The economic recession has not only affected the major Wall Street companies like Lehman Brothers, Citibank, and Goldman Sachs, it has affected the pockets on almost every small business across the country. Every business owner should be looking to reduce costs and spend their advertising money to get the biggest return.
Small businesses are a significant contributor to our economy and their survivability must be taken seriously. This is a significant since companies smaller than 500 employees employ over half of the private sector workforce in the United States and have represented 64 percent of new jobs over the past 15 years.
According to the US Small Business Administration in a Report to the President, “more than half of the 763,000 jobs lost in the first two quarters of 2009 were lost in small firms.” According to the Bureau of Labor Statistics, approximately 4.3 million businesses with 19 or fewer employees closed their door during 2008.
Recession: Time to Grow
With statistics like these it is critical for business owners to take concern over spending their money to remain not only successful but in business. Many newspapers and bloggers will discuss the horrific effects of recession on small business, but savvy owners can take advantage of this downturn and grow their businesses.
It may sound odd to think of a recession as an opportunity to grow your business, there are significantly underserved or un-served customers who need your services. While many companies overstretched during the period before the recession and have subsequently over committed and gone under, wiser business owners understand the opportunities and customers who are left under served in current markets and grow their business in these areas.
We have found that during a recession most small business owners reduce their spending on everything especially advertising. The well cited case study that demonstrates the effect of advertising during a recession was done by McGraw-Hill Research. This study analyzed 600 companies during the 1981 recession. The results show that business-to-business companies that maintained or increased their marketing expenditures during 1981-1982 averaged significantly higher sales grown, not only during the recession but for the following three years. By 1985 those companies who were maintain strong ad campaigns had grown over 256 percent over those that cut their ad campaigns.
The study from Oregon State University and Western Oregon University dated April 19, 2009 confirms this finding in their report citing: “Firms that are able to increase advertising during recessions are likely to have stronger future earnings.”
Where to Spend Your Money
By now, we hope you are convinced the importance of maintaining your marketing strategy and continuing to be a strong advertiser. There are many opportunities for small business owners to spend the advertising dollars. Some of the traditional advertising forms: yellow pages, newspapers, television, and radio. The basic fact is that many of these are extremely expensive and the effectiveness is questionable in today market. The ability of traditional forms of advertising, or reach, is waning and is not offset by either its effectiveness or price.
- Yellow Page Directories are being replaced by online phone directories and searches. Bill Gates stated: “The Yellow Pages are going to be used less and less… These things always take time, but Yellow Page usage among people, say, below 50, will drop to zero—near zero—over the next five years
- Newspapers are struggling to maintain readership as more and more people are turning online for their up-to-date news and information. Arbitron reported that only one out three Americans read a daily newspaper and this is decreasing.
- Television advertising is hard to determine its effectiveness and reach due to technology like DVR and TiVo that allow users to avoid ads altogether. This is further complicated by the ability to watch passed episodes online with little or no ads either.
- Radio is being replaced by satellite which has not advertisers. And for those companies who still advertise on the radio, the Outdoor Advertising Association of America (OAAA) advertisers must buy deep (multiple stations and formats) to accumulate audience reach of over 50 percent, offsetting the cost effectiveness of radio if the target is a large, broad group of consumers.