It’s about the seven neighbourhood brats whom I had to take out for a lunch last Sunday. Not that I had any love lost with them, but the nine year old imps irritatingly demanded a gourmet at either McDonald’s or Pizza Hut, while I was stuck on to the fact that if I really had to waste my money during an economic downturn, I’d rather do that at the relatively health-oriented Subway. “Who’s even heard of Subway?” the scallywags protested in unison. The deepening frown on my face notwithstanding, I realised a point in their statement. Was global recession forcing Subway to advertise lesser? Given that Subway is now America’s largest quick service restaurant chain [larger than McDonald’s], would it therefore mean that during a slowdown, reducing one’s ad spend was the correct strategy for a stronger and fortified long term vision?
In this fantastic 2008 Kellogg report [Innovating Through Recession], Dr. A. Razeghi argues that in times of recession, “the worst thing you can do is to hide... and disappear from a marketing perspective.” Companies should, he says, “use this time to increase their customer communication!” Senior Associate Dean, John Quelch, of HBS, the noted author of the 2008 benchmark Harvard paper, Marketing Your Way Through A Recession, definitively proves, “Brands that increase advertising during a downturn improve market share and ROI...” The world renowned Prof. P. Barwise of London Business School concludes, “The most successful firms maximise long term shareholder value by maintaining or increasing their ad spending when the economy slows down... This enables them to build market share faster and at less cost...” My personal favourite Sir Martin Sorrell, Group CEO of the world’s leading media firm, WPP, deliberates [in Their Recession, Your Opportunity] that even maintaining advertising spend vis-à-vis the previous year during an economic downturn “carries clear benefits in terms of market share and profitability once the post-recession upturn develops.”
Wharton professor Leonard Lodish, in the November 2008 report [...The Tough Don’t Skimp On Their Ad Budgets], strongly advocates, “If your company has something to say that is relevant in this environment, it’s going to be more efficient to say it now,” a fact supported by the fall 2008 JWT report [Marketing In Recession], “Boosting ad spend in a recession is more beneficial than at other times;” with the closing statements by Dartmouth’s marketing totem pole, Kevin L. Keller – “People who starve their brands now will be paying for it in the future.” According to Forbes-TNS’ 2008 research, the ones who suffered the most in recession are those industries that cut advertising: Real estate (-14.3%) and car makers (-6.6% to -7.1%). The globally quoted McGraw Hill research proves statistically that in the past recession (1981/82) those companies that continued to advertise in the subsequent three years enjoyed a whopping 275% sales increase, while those that didn’t had at best only a 19% increase.
No wonder while Subway had an annual ad budget of just over $100 million [and revenues around $10 billion], McDonald’s had a gut wrenching $1500 million ad budget [with revenues smashing above $23 billion]; and forget the US, internationally McDonald’s is the numero uno QSR by miles!!! With options of bodily threatening the seven rapscallions literally out of the question, damn the research is what I thought! If advertising was what it took, advertising is what the kids would get. In the two days leading to the lunch, I made one-page exhaustive flyers about the massive health benefits of eating out at Subway. I then deliberately spent the better half of Saturday prancing around the neighbourhood meeting with the kids’ parents, convincing them too, which they absolutely were! Advertising works, and like nobody’s business. Sunday lunch, my wife sweetly told me to proceed to Subway to book the table, as she was getting all the kids in her car. The lunch was a fantastic success! I ate a veg sandwich... alone! Nobody else came. My wife had taken all the kids to McDonald’s. She didn’t even call once...