What happens when you
In tight economic times, the pressures are always on to cut advertising. Can a company do this? Can it get away with it? What will be the effect on the company a bit further down the track? These are the questions that are asked when the recessionary animal starts to bite.
If the company stops advertising and sales stay at the same level, the cessation of ad spending generates an immediate improvement in the bottom line. Hence the strong temptation to cut advertising in tough times and make the company's profit performance look good. What are the consequences? What do we know about ceasing to advertise?
We do not know a lot about what happens when advertising stops but what we do know is enough to warrant caution. Most companies don't know what happens when advertising stops because they only look at the immediate sales figures. If sales don't go down, they breathe a sigh of relief. But it is critical to look at what is going on underneath, at the brand image and 'brand value' level. Here is where the early warning signs of erosion in brand value are likely to be seen first.
For example, in 1988, a major US food brand cut its advertising budget in half (from US$7 million to US$4 million). Before the cut, ratings of the