Loading ...Advertising Picks Up, Recession Nears End?
For several years, I have maintained that advertising expenditures are a way to measure confidence in the economy. As markets contract; advertising contracts. When the market returns, so does spending.
Advertising is the first to go and the last to return because many managers are too quick to cut spending at the first sign of stormy seas, and too slow to reinstate out of fear that the storm has yet to pass.
My Theory on Advertising as an Economic Indicator
It’s a simple premise, when you think about it. As the corner office grows anxious about company revenues, marketing budgets are the first sacrifice on the Holy Alter of the MBA. Managers view marketing as an expenditure, by and large, rather than the investment portion of the ROI equation.
Earlier this decade, when I worked for a Fortune 500 business unit, our division president released five people as part of a company-wide restructuring initiative. Four of the five came from the marketing department because “we can’t afford the luxury.”
Never mind the rationality behind the decision. Many CEOs do look to their CMOs as a first option to cut budgets and keep profit margins steady in a declining marketplace.
On the other hand, expenditures on advertising are usually the last budgetary item restored once the market picks up—sometimes a quarter or two behind “for good measure.” In many ways, my theory is akin to the way some people invest I the stock market: they buy only when the market soars rather than during slower times. So too, is advertising.
Considering the FILO (first in, last out) nature of advertising, I believe you can look to ad spending as a way to gauge general sentiment among businesses leaders.
Editor’s Note: When I return to graduate school, this topic is on my dissertation short-list. Please be kind by not taking this topic without providing me with proper credit or citation.
Advertising Markets Moving Again
On Thursday, Brian Steinberg wrote about the pickup in scatter buying. These are the types of purchases that happen 90 days before a program airs on television. April typically is a month where companies approve their 3Q budgets and authorized buyers to place schedules. This is something we are beginning to see.
The news should come as a relief to TV networks. In March, the market appeared to be frozen, as advertisers pulled back between 12% and 14% of their “holds,” the second-quarter ad time they earmarked last May during the annual upfront ad-sales session.
While there is some concern that these new buying may be nothing more than true scatter and not an overall return to ad spending, there is little question than the advertising marketing is moving again.
If my theory on advertising holds true, we are seeing the beginning of the end of the recession.
What do you think? Am I totally crazy?
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