Pizza. And the reason to increase advertising during a recession.

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Hopefully, “pizza” got your attention. I mean, everyone loves pizza. Everyone, that is, except early 90’s McDonald’s. That’s because from 1990-91, Pizza Hut did something that the Golden Arches didn’t have the guts to do: increase their advertising dollars during a recession. And that marketing strategy paid off. Big time. When all was said and done, Pizza Hut saw their sales increase by a whopping 61%, while McD’s saw theirs decrease by 28%. It was McDonald’s first major misstep of the decade (the second being the Arch Deluxe—ba dum tss!). 

To be fair, McDonald’s decision to slash their marketing plan was/is a pretty boilerplate procedure for many companies during an economic downturn. They, like other companies right now, probably even considered it common sense. Pizza Hut, on the other hand, based their marketing plan off the old, fabled adage, When times are good, you should advertise. When times are bad, you MUST advertise.”

Notice that emphasis on “must.” That’s because it isn’t just a suggestion, it’s an imperative marketing strategy—one that our CEO, Dave Thomas, echoed in a recent podcast when he said, “In moments of crisis [great companies] double down.” It’s a sound marketing strategy that companies across the country have seen work time and time again during even our worst financial crises, including The Great Depression and The Recession of the 80’s. If you’re interested in learning more, or need a little convincing, click those links—they’re chock-full of information and data supporting the position that increased advertising helps, rather than hinders. In the interest of blog brevity, however, the main takeaways are summed up pretty nicely by Forbes:

  • The “noise level” in a brand’s product category can drop when competitors cut back on their ad spend. It also allows for advertisers to reposition a brand or companies to introduce a new product.
  • Brands can project to consumers the image of corporate stability during challenging times.
  • The cost of advertising drops during recessions. The lower rates create a “buyer’s market” for brands. Forbes reports that studies have shown that direct mail advertising, which can provide greater short-term sales growth, increases during a recession.
  • When a marketing plan reduces its ad spend, the brand loses its “share of mind” with consumers, with the potential of losing current – and possibly future – sales. An increase in “share of voice” typically leads to an increase in “share of market.” An increase in market share results with an increase in profits, even during a downturn.

Okay, I’m convinced. But HOW do you advertise in a downturn?
That, my friends, depends on the downturn. Every business slowdown is caused by something different, and it’s important to “read the room,” so to speak, in order to craft an effective marketing strategy that communicates with consumers without appearing insensitive or opportunistic. With our latest economic slump caused by COVID-19, most people are primarily concerned with the health, safety and security of themselves and their loved ones. As such, it’s a brand-building moment—not a time to be hawking your wares. A simple reminder that you’re there, and that you’re making changes to accommodate your customers’ safety and peace of mind will go a long way—for years to come. 

…Now go order a pizza.

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May 19, 2020by michael jernigan

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