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Recession Hits: What It Means for Ad Biz

Ten Industry Leaders Offer Their Takes on the Approaching Downturn

By Published on .

CHICAGO (AdAge.com) -- Merrill Lynch last week became the first major U.S. investment bank to declare the U.S. economy in recession. Two days later, Goldman Sachs jumped in, predicting that the economy would enter recession during 2008, if it wasn't there already.

Recession Impact:

Even Package Goods Not Immune
As Consumers Trade Down to Private Labels, Category Takes a Sales Hit -- and Marketers Might Have to Cut Ad Spending
Marketing Challenges Loom for Big Retailers
Kohl's, Macy's, Others Likely to Lean on Promos to Lure Reluctant Shoppers


The thinking at both banks is that a recent spike in unemployment is evidence that the credit crunch roiling the housing and financial sectors is beginning to infect the larger economy. So in order to find out what that means for the marketing world, Ad Age asked leading industry executives what they think a recession means for the business in 2008.

Their reply: It might not hurt in the short-term, but if things don't tick up, gird yourself for a tough 2009.
MARTIN SORRELL
WPP GROUP CEO
"Looking at 2008, there's the presidential election, there's the Beijing Olympics, which will probably be the most spectacular Olympics we've seen ... and there's the European football championships. So '08 is not the issue; '09 is."
JON SWALLEN
TNS MEDIA INTELLIGENCE SENIOR VP-RESEARCH
"The lesson to be learned from the past few recessions is that it obviously impacts different categories differently. Automotive ... is already pretty grim, and budgets have already been pruned across the board. Retail is traditionally the most economically sensitive category when you have a downturn in GDP. We're already seeing a flattening in spending by department stores, restaurants and a host of categories related to housing (including hardware, home furnishing and appliances). ... What's kind of interesting is that financial services -- which is sort of in the center of the storm -- has actually been quite robust. In the short term, at least, these guys are battling for a share of a shrinking pie."
LARRY WITT
MORNINGSTAR ANALYST
"If there was no recession at all, 2009 would, at best, be a flat year. If there is a recession and it stretches into 2009, it'll be bad. Fortunately for the industry, you do have some short-term tail winds."
IAN BEAVIS
KIA MOTORS CHIEF MARKETING OFFICER
"You can smell recession. Dealership traffic is down (across the board). There is more negative equity in cars (being paid off through loans). New loans are being made for extended loan cycles of 72 to 84 months, longer than most marriages last. And none of us have seen the impact of $100-a-barrel gas prices. It's a train wreck."
RANDY RANSOM
MILLER BREWING CO. CHIEF MARKETING OFFICER
"Beer has traditionally been among the more recession-proof industries. We believe our portfolio is well-positioned, and as consumers continue to show that they are willing to trade up in the beer category, we will continue to migrate our portfolio to the higher end to deliver growth for our business."
ALEXIA QUADRANI
BEAR STEARNS ANALYST
"If it's a short recession, just a couple quarters, you'll probably just see a shift (away from traditional brand advertising) to more promotional spending and more accountable means. ... If it's longer, it becomes a global crisis that does a lot more damage to these global networks."
CHUCK MCBRIDE
CUTWATER EXECUTIVE CREATIVE DIRECTOR
"It's starting to hit home now. I get the feeling clients don't want you to spend as much, to save money where you can and do more. But they still want something really creative. It's got to be really hot and at least get a burst and get some attention."
HOWARD DRAFT
DRAFTFCB CHAIRMAN-CEO
"I remain cautiously confident. At this point, we're not seeing any major client cutbacks. Our budgets remain on track."
MARK-HANS RICHER
HARLEY-DAVIDSON CHIEF MARKETING OFFICER
"Our belief is that spending through a market downturn creates competitive advantage for the market upturn, and an extra dollar spent today has extra dividends for tomorrow."
BRIAN NICCOL
PIZZA HUT CHIEF MARKETING OFFICER
"As the economy changes and our customers' behaviors change, we are always working to anticipate their needs. The current situation requires Pizza Hut to redefine how the consumer obtains value solutions. We've acted quickly to create an everyday value pizza solution, Pizza Mia, which is just five bucks with superior taste."

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Contributing: Jean Halliday, Alice Z. Cuneo, Emily Bryson York
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