Consumers Will Relate to Ads Urging Them to Spend Sensibly

The Industry Needs to Find Ways to Keep the Power of Persuasion Strong

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Momentum is building for my advertising-stimulus plan. The latest (only?) guy to jump on the bandwagon is Bob Pittman, who's had plenty of heavyweight marketing experience at such disparate companies as MTV, Six Flags, Century 21 and AOL.

So listen to his words of wisdom in Fortune: "There's a reason that America is the largest consumer market in the world: It also happens to be the largest advertising market in the world. Advertising works -- and it has been proven again and again for over a century ...

"But today's businesses have responded to the economic crisis by radically cutting payrolls and other expenses, which includes advertising budgets. We are now at the lowest levels of consumer spending in recent history -- it fell at a 4.3% rate in the fourth quarter of last year, the biggest drop in nearly three decades -- and the lowest level of advertising spending as well. There is a connection. Maybe, just maybe, some of the drop in consumer spending is the result of cuts in advertising," Mr. Pittman writes.

More than maybe. If we really believe the great engine of advertising is the most effective stimulus of our economy -- where consumer spending accounts for 70% of all economic activity -- then we need to find ways to keep the power of persuasion strong.

What can the government do to turn on the spigots? Mr. Pittman asks. "If the recovery program includes provisions promoting job creation, renewable energy and infrastructure improvements, couldn't it include a least a little something to help businesses advertise more? That would enable them to connect the consumer to those products and services through awareness, excitement and information."

He suggests the government could give a tax credit for extra advertising "up to some percentage of prior-year sales."

Some consumers are too strapped to increase spending, Mr. Pittman acknowledges, even with increased promotion. "However, there is a much larger group of consumers that I believe holds the key to our recovery: those who can spend, but aren't. They are sitting on the sidelines and waiting, even though they have the money and security to be spending. How do we stimulate them to spend again? With advertising."

As I said in my January column, even with government incentives, ad money would still have to go where it's most effective. I agree with our premise in a recent issue that we don't need a general ad campaign, under the auspices of the Ad Council, to get people spending again. We've got to be more surgical, and advertising must be directed at products and services appropriate for these economic times.

As the Citi ad says, "We've all got to spend. Let's be smart about it." In other words, consumers won't pull back on things that can save them money -- not just trading down to generic brands but trading up to better-built products that conserve energy, don't waste product or last longer. If marketers can show that their products can save money, cut down on stress and help consumers live their lives more efficiently, consumers will respond.

The big question, as The Wall Street Journal put it, is whether personal savings -- now swelling as consumers cut back on expenditures -- will grow to such an extent that it will dampen consumption and growth.

What's sorely needed is for the government to stop lurching from one cure-all plan to another. Every time it opens its figurative mouth, something bad happens. I believe consumer and investor confidence would be a lot higher if the government toned down the rhetoric and let businesses resume turning the wheels of commerce one crank at a time.

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