Why does advertising slump in a recession?

The FT notes that advertising budgets are being cut, typically by double digit percentages.*

If advertising works - that is, it sells more of what you're selling - you'd do more of it in a recession, wouldn't you? When every penny counts, surely you'd pump every available budget into selling more, including advertising. If advertising works...

Which just makes me even more convinced that advertising really doesn't work.

I also hear on the grapevine that operational marketing budgets are being cut at many tech vendors, as recession looms. Again, why would they do this if marketing works?

In a recession, every sale is harder to make, since customers are more reluctant to part with cash. Effective marketing must surely be an imperative.

Is this too simplistic a view? Please tell me.




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Tom Peters on ads

The management guru on advertising:

Advertising is a sick business. And it isn't just for the oft-mentioned reason that "consumers are using so many more media outlets—the Internet, hundreds of
TV stations, thousands of publications."

It is because people just don't buy this way anymore. Customers—your customers—are scrutinizing, savvy, discerning, and self-reliant. They look beyond your promises, and consider every interaction with your company as a chance to evaluate you.

Ouch.

Smoke & mirrors from adland

"Pre-Click Ad Influence" - creativity clearly isn't dead!

http://www.clickz.com/showPage.html?page=3624442

Thanks to Gartner's media blog for highlighting this tosh.

I've seen the future...

... and it doesn't have ads in it.

Witness this advert (noting the irony) I snapped on the Tube for Sky Movies promising whole films with no interuptions.

I admit that, for me, ad-allergic as I am, this is compelling.

Advertising works... kind of.

I was tickled by Paul Ashby’s forum thread on Brand Republic, stating that advertising works. If by “works” you mean wasting huge amounts of marketing budget and duping the customer into believing it is effective with ever having produced data to support the fact.

So why do firms still spend millions on advertising? I was party to a nugget of insight this week on a client trip to Paris. There’s not much to do on the Eurostar for two and a half hours, so the client was happy to chat about their recent marketing activities. It turns out that they’d just spent $800,000 on an airport advertising campaign. And the manager knew he’d get no tangible return on his spend.

Why would a sane person do this?

Here’s the reason. This firm, a large US-based technology firm, wants to increase its profile in Europe. Standard practice in these cases is for corporate HQ to dictate how and where European “satellite” operations spend their marketing budgets. Sometimes this centralized command-and-control process manages budget to the dollar.

So when corporate marketing offers $800,000 as long as it’s spent on marketing, what is a European marketing VP to do? Especially when they know that advertising will make little impact on sales.

This smart VP decides to advertise not where prospects might see the advert (because they’d tune it out anyway) but where his company colleagues and senior management would see it. If you work for a firm, then you tune in to its adverts, rather than tune them out (like prospects would).

The marketing VP then gets plaudits from his senior management for the high visibility. “You’re doing a great job – we saw the adverts in the airport.” This raised kudos allows the VP to attract more support for marketing and, importantly, more budget to do the things that he knows will actually affect sales.

So this VP is not insane after all – in fact he’s playing the game skilfully. But why do other people assume that advertising works? Perceived wisdom is defying hard facts – nobody can establish a link between advertising and sales. Is it the case that marketing is insane because everyone else is? And are marketers the only sane people around, but bound by the prevalent insanity to do daft things, like spend $800,000 on airport advertising?

It’s official – advertising doesn’t work

It’s official – advertising doesn’t work, and marketers are insane.

On BBC Radio 4’s PM programme on Monday 5th February, Eddie Mair interviews Fiona Dawson, Managing Director of Masterfoods UK, on its move to stop advertising targeted at under 12’s. Masterfoods makes Mars bars and other sweeties.

In explaining the impact of the decision on Masterfoods’ market, Ms Dawson states that, “There is very little evidence to show that advertising has any effect, despite the amount of money that we spend on it, in term of driving purchasing behaviour.”

You can almost hear Eddie Mair’s jaw hits the table. “You don’t think that advertising affects buying behaviour?!” he asks.

“Well, there’s very little evidence to show it…” repeats Ms Dawson, adding, “We still spend quite a considerable amount…”

Indeed they do. Advertising Age estimates MasterFoods’ global advertising expenditure of $939m in 2005, on annual sales estimated at $18bn. That’s roughly 5% of sales, with no evidence to support its effectiveness.

I recorded my thoughts on this type of insanity in a white paper recently. MasterFoods is another example of marketers doing what they have always done, despite any measurement of its effectiveness.