NEW YORK (AdAge.com) — It’s not getting a lot better, but at least it’s not getting any worse. And it probably won’t ever get back to where it once was.
That’s the marketing forecast for the second half of the year based on a temperature check of players in the media, marketing and agency worlds by Advertising Age. We found that there are pockets of strength: online and PR, for example. Some package-goods players are ramping up spending, but many are doing so to take advantage of lower media pricing. The TV networks continue to struggle, and agencies are coming to grips with the fact that marketers will continue to squeeze them on fees with procurement (recession or no) — and that they have to come up with more-viable metrics.
Ad Age Digital DigitalNext MediaWorks On one point there seems to be almost universal agreement, and it was perhaps stated best by Robin Domeniconi, VP-sales at Microsoft: “Right now some of the budgets are being released more than they have in the past [year],” she said, but “it’s a reset. It’s not like, ‘Yoo-hoo, we’re out of the recession.’ This is about a new way of doing business.”
“This current economy has stimulated a new marketing consciousness,” said Laurence Boschetto, president-CEO, DraftFCB. “Clients are saying they want accountability for every dollar they spend, and they want cause and effect. Clients will continue to rally behind ideas that build business, and we as an industry have to accept that things will never revert back to the pre-recession mind-set that wasn’t totally focused on accountability.”
That seemingly bodes well — or at least better — for some media. MaryLee Sachs, director of the worldwide marketing communications practice at WPP’s Hill & Knowlton, said that when a turnaround does come, chief marketing officers “will continue to look for new avenues and means with which to connect with their core consumers most cost-effectively. This puts digital, earned-media opportunities and niche-targeted initiatives” at the forefront.
She added: “Some consumer values and buying habits may have changed irrevocably, so it will become increasingly important to foster brand relationships — ideally loyalty and advocacy — and this is more difficult to achieve through traditional TV push marketing.”
Tough road for TV
Indeed, the outlook for TV isn’t very bright. “In this environment, ad spending for the broadcast networks may stabilise in the second half of 2009, but it is more likely to remain difficult. Marketers continue to hold on to budgets longer and seek more flexibility in their buys,” said Christopher Vollmer, partner and leader of global media and entertainment at Booz & Co. “They also have more and more options — whether it’s cable, digital or other below-the-line marketing services. This will not make it any easier for broadcast to get growth going.”
Early reads on this year’s broadcast upfront marketplace suggest that total dollars committed were off by as much as 15% or more, meaning that the five broadcast networks took in something akin to $7.8 billion to $8 billion for prime-time inventory, compared with the about $9.23 billion they secured for their prime-time ad slots in 2008. While softer pricing played a role, part of the falloff is due to the fact that there was less volume, as networks held more inventory to sell in the scatter market. Cable volume could be off as much as 10% or more, media buyers said, meaning that total dollars committed to cable in the upfront would come in at about $6.75 billion, compared with about $7.5 billion last year.
“Media-spend trends can only go up and will be accelerated by the dramatic drop in pricing across all media,” said Linda Sawyer, CEO of Deutsch. “TV and online will recover fastest, print the slowest, as their decline is less economic and rather a fundamental, long-term shift.”
At least the second half won’t be as brutal as the first, said Stephanie George, exec VP of Time Inc. and president of Time Inc. advertising sales and marketing. “In categories like auto, retail, pharmaceutical, finance and even some luxury, the second half is better than the first.”
Another potential bright spot is package goods, where several signs point to a spending rebound in the second half, thanks to a combination of lower commodity costs and relief from profit pressure on U.S.-based marketers from a stronger dollar.
Some increase spending
Two marketers that already have seen pressure from commodity costs lift and face relatively little foreign-currency impact — Clorox Co. and Church & Dwight Co. — both hiked ad spending considerably last quarter and vowed to continue spending increases into the second half. Likewise, Colgate-Palmolive Co. plans to increase its marketing spending after three quarters of taking savings in media costs to the bottom line instead of increasing media weight.
Bigger fish, too, appear poised to ramp up spending. Irene Rosenfeld, chairman-CEO at Kraft Foods, said: “We delivered strong, broad-based results in the first half and raised our full-year outlook. What’s more, we’re reinvesting a portion of that upside in incremental advertising and consumer spending to increase our share of voice. As a result, we expect 2009 [advertising and marketing] to increase as a percentage of net revenue, even though advertising rates have come down.”
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