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In spite of stock market gyrations, a softening global economy and fears of a recession, the U.S.' largest advertisers insist they won't move immediately to slash ad spending.

"I'm not aware of any decisions to cut back in the U.S.," said Denis Beausejour, overseer of a $3.7 billion ad budget as VP-advertising at Procter & Gamble Co., which has seen Asian profits plunge in its most recent quarter. "Outside the U.S., I'm less certain. But generally we look at advertising as necessary to grow our brands."

He said the marketing giant will continue to spend to support the introduction of new products.

Other large marketers echoed those comments, saying their commitment to building brands won't falter if the economy does.


"We are committed to continuing to invest in brand-building activities, and we forecast modest increases in overall spending," said John Costello, senior exec VP-marketing at Sears, Roebuck & Co. "Within that, brand-building activity will increase at a faster rate, funded by continued efficiency of promotion."

Mr. Costello said marketers will more closely monitor how their ad money is spent, noting "advertisers will be more selective in their media choices."

Sears is "quantifying the return on investment of all our marketing; spending increases are increasingly being driven by ROI," he added.


Smaller advertisers are a bit more cautious in their outlook.

"We're not looking at cutting back on advertising, but we are watching what we're spending and being extra careful," said Peter Cremer, director of integrated marketing communications at U.S. Cellular, which spends about $30 million a year on advertising.

Shifts could occur in the types of media utilized if the stock market turmoil shakes consumer confidence.

Although ad outlays won't change, there could be a move toward "more tactical approaches" at BMW of North America, said Jim McDowell, VP-marketing.

If consumers become reluctant to commit to high-ticket purchases, there might be more focus on leases or a movement toward media, such as magazines, with shorter lead times than network TV, he said.


Such cracks in confidence are beginning to show. The New York Times reported in a cover story earlier this month that affluent consumers are showing signs of caution about spending as a result of the recent market plunge.

Still, "cutting ad spending would be a mistake," said Don Calhoon, senior VP-corporate marketing at Wendy's International. "In fact, we're going the other way."


Even financial service providers, presumably hit hardest by the stock market unrest, insist their ad expenditures are holding steady.

"We believe advertising is an integral part of marketing, regardless of what the market is doing," said Denise James, director of advertising at Cigna Corp. "In fact, we might want to throw even more resources against advertising to assure consumer confidence is high" among those watching their investments in a volatile market.


But even those committed to the long run are often bound by short-term problems. And if a recession does hit, some companies may move quickly to slice ad spending.

"Some companies having a tough time hitting their growth expectations" may be tempted to cut spending, said Kraft CEO Robert Eckert. He said that is not the philosophy of Kraft, which he characterized as "long-term thinkers."

Yet, he admitted, Kraft "has scaled back" ad spending in selected categories in the fourth quarter (AA, Oct. 12).

Mr. Eckert wouldn't quantify the cuts, but executives close to the company said they could reach 20% of the total ad budget for the quarter.

Although some agency and media stocks have taken a pounding in anticipation of an ad-spending downturn, even industry observers say it's premature to make such predictions.


"Will I revise my 6% prediction [of ad spending growth for '99] down a bit? I don't know," said Robert Coen, McCann-Erickson Worldwide's senior VP-director of forecasting. "The fluctuations in the stock market don't really mean anything. Company earnings could have an effect. Any company with a lot of dealings in Asia could have global profit problems."

Still, he added, "There's a lot of talk about a downturn, but no hard facts so far. Here, we still have high employment and expanding ad spending."


Steve Gundersen, president-CEO, Gundersen Partners, a consultancy representing both advertisers and agencies, agreed. "There doesn't seem to be any rhyme or reason behind what's happening in the market. Y&R stock is down, and they are winning business like crazy. There's a lot of emotion in the market."

He added, "I think this last quarter will finish strong. But into '99? That's anybody's guess."

Contributing: Chuck Ross

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