Research on Advertising in a Recession: A Critical Review and Synthesis

Gerard J. Tellis and Kethan Tellis
Marshall School of Business University of Southern California

INTRODUCTION

Periodically, recessions afflict the U.S. and world economies. At such time, firms face declining revenues and shortages of cash. Their natural tendency is to cut back on seemingly discretionary expenditures such as R&D, marketing, and advertising. What has perplexed managers and analysts is whether such cutbacks are wise or self-defeating, either in the short or long term. Over the decades, a number of studies have examined this issue in the context of advertising. This article critically reviews the literature on the effectiveness of advertising in a recession and synthesizes the major conclusions from this review.

A narrow definition of a recession is two successive quarters of negative growth in gross domestic product (GDP). The advertising literature reviewed here often has used the term narrowly (as in the above definition) and sometimes broadly (a contraction—as opposed to an expansion—in the economy or a decline in GDP over a whole year).