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Why advertise in a down economy?

Why advertise in a down economy?

Experts suggest the short- and long-term benefits of advertising and how to go deeper with promotions, experiment with online advertising and social media and why creativity is an advertising must during a recession

As the economy continues to sputter, beleaguered retailers keep looking for places to make cuts. But most experts agree that advertising and marketing campaigns aren’t the right places. They point to studies through the years showing time and again that companies that continued advertising and marketing efforts in a recession maintained or even increased sales, and were in a better position to rebound once the market recovered.

“From studies dating back to 1916 up to 2010, the message is the same,” says Mark Rothman, chief marketing officer for New York-based American Business Media, an association for business-information companies. “You benefit in the short term, and you benefit in the long term, if you advertise.” (See “Research makes the case for advertising,” on the last page.)

Today’s business owners seem to trust the research. A 2010 report by American Business Media shows that despite the ongoing economic downturn, 39 percent of businesses plan to increase their advertising budget, 48 percent plan to maintain their budget at its current level and 13 percent plan to cut their budget.

“This is the ideal time to be advertising,” says Jim Hertel, managing partner of retail consulting firm Willard Bishop in Barrington, Ill. “But you have to have a lot of faith and a strong stomach.” And a clear plan about where and how those advertising dollars will have the biggest impact on sales. Here are the top strategies for natural products retailers looking for a boost in today’s economy.

Go deeper with promotions
Although experts agree that keeping existing customers is key, opinions vary on how to retain them and whether it’s a good time to go after new customers.

A case in point is weekly circulars. Hertel says doing away with them right now is “kind of dangerous” because loyal customers read the ads, and you want to hang on to those customers. However, he says a circular isn’t likely to pick up many new customers, and other experts say because fewer people are reading newspapers these days, weekly circulars aren’t as effective as they once were.

As an alternative, Jay Jacobowitz, president and founder of Retail Insights, a Brattleboro, Vt.-based consulting service for natural products retailers, says store owners should “go deeper with existing customers.” But this doesn’t mean venturing into mass-marketing vehicles, such as newspapers, magazines or radio, that you haven’t tried before, “unless you have deep pockets,” he says. Instead, Jacobowitz recommends relying on old standbys like word of mouth and direct incentives as inexpensive and effective ways to market your store to existing customers.

For instance, Jacobowitz suggests sending frequent shoppers postcards offering $5 off on their next trip to the store. “Do a campaign: ‘Who says there’s no free lunch?’ Offer a free cup of soup or half-sandwich to customers who bring in a coworker or neighbor. And then offer [the new customer] the same thing.”

Sheldon Baker, principal of Baker Dillon Group, a brand development and market research firm in Clovis, Calif., also recommends using old-fashioned promotions such as stamping a card every time the customer buys a particular product and, after a certain number of purchases, giving the next one free or at a discount.

Experiment with online advertising and social media

According to the Washington, D.C.-based Pew Research Center, 58 percent of Americans report that they check out products and services online before making purchases. The number of those who research products on any given day has jumped from 15 percent of adults in September 2007 to 21 percent in September 2010.

“Now’s the time,” Hertel says. “Online advertising doesn’t cost much. Plus, you can read the responses right away” by monitoring the number of hits your ad gets.

Online advertising options are as vast as the Internet itself, but depending on your budget, you can advertise on Facebook, on Web portals such as Yahoo or MSN, and in e-newsletters and coupon websites that target customers you want to reach. You also can buy keyword advertising on Google (see a detailed explanation at or banner ads on sites your customers are likely to visit. Rates vary, but often are based on the number of clicks the ad gets.

“If it doesn’t work, you haven’t lost much,” Hertel says. “You can fail quickly and fail inexpensively.”

Baker advises updating your website daily with offers, coupons and specials. Post those promotions to your Facebook and Twitter accounts too. Don’t have those? Don’t know how to update them? Hire a social media marketing person to do it for you. And make sure the person responsible for your website content includes frequently searched keywords like organic or natural foods store and your city or neighborhood name so your site will rank at the top of search engines.

Do the unexpected
Jacobowitz likes the idea of guerilla tactics to get new customers into the store. “If you have a prepared food counter or a salad bar, hire somebody looking for a job, stick an A-frame [advertising a lunch special, for example] on them and have them walk down the street” like the old “Eat at Joe’s” hawkers.

“Be creative,” Jacobowitz says. “Choices become more stark in a recession, and your ability to stand out becomes greater.”

Research makes the case for advertising

A 1985 study of manufacturing firms by McGraw-Hill Research’s Laboratory of Advertising Performance reported the link between advertising and sales during the 1981 to 1982 recession. Six years after the recession ended, companies that did not cut their advertising during the recession boosted their sales by almost 340 percent, compared with about a 200 percent increase for companies that pared their advertising budgets.

A 2002 study published in the Journal of Brand Management looked at 822 firms during the 1990 to 1991 recession. Companies that maintained or increased their advertising spending had 7 percent sales growth in 1991 versus no growth for companies that decreased their advertising. The difference widened to 25 percent by 1995.

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