The cost of cutbacks. Cut budgets may not pay - even in the short term.

Alexander L Biel

The author demonstrates that the temptation to cut advertising during a recession generally has a serious long-term effect of return on investment (ROI), as well as hurting the current account.

The cost of cutbacks

Slashing brand budgets may not yield even short-term saving

Alexander L Biel

Extensive macro analysis in two continents shows that the temptation to retrench during a down-turn generally has a serious long-term ROI cost - and can hurt the current account as well.

Then the economy turns down, businesses naturally search for ways to cut overheads. Marketing budgets in general, and advertising budgets in particular, are often vulnerable targets, since they can be cut on relatively short notice.

But do budget cuts really help even short-term profitability and what, if any, are the down-side risks...

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