With computer industry marketers laboring to shore up profit margins and with no new products to match last fall's marketing frenzy around Microsoft Corp.'s Windows 95, there will be no dramatic increase in ad spending-and, for some marketers, there will be cuts.
There are clear warning signs. Compaq Computer Corp. early in 1996 announced it would cut prices and margins to keep sales growing in a tough market. Over the summer, Hewlett-Packard Co. warned of sluggish demand across product lines.
Spending is under scrutiny. Compaq is cutting its fall home PC campaign to less than $10 million from the $12.5 million it spent in the fourth quarter a year ago.
PACKARD BELL BAILOUT
Packard Bell Electronics, the margin-pressed king of home PCs, this year swept into a marriage with NEC Corp. that many saw as a financial bailout. One-time star performers Apple Computer and AST Research reported staggering losses that showed the market's turbulence.
Yet each time the market was spooked, quarterly sales showed PC demand still growing at a rate most industries would kill for. U.S. PC shipments this year will grow 13.6% vs. the 21% increase last year, when manufacturers shipped 22.5 million PCs, says Dataquest.
Last year was unprecedented for advertising. Spending by computer, software and printer marketers in consumer media soared 99% to $1.1 billion, according to Competitive Media Reporting.
Computer spending in computer and business publications and newsweeklies last year jumped 19% to $2.2 billion, estimates Adscope, a tracking service whose totals include some overlap with CMR's consumer magazine tallies.
Spending this year varies dramatically by company. Compaq is paring some computer advertising and Hewlett-Packard is believed to be tightening its wallet.
Media stand to gain from a handful of big global names entering the capricious U.S. market.
Sony Electronics this fall enters the home PC market. Japan's Hitachi and Fujitsu and Italy's Olivetti already have leaped into the crowded U.S. notebook PC market.
The four companies together should generate some $40 million to $50 million in new spending their inaugural year.
Two other marketers are stepping up activity. Fast-growing Acer America Corp. last month began its first TV campaign. And Packard Bell NEC's Packard Bell division, which always has focused money on retailer co-op advertising, this fall starts its first major consumer campaign.
AD SPENDING SHIFT
Just where the tech money goes, though, seems to change season to season. Last year was the year of TV: 42 hardware, software and printer marketers turned on the tube, vs. 34 TV advertisers in 1994.
Chip producer Intel Corp. fueled PC makers' move to TV last year by targeting one-third of its massive $300 million "Intel inside" U.S. co-op funds for broadcast media.
Computer industry spending on television in 1995 soared 86.6% to $338.5 million. But of that $157.1 million jump, $112.6 million represented increases in TV spending by just two companies-IBM Corp. and Microsoft.
Microsoft more than tripled TV spending last year to $58.8 million, most of that after the Windows 95 launch in August. Microsoft's TV spending in '96 will fall as the company has no new product to warrant such heavy outlays.
IBM, likewise, boosted TV spending 115% in 1995 to $132.4 million and nearly doubled overall consumer spending to $289.8 million. A larger budget backed the ubiquitous "Solutions for a small planet" brand campaign.
Later this year TV will come up on the short end. Canon Computer Systems, which jumped into TV a year ago, is investing most of its money in print this fall to explain its more sophisticated printers.
Compaq also is turning off the tube. Last year, Compaq put 100% of its fourth-quarter home PC budget into TV. Now it needs to get out the word on a broadened line of home models designed for specific niches. To tell the story, Compaq plans to put the entire fall home PC budget in print.