Published: March 20, 2009 03:56 pm      

'A strategic investment'

Professionals advise against firms slashing marketing budgets

Ed Kane knows that when the going gets tough for businesses, the first cuts are to their marketing and advertising budgets.

Kane, now retired at age 80, established Kane & Co., a marketing and advertising firm in

Johnstown. He operated the firm from 1970 until he sold the business in 1997 – experiencing, he said, at least four national recessions.

In addition, Kane saw the local economy impacted by its own problems, starting with the Johnstown Flood in 1977. During the 1980s, big coal and steel collapsed, leaving the region with unemployment in the mid-20 percent range and its own localized depression.

“When the flood came along, well, that stopped just about everything for a while,” Kane said.

“There were bad times. We struggled. The mills went down and business went down in the 1980s, particularly.

“When your major industries are having problems, there isn’t going to be the same amount of money for purchases,” he said.

Worst thing to do

Time after time, Kane saw the same reactions from business leaders. Their first cuts would be to advertising and marketing budgets in hopes that the savings would hold them through a difficult period in the economy.

“It doesn’t involve any layoffs, changes to office procedure or management of company,” Kane said. “They don’t have to lay off two salesmen

– it’s nothing but cutting the budget.

“But that is the worst thing you can do. Advertising and marketing are the lifeblood of any business. More simply, advertising is sales. When you cut your ad budget, that’s just going to make those cuts run deeper because you’re – in essence – cutting your sales.”

That’s just what marketing companies in the region are preaching to clients and prospects now – even as the country deals with one of its deepest recessions.

And that national recession is being felt locally as unemployment in Cambria and Somerset counties hit 8 percent in January, the highest rate in 12 years.

Ryan Gindlesperger, president of 1sTeam Advertising of downtown Johnstown, recently reached out to clients and prospects with an e-mail letter concerning businesses responding to troubling times by cutting marketing and advertising budgets. He proposed that the perception of those tools is that they’re an expense rather than an investment.

“People are turning on the televisions, hearing the word ‘recession,’ and panicking,” Gindlesperger said. “They look at their budgets for ways they can cut their overhead and quite often it is the marketing and advertising that are the first to go.

“The problem is, too many people in business view those tools as expenses rather than what they really are – investments in the future of your company. If you’re doing your marketing the right way, you will see it is an investment with a calculated rate of return.”

A reluctance to spend

Brian Law, president of Prime Design Solutions – or PDS – located in the Moxham section of Johnstown, said he has seen some reluctance on the part of customers and prospects to spend on promotions. At the same time, however, Law said his firm, which offers a full line of graphic design and company image development services, has been picking up new business that is leading to growth.

The key for PDS has been taking some of Law’s own advice and investing in marketing during the downturn. While he said most of his business has traditionally generated from referrals, he has built his business in recent months with the addition of some direct marketing techniques.

“I’m working from 6 a.m. until well into the night, every day,” Law said. “We’re almost getting more work in than we could handle.

“We have some new customers, but also we’re picking up more work from some existing clients who view this as an opportunity to expand their business and prepare to move forward in 2009.

“They look at spending these dollars as a strategic investment.”

Kane said the opportunity develops when companies begin to cut spending on advertising and marketing. He said these times produce situations where companies that market aggressively can gain market share from competitors that contract their advertising budgets as a cost-saving measure.

Robin L. Quillon, publisher of The Tribune-Democrat, said that it’s during challenging economic times that companies can make the most of their advertising dollars. The absence of competitors from the public’s consciousness serves to accentuate the efforts of those who continue to advertise and market their businesses.

“I believe companies put their long-term futures at risk when they cut their advertising budgets,” Quillon said.

“What kind of boat are we building when the tide is out? Will your business be ready when the tide comes back in – and it will.”

Gindlesperger said history is on the side of Quillon’s argument.

“During past recessions, companies that have at least maintained their level of investment in marketing and advertising were largely able to stabilize their business through the downturn

– and in many cases grew as a result,” Gindlesperger said.

“When your competition elects to contract, there’s always an opportunity for you to expand.”