Marketing During a Recession

Are we in a recession? That's not quite the right question to ask. The question for marketers is: are you ready for a recession? History shows us that market share is won -- and lost -- during a recession. Those who market during a recession, win. On this week's Brand Shorthand, Mark and Lorraine cover companies like Kellogg's (versus Post), Ford (versus GM/Chrysler), and others who won market share during a recession. The positioning duo discusses why advertising during a recession costs less and goes further.

Spend 30-ish with Mark and Lorraine as they discuss all things marketing, advertising ... and positioning!

Transcript

Mark Vandegrift
Welcome to the latest episode of the Brand Shorthand Podcast. I'm your host, Mark Vandegrift, and with me is the total eclipse of earned media, Lorraine Kessler. Thing one, how was your celebration last week of the eclipse?

Lorraine Kessler
Well, actually it ended up being great. First of all, right? Northeast Ohio. Like we didn't have any clouds, which was amazing. And Texas did. I have people, friends who were going to go to Texas and they had to cancel it. I'm like, oh my gosh. So that itself, but we were just able to sit on our front stoop. And that word makes me laugh, stoop. Nobody uses stoop.

Mark Vandegrift
Patio. Is it a patio? No, it's not a patio. Front porch.

Lorraine Kessler
But we were able to sit up there, my husband and I, and share a little sparkling wine from Michigan. And it was great. We had a perfect view.

Mark Vandegrift
Awesome. Yeah, we there were a few of us here still at the agency just working and you know, it amazed me as you took the glasses off. You couldn't look at the sun until that point of totality. And then what was neat during that was the little bursts that were kind of… from here it was on the kind of southwest side of the corner of it. It almost looked like the moon was burning up, you know, the cheese of the moon caught fire or something. And I just thought it was fabulous. And what a point in history that, you know, what's the next eclipse coming to Ohio… 2090?

Well, nothing major seemed to happen. The new Madrid fault that was supposed to have a huge earthquake quake, at least it didn't happen that day and it hasn't happened yet. And all the planes seemed to stay in the sky. So I guess let's chalk that up as a win. 

Well, thinking of natural, potential natural disasters, we're at episode 13 for this season. 

I thought it would be good to visit the dark side of the economy for an episode where we discuss marketing during a recession. Not that we're in one, but that's kind of the point because instead of reacting, once you get into a recession, preparing for a recession is kind of more important.

We've written about this in a few of our blogs, which you can find on our website. But I'm not sure it always sinks in because we don't tend to think about dark times when things are going well, which seems to be the case now. But, did you know, just a stat here, Lorraine, and I'm sure you look this up all the time because this is exactly what we think about in marketing. There were 20 recessions during the 20th century.

So for those that are not good at math, 100 divided by 20 is five. So that's one on average every five years. And so far in this century, we've had three and they've all been pretty big. The first one we know is the tech bubble burst and that combined with 9/11 in 2000-2001. So we kind of had like Y2K and 9/11 and a tech bubble burst kind of all at once. So that was quite the confluence of events. 

And then the next recession was in 07-08. And I don't think people have to be reminded of that. That was technically, they called it a great recession. And then of course we had the COVID or the pandemic recession for most of 2020. And that's three in 24 years. And some would say we had another recession at the end of 2022 and the start of 23 but they redefined what a recession is now. So I guess potentially that one didn't count? I don't know. 

Nevermind all that, whether they come every five or eight or 10 years, we know a recession is coming. It's just the cycle of humanity. And I guess we would ask marketers, in particular, not just people in general, have you prepared for it? You know, in our personal lives, we have that mantra, make sure you save for a rainy day, but I'm not sure we do that in our businesses. Lorraine, why do you think that businesses rarely think about the rainy days?

Lorraine Kessler
Well, I think, you know, we've talked about this in some previous podcasts, I think the most obvious glaring thing, right, is that they make these unrealistic business plans based on Wall Street or investors. And they're trying to please those investors by talking about how they're going to have many more sales or profits. And it's so bad. It's it's by month. It's by quarter. I mean, some people said Americans the business of America is a problem because we only think quarter to quarter. And so to appease these investors, we come up with these anomalous-to-the-category ridiculous numbers for growth and profit. And then they get pushed down to marketing and marketing's then told, well, make this number happen. And so that's just, and I think that's a problem. 

