There's no better time to hike spending, especially as a lot of others will cut support. The strong brands have an opportunity to stand out even more and build strong franchises.
ANA Members Suggest They're Ready to Spend -- Some Have Already Begun
By Jack Neff
If you page through The Wall Street Journal or New York Times, you might discover a few surprises. FedEx, General Electric and IBM have recently launched corporate branding campaigns, and tech power SAP made a splash just last week with a global push from Ogilvy themed "Time for a clear new world."
Coming at a time when most marketers have been hoarding spending, heavily discounting and focusing on any way to move merchandise in the recessionary short term, this sudden burst of branding stands out like a wildflower among weeds. Given that it coincides with a new survey from the Association of National Advertisers that suggests marketers are getting ready to once again open their wallets, and some promising remarks from senior executives from marketers including Walmart, Procter & Gamble and Unilever, a tentative case might be made that branding is making a comeback.
"Branding is the hardest thing to justify, and everybody looks to that budget first," said Bob Thacker, senior VP-marketing at OfficeMax. "There are things that we have in the past considered more pure branding initiatives ... we've had to put on the back burner. And now we see more opportunity to do more of those things."
Two-thirds of the 129 marketers surveyed last month by the ANA said the recession shifted focus of their companies toward short-term results. But nearly three-quarters of them, 73%, said they are poised to start spending even before the recession ends -- 43% three months before and 30% six months before. With economists in a Wall Street Journal poll last week predicting on average the recession will end in August, that could mean a recovery in spending is very near.
Just over two-thirds of marketers surveyed said they plan to hike media budgets when the recession ends. Increases in social media and experimental budgets are next on the priority list, but only 5% said they plan to increase pricing deals once the recession is over.
'No better time'
Unilever CEO Paul Polman counts himself a pessimist on the recession ending anytime soon, but he said Unilever is still hiking spending globally starting this quarter after four consecutive quarters of reductions in support as a share of sales. "We assume it's not yet the beginning of the end but still like the end of the beginning," Mr. Polman said in an e-mail. But he added that there's "no better time [to hike spending], especially as a lot of others will cut support. The strong brands have an opportunity to stand out even more and build strong franchises."
"At times of uncertainty, companies need to reassure the market that they are stable, reliable and have a long-term vision," said SAP Global Chief Marketing Officer Marty Homlish in an e-mail statement.
Some retailers, too, are looking to ramp up branding after feeling forced to focus more on pricing and promotion. Über-value retailer Walmart clearly has benefited from the recession, with 17% of its traffic growth last quarter from new shoppers, said Eduardo Castro-Wright, CEO of Walmart U.S., in an earnings call last week. But the retailer's executives increasingly are making the case that it can keep those new customers in better times.
To that end, Walmart -- working with its ad shop, the Martin Agency, and its digital agency of record, R/GA -- is focusing more on quality, not just price, particularly in fresh departments where its shares still lag those in dry grocery, health and personal care. Among other things, Walmart is preparing a campaign around a "Two days faster. Two days fresher" theme highlighting improvements in its produce, said Wanda Young, senior director-digital marketing.
In the ANA survey, marketers ranked products as the most important factor in building brand equity. Product launches drive most branding efforts at consumer-package-goods companies, and there are some signs an industry new-product slowdown may be ending.
Schawk, a publicly held company considered the largest provider of pre-press and design services for product packaging in the U.S., said in preliminary results released last week that sales to packaging clients were down 16% last quarter. But that's an improvement from a 22% decline in the fourth quarter. In a statement, CEO David Schawk said monthly sales numbers have been improving since December. Marketers have a backlog of projects, and Mr. Schawk is "cautiously optimistic that certain of these projects will be initiated in 2009, as clients get more comfortable with the credit and economic environment and start to focus more on consumer needs and the competitive landscape."
Caught between two European rivals -- Unilever and L'Oréal -- that have scrapped earnings guidance and signaled plans to hike marketing spending, some analysts say Procter & Gamble Co. may have no choice but to a least moderate earning targets and ramp up spending in its fiscal year starting July 1. Much is likely to go into developing markets, said Deutsche Bank analyst Bill Schmitz. But he expects some increased spending in the U.S., too.
A P&G spokesman said the company's not giving guidance yet, but "we're going to continue to invest behind our brands, products and our innovation plans."
L'Oréal is one of relatively few marketers that has increased marketing spending in recent quarters despite the recession, and it plans to continue. "It has always been L'Oréal's strategy that when times are tough, you spend against the categories and grow your market share," said Joseph Campinell, president of the consumer-products division of L'Oréal USA in an e-mail statement. It's a strategy he said is working.
L'Oréal isn't the only brand trying to prove its worth to consumers, particularly as many have taken price hikes amid a recession and private-label growth. Chris Heye, VP-marketing at Welch's, said the company almost doubled its $10 million to $12 million advertising budget for this fiscal year and plans to maintain spending next year. "As one of the more expensive items on the shelf, we had to tell consumers why we're worth it," he said.
This is only an excerpt. Read full article here.
Published in AdAge.com on May 18, 2009