Why it pays to run ads in bad times

Coke and Pepsi just rolled out huge campaigns, recession or not

Why it pays to run ads in bad times

Anyone watching the Super Bowl earlier this month could be forgiven for momentarily forgetting all about the recession. After all, along with some good football to take their minds off of the economic turmoil, there was the barrage of advertising, pushing everything from beer and chips to cars and Internet firms.

Ad budgets are typically easy cuts when times are tough, but last week NBC reported that it broke an advertising record during the game, with $206 million in sales. It turns out that when it comes to advertising, a few savvy companies are saying: what recession?

There is a method to their madness, says Niraj Dawar, a brand expert at the University of Western Ontario. “There are some companies that see the downturn as an opportunity to build long-term brands,” he says. In good economic times, there is so much advertising that messages can easily get lost. But in a recession, when competitors are pulling back, “you have an opportunity to break through the clutter.”

The result is that while advertising in North America has been declining overall (TV advertising is expected to drop four per cent this year, according to eMarketer), bubbles of ad spending are still popping up. Apple Computer increased its ad budget during the last three months of 2008, compared to last year, according to its latest financial results, and rival Microsoft has also been spending big. Meanwhile Coca-Cola and Pepsi have renewed their advertising battle with duelling feel-good ads, even as soft-drink sales are falling.

It’s a smart thing to do if you can afford it, because building brands is not a cyclical activity, says Dawar. The most successful companies—such as Kellogg, Kraft, and Heinz—are those that tend to spend in both good times and bad. It’s no accident those are the household names that everyone knows so well.