Industry tremors

Recently, when an automobile company announced that it was cancelling some of its advertising on television, the advertising and media industry experienced earthquake-like tremors. Fears about the outlook are mounting. Advertising spending is one of the first things business decides to cut when faced with a sales slowdown.

Of course, that is illogical as every tool available should be used to boost sales. While there currently are some important events that could bolster ad budgets for the remainder of this year, such as the Olympics in China, or a renewed hockey season, nevertheless, over the next year, advertising budgets are more than likely to decrease, foolish as that may be.

The increasing spread of the internet could be a bit of an offsetting factor; it brings greater accountability in advertising expenses. With a click of a button, consumers can respond to an ad with a purchase.

Despite the partial shift to more advertising on the internet at the expense of traditional media such as television or print, there is no way the internet can replace other forms of advertising to a major extent. Few will be willing to purchase an automobile or large appliance as the result of something on the internet. The internet is most suitable for short-term sales, whereas television is far more effective in building long-term, brand name identification.

There was a recent survey of consumers, which revealed that more than three-quarters of those questioned stated they found online ads more annoying than those on television or in print. In addition, more nowadays are concerned about protecting their privacy or, as a matter of fact, are not willing to divulge their name and address.

In previous years, for example, during the high-tech boom, numbers of companies used their new-found wealth for self-promotion by advertising. This time around the hitherto strong stock market did not entail companies plowing more money into advertising. Hence, outlays may not fall as much as they did in the early part of the previous decade, but declines seem almost inevitable.

Cutbacks in advertising budgets will vary, depending on the industries involved. Makers of luxury goods who are more exposed than most to a business slump, very likely will slash their marketing budgets. Banks that have been badly mauled by recent events, will be reluctant to spend more on advertising, regardless of the need to restore their credibility. Thus, some will be inclined to stay the course on ad outlays, but most will follow the historical pattern and curb advertising. The public may welcome such a respite from advertising, but obviously others will not be pleased by those reductions in expenditures.


Bruce Whitestone