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Here's the good news
for CMOs, media and agencies: 26 top marketers bucked the trend and boosted 2009
advertising even as spending for the 100 Leading National Advertisers plunged
10.2%. Among those with the guts to spend more, 70% saw a U.S. sales increase -
double the success rate of those whose spending declined.
As for the bad news: Last year's LNA spending decline marked the sharpest drop
since Ad Age began the ranking in 1956.
Exhibit A for ramping up when many others hunker down: Walmart Stores. Walmart,
gunning for market share during the recession with its value message, increased
2009 U.S. spending 14.2%, according to Ad Age estimates. In its 10-K regulatory
filing, the world's largest retailer said it spent $2.4 billion on global
advertising in 2009, a whopping $300 million increase over the previous year.
For the first time, Walmart Stores in 2009 was the nation's No. 1 spending
retailer based on measured-media advertising, displacing Macy's. Walmart in 2009
was the country's third-most-advertised brand; in 2007, on the eve of recession,
it ranked No. 16.
The company's Walmart U.S. division last year managed a 1.1% sales increase in a
brutal retail market, gaining share even as the nation's retail sales fell 2.1%.
Walmart still spends less than retail rivals by one key measure: advertising as
percent of sales. But the trend is upward: Walmart spent 0.59% of worldwide
sales on advertising in 2009, up from 0.52% in 2008, 0.48% in 2007 and just
0.30% in 2000, according to Ad Age's analysis of 10-K disclosures.
Nine of the 26 spending gainers - including Hershey Co., General Mills, Nestl"
and Unilever - came from the recession-resistant sectors of food and package
goods.
The list of spending boosters also includes restaurants offering relatively
cheap fast food (McDonald's Corp., Subway franchisor Doctor's Associates); four
pharma firms (including Pfizer), a sector that kept growing through the
recession; dueling satellite services battling for market share (DirecTV, Dish
Network); and four retailers (Walmart, Safeway, Gap Inc., regional chain Fry's
Electronics).
Rounding out the list was an insurance company (Progressive Corp., which gained
share last year in the hotly competitive auto-insurance market), a bank (Wells
Fargo, which bought Wachovia Corp.), two tech firms (IBM Corp., Microsoft Corp.)
and a big player in the surging field of for-profit education (Apollo Group,
owner of University of Phoenix, making its 100 LNA debut).
Many marketers managed to do more for less, taking advantage of what once seemed
unimaginable: media deflation.
Marketers from Anheuser-Busch InBev to Procter & Gamble Co. cited media
discounting as a significant cost savings in their annual-report filings.
A-B InBev, the world's largest beer marketer, noted "media and advertising cost
deflation in key markets." Spirits marketer Diageo took advantage of "media rate
deflation" in North America. Food maker Kellogg Co. said operating profits
benefited from "media deflation" in Europe.
P&G, the nation's and world's largest advertiser, said "media rate reductions"
helped reduce marketing expenses as a percent of sales.
Revlon, though too small to make the 100 LNA ranking, offers a clear example of
how marketers gained from media price cuts. In its 10-K filing, the
personal-care products marketer said it cut 2009 worldwide ad expenses by $24.8
million - or by about 10% vs. 2008 - "as a result of achieving lower advertising
rates, while increasing the level of media support."
It's apt that marketers used the word "deflation" to discuss media prices, for
2009 in economic terms was a deflationary year: The U.S. Consumer Price Index
(annual average) fell 0.4% in 2009, the first decline since 1955. The easy
savings for marketers probably are over. Consensus is the 2007-2009 Great
Recession ended in third-quarter 2009, giving way to a weak economic recovery -
and some increased demand for media.
U.S. measured-media spending in first-quarter 2010 rose 5.1% for all advertisers
(and 11.0% for the top 100 advertisers), the first quarterly gain since
first-quarter 2008, according to WPP's Kantar Media. More demand from buyers
means media sellers - at least strong media properties - should feel less need
to give away the store.
There are signs the media market is stabilizing. Media staffing offers some
clues about the health of that market. Overall U.S. media employment is still
falling. But when you factor out newspapers (where job losses continue), media
staffing has been essentially flat since last September - good news following
massive job cuts that occurred in 2008 and early 2009.
This LNA report chronicles a remarkable year for the advertising economy - and
only the fifth drop in spending in the report's 55-year history. Spending fell
2.7% in 2008, 1.3% in 2001, 3.9% in 1991 and 0.4% in 1970, all recession years.
The 100 top U.S. spenders - blue-chip marketers from Abbott Laboratories to Yum
Brands - cut U.S. ad expenditures by 10.2% in 2009, according to Ad Age
DataCenter's analysis. The figures include Kantar's estimates of measured media
and Ad Age's estimates of unmeasured spending (including promotion and direct
marketing).
The 100 leaders cut measured-media spending in all media but the internet (up a
whopping 34.2%), cable TV networks (up 3.9%) and free-standing inserts (up
1.1%), according to Ad Age's analysis.
Measured-media spending for the entire U.S. ad market dropped in all but four
major categories in 2009: telecommunications/internet services (up 1.5%), a
battle ground for market share; food, beverages and candy (up 0.5%),
recession-resistant areas; pet food and pet care (up 21.5%), a growing market;
cigarettes and tobacco (up 25.7%), a comparatively small category where a
limited number of campaigns can move the percentages.
Measured spending in automotive - the second-largest ad category, after retail -
crashed 22.8%, according to Ad Age's analysis of Kantar data. U.S. auto sales
last year plunged 21.2% to the lowest level since 1982, according to Ad Age
sibling Automotive News.
Auto sales and auto ad spending have seen gains in 2010, though the market is
hardly surging.
There are signs of hope. One year ago, General Motors Corp. was steering through
a government-sanctioned bankruptcy. GM slashed ad spending last year, but it
remained the auto industry's largest U.S. advertiser in 2009 and in
first-quarter 2010. Today, successor General Motors Co. is moving toward a
highly anticipated initial public offering of stock. If the IPO sizzles, Uncle
Sam - GM's 61% owner - will be in a strong position to start selling its stake.
Source:
Advertising Age | June 21, 2010 |