Jane F. Bedford Quoted in Forbes
February 5, 2008Forbes.com Louis Hau “Economy Sneezes, Ad Market Chokes” February 5, 2008 When the economy falters, marketing budgets get the ax first. Not everyone gets clipped the same way, though. One canary in the coal mine is choking already: local retailers and service providers. Mom-and-pop stores, local attorneys, dentists’ offices and the like tend to be most sensitive to short-term changes in the economy. Ad spending by these local businesses has slowed sharply, rising 2.3% in the first nine months of 2007 from the same period a year earlier, down from growth of 11% during the first nine months of 2006, according to TNS Media Intelligence in New York. TNS projects that total U.S. ad expenditures will climb 4.2% this year. But expectations of big gains from political campaign spending and the Beijing Summer Olympics mask weakness in the core ad market. Expected to slide further this year: Real estate, where spending sank 13.9% during the first nine months of 2007 from a year earlier, and retail, which slipped 1.8%, including a 2.1% decline among department store chains, according to TNS. Financial services will also falter. Despite all the turmoil in the credit markets, ad spending by Wall Street held up surprisingly well, climbing 10% during the first nine months of 2007, 5% in the third quarter. Retail banks and even mortgage lenders refrained from pulling their advertising last year, hoping to drum up business and maintain market share, a common response in the early stages of an economic slowdown, according to Jon Swallen, senior vice president of research at TNS. But “eventually, the P&L sheet catches up with you–at some point, you have to realign your cost structure,” he said. Brand marketing will also take a hit. During good times, big brands typically devote part of their marketing budgets to campaigns aimed at strengthening their brand visibility and equity over the long term, said Sanjay Dhar, a marketing professor at the University of Chicago Graduate School of Business. During tougher times, those brand-building campaigns tend to get dialed back, particularly for low-margin, high-volume consumer packaged goods like food products, apparel and footwear. Dhar expects an overall decline in ad spending by packaged goods companies, as more consumers opt for generic, private-label products. Swallen believes spending will hold relatively steady as companies shift their ad dollars away from their premium brands to cheaper, down-market brands. So much for the losers. Which ad categories should hold up? Automotive advertising, which sank 7.1% during the first nine months of 2007, won’t decline as much in 2008, said Dhar. Relentless competition from Japanese automakers forces U.S. car companies to advertise if they want to keep their names in front of the public and minimize further losses in market share, he said. Consumer electronics is another category that should remain steady. The marketing efforts of personal technology manufacturers don’t follow ups and downs in the economy because they are more geared around product cycles and a big fourth-quarter holiday blitz. Another winner? Online advertising. As ad budgets shrink, marketing departments will come under greater pressure to show a return on their investment. Internet advertising and direct-marketing campaigns, such as direct mail and direct-response television, yield results more easily trackable than traditional, mass-media ad purchases. “Online is just ascending like you wouldn’t believe,” said Jane Bedford, head of The Bedford Group, a marketing management consulting firm in Atlanta. That’s bad news for newspapers. Historically rising and falling in line with the economy, the newspaper business has suffered hemorrhaging losses in classified advertising revenue, long the industry’s lifeblood, thanks to competition from online rivals like Craigslist and steep cyclical declines in real estate and automotive classifieds. “An alarming trend has developed over the past three years,” Goldman Sachs observed in a research report earlier this month, “with newspaper ad revenue growth slowing and ultimately turning negative despite a relatively healthy economic backdrop.” Goldman cut its advertising revenue estimate for the U.S. newspaper industry to a projected 7.9% decline in 2008, compared with its previous estimate of a 2.6% drop. Won’t election-year campaign ads help newspapers? Not as much as they will help everyone else. Television stations are expected to reap a $2.3 billion windfall in political advertising in 2008, while $1.08 billion is expected to flow to direct-mail campaigns, $272 million to radio stations, $200 million to cable TV, $106 million to newspapers and $63 million to outdoor display advertising, according to PQ Media, a Stamford, Conn., media research firm.
About The Bedford Group
The Bedford Group is an Atlanta based Marketing Management Consulting firm that has been in operation since 1986. It has built its reputation on marketing organization support, agency search and relationship management and strategic marketing consulting. Unlike traditional advertising consultants, The Bedford Group looks beyond traditional marketing disciplines to solve complex, enterprise-wide issues for efficient resource management and improving marketing ROI.