Every time a recession threatens, executives glare at the balance sheet and wonder aloud about one particular expense: brand building. Trimming the marketing budget can seem eminently sensible. After all, doing so won't hurt product quality or, most likely, next week's sales. As the business climate has worsened in recent months, a number of blue-chip companies have announced plans to cut marketing costs, including Coca-Cola (K) and Visa. U.S. automakers have already done so. As have several hard-hit banks.
Then there are the other guys—companies that refuse to let tough times distract them from their long-term brand-building efforts. Sometimes they see a recession as the perfect moment to get a leg up on a weakened rival. Others strengthen their brands to ward off discount competitors. Still others feel they have a knockout new product that requires support. In BusinessWeek 's annual ranking of the 100 Best Global Brands, several are keeping their U.S. marketing budgets steady, as a percentage of revenue. Among them are American Express (AXP) (No. 15) and Diageo (DGE) (owner of Smirnoff, No. 89). Others are going further. Louis Vuitton (No. 16), Kellogg's (K) (No. 39), Accenture (ACN) (No. 47), and Kleenex (No. 74) are all aggressively boosting their marketing expenditures as a percentage of expected sales. "There's always pressure to cut," says Jez Frampton, chief executive of Interbrand, a brand consultancy, which for the eighth year crunched the numbers for our ranking and typically advises clients to spend harder during a recession. Consumers, he argues, "are more conscious they're spending their hard-earned money. It increases what they expect they should receive in return."
History shows that a recession can be an auspicious time to invest in a brand. Some of the most successful brand campaigns in the past six decades began during economically challenged years. Of Advertising Age's "Top 100 Ad Campaigns of the 20th Century," fully a quarter that got under way after 1945 did so during recession years. Several of the most effective were launched in the ugly years of 1974 and 1975, when consumer spending tanked and gas and commodity prices soared (sound familiar?). In 1974, for example, BMW introduced itself as "The Ultimate Driving Machine," a slogan that endures to this day and helped turn the German automaker from a niche sports sedan in the minds of American drivers into a top luxury auto brand known for superior engineering in everything from roadsters to SUVs. "I love bad times," says Martin Puris, the adman who came up with the slogan. "In good times, people are less apt to try new things. In bad times, they have to start to do things better."
Still, it requires a gutsy chief marketing officer to ask the boss to invest in something as squishy as brand-building when the economy softens. CEOs typically set marketing budgets as a percentage of expected future revenue, a number that often shrinks in a downturn. Results-hungry investors, meanwhile, want marketing money spent on activities that ring cash registers now, like promotions or coupons. Even the competition can create temptations to play it safe. Advertisers closely monitor how often their ads appear vs. the competition's. They call this their "share of voice." A pullback by a timid rival gives penny-pinchers an excuse to pull back while still preserving share and save money. And most companies succumb to the pressure. During the last two recessions, in 1991 and 2001, overall ad spending fell.