And I think that focus, right… It takes the eye off what I think is much more important and very few companies really focus on, unless they're led, I think, by a marketing person who has a vision or someone who's more of a visionary. And that is they take their eye off share, market share. I mean, market share is the holy grail. So aiming for share over a short-term reward of quick sales or profit pays dividends in up-markets and in down. That's the real key. And that's the best time to do it because often in down, when economy's turned down, there's enough scaredy cats to run the other way and try to play it safe, which ends up being the riskiest decision of all because you can have your share eaten up. So true strength in a business, I believe, comes from leadership. So the more you can grab share, the better off. 

And, you know, ironically, the chasing of sales and profit versus share is one of the biggest reasons behind something we've talked a lot about, which is rampant line extension. And history has shown that the more you add, more is less, that the more you add, the more you start to split your own atom, in other words.

So, and I know this is kind of ancient history, but one that occurs to me is Miller, Miller Beer. You know, we always have the beer wars and, but you know, you can learn a lot from ancient history as I have learned now watching all the YouTubes I do. But you know, they, Miller was selling like 35 million gallons of beer when it had just two brands, the High Life, which is its original and Light.

And then by the 90s, after having added other beers, including I think what they call Genuine Draft, you know, they went down to 32 million. And then pretty soon they were overtaken by Budweiser. So, you know, more is less. And I think that what happens is people are chasing sales and profit and trying to appease or please investors versus looking strongly down the future. And really having a future vision.

Mark Vandegrift
Well, you know, there's two principles at play here. One is just saving for the future. My dad always said, you know, first 10% goes to the church in your tithe. Next 10% you need to save for a rainy day. And that still gives you 80% to do a lot with. But if people save 10% during a recession or outside of a recession, and the general line of thinking is that a true recession happens every 10 years. That gives you 10% a year for 10 years, right? What does that add up to? 100%. 

So in the year that you're down, technically, if you dip into that 10% per year savings, you should have the same or more budget available in the year when the recession hits. And that should go further. Why? In a lot of ways. 

One, the cost of media goes down typically during a recession because of supply and demand, right? So you can buy more with every dollar. And then number two, there's less clutter. So not only can you buy more, but your competition's probably shriveled up into the corner, sucking their thumb going, um, you know, woe is me. So there's a lot of principles, you know, at play here. 

And, I think if we look at history, since you said you wanted to look at history, we have a lot of facts and figures to back that up. In fact, let's share a few of our stats and I'll put these up on the screen because it's sometimes easier to see a stat than it is to hear it. Although we have a lot of folks hearing this podcast, so you'll have to just hang with us.

So in every recession, this is a chart you can easily find online since the 1920s, the companies that increased their marketing spend during a recession came out ahead. Okay, so the key thing is increased their marketing spend during a recession. And the classic example we always hear is during the Great Depression was Kellogg's with Tony the Tiger.

And the company they overtook was cereal leader Post, which decided to retreat and play it safe. And not only did they win market share that year, but guess who has been number one in cereal ever since? Kellogg's. Now that said, we know what the Kellogg's CEO just did, as you mentioned in our last episode.

Lorraine Kessler
Yeah, the saboteur. Let them eat cereal.

Mark Vandegrift
I mean, when will they learn? I don't get it. When will they learn? You know? But, so let's go to a more recent example, which is the 07-08 recession. And I thought this was interesting because again, these case studies are online. We're not inventing these. 

Ford increased its marketing spend rather than retreating. And here are some stats that you can chew on.

Ford's then-retail market share rose for four consecutive months for the first time in 14 years. And Lorraine, you gave examples over several podcasts where the big three automakers always went to the government basically bemoaning and asking for controls to protect them. But...Ford actually went and did something about this. So for the first time in 14 years, and guess where that share was coming from? General Motors and Chrysler.

Lorraine Kessler
I was going to guess they're the old arch enemies.

Mark Vandegrift
Yeah, not from Toyota, not from Honda, not from the big guys. And data from the CNW market research, so you can look that up, Google it, showed that 19% of consumers who had planned to buy a GM car in January or February of 2009 instead bought a Ford, Lincoln, or Mercury.

