I plead guilty to enjoying a cold beer or two, and I’ve watched with amazement as the decade-long bull market in the craft beer industry shows no signs of abating.
That's not an overstatement.<br clear="none" /> During a pullback, within an industry or across the broad economy, one instinctive reaction is to reduce or eliminate company spending that's regarded by many as "not vital" or "discretionary," i.e., advertising. Or to use the umbrella term, "marketing communications," which embraces sales promotion, trade shows, search engine advertising, publicity, direct marketing, and other outreach activities.<br clear="none" /> But though a company finds it's bleeding during tough times and feels it <i>must</i> cut, it would be wise not to aggravate its problems by eliminating advertising, the "healthy blood" that helps keep the body nourished and fit. <br clear="none" /> It's useful to know just why that is.<br clear="none" /> Like most of us, CEOs value reports and information that enhance understanding of their own company's operations or of their served markets; that's red-meat kind of stuff.<br clear="none" /> But show those same CEOs a pile of reports compiled by research firms about "the efficacy of advertising during recessions" and their eyes quickly glaze over. Such things "apply to other companies, not to us," and seem too far removed from the operations of their own company.<br clear="none" /> That's unfortunate, because the studies of recessions, going as far back as the one in 1923 and including all of the post-war recessions, all show convincingly that cutting advertising reduces business, both during the recession and for years thereafter.<br clear="none" /> To spare readers the agony of actually digesting such reports, here's a rundown:<br clear="none" /> <b>1923 recession. </b> Two hundred companies were studied for many years by Roland S. Vaile. In 1927, he published his findings in Harvard Business Review. Results: The largest sales increases were made by firms that had advertised the most.<br clear="none" /> <b>1949, 1954, 1958, and 1961 recessions.</b> Buchen Advertising in New York plotted the performance of numerous companies. Findings? Almost without exception, at firms where advertising was cut back, those firms experienced significant drop-offs in sales and profits. Plus, their sales lagged after the recessions ended.<br clear="none" /> <br clear="none" /> <b>1974-'75 recession. </b>Similar results to the Buchen study, except this research was performed by The American Business Press together with an advertising agency, Meldrum & Fewsmith. This study further noted those companies that did not cut advertising experienced higher sales not only during the two recession years but for the two years following the end of the recession.<br clear="none" /> <b>1981-'82 recession.</b> McGraw-Hill's Research arm studied 600 companies and found those that maintained or increased their advertising during the recession experienced, by 1985, a rise in sales of 256 percent