Ad Budgets Get the Axe

For the Survivors, New Directions and Austerity are the Norm

By Elena Babiy
Publishing Projects Director, Willard

Advertisers have less money to spend, and are spending it more cautiously. Forget the advertising budget that was approved earlier in the year. Long-term planning has been replaced with short-term strategies that endeavor to spend less and utilize creative approaches that attract consumer attention and move product.

By the end of 2008, experts say that many advertisers could see the recession coming and were figuratively fastening their seatbelts in preparation for a bumpy economic ride. Often, promotions budgets were slashed or eliminated overnight. Those managers lucky enough to still have cash at their disposal were forced to change direction in order to accommodate the reality of an economic crisis of indefinite duration.

Uncertainty over the future spurred concern that the overnight raid on their ad budgets by corporate headquarters was likely just the opening round of cuts, rather than a one-time reduction. Some of those worries were proven to have been justified.

With money for promotions thin - and the promise of additional funds taking on the substance of a mirage - long-term plans were scrapped and managers began to adopt almost a siege mentality.

The more expensive mediums - particularly television - arguably took the hardest hits, with contracts being renegotiated or cancelled on a daily basis.

Elena Selyutina, the co-owner of Nebo Events Agency, said that clients have been requiring agencies to be more efficient, respond more quickly, be better organized and demonstrate greater flexibility than in times past. She said that the larger agencies tend to be more bureaucratic and have had more difficulty adjusting to the new paradigm.

Experts say that they have seen a greater reliance on marketing research emerge, and that clients are being more reactive, looking at what competitors are doing before committing funds for events and advertising.

Yuriy Stankevych, who heads corporate marketing for Raiffeisen Bank Aval, says that even when companies have an advertising budget, they may be unable to commit funds. He also believes that marketing specialists are being pressed to create mega-promotions using micro-budgets - challenging creativity and doing things that wouldn't have been considered last year.

Just as companies with limited advertising funds have been compelled to re-think how best to attract consumers, the companies that depend on advertising sales have had to review and in many cases dramatically reduce what they charge for print and broadcast ads. The good deals are out there, Stankevich says, and television has become somewhat a bargain. He added, though, that advertisers are tending to recycle last year's spots to save money. That means, he says, that such advertising lacks novelty or relevance to today's situation.
 
"Ads are more obtrusive and less creative," Selyutina agrees. "They target providing hard information and incorporate more comparisons with competitors' products." They also tend to be shorter and repeated more frequently, she says.

Given the additional uncertainties particular to Ukraine's banking sector, Stankevych said that the banks which didn't continue to use last year's advertising have generated messages about the bank's reliability, its long-term experience and international presence, geographic coverage and membership in foreign financial groups. These messages, he says, are calculated to build consumers' trust and stimulate deposits.

For another besieged sector, real estate, the messages have evolved.  Where before developers focused on creating images reflecting quality, they're now directly asking for the sale. 

"If in the past a developer's advertising said, 'We're the best,' today they're saying, 'Come and buy,'" says Violetta Losyeva, marketing and communications director for property developer Seven Hills.  She said that image - including the developer's reputation and the image of each project - remains important, however.

Selyutina says that she has also seen a shift to a greater emphasis on economy and price, and emphasis the importance of optimizing the number of contacts that an ad generates. She says that reduced budgets caused the overwhelming majority of clients to redistribute budgets between communications channels. Inherent in that was a belief that television would tend to "get better" quicker than other channels and that outdoor advertising would suffer most and longest.

She said that as rebalancing takes place, public relations activities, Internet advertising, and promotional events could benefit if considered cost-effective. BTL activities and sales promotions could recover soonest, she says.
Losyeva says that she believes that computer-integrated communications will play an important role in the months ahead - an opinion shared by Raiffeissen's Stankevych, who says that this year his bank decided to expand its use of non-traditional media also.

Internet-based viral advertising and direct marketing are likely to gain popularity during a recession, Selyutina says, because worried consumers are more likely to seek out information.  They will traditionally turn to newspapers, periodicals, and news radio, but the Internet is a very attractive channel as well - providing low cost per contact as well as an element of interactivity and feedback.

Experts warn against the impulse to pay attention to price at the expense of quality and service during tough economic times, pointing out that the adage 'Penny wise and pound foolish' has never been more true. It's very risky to choose based on private material interest alone, without considering an agency's professionalism, Selyutina says.

The presence of fewer advertising messages - a period of 'advertising silence' - creates opportunity for those companies with the funds to take advantage of competitors relative silence, but, Raiffeisen's Stankevych says, in so doing cautions against using recycled ads that carry messages that are no longer relevant.