Lorraine Kessler
That's interesting.

Mark Vandegrift
Yep. 15% of people who were set to buy a Chrysler or Dodge in 2009, switched over to one of Ford's brands. And then here's a quote from the VP, the then-VP of sales and marketing. I don't know if he's still there or not. His name's Ken Chuzeby. “Times like these can provide opportunities for us to distance ourselves for the long term.

In the first two months of the year, he's talking about 2009, the number of qualified buyers who planned to buy a Ford jumped 16 % from 2008. And qualified buyers who intended to buy GM fell 12% and Chrysler 33%.”

Lorraine Kessler
Oh my gosh, that's disastrous. And bad enough, anything double digits. You're not going to get that back easy. See, once you lose a customer, you don't get them back easily. That's the other problem. Right.

Mark Vandegrift
No, not at all. Yeah, and Ford doesn't have this path of Nirvana or anything like that. I can't even think in the last 30 or 40 years where any of the big three were making a huge dent in market share, but Ford took that opportunity of a recession and just poured it on.

Lorraine Kessler
Well, they each have enough market share that if you take some, it's a good win. I mean, GM has a really broad line. And to lose the kind of share they did is pretty big. It's pretty, it's hard to recover, I think.

Mark Vandegrift
Well, look at Chrysler, 33%. I mean, go back to the days of, what was his name at Chrysler? Yeah, Lee Iacocca. I mean, what a far cry from those days, right?

Lorraine Kessler
Yeah, the patron saint of American businessmen and Italian American businessmen. Oh my God, my father loved Lea Iacocca. I know, I know. We have our affinities. They're not always logical.

Mark Vandegrift
Well, let me give you two more and then we'll let you, I guess, go through the principle here and explain it for our listeners and viewers. Let's go back to the mid 70s… 74 and 75 and McGraw -Hill did a study and their conclusion was this, that advertising during that recession created a 132% five-year sales growth.

So subsequent to that recession, if you increased your advertising during the recession, the next five years you increased 132%. Then they did an analysis in the 81-82 recession, which were the early Reagan years. The conclusion was even stronger. Advertising during that recession created a 275% sales growth by 1985. So only three years subsequent to that.

So, I mean, this has a very long tail to it. And then let's move into the 90s recession and we'll be very specific with a brand and that was McDonald's. And I couldn't believe when I read this one because McDonald's doesn't typically do this, but they decided to reduce their costs. And what took the biggest chunk of that was they reduced their advertising. And what did Pizza Hut and Taco Bell do? 

And, you know, usually you don't think of those. You think McD's and Burger King and other burger joints, right? But really it's the bigger fast food market because if you're going to buy fast food, it's probably going to be Taco Bell or Pizza Hut or KFC or any of those. So Pizza Hut and Taco Bell turned it on. They came out with their value menus and they had several new products and they stole market share from McD's and the result for Pizza Hut was a 61% increase in sales during the recession. And then for Taco Bell, they had a 40% increase. Take a guess at how much McD's fell. Just a wild guess.

Lorraine Kessler
18%.

Mark Vandegrift
Up. 28%. I mean, that's in empirical dollars, right? We think, oh, 28%, big deal. You're talking a huge company in McD's. So you're talking billions and billions and billions of dollars in sales that fell during that. So I think these all, if you need more convincing, just Google “advertise during a recession” and you'll get plenty of case studies. But Lorraine, share with us what principle is at play here.

Lorraine Kessler
Well, I think the principle is don't be an idiot. 

Mark Vandegrift
Okay, listeners, sorry. Don't take offense to that. That's Lorraine's Italian coming out in her.

Lorraine Kessler
Maybe they should take offense because it tends to be the one area where we have statistical, reliable, consistent data. And most clients aren't listening to it. They go on the irrationality part of I got a clue. I got to… what do they call that? Batten down the hatches kind of thing, right? Here's the thing, when the market goes down, advertise more. I mean, it's really simple, right? Dominate your goals to dominate share of voice. Share of voice connects to market share. And it may be the only really advantageous time in today's competitive markets, I believe, to grab market share. So it is an opportunity on the plate and it's handed to those who have the chutzpah, the grit to go against those who think we should cut costs and kind of retrench, to just say, play it safe, for example, as I said, it's the riskiest decision you can ever do, to go at it with everything you've got, because we know that the return is there, right? We just know it. So anyway, don't be an idiot, spend more in a recession.

