economy, it keeps them top-of-mind when you make purchase decisions

When you see a company advertising in a down economy it

makes you feel more positive about the company’s commitment

to its products and services

Yankelovich/Harris Study (Continued)

Q305 (Base: Total Respondents, n=505): Please tell me whether you strongly agree, somewhat agree, somewhat disagree, or strongly disagree with each of the following statements.

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Yankelovich/Harris Study: Conclusions

• More than 95% of executives maintain a high interest in learning about and investing in a new products and services even in a down economy

• Over 85% of executives believe advertising in a down economy is extremely important

• Executives react favorably to companies that advertise in a down economy: the companies stay top-of-mind and are viewed more positively

• Executives are not about to let their guard down even during an economic downturn: they must stay current on what is new in the industry and must position their organizations for the future.

Proactive Marketing for better business performance

• “The greater the proactive marketing of a firm during a recession, the better its a) Market performance and b) Business performance”1

• “Research on firm performance in hostile environments suggests that risk-taking may be necessary for survival and growth”

• “Firms that invest aggressively in marketing send a reassuring signal of confidence to concerned customers about their staying power and provide an incentive for customers to switch from brands/firms that they perceive as weak”

• During a recession, “reduction in input costs, combined with the increased marketing effectiveness of the proactive firm should result in improved business performance.”

1 Pennsylvania State University: ISBM Report, Raji Sriniva, Gary Lilien, and Arvind Rangaswamy, 2002

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Proactive Marketing for better business performance(Continued)

• “Results confirm business press accounts of companies such as Dell, Microsoft, and BMW that view recessions as opportunities and exploit that perceived opportunity with aggressive marketing programs”

• “Proactive marketing has a strong direct effect on market performance even during the recession and an indirect effect (through market performance) on business performance”

• Surprisingly, “firms do not have to wait until a recession is over to realize benefits from the marketing investments they make during a recession”

Conclusions of Previous Studies

• McGraw Hill Research’s Laboratory of Advertising Performance (LAP) analyzed the performance of 600+ business-to-business firms: those firms which maintained or increased their advertising expenditures “averaged significantly higher sales growth” during and for the three years following the recession compared to those which eliminated or decreased advertising• Firms which maintained or increased their advertising

budgets during the recessionary period “could boast an average sales growth of 275 percent over the preceding five years” 1

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• American Business Press Study: “Sales and profits can be maintained and increased in recession years and [in the years] immediately following by those who are willing to maintain an aggressive marketing posture, while others adopt the philosophy of cutting back on promotional efforts when sales appear to be harder to get.”2

2 American Business Press: 1974 – ‘75

1 McGraw Hill Laboratory of Advertising Performance (LAP): 1985

Conclusions of Previous Studies

• Buchen Advertising Inc. tracked a ‘large number’ of business to business companies: sales and profits dropped off, “almost without exception”, at companies which cut back on advertising. Post recession, those companies continued to “lag behind” companies which maintained their advertising budgets.1

• Harvard Business Review report of 200 companies: largest sales increases reported by companies that advertised the most during the recessionary year(s).2

1 Buchen Advertising Inc. 1949, ’54, ’58, ‘61 2 Harvard Business Review: 1923

Additional Thoughts

• If during an economic downturn you maintain a strong advertising presence while your competitor cuts his budget, you will automatically increase your “Share of Mind.”1

• Economic downturns reward the aggressive advertiser and penalize the timid one.2

• During an economic downturn, a strong advertising/marketing effort enables a firm to solidify its customer base, take business away from less aggressive competitors, and position itself for future growth during the recovery.3

• Advertising in an economic downturn should be regarded not as a drain on profits, but as a contributor to profits.4

1 San Diego Executive Magazine

2 The Strategic Planning Institute

3 Coopers & Lybrand

4 Harvard Business Review

Summary:

Advertising aggressively in a recession can not only boost sales and market share, it can also open a lead on the more timid competition. It can skillfully reposition a product to take advantage of new purchasing concerns, give the image of corporate stability within a chaotic business environment, and give an advertiser the chance to dominate the advertising media.

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Summary:

When times are good, you should advertise.When times are bad, you must advertise.

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