Recession: To Cut or Not to Cut, That is the Question

There’s been a lot of talk lately about the dreaded “R” word: Recession.

There are also a lot of discussions happing about what items on a company’s P&L statement go first when the company starts to experience the effects of a downturn in the economy.

If you think that cutting your marketing, advertising and public relations budgets is the answer, you might want to think again.

Recession Advertising Public Relations
Chart from the Ehrenberg-Bass 2018 Sponsorship Program

Renowned advertising expert and author Simon Broadbent had this analogy as a warning for what would happen if you cut your budgets out of fear: “The sales of a brand are like the height at which an airplane flies. Advertising spend is like its engines: while the engines are running, everything is fine, but, when the engines stop, the descent eventually starts.”

In 2009, when I started my company Commonwealth Public Relations, many companies had already begun their descent.

At the beginning of the recession, I made it known that I was looking to freelance for a couple of clients to make some additional money. By mid-2009, companies had decreased or, in some cases, stopped their marketing, advertising and public relations efforts and were already starting to feel the effects from competition that didn’t.

I received a call from a local advertising firm saying, “We have a client that stopped their PR and they need to get back into it ASAP, can you help?” This led to my first large client and the opportunity to leave my full-time job and start my agency.

According to the Ehrenberg-Bass Institute for Marketing Services:

  • When brands stop advertising for a year or more, sales often decline year-on-year following the stop (on average, sales fell 16% after one year, and 25% after two years).
  • The rate of decline is fastest for brands that are already declining before the advertising stop.
  • Brand size also matters. Small brands typically suffer greater declines than bigger brands.
  • Bigger growing brands tend to continue to grow after advertising stops for one to two years, whereas the sales trend quickly reverses for small growing brands.

What should your brand do if it is feeling the effects of a recession? Our recommended strategy is to strategically reallocate dollars to different marketing channels that are likely to generate the best return on investment.

For many of our clients, when times get tough, they see the solution as ramping up their media relations campaigns and social media campaigns.

Because news stories go through the third-party source of a journalist, they are often considered more influential than advertising and can drive results quicker as well. Through our client’s social media campaigns, we know that we are able to quickly and effectively target key audiences and drive results through them.

We are not by any means saying stop your advertising, but make sure to be strategic and in some cases reallocate funds to areas of marketing and branding where your competitors might not be targeting.

Even though inflation is at a major high, we are seeing lots of activity with clients and new business indicating that recession fears are not taking hold, yet. This is a good sign for all of us.

If you have questions about your marketing, advertising or public relations campaigns and want to discuss some options with us, please don’t hesitate to reach out to me by phone or email: 804-510-0039, click here.

We are here to help your company succeed! Reach out today to set up a conversation with our team to discuss your needs.


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