Mark Vandegrift
Well, you know, think about, I don't know how much you probably don't do any day trading, which I highly advise against unless you're trained. But what's one of the things that if you talk to a financial advisor, they get all excited about. And that's when the market has a downturn. If you're looking long-term, they always call it a “garage sale.” Well, why do you want a garage sale in terms of investing? Because everything costs less. I mean, you don't go to a garage sale to pay more for something that you could buy new at a store. I mean, you're getting things pennies on the dollar and that's what ends up happening. 

I mean, media, we've seen media where it's almost like buying in at remnant prices, which, you know, for our listeners who don't know what remnant is, remnant basically is where you go to a media outlet and say, we're only going to pay this amount for something. Do you want to accept our offer and then you hand over their ability to run it whenever they want, right? But in the bad times during recession, they're basically selling a lot of media at remnant prices and you still get to command placement, frequency, day part, you name it, all the things about media. And it just costs less. And so that's why a garage sale when it comes to marketing, which equals a recession, is such a valuable thing. Yeah.

Lorraine Kessler
Right. Right. So we just need a few bold clients to approach us in a recession. And we'll help you spend for your success.

Mark Vandegrift
Well, that's exactly it. And if you think about the fact that from the standpoint of saving now, I think there's still time, right? Now there's signs that things are slowing down, but slowing down is just a reminder that a recession will eventually come. We don't know when that will happen. Given that we just had one in 2021 and I guess one that's not defined as one, which was one in 22-23.

That's pretty good reminder that, hey, start saving 10% now of your marketing budget. I don't know how, you know, your companies work that listen here, but, you know, put it aside so that you have that opportunity because, you know, the main principle is the clutter decreases and that's why you start gaining market share. So, you know, what does this mean for the good times, Lorraine? How should a marketer plan for these cycles? What's your perspective on that?

Lorraine Kessler
Well, I think you have to stay focused on the main goal. And the main goal to me in competitive markets is how do I approach leadership or maintain it? How do I get that advantage? And like I said, more is less. So it's really staying focused and concentrating that money in that window. Because like you said, you're going to buy inventory in a... it's much less to buy, so you're gonna be able to buy more inventory to be able to have higher share of voice. And it's likely some of your competitors will retrench rather than move forward. So you can take advantage of them. And so, you know, stay focused on the main goal, not just sales and profit or trying to protect, but actually focused on growth. How do I grab share? How do I improve our position and come out of this on higher ground I was when I went in so and you know. 

I remember years ago there was a client who shared an analogy, you know how I like analogies But he was talking about focus and concentration and it was he made the analogy to if you had 40 soldiers and you wanted to break through a wall Would you string those soldiers out in a line, you know one next to the other, how likely would it be that you break through the wall? Or would you put them bunched together on one target and with all their might push? So which has a more likely outcome? So I think that speaks to me about focus and then concentration, like amass all of your focus on that moment and break through that wall of competition. I think you're going to come out.

Mark Vandegrift
Well, and let me throw a little curve ball here because a lot of times recession is caused by crisis. So we think of 9/11, we think of the pandemic. 07-08, I don't know that there was no crisis per se, but let's just take 9/11 and the pandemic. What would you say to an advertiser who finds themselves trying to leverage the crisis? And let me explain that a little bit more.

Do you recall all the emails that you got from all these vendors that said, we're doing everything possible to keep you safe during this COVID period, blah, blah, blah. I mean, I would get them from my credit card company. And I'm thinking, what can you do to keep me safe? I don't visit you. You don't do anything for me that would give me the virus, right? And it felt very disingenuous, frankly, that they were trying to leverage the crisis in their messaging. So give us a little bit of advisement on that.

Lorraine Kessler
Well, you always have to be authentic, right? You can't use a crisis shamefully for some advantage. It will only backfire on you, I believe, perceptually. It becomes that you are greedily trying to make a grab at other people's expense. And so you can't do that. 

