Cut in Advertising could be a cut in Market Share
I’ve heard this time and time again. In fact, my ex-employer (a prominant business man and a Mega-Auto Dealer) always preached that when everyone else cut back, it’s when we need to stay visible. The article below highlights a few reputable national chains that like so many other advertisers, cut their marketing dollars in this down economy, but it seems it may have been the means to an end.
I am a true believer in no matter what the size of the pie, you still want to get your piece of it. When the pie begins to grow, your business will reap the benefits.
From Advertising Age….
SOME PACKAGE GOODS CUTTING BACK…
What two things do Mervyn’s and Bennigan’s have in common? They both cut back on marketing dramatically in the last year — and they both filed for bankruptcy protection last week.
Advertising Age, quoting TNS Media Intelligence figures, reports Mervyn’s, a large advertiser in its markets, cut back spending about 25% to $76 million last year. Bennigan’s isn’t nearly the size advertiser of the department store, but it cut a budget that had been more than a million dollars in 2006 to just $347,000 last year. They weren’t alone. Ad Age notes that Sharper Image had cut its budget by about 82% in the two years before it filed for bankruptcy in February, and another restaurant chain, Baker’s Square, cut back 19% last year before it filed in May.
Certainly, there’s no way to prove the results might have been different if spending hadn’t been cut back. “Obviously, there are a lot of factors at play,” Dartmouth marketing professor Kevin Keller told the magazine. “But the pattern is there. It’s not like they were investing a lot in advertising and failed.” Darren Tristano of restaurant consultancy Technomic said that while marketing may seem like an easy place to cut when business is difficult, “ultimately, because a lot of traffic you’re driving is through marketing and promotion, you’re really cutting off your nose to spite your face.” Larry Light, formerly of McDonald’s, added that when that company had tough times earlier in the decade, it made marketing cuts but “the problems didn’t get better, they got worse.” But when McDonald’s started to implement its very successful turnaround beginning in 2003, it increased marketing, and same-store sales rose shortly thereafter. Tristano is quite concerned about the restaurant business. He notes that restaurant chains have averaged about 5-6 bankruptcy filings a year for the last three years, and there have been four already this year. Tristano predicts at least three more restaurant chains will go under this year.
But in what appears to be disturbing news, Advertising Age notes separately that some of the biggest package goods makers, including Procter & Gamble, Johnson & Johnson, and Unilever, started to cut back their spending as the economy weakened this year. It notes that P&G’s cutbacks have been particularly felt in the magazine business, as brands like Olay and Pantene have sliced their spending, but its monitored television expenditures were down 4% in April and 31% in May. Figures for June, the last month of P&G’s fiscal year, weren’t available yet.
On the opposite side, we’ve been able to report recently on a few major companies, largely in the food business, that have seen good sales results and are actually crediting increased marketing and advertising for helping their businesses. Kraft, Hershey, Kellogg and General Mills have all had encouraging sales and profits in their latest quarterly reports, and Advertising Age points out they have each cited increased marketing and advertising investments as part of the reasons for the good numbers. “Our commitment to advertising investment is a key component of our strategy,” Kellogg CEO David Mackay told investors.
