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Wednesday, February 17, 2010

Marketers Still Frugal, But Deepest Cuts Behind Them

According to the most recent contiguous six month poll by the Association of National Advertisers (ANA), 83% of the respondents indicate they are identifying cost savings and reductions in their current marketing and advertising efforts. While that represents a high percentage of respondents, this is improved from six months ago (87%), one year ago (93%), and eighteen months ago (87%).

Marketers Being Challenged to Identify Cost Savings/Reductions in Current Marketing/Advertising Efforts (Base: Total Sample)
*Survey Period*	*% Challenged for Savings, Reductions*
January 2010	83%
Jul/Aug 2009	87%
Jan/Feb 2009	93%
Jul/Aug 2008	87%
Source: ANA, January 2010

The report concludes that "The recession may be officially over, but it appears that marketers have reset their expectations and a greater degree of frugality has set in. Cost savings and reductions may be the "new normal", even when the economy improves significantly."

In the most recent survey, 41% of respondents are planning to reduce marketing budgets by 1-5% and 70% plan reductions of 1-10%, up substantially from 55% in the July 2009 survey. Only 7% plan reductions greater than 20%, which is down sharply from 30% in July 2009. This indicates that the deepest cuts may have already been made.

Planned Reduction in Marketing Budget (Base: Those Reducing Marketing/Advertising)
	*Percent of Budget Planned to Reduce (rounded)*
*Survey Period*	*> Than 30%*	*21 - 30%*	*11 - 20%*	*6 - 10%*	*1 - 5%*
January 2010	4%	3%	23%	29%	41%
Jul/Aug 2009	18	12	26	23	22
Jan/Feb 2009	19	18	25	23	15
Jul/Aug 2008	10	10	27	33	19
Source: ANA, 2010

The top four ways marketers are reducing costs and spending:

75% are challenging agencies to reduce internal expenses and/or identify cost reductions
73% are reducing departmental travel and expenses
53% are reducing advertising media budgets
50% are reducing advertising production budgets

Challenging agencies to reduce internal expenses and/or identify cost reductions has increased in each of the surveys. But just about every other category declined in the most recent survey, notes the report.

Areas Where Marketing/Advertising Efforts Are To Be Cut Back(Base: Planning To Reduce Advertising/Marketing Costs)
	*Survey Period (% Planning Reduction*
*Area of Cut-Back*	*Jan 2010*	*Jul/Aug '09*	*Jan/Feb '09*	*Jul/Aug '08*
Challenge agencies to reduce internal expenses and/or identify cost reductions	75%	71%	68%	63%
Departmental travel and expense restrictions	73	81	87	63
Reduction in advertising campaign media budgets	53	74	77	69
Reduction in advertising campaign production budgets	50	64	72	63
Eliminate/delay new projects	47	53	58	61
Reduce agency compensation	35	56	48	32
Reduction in professional development activities such as conferences and training	35	na	na	na
Reduce/eliminate use of outside consultants (e.g. management consultants)	34	42	43	36
Departmental salary and/or hiring freezes	29	56	57	45
Alter mix of marketing channels to lower cost channels	29	46	44	40
Reduction in spending on research	24	34	na	na
Decoupling of services from the agency and buy direct from supplier	16	9	15	21
Use freelancers to fill open positions (instead of hiring fulltime employees)	14	17	18	24
Use open bid sourcing among agencies for projects/campaigns	11	14	11	12
Conduct compliance audits for recovery of misbillings, over-payments	9	18	14	13
Use online reverse auctions to bid down/identify lowest cost supplier	8	4	10	12
Other	6	na	na	na
Source: ANA, January 2010

Current responses suggest some degree of optimism since the last survey. But the deepest cuts may have already been made.The majority of marketers forecast no change in spending for the first half of 2010:

59% think budgets will stay the same
22% think budgets will be reduced
19% are hopeful budgets will increase

The report concludes by saying that the recession may be officially over, but it appears that marketers have reset their expectations and a greater degree of frugality has set in. Cost savings and reductions may be the "new normal" even as the economy improves. However, the deepest cuts are likely to have already been made.

We use the term research in the broadest possible sense. We do not perform an audit, nor do we analyze the data for accuracy or reliability. Our intention is to inform you of the existence of research materials and so we present reports as they are presented to us. The only requirements we impose are that they are potentially useful and relevant to our readers and that they pass the rudimentary test of relying on acceptable industry standards. We explicitly do not take responsibility for the findings. Please be aware of this and check the source for yourself if you intend to rely on any of the data we present.

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