International: Advertisers ready for age of austerity

International: Advertisers ready for age of austerity

Author | Source: Advertising Age | Tuesday, Jul 22,2008 8:21 AM

International: Advertisers ready for age of austerity

Here come the cuts.

Amid roiling financial markets, who's who of blue-chip marketers are making moves to slash marketing spending, or at least apply tougher financial discipline to what they do spend. Among them are five major companies that together contribute more than $10 billion to the U.S. ad economy: General Motors Corp., Procter & Gamble Co., Anheuser-Busch, Coca-Cola Co. and Nissan.

The biggest of them all -- P&G -- last week appointed as its new Global Marketing Officer Marc Pritchard, who spent eight years in finance compared with only six in brand management and marketing. The new steward of P&G's reported $7.9 billion global ad budget has spent the past two years developing corporate cost-cutting initiatives and before that was known by marketing executives who worked with him for his keen eye on spending.

The country's No. 2 advertiser, AT&T, meanwhile, is in a period of transition as its marketing chief, Wendy Clark, departs the company, leaving a question mark about how her successor will manage its massive $3.2 billion budget.

Two rungs down at No. 4, struggling automotive giant General Motors, which already cut its measured media spending nearly $1 billion from 2005 to 2007, is looking to cut more and shift more dollars to digital amid a new round of restructuring.

Auto slowdown

Others in the auto industry, the biggest ad-spending category behind retail in the U.S., appear to be following GM's lead as it adjusts to one of the slowest sales years in recent history and to Americans' quick shift to smaller, more-fuel-efficient vehicles.

Nissan North America is trimming $100 million from its ad spending this fiscal year that started April 1 to help meet an aggressive profit target set by Nissan Motor Co. CEO Carlos Ghosn, according to two former executives. The ad dollars are being moved to the incentives bucket, needed to move big trucks out of showrooms, they said. A Nissan spokesman declined comment.

Meanwhile, Coca-Cola wants to save between $400 million and $500 million a year by the end of 2011 and wants to find some of those savings in marketing.

In a second-quarter earnings call with analysts July 17, newly minted Coca-Cola CEO Muhtar Kent said as the company undergoes an aggressive review of spending, marketing will be a primary area of focus.

The company will look to reduce "nonconsumer-facing" programs through global campaigns. It will also leverage best practices for creative and overall execution, as well as optimize its use of agencies. As an example, Mr. Kent said Coca-Cola recently completed a global marketing research agreement that will replace a number of local agreements.

"Our objective is to reinvest marketing efficiencies ... that we realize into efficient brand-building activities to drive the long-term health of our business," he said.

More direct-marketing

Coca-Cola Exec VP-Chief Financial Officer Gary Fayard said that given the economy, the company is maintaining a "disciplined" approach to marketing. That entails an increase in total direct-marketing spending vs. planned spending, as well as reallocation of funds against certain geographies to drive growth.

The soft-drink giant's strategy to reduce costs through increased use of global campaigns is an approach similar to that outlined by Unilever Chief Financial Officer Jim Lawrence earlier this year.

Historically frugal InBev's $52 billion buyout of free-spending American beer marketer Anheuser-Busch also has agencies girding for a possible spending pullback. And some A-B agency executives said they simply don't see how InBev's philosophy of zero-based budgeting can mesh with A-B's prolific approach to brand marketing.

While package-goods companies broadly have been talking about cutting overhead to maintain marketing spending, managers at analytics firms say the companies also have been actively testing models to project how successfully they can raise prices without losing out to private labels -- and the impact of shifting funds from media advertising to trade promotion and other areas of shopper marketing.

A combination of a hard times and internal austerity measures often has meant a back-to-basics movement for P&G and others -- and quite possibly a resistance to any experimental marketing that doesn't have proven ROI.

Lafley's example

After Chairman-CEO A.G. Lafley took over P&G amid earnings misses and a looming recession in 2000, he cut back interactive efforts and abandoned hundreds of URLs it had accumulated. P&G also ramped up couponing and, in some cases, trade promotion.

But at P&G, at least, it's far from certain any of that will play out again. Mr. Pritchard, while a financial disciplinarian, has also been a champion of interactive media at times.

And even as GM expanded its restructuring last week, VP-North American Sales, Service and Marketing Mark LaNeve told Advertising Age sibling Automotive News the company is looking at "getting better at digital" advertising in addition to "big savings."


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