Is Recession the Time to Boost Ad Spending?

These are down times for marketers, and it's not just boozy parties getting the ax. In late March, Google (GOOG) laid off 200 sales and marketing employees. Advertising giant Omnicom Group (OMC) cut more than 3,000 positions in late 2008. And the layoff lists and budget trimmings continue apace. When the Association of National Advertisers polled its members in February to learn how they were being affected by the economic downturn, 93% of respondents mentioned cost-cutting, with almost 37% reporting budget cuts greater than 20%.

Still, for some, the down economy is an opportunity.

Joel Ewanick, vice-president of marketing at Hyundai Motor America, is pumped—and not just because he's downed four cups of coffee. His gamble on Hyundai Assurance—the recession-inspired marketing program launched on Jan. 3 that allows buyers to return loaned or leased cars with no penalty if they lose their job—helped the company report a tiny uptick in year-over-year sales for the first quarter while the industry overall was down 38.4%. "We've increased our market share. Brand awareness has gone up 25% across the board," Ewanick says. "And consumers look at us differently because of the offer."

Spending on the Oscars and Super Bowl

Hyundai hasn't been immune to the downturn: In January its U.S. division laid off 50 workers, cutting the workforce to 542. Yet the Korean-based automaker is taking advantage of opportunities offered by the shaken economy. So when General Motors (GM) quit its decades-long position as exclusive automotive sponsor of the Academy Awards, Hyundai jumped at the opportunity. In 2008, 30-second ad slots for the Oscars telecast went for $1.82 million. According to market research company TNS, GM spent a total of $13.5 million that year.

Hyundai's approach is surprising not only because it runs counter to the dominant trend of budget trims, but because it's focused on the most expensive kind of marketing: big-budget sponsorships such as the Oscars and Super Bowl ads. In contrast, most companies are shifting money away from high-cost traditional channels toward less-expensive Web-marketing and other interactive tools, according to Shar Vonboskirk, vice-president at Forrester Research (FORR), a Boston-based market research firm. Based on its first-quarter results, Hyundai's investment seems to have paid off.

AirTran Airways (AAI) is another company that has boosted its marketing budget while some rivals have contracted theirs. The Florida-based discount carrier put $8 million behind a TV and digital campaign that runs through the summer in six markets. The recession made it harder to make a case for that spending, but the airline's business model is built around stimulating demand and emphasizing value, said Tad Hutcheson, AirTran's vice-president of marketing and sales. "If the airline were run solely by the financial people, we'd never spend a dime on advertising," he says.

Ads let Chevy pass Ford in the 1930s

Such spending is smart, says John Quelch, a professor at Harvard Business School and a nonexecutive director of WPP Group, who argues that recessions aren't the time to cut advertising. "It is well documented that brands that increase advertising during a recession, when competitors are cutting back, can improve market share and return on investment at lower cost than during good economic times," Quelch says.

History certainly supports his argument that downturns are great opportunities for companies—and for corporate marketing. During the Great Depression, Proctor & Gamble (PG) pioneered the soap opera and Chevrolet invented the billboard. "In '31, Chevrolet was being outsold by Ford (F), but its outdoor advertising campaign helped the Chevy 6 become the best-selling car in its class until 1938," says Forrester's Vonboskirk.

Still, history doesn't hold all of the answers. Today's digital marketing options change the game in myriad ways. Online marketing campaigns are less expensive, more targeted, and more personal, not to mention that it's easier to measure return on investment in the digital world. It also means that the era of the annual planned marketing budget is over. Marketing, which has always been a sort of performance art, has become more improv as teams learn how to test and adjust, test and adjust.

One thing Vonboskirk warns against is focusing too much on short-term sales at the expense of building the brand. That, after all, is one reason Packard no longer sells cars.

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