The Value of Increasing Investment in Employee Benefits During an Economic Downturn

 

Whether the U.S. economy is in the middle of a recession, not in a recession, or on the verge of a recession is a subject of much debate. One thing is certain, however. Businesses are cutting back and are reluctant to spend. And so are their employees. From sky-high fuel prices to the mortgage crisis to continually increasing health care insurance premiums, employers and employees alike are in a spend-less mode. For most businesses, that translates into pulling back on discretionary spending. Typically, one of the first line items to go is advertising. According to a recent study by MarketingSherpa, 60% of large companies are cutting marketing budgets in 2008.

 

Seasoned professionals in advertising agencies who have weathered more than one economic downturn recognize the pattern. Americans have weathered nine recessions since World War II. Advertisers who increased marketing spending during these periods of economic uncertainty ultimately came out ahead of the competition—in most cases, way ahead.

 

A McGraw-Hill study conducted following the 1981-1982 recession showed that industrial companies that increased investment in marketing and advertising posted average revenue gains 40% greater than noninvestors during the period from 1980 to 1985. More impressive yet, investor companies saw 275% growth while firms that cut ad spending grew sales only 19% during the same period.

 

Why does this counterintuitive strategy (times are tough/spend more) consistently work so well?  Read more >>