Retailers Shrink Ad Spending During Holiday Sales Period

Survey of CMOs Finds Majority of Budgets Going to Print

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NEW YORK (AdAge.com) -- Retail chief marketing officers are trimming budgets rather than trees this holiday season.

A study from BDO Seidman found that marketing and advertising spending at many of the nation's retailers have been cut during what is the most-important sales period of the year. While the results are certainly not shocking -- we are in a recession, after all -- a number of retailers, including Kohl's and JCPenney, had pledged to increase or maintain budgets as they look to attract wary consumers.

Among the first to go
BDO Seidman said that of the 100 chief marketing officers surveyed, 32% report having a smaller holiday advertising budget than last year. Forty-three percent of retailers said their budgets are flat, while only 25% said their budget would increase for the holiday season.

"The recessionary climate has caused retailers to cut back in many ways, and advertising budgets are among the first items retailers consider when reducing spending," said Catherine Fox-Simpson, a partner in the retail and consumer-product practice at the accounting and consulting firm. "This holiday season, we can expect that advertising buys will be very targeted and, in some cases, more conservative. Historically, in tough times, campaigns become less flashy, more sentimental and heavily focused on value-added items such as sustainable products."

The study also found that print was the media of choice for retailers this holiday season. A full 57% of CMOs plan to spend a majority of their budget on print advertising, while 21% said they would focus on broadcast.

Focused spending
"Print media can sometimes be cheaper, and retailers can target specific peak shopping periods," said Ms. Fox-Simpson. "[Retailers] are cutting costs in all areas, but they're also being very specific about focusing their spending in areas where they will see a return. They are reacting very quickly and retargeting their funds."

Retailers across the board have been pumping up their value messages. And 88% of chief marketing officers said they expect to offer more discounts and promotions this holiday season, compared to 73% last year.

"The pessimism among chief marketing officers this year is unprecedented and highly attributed to the recent turmoil in the financial markets," said Al Ferrara, also a partner in the retail and consumer product practice at BDO Seidman. "Without a doubt, we can expect a very promotional environment that will appeal to cost-sensitive consumers, despite the impact it many have on shrinking margins."

Uncertainty about future
But CMOs are not only pessimistic about the holidays, they are uncertain about the economy's ability to recover. The vast majority, or 65%, of CMOs surveyed said they do not expect to see a meaningful turnaround in the economy until the third quarter of 2009 or later. Twenty-nine percent expect a recovery in the third quarter, while 17% are looking to the fourth quarter of next year for a recovery. Nearly a fifth of CMOs say they don't expect a turnaround until 2010.

"It's going to be a challenge to figure out what the 2009 budget should be," said Ms. Fox-Simpson. "Everything changes weekly right now, with the economy. I don't think you could make any predictions at this point."

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