You can certainly recognize the crisis as an opportunity to add value to your customers like offering discounts on fast food and things like that that might help people during a time when they are feeling threatened or insecure, but not couching it so overtly about, we'll help you survive the crisis by cutting the Whopper price. I mean, come on. And so again, there's a certain amount of professional dignity and authenticity that…  brands are people too, Mark. There's a certain dignity that a brand, I think, has to show in respect to what's happening in terms of a crisis and be legitimate about it.

Mark Vandegrift
Well, you mentioned last time you brought up Kellogg's and what they did. You know, you could call food prices right now a mini-crisis, right? I mean, we're not like Weimar Republic where it took a wheelbarrow of money to go get a loaf of bread, but certainly a lot of people are feeling the pinch at the register. And Kellogg's went, I mean, that was the opposite of helping people in crisis. You don't tell someone, let them eat cereal and...

Lorraine Kessler
Well, plus you raised your price on the cereal. Cereal is like $9 a box. I mean, it's ridiculous. So you raised your price and then you told them, eat cereal for dinner. I mean, that is the worst of the worst. I mean, yeah, what Kellogg should have done, yeah, what Kellogg should have done is said, we recognize families are struggling. We are cutting our price for a three month period to make cereal affordable. So at least one good meal day can be put in front of your family. Well, that would be authentic. That would be like, okay, you really are my world. You're trying to help me. But what they did is the worst of the worst.

Mark Vandegrift
It was the opposite. I don't think they understood the principle in marketing where for warfare of going opposite.

Lorraine Kessler
Well, what happened is the CEO, probably in his board meetings with people who were focused on sales and profits, got enamored with the idea of what they call expanding the occasion. Okay. This is big in food. I remember I worked for a ham producer and we were always talking about how do we expand the market? Like, how do we get people to use ham in more ways? Breakfast, lunch, dinner, how do we get them to use it in different recipes?

Ham is extremely versatile. The problem is most people don't like ham that much. So, but, you know, he got enamored with this expand the market in terms of occasion. Oh yeah. If we got people to eat cereal for dinner, look at all the, we could, we could times our sales twice to one family times how many families. And it's just a dumb idea when, when you take advantage of the situation.

Mark Vandegrift
Well, Lorraine, I hope you stay recession-proof. It's certainly not anything that we eagerly anticipate, but it's a reality we can't avoid. I mean, 20 recessions in the 20th century. I mean, if that's not reality hit in your face, I don't know what is, but I think marketers should take advantage of that and can take advantage of it.

Any last words of wisdom for our viewers and listeners about advertising during a recession?

Lorraine Kessler
Yeah, I think one last thing I found really interesting, I listened to the Frontline story on Jeff Bezos, right, and Amazon. And Bezos spent years not making profit, not making money, right? Zero. And here's what I think more CEOs of big companies with a vision need to do. He convinced investors. So think about that word, convinced. He used persuasion of his vision and his belief. In fact, one investor said that his greatest accomplishment was convincing Wall Street that his company wasn't going to be profitable for 20 years. Now, it's a trillion-some company. I don't know how many trillion, but more than I can count.

Mark Vandegrift
I think they just went over two trillion market cap.

Lorraine Kessler
That's insane. So that is banking on the future. That is really and some more CEOs used to need to exert. I think one of the problems is so many CEOs as we know, and I hate to say this because I probably have people listening, but there are accountants and financial people and they look at risk differently than marketing people, than people who have a vision, an entrepreneur would. And I think that's a problem because you need this chutzpah to use every ounce of your persuasion ability to make sure that investors kind of back off if you have that kind of world-changing idea. Now, not everybody has a world-changing idea, but I just thought that was kind of an interesting take.

Mark Vandegrift
Well, that's great advice. And I think that's a great way to close this episode. So to our listeners and viewers, thank you for joining us. And if you haven't liked, shared, subscribed, or told your friends about the Brand Shorthand podcast, please do. And did I say Lorraine, please subscribe.

Lorraine Kessler
Yeah. Yes, there you go. Please subscribe. Subscriptions matter.

Mark Vandegrift
Yes, and until next time, have an amazing day.