Signs point to increased ad spending next year

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Ad spending by b-to-b marketers, which is expected to remain sluggish through the fourth quarter, may finally show signs of recovery in 2003.

In a report that bodes well for b-to-b marketers, 49% of senior marketing executives surveyed by Patrick Marketing Group said their marketing budgets would be larger in 2003 than this year. On average, marketing budgets will be 11.1% larger next year, according to the report released last week by the Calabasas, Calif.-based marketing agency.

"Companies can’t continue to wait on the sidelines," said Craig Shields, a partner at Patrick Marketing. "There is pent-up demand they want to capitalize on."

Meanwhile, this year’s numbers, particularly for print advertising, continue to drop compared with last year’s spending, although at a lower pace. "We’re not seeing an increase, but we’re seeing a diminishing downside," said Gordon Hughes II, president-CEO of American Business Media.

"We do expect to see growth in some sectors in 2003," Hughes predicted. Industries expected to show improvement next year include health care, travel, automotive and retail; these are already showing signs of improvement this year.

However, Hughes added, "Some sectors, like telecom and computer hardware and software, will not turn around next year." Overall, he said, b-to-b ad spending in 2003 will probably be up 2% to 3% over this year’s spending.

Hughes estimated b-to-b ad spending was down 12% to 13% in the third quarter from the same period last year. He predicted the fourth quarter would finish down 3% to flat and the full year will finish down 12% to 13%.

CMR, a Taylor Nelson Sofres company that compiles spending data, projected ad spending will total $109.1 billion this year, up 2.5% from last year. Media outlets expected to show the greatest gains this year include spot TV and radio. CMR has not issued a forecast for 2003.

Some executives surveyed by Patrick Marketing Group said that while they cut back on marketing budgets in 2002, they were busy cultivating new products and services, which will be ready to roll out next year, along with expanded marketing budgets.

Asked where they’ll be spending their marketing dollars in the next 12 months, 71% of respondents said public relations campaigns, 67% cited direct mail, 63% said e-marketing and 61% said trade shows. Just over half of respondents (56%) said they would use advertising.

The survey of more than 250 senior executives was conducted online during September. B-to-b companies made up more than half of the respondents.

Uptick in agency business

In another sign of recovery for the ad industry, many agencies reported business picked up heading into the fourth quarter.

"Where we had virtually no pipeline in mid-August, we now have 25 to 30 active prospective accounts and five or six active reviews," said Rick Segal, chairman-CEO of HSR Business to Business Inc., Cincinnati.

HSR last month won the marketing communications business of Aprimo Inc., Indianapolis, which makes enterprise marketing management software. Billings for the account were not disclosed.

Rob McLaughlin, exec VP-product and marketing at Aprimo, said the company initiated a review this summer, after working with local creative shops on individual projects for the past three years.

McLaughlin said Aprimo tried to find an agency shortly after its launch in 1998 but couldn’t get the attention of large agencies because of all the competition for high-tech clients during the dot-com boom. So it sat back and grew its business—achieving 40% growth in the second quarter of 2002 compared with the same period in 2001—and recently decided the time was right to consolidate its marketing communications with one agency, he said.

Aprimo plans to focus on events, direct marketing, e-mail, PR and analyst relations in the coming year. "We will be doing a lot more targeted campaigns," McLaughlin said. "We won’t be doing a lot of mass media."

Turning to e-mail

While print media are still suffering, other marketing channels, such as e-mail, events and relationship marketing, are gaining momentum as marketers shift their budgets to more affordable tactics.

Pam Eleftherio, VP-media services at Carat Interactive, said, "Taking into consideration the economic realities, we’re definitely seeing a lift from last year’s dreary Q4."

Eleftherio said many clients, particularly high-tech companies, are shifting marketing dollars to the Web. "Our tech clients have realized significant budget cuts," she said. "They know their C-level target is on the Web."

Bruce Carlisle, president-CEO, SF Interactive Inc., said clients aren’t necessarily spending more on online marketing, but there is a shift from traditional to online media.

"Particularly in this economy, and it may be true next year, there’s a shift from unmeasurable media to measurable media," Carlisle said. "There’s a shift from TV and print to online and direct mail."

Carlisle added that SF Interactive has seen an increase in new business activity. "Since Labor Day, we’ve been exceedingly busy, after nine months of living in Death Valley," he said.

Long-term spending

Another sign of improvement in the ad market is a commitment to longer-term media spending, said Lou Rubin, chief marketing officer at Doremus, a b-to-b agency that’s part of the Omnicom Group.

"People have been very reluctant to make long-term commitments—anything more than 30 days," he said. "Now, people are taking a 90-day, 120-day, even a one-year focus." One client recently locked down a three-year media plan, where previously it had been going from quarter to quarter, Rubin said.

"The fourth quarter is finally beginning to look like the quarter of the year when people are starting to get back into the market," he said.

"At the end of August, it was like lightning came down and more RFPs [requests for proposals] fell out of the sky than I’ve seen in the last nine months. Everyone was tired of the inertia and needed to do something."

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