‘Risk Strategy In Advertising Pays Off’ Says IPA

Risk strategy in advertising pays off in tough economic times, according to new research. Businesses which maintain or increase advertising spend during recession grow faster once recovery starts, according to research carried out by PIMS(Profit Impact of Market Strategy).

Talking at a conference, Marilyn Baxter, chairman of the IPA Value of Advertising Committee, said that not only were businesses that increased their adspend during a recession more profitable, but once market recovery had started, such businesses made the fastest profit improvement and increased their market share more quickly.

Advertising tends to be one of the most common areas for cutting costs when businesses start bracing themselves for a slow down, but this research, which was carried out on 183 UK companies, showed that businesses which increased their spend on advertising found their return on capital employed averaged a healthy 14%.

Baxter commented: “Companies who take marketing risks in times of recession put themselves in a stronger position, both during recession and in the recovery period, than companies who retrench and cut marketing expenditure in the delusion that this will give them immediate profit gain. This new data from PIMS gives ammunition to marketing directors to help them resist the cost-cutting instincts of their finance colleagues and should give finance directors pause for thought.”

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