Brands Continue to Focus on Cost

The Great Recession wreaked havoc on the entire economy. A problem the economy has encountered in its fitful recovery is businesses have learned, it seems permanently, how to do more with less.

Marketing is no different. The Great Recession was an excuse for marketers to tighten their belts and scrutinize every expense for what it brought back. Corporate balance sheets have recovered significantly from 2007 to 2009, but that frugality represents a “new normal,” the Association of National Advertisers believes.

In a survey of its members, the ANA found that cutting costs remains a top priority for marketers. Four out of five said finding ways to decrease spending in advertising and marketing remains a top priority. Over half (55 percent) said they want to cut agencies’ pay even more than they already have. Nearly half (46 percent) are going after paid media budgets.

That’s the bad news. The good news is the worst appears over. Two out of three of those who said they need to cut costs said the reductions would be 10 percent or less in 2013. Four years ago, 37 percent said they needed to cut 20 percent or more.

On the agency front, marketers present a mixed picture. Only 15 percent want to cut agency compensation further. This is probably because there might not be that much more to cut, considering how compressed agency margins have become. Instead, 55 percent say they’re pressing them to “reduce costs internally and/or identify cost reductions.” The ANA drily notes that from the agency perspective this drive for “efficiency” will have the same result: drive down agency revenue.

The silver lining for media owners is clients are loath to cut too deeply into ad budgets. Over half (55 percent) said ad budgets the prior six months had remained the same or increased. About 73 percent said these spending levels would remain the same or increase over the next six months.

The ANA concludes that in this “new normal” the winners will be those on the agency and media side that are “accountable” in proving beyond a doubt that they’re providing real value for clients. That should, in theory, help online advertising, although attribution models for its effectiveness for brands remain in flux. The continued focus on cost savings will likely keep up the drive to reform the complicated, inefficient ad-buying system. That should continue the growth of automation technologies, for both indirect and direct buys.

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