Ask an Expert: Getting real about ads' effect in a recession

Q: I keep hearing that one way to make it though this recession is to advertise more — that that is one thing successful companies did to make it through previous bad economies. Is that accurate? — Amy

A:Advertising more right now makes intuitive sense to me, but does it make actual, real business sense? Maybe, but maybe not.

Intuitively, one thing that is clear right now is that people are looking for a bargain; customer loyalty is a bit of any oxymoron as customers are generally more interested in saving money than patronizing their favorite businesses. As such, advertising can put your business in front of these potential customers.

But a really interesting new book calls into question that very premise (which is actually also the premise of the question above) as well as other sacred cows of conventional business wisdom. The book is called Duck and (Re)Cover by Steven S. Little (Note: Steve is an associate of mine as this book is published by John Wiley & Sons, who also publishes my Small Business Bible.)

In the book, Little points out that this piece of conventional wisdom — that advertising more in a recession leads to increased sales growth — is essentially an urban myth.

The book explains that if you Google the terms "recession," "advertising," "study" and "sales growth" — you end up with millions of pages that essentially say something like "The results of a study indicate that businesses that maintained or increased their advertising expenditures during the 1981-1982 recession averaged significantly higher sales growth."

The book notes that the study is then cited ad-naseum by anyone who wants to get you to advertise more right now, for example

• The radio station that cites the report to explain why people need to advertise on its station now more than ever

• The PR firm, saying that marketing with them in a downturn is critical

• The freelance copywriter who is looking for clients

So Little decided to find out what this study actually says. It turns out that all of these sites are talking about the "McGraw Hill Research Laboratory of Advertising Performance Report 5262." Little discovered that what report No. 5262 actually says and what the millions of sites citing it think it says are not nearly the same thing.

In fact, Little found that report 5262 expressly states that there is no "causality" between advertising in a recession and sales growth, that the study only looked at public companies, that these companies had sales more than $1 billion a year, and that the study took place in 1985.

So, as Little concludes, the McGraw-Hill study and its "advertise more'" conclusion only tangentially relates to you if you own "a relatively large industrial company with a business-to-business advertising bent" and you think a study that is more than 20 years old can help you in the 21st century (page 11).

Little's point, and the point of the book, is that you need to examine closely your business beliefs, especially those relating to how to deal with "the choppy waters of a recession." Yes, advertising more may make sense for you, but if it does, it is not because of some old study that is oft misquoted, it is because that is what your business today, properly analyzed, requires.

And that is what this book does. It helps business owners analyze the state of their business accurately and then it prescribes various ways to see and seize the opportunities that are out there. It is, as the subtitle suggests, "the embattled business owner's guide to survival and growth."

As Little told me last week, "in a time like this, opportunities will become available — but you have to get yourself ready for them. That is what the book is designed do" The trick, he says, is not to over-compensate, or do nothing, or to do what you have always done (because the market has changed now) but to use logic to make smart choices.

This is a really good book. I say check it out.

Today's tip: Another piece of conventional wisdom given to small business owners is to "get a board of advisers." But where do you find them? Where do you find business mentors, other business owners, entrepreneurs to commiserate with, etc.?

Here's a resource you may not know about: PartnerUp.com is a great site that offers entrepreneurs the chance to meet and partner up with other entrepreneurs, find mentors, network, and more.

Ask an Expert appears Mondays. You can e-mail Steve Strauss at: sstrauss@mrallbiz.com.And you can click here to see previous columns. Steven D. Strauss is a lawyer, author and speaker who specializes in small business and entrepreneurship. His latest book is The Small Business Bible. You can sign up for his free newsletter, "Small Business Success Secrets!" at his website —www.mrallbiz.com.

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