After a brutal period of hearing dire economic news on a daily basis, encouraging signs are starting to appear – the housing market is beginning to see a much needed up-tick; the S&P has climbed 48% since March; and the July unemployment rate dipped unexpectedly. The official end of the recession, the strength of recovery and how long it will take to rebound is debatable among economists. However, as marketing plans are developed for 2010, preparing to take advantage of this period of economic recovery is critical.
The American Association of Advertising Agencies (4As) recently published a bulletin on preparing for the recovery, which is the central focus of this month’s MSM Monitor.
A survey conducted by the Association of National Advertisers (ANA) showed that 73% of marketers intend to build momentum by implementing new marketing activities three to six months before the recession ends. In addition, 68% said they will increase their media spending when recovery begins. If we are truly heading out of the recession, even if it is not officially over until the end of 1st Quarter 2010, the time to start implementation of new marketing initiatives is now!
It is almost certain that the marketing and media mix will look different on the heels of the recession as pressure for campaigns to produce immediate results intensifies. The expected shift in terms of media mix can be anticipated by the importance that advertisers place on media channels considered to be effective brand builders. The chart below shows how different media rate among advertisers.
Tried and true media forms such as television, online and magazines are considered highly effective. Guerilla, word-of-mouth and buzz, though not as easily tracked, are also rated well. Perhaps even more telling is that 41% of those surveyed by the ANA intend to allocate more funds to social networking and word-of-mouth opportunities, and 40% intend to increase their budgets for innovation and testing of new opportunities.
Things are looking increasingly positive, but consumers are not going back to the mid-2000s. The recession has changed things, perhaps teaching everyone a lesson or two. The good news is that consumer indices are increasing as compared to a few months ago, but consumer confidence is often relative. It is likely that consumers have adapted to a more frugal lifestyle. In fact, a recent Gallup poll in which Americans were asked about their spending habits found that one-third of consumers said spending less will be their new norm.
So, it seems that consumers will continue looking for ways to cut corners, but what changes are they truly willing to make in an improved economy? A recent Nielsen poll of consumers with regard to what behaviors they expect to continue post-recession showed that 40% will still try and save money on energy products, indicating a desire to be green while also being more prudent. However, only 7% will continue going without an annual vacation, and just 10% will continue to delay replacement of major household items.
History shows that companies which maintained or increased spending through a recession came out of it with stronger awareness and positive sales results. One study showed that increasing advertising investment during a recession resulted in strong financial performance for up to three years afterward. On the flip side, a 50% cut in spending for one year resulted in weaker sales that year and the year following. Going completely dark for one year resulted in three to four years of decreased sales. In addition, trying to recapture lost sales in one year required 60% more spending than the amount saved by cutting the ad budget in the first place1. These analyses were performed on major national advertisers. It is understandable that local and regional advertisers may not have had the option of increasing or maintaining budgets during the past 18 months. The bottom line is that if a company has significantly pulled back spending during the recession, now is the time to start ramping up advertising efforts.
MayoSeitz Media’s Point-of-View
Over the last year or so, we have seen an economic downturn unprecedented in most of our lifetimes. According to the National Bureau of Economic Research (NBER), the current recession started in December 2007. A growing number of economists believe that the recession may have ended in July 2009, though the NBER will not make the official determination for quite some time. If we are truly in recovery, the “Late 2000s Recession” would have lasted for 19 months. We would have to go back to the Great Depression to find a period of economic downturn with longer duration! It is no wonder that a conservative approach became necessary for many companies, but we believe that time is over. Advertisers looking to gain market share and increase sales over the competition should be taking an aggressive approach at this point. As Southwest Airlines has been saying, “It’s on!”
We advise advertisers to remember three key things as they plan for the next 16 months:
- It is still a very good time to be buying media. For the balance of 2009 and into 2010, there are deals to be made. While year-over-year spending in media will likely increase in 2010, it will be off from what it was even five years ago. This will be an advantage to advertisers for the foreseeable future.
- Understanding the different segments of a target audience is more important than ever. Different regions of the country and various demographics will reach a point of recovery more quickly than others. A deeper commitment to planning research is critical.
- Diversify the media mix. A study conducted on channel effectiveness showed that campaigns using one channel were 55% effective while campaigns using four or more channels were 80% effective2. There is a delicate balance between diversification and spreading the budget too thin; however, given rapid changes in the media landscape, dedicating a percentage of the budget to testing new opportunities is important.
The light at the end of the tunnel is well within sight. If advertisers commit to taking an aggressive and well thought-out strategic approach for the next 16 months, this light will shine brightly on brands within their portfolio.
1 Paul Dyson, D2D Limited, March 2008
2 “The Pursuit of Effectiveness”, Les Binet and Peter Field, Market Leader