Standard advice to marketers from media and advertising agencies is turn up the ad spending to reap higher sales and market share as the economy rebounds. But given today's realities, we cannot endorse that blanket prescription without reservation. Just having the biggest ad budget won't win the game. Rather, marketers need to rethink the game-where advertising fits in and how marketing is changing-and recognize how marketing spending affects stock price.
The consensus is that the overall ad market has hit or is close to its nadir. Spending this year should play in a narrow range, up or down a few percentage points from depressed 2001. Next year (there's always next year) looks a bit brighter. But this rebounding market will be distinct, with at least a short-term redistribution of wealth among media (broadcast winning and magazines losing). And, as became clear at June's AdWatch: Outlook 2002 conference, traditional advertising will get a smaller piece of the pie as marketers scope alternatives, such as entertainment tie-ins and ideas still to be hatched.
Now, about Wall Street. It used to buy the idea that a heavy "investment" in advertising would pay off in sales, profits-and stock price. Today, the measure is real profits, right now. Post-Enron, companies are under intense pressure to use the most conservative standards of accounting while still delivering promised profits. Advertising and marketing are expenses. Want higher profits? Cut costs. That's reality, and marketing must face the same scrutiny as any expense.
What to do? Challenge the way your company spends its ad budget. Take seriously that, in the recovery, there will be smart new ways to market. And remember that marketing is an expense. The bottom line: Make every dollar count.