Archive for November, 2008

Increase or Cut Ad Budgets?

Wednesday, November 19, 2008

Advertising budget

Marketing News published two sides of the Ad-spend-in-a-down-economy dilemma in its October 15th issue.

The first take – Don’t Touch That Budget, a sidebar to the cover story, Austerity Marketing – is the philosophy that maintaining or increasing your ad spend will better position your company for growth when coming out of a down economy. A key point that is made is that consumers are re-evaluating their purchase decisions and you need to be there to establish your relevance. In addition, there will be fewer messages in the marketplace to compete with.

On the flip side, noted in Marketing News’ article, Disrobing the Emperor, by Don E. Schultz, the author attempts to disspell the Share-of-Voice concept as it relates to market share. Schultz uses the automotive industry as an example comparing market share with ad spend for the top six automobile manufacturers. He concludes that the correlation is all over the board.

I believe the answer lies somewhere in the middle. Consumers are re-evaluating their purchase decisions and there are fewer purchases being made. The key is to be relevant to those that are going to make a decision to purchase. And ad spend may not be the best way to reach them.

As your company’s sales decline in a down economy, marketing budgets should be re-alinged to sales targets. Greater scrutiny should be given to the marketing budget, including advertising spend. It may be that your marketing strategy will be to focus on a smaller demographic, yet the proportionate advertising spend be greater for that segment. You may find that your overall marketing budget may be down, but that key demographic you are targeting may see an increase in your marketing messages.

You may also find other ways to reach your audience where you can transfer budget from your general ad spend. Maybe direct mail, newsletters, sponsorships, etc. will give you a more timely message to your prospect at the moment of purchase than you were getting from advertising.

So, while I don’t think its realistic to maintain ad spend from the height of the economy into the downturn, go ahead and defend that budget as long as your strategy is on target and positions you for momentum on the economic rebound.