Faced with 2001's reeling stock market and the expectation that the economy won't improve until late this year, financial services companies are headed into the upfront TV buying season with the goals of attracting worried investors while minimizing their own advertising investments. * The result is likely to be a spending environment as erratic as Nasdaq. No one's willing to say just what they expect of ad rates for the upcoming season-indeed many financial companies decline to discuss their expectations going into the upfront-but as talk of a soft upfront market proliferates, it may mean a bigger bang for their buck this year.
"Trying to get on CNBC last year was impossible," says Lou Rubin, chief marketing officer of Omnicom Group's Doremus Advertising, New York, which represents corporate, financial and technology companies. Doremus' clients include Bank of America, Guardian Insurance and Morgan Stanley. "Last year, your $1 of advertising got 75 cents of value. This year, for $1 of advertising, you'll get $1.50. People are willing to help you in your delivery, make sure you get the audience."
Financial services ad spending may be a category to watch this year because if there was ever a time to send a serious message to investors, it is now. Last year, total financial services TV ad spending rose 30% to $2.8 billion, according to Taylor Nelson Sofres' CMR.
Other factors are at play as well. Efforts to enact the biggest overhaul of bankruptcy laws in 20 years would make it harder for people to erase debt. Separately, deregulation of the financial services industry continues to enable banks and insurance companies to expand into new businesses.
Still, Mr. Rubin notes that with corporate fortunes flailing, the marketing budget is often the first area cut. "The smart marketers will advertise heavily now," he says. "History has proven that people who invest in uncertain times come out on the other side in stronger shape. But the marginal marketers will be frightened and cut expenses."
CLOSE TO THE VEST
Most financial services companies are playing their cards close to the vest this year. Visa USA, which in 2000 was the biggest TV spender in the financial services category at $266 million, according to CMR, declined to be interviewed for this article. A spokesman for Charles Schwab Corp., the largest U.S. discount broker, would only say that the company spent $330 million on market development and advertising last year and expects to commit a similar amount in 2001. Schwab's TV spending last year was $161.6 million, according to CMR.
Creativity in the process, on both sides of the table, may be key.
That's precisely what H&R Block is looking for in the 2001 upfront. Faced with potential tax law changes next year and a widening array of products, the company intends to spend "clearly more" on TV this year and it's looking to get the most from its investment, says David Byers, chief marketing officer. "It's sitting down with the [cable and broadcast] networks and seeing what they can provide in terms of incremental sponsorship," he says, adding that H&R Block believes it has negotiating leverage this year and is unlikely to shift its money into print.
At last year's upfront, H&R Block and ABC created a promotion under which the financial services company footed the income tax bill of winners on ABC's hit "Who Wants to Be a Millionaire" for four episodes in mid-February. H&R Block spent $26.8 million in 2000 on broadcast advertising, according to CMR figures.
The expectation is that most companies, unlike Block, will spend less, not more, making for a flat to down upfront market. "It's clear from everybody's pronouncements that the marketplace simply isn't going to be as strong as it has been in the past few years," says Bob Igiel, president of broadcast for WPP Group's Media Edge, whose accounts include H&R Block. "The financial category has been a substantial advertiser in network and in cable. It's clearly one of the categories that, by every indication, is going to be spending less."
Mr. Igiel predicts that because of tight marketing budgets, financial services companies will try to focus on the best demographic base among the stations and programs. "Advertising doesn't disappear. [Advertisers] spend money in more concentrated areas," Mr. Igiel says. A year ago, E-Trade Securities placed the bulk of its orders during the upfront, including the kudo-winning Super Bowl spot of a horseback-riding monkey passing through a dot-com ghost town. The media markets were at their peak when E-Trade made that commitment and others, and the company opted for the efficiency of upfront buying over the flexibility of the scatter markets.
BUDGET CUT IN HALF
But last month E-Trade told financial analysts it would cut its marketing budget by half; its broadcast spending alone totaled $69.8 million in 2000. And it's no longer sure how big a player it will be in the upfront.
"One of the things that may be true this year is that (with) the efficiency of the upfront vs. the scatter market, there may be smaller spread between the two this year," says Michael Sievert, E-Trade's chief sales and marketing officer. "I'm not so sure that there will be such an inventory problem that the prices would be higher in the scatter market than we saw in 2000."
Merrill Lynch & Co. spent much of its ad budget in the scatter market last year. This time around, Eileen Lynch, first VP-global advertising, says she isn't sure where the spending will take place, though she's hopeful the brokerage operation will have more leverage at the upfront negotiating table. "I think it's going to be a much softer market," Ms. Lynch says.
Financial marketers expect not only the pricing environment to change but the ad message to become more sophisticated. Cute and funny is out; a serious commitment to weathering the tough times is in.
"The bravado is very much gone," says Doremus' Mr. Rubin.