Recession Means There Will Be Less Advertisement Budget - True!

Do you remember the days back in 2001 when we had a great depression in the market? Just like those days, advertising agencies are also going through some tough times now. Especially the small advertising agencies with smaller and running accounts or clients are really facing some tough time as the companies invariably reduced their promotional expenditure.

It is not just about small advertising agencies. There had been lots of changes and shifts even in small and medium sized agencies (however, in some of the cases the reasons had been different like changes in company management team).

Now a lot people ask a not so unique question. If the companies can do well without advertising during recession (as they normally do), why do they really spend so much in advertisement at normal times? In fact, this is not one question. This question asks few smaller but very interesting questions like:

1. Can companies do well without advertising at the same rate during recession?

Well-managed companies normally have a blue print of what they are expecting from an advertisement campaign. Accordingly, they allocate money to each advertisement campaigns. Now during recession companies often shrink advertisement budget for some products or product range that are not doing well or the products and services that have less chances of doing well. During recession, all companies try to reduce their regular expenditure and spending less money for advertisement is just a part of it. However, some companies or products solely depend on advertisements. They do not normally make huge changes to their advertisement budget in such a period. Sometimes the advertisement expenditure also depends on competitors. If the competitors start spending huge amount in advertising to take advantage of recession, one cannot wait and watch the market moving towards one direction.

2. Companies spend huge amount in advertising during regular times and some investments are really wastage.

In case of offline advertisement, there is hardly any easily accessible tracking solution to measure the cost per impression. If you think about TRP ratings for audiovisual advertisements run on television channels, there are so many doubts about authenticity of actual penetration. To add t this, POPs also cannot provide you some unique data to understand the actual impact of an advertisement. However, it will not be wrong if we say that, a good amount of money is wasted in any offline advertisement campaign. And budget allocation depends on identifying the actual target market and the best medium to reach them on time. If the advertisement agency is good at both the aspects and if they can develop the best copy to penetrate that market, they can reduce the wastage amount.

3. Is there any direct relationship between advertisement campaign and sales volume?

There is no doubt about that - today both of them are directly related and the degree depends on the size of the market you want to penetrate. As I said earlier, some products in the FMCG sector solely depends on advertisement to continue good business.

However, smart companies and marketers always maintain a balance in advertisement budget allocation across soft and hard times. This is an important part of their marketing strategy.