More than one-third of marketers plan to cut their advertising budgets over the next six months as they face a continuing down economy, according to a study by the Association of National Advertisers. However, this is an improvement from an ANA survey conducted earlier this year, when nearly half of respondents said they planned budget cuts.
The study, “ANA Recession Survey—3rd Edition,” was based on an online survey of 128 b-to-b and b-to-c client-side marketers conducted in late July and early August. The first “edition” of the survey was conducted in July/August 2008, as the economy began to falter, and a second edition was conducted in January/February.
The latest survey found that 39.3% of marketers expect to cut their advertising budgets over the next six months, while 16.8% are hopeful that their budgets will increase; 43.9% plan to keep budgets the same.
When asked this question in January/February, 48.8% of the 127 marketers surveyed said they expected their ad budgets to be cut over the following six months; 43.2% said they expected them to stay the same; and 8.0% said they expected an increase.
In actuality, 61.7% of marketers said they cut ad budgets over the past six months; 31.8% kept budgets flat; and 6.5% increased them. According to the report, this indicates that the deepest cuts may already have been made.
The latest survey also found that 29.2% of respondents plan to cut their overall marketing budget by more than 20% over the next six months, compared with 36.9% that planned to cut their budgets by more than 20% in the January/February survey.
“Marketers are making sure their optimism is cautious,” said Bob Liodice, president-CEO of the ANA, pointing to some positive signs in the survey.
For example, 52.7% of marketers said they are eliminating or delaying new projects in an effort to cut costs, compared with 57.8% six months ago and 61.3% a year ago.
“A year ago, we were staring into the abyss,” Liodice said. “The natural inclination was to put a substantial amount [of new projects] on hold until it was evident what direction the economy would be moving in. Now, we may be seeing a greater degree of confidence that the economy is going to recover or is in recovery.”
However, Liodice noted that historically there is a six-month lag between an overall economic recovery and an uptick in ad spending. “Until there is some pronounced economic upturn that translates to increased confidence, that in turn translates to increased media investment, that optimism will continue to be cautious.”
Eighty-seven percent of the marketers who responded to the latest survey said they are challenged with identifying cost savings and reductions, compared with 93% six months ago and 87% a year ago.
The top four areas of cost savings were: departmental travel and expense restrictions (81.3%); reduction in ad campaign media budgets (73.6%); challenging agency partners to reduce internal costs (71.4%); and reduction in ad campaign production budgets (63.7%).
The survey found that 56.0% of marketers are reducing agency compensation as a cost-cutting measure, compared with 48.3% six months ago and 32.0% a year ago.
“If this is indicative of a witch hunt to cut costs, it is a short-term strategy that could backfire long-term,” Liodice said. “These are times when marketers should be investing to build market share and develop a longer-lasting ability to generate revenue growth. Agencies need to be part and parcel of that process.
“Agencies have already felt that their margins have been cut and, if the survey results indicate they will be cut any more, that worries me. Then the process of the agency-client relationship will get undermined.”
In a separate study released last week, the ANA and Marketing Management Analytics reported that as marketers struggle with slashed budgets, they are beefing up their marketing accountability efforts.
The ANA/MMA study was based on an online survey of 95 senior marketers conducted in June.
It found that 75% of marketers reported a decrease in their marketing budget this year, while 67% said marketers are expected to drive more sales with the same or lower budgets.
To achieve this, most marketers are seeking to improve their marketing accountability systems and processes, the survey found.
For example, 32% of marketers said their cross-functional teams include representatives from marketing, finance and research. That is up from 22% in a similar study conducted last year. Also, 43% percent of respondents said they use customer lifetime value models, up from 27% in last year's study.
Nineteen percent of respondents said they were confident that if they had to cut marketing spending by 10%, they could use metrics and analysis to forecast the impact on sales, compared with only 10% in last year's study. M