Ad spend cuts not the proper response to an economic downturn

MANILA, Philippines - Advertising budgets should not be cut during economic downturns if companies want to improve their market shares during a subsequent recovery, industry officials said. Chris Thomas, chairman and chief executive of marketing agency BBDO Asia Pacific, told a briefing last Friday that there was plenty of evidence from Europe and the US showing that firms which maintained advertising amidst a slowdown increased market shares when economies improved. David Guerrero, chairman of BBDO’s local arm, added that people, during economic downturns, delay buying and plan more to justify what they ultimately purchase. "Companies have to give them reason to spend. Brands that cannot be justified are those that get traded down," he said. Philippine Association of National Advertisers executive director Digna T. Santos agreed, saying in a telephone interview that maintaining ad spending during an economic downturn would have a positive effect. "The concept of ’out of sight, out of mind’ comes to play. If you pull back on ad spending, you would be off the mind of consumers," Ms. Santos said. Ad budgets, unfortunately, are among the expenditures first cut by companies since it is hard to quantify its effect on sales unlike direct promotions, she added. Mr. Thomas also cautioned against price cuts to combat slowing demand, saying "You can destroy your brand equity very, very quickly if you look and behave distressed in the area of price, if you look like a brand in a panic, cutting prices 50% everytime." Price cuts, he said, do not necessarily increase sales but may just instead make consumers wait for the next sale to make a purchase. Mr. Guerrero added that excessive price cuts may also lead to the brand being identified as cheap. A brand, said Mr. Thomas, should not reflect the uncertainty that is going in the general environment. "A brand is a combination of emotional aspects that exist in people’s minds, so when there is uncertainty you have to make sure that that uncertainty is not reflected in the brand," he said. If a firm wants to deliver a price message for a product, he said it was important that this be done creatively to offer a better value proposition that reflects the brand. It is important to be creative now, said Mr. Guerrero, since firms face the "unique combination of expanding choices and a declining economy." "More brands than ever are competing for attention and the winners will be those with the biggest ideas," he said. - BusinessWorld