Marketing cuts foreseen as AT&T trims expenses

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AT&T Corp.'s estimated $650 million marketing budget won't escape CEO Michael Armstrong's ax.

In 1997, AT&T cut its marketing budget, then estimated at $1 billion, by 30% to 40%. Further cuts are expected this year as part of a cost-trimming plan announced last week that includes the elimination of up to 18,000 jobs and a freeze on executive salaries.

It's unclear how the job cuts will impact AT&T's marketing department, although Mr. Armstrong's plan includes letting go one of every four executives and one of every seven general employees.


Marilyn Laurie, exec VP brand strategy and marketing communications, said AT&T's ad budget will be about the same as last year, although it could decline somewhat due to decreases in business-to-business ad spending. Spending in other marketing areas is expected to decline, she said, although she wouldn't specify by how much.

"One of the things we will do is tighten across the whole marketing mix, so it won't just be advertising," said Ms. Laurie, who previously had announced she will leave the company April 1. "We need a Marine mentality. We need every bullet to hit every target."

"They're going through major cost-cutting measures, and increasing advertising spending again, I'm sure, is not going to be at the top of their hit parade," said Jeffrey Kagan, president of consultant Kagan Telecom Associates.


But Ms. Laurie said AT&T is not losing faith in marketing, adding she expects the company to emerge from the downsizing better poised to compete in the global telecommunications wars.

"What [Mr.] Armstrong has got to do first is get us into shape -- not just reduce costs but reduce appropriate costs," she said. "Once that's achieved, he intends to invest and grow, and that includes marketing."


So far, the ad spending cuts don't seem to have damaged the power of AT&T's brand. According to a recent Yankee Group study, more consumers surveyed said they would choose AT&T for local and long-distance service over any other competitor.

Brian Adamik, Yankee Group VP-research, said AT&T executives stressed at meetings with analysts the continued importance of brand messages but said support would be focused on campaigns deemed most effective.

"First and foremost, they are going to put a tremendous amount of effort into the brand. They realize it is their most powerful asset. But they also realize there was a lot of less effective advertising going on," Mr. Adamik said.

Copyright February 1998, Crain Communications Inc.

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