For the Last Time, Don't Cut Your Budget During A Recession!

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Research. You gotta love it. It can support whatever point you want to make and it can reiterate important findings even if an almost identical study has been done prior resulting in the same findings.

More than fifteen years ago, Fortune (as well as many others over the years, one would assume) commissioned a study which found the money spent on marketing directly effect brand perception, stock market prices, cash flow and bond ratings.

These studies are great for agencies pitching marketers on brand-building campaigns that are easy to create, easy to manage and make the agency a lot of money without having to actually move any product or prove the campaign had any immediate effect. [Ed. I know. I used this strategy many times to get companies to spend boatloads of money on frivolous "branding" campaigns.]

So here comes another study touting "firms with strong brands have more stable stock prices, predictable cash flow and higher bond ratings than firms with weaker brands, thus reducing the firm's overall risk" and "a strong brand--high levels of consumer loyalty and commitment, insulation from competition, and diminished price sensitivity--contribute to higher levels of more stable cash flow" and "Strong brands are associated with stronger cash flows that are more reliable and predictable in the future. That means debt and equity holders have an easier time predicting the firm's future cash flows and that makes them less risky investments, increasing their long-term financial stability" and...oh you get the point.

The study was conducted by two University of Iowa professors, Lopo Rego and Matt Billet, using data from Harris Interactive. From the data, the pair created a Consumer Brand Equity Score.

The thrust of the study encourages marketers to think of marketing as an investment versus a cost center. [Ed. Hmm. Nevrer heard that one before!]

Rego drives the point home saying, "Most corporate executives see marketing as a cost center, not as an investment, but this study should remove all doubt that brands are assets and should be managed as such. This tells us that a firm's ability to build a strong brand using marketing reduces risk and raises the firm's overall value, and will help especially during a downturn."

Well, there you have it. Yet another reason not to cut your budget during a recession or anytime for that matter...whether or not you have revenue to support a marketing budget.

by Steve Hall    Jun-12-09   Click to Comment   
Topic: Research   

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Comments



Comments

Link?

Posted by: Nobody of Consequence on June 12, 2009 12:41 PM

Here's another article citing similar research: http://tinyurl.com/kqf5qm

Posted by: sean on June 12, 2009 1:17 PM

We recently ran a similar survey with Adweek on LinkedIn Polls which garnered almost identical results (with considerably less capital outlay! :) You can actually slice and dice the results according to industry, age, title, etc, which shows some interesting differences.

http://polls.linkedin.com/p/34705/afsjk

And if you're hankering for even MORE data, you can peruse all of the polls we've run here on Adweek: http://polls.linkedin.com/p/34705/afsjk (there are text links to the poll results in the body of each analysis).

This is a twice a month poll series that LinkedIn/Adweek will be running throughout the year, so let us know if there are any hot burning topics you'd like us to cover and we'll try and squeeze them in!

Posted by: Kim Kochaver @ LinkedIn on June 12, 2009 1:48 PM

If anything, marketing should be stepped up during economic downturns. These are times when the weak get weaker and the strong get stronger.

Posted by: Frugalocal on June 14, 2009 6:48 PM







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