There’s a mixed outlook for advertisers at the moment. On one hand, bargains abound, but on the other, businesses want a guaranteed return. We examine the opportunities and risks involved with advertising in a recession
Anyone working in the media will have been shaken by the falling demand for advertising. Titles across the board are being left with unsold space, as businesses in almost every sector rein in their marketing spend. But while this has put the frighteners on those in the worlds of print, radio, TV, outdoor and even online media, it also presents opportunities for entrepreneurs.
TV, it is said, has fallen to 1993 pricing levels, the problems posed by its recession-unfriendly costs compounded by an increasingly disparate audience, with the emergence of more and more channels and viewers flocking online. Everywhere you look, advertisers have been forced to become more flexible or face the prospect of unsold inventory.
Several of our readers and recent interviewees have alluded to jaw-dropping bargains in their advertising and marketing activities at the moment. “Now is a very effective time to advertise because everybody is cutting their spend back so you can get good deals and you’re not fighting against everyone else in the marketplace,” says serial entrepreneur and TV Dragon, Deborah Meaden.
She adds that the apparent consensus to reduce marketing efforts is counterintuitive and doesn’t make much sense to her at all. “If ever you needed to get your message out, now’s the time.”
Marc Boyan is CEO of Miroma, a company that enables clients to part-fund advertising with their goods and services. He agrees that the bottom has fallen out of the industry, with some ads being sold at 50% of the price they were before the downturn hit. “If you’re entering the market for the first time in media, the deals you can get are incredible. They’ve hit the floor. Across the board, outdoor, online, radio, TV, everyone’s having to drop their rates because people can’t afford to pay the price. There’s just no money. The companies just don’t have the budget. If your budget’s cut by half then media will be down by a similar amount.”
With rates tumbling and the importance of brand awareness higher than ever, it would seem that now was the perfect time to up your advertising ante. But where should you turn and what medium will give you the best results? And is it really a smart idea to try out a new channel in a recession, even if it’s a steal? We spoke to some industry insiders to get their take on the opportunities available, and how to make the most of advertising in a downturn.
The right message
In recessionary times, priorities change. The most effective marketing will take this into account. Job prospects, debt levels and mortgage payments take precedence over wider issues, and as the public becomes more inward-looking, people will gravitate towards brands that offer reassurance and familiarity. While this atmosphere of uncertainty and wavering confidence presents a challenge for marketers, it also poses a major opportunity for owner-managed businesses, which are better placed to strike up a more personal and genuine relationship with their customers.
“Consumers are reacting far more to personal communication, one-to-one activity that is sincere and creatively executed,” says Scott Knox, managing director of the Marketing Communication Consultants Association (MCCA). “In a climate like this, people know there are bargains to be had, mass communication of discounted offers does nothing but devalue the brand. However, value-based offers direct through quality digital and direct marketing will retain brand value and deliver sales.”
In other words, there might be bargains around, but don’t forget the basics. If you are trying a new medium for the first time, make sure that your messages are hitting a captive audience. Before spending money on advertising, road-test your campaign through market research to gauge what the response is likely to be.
Knox warns that while there are knockdown prices in some of the large broadcast mediums at the moment, mass messages should always be carefully thought out. “Whether good times or bad, deal time or no deal time, broadcast mediums should only be used if it is right for the brand and the target audience. The question should always be to decipher the return on investment (ROI) of any communication channel, look at past case studies and test activity prior to major roll out.”
Taking account
What Knox is saying is this: consumers wants and needs might have changed, but when it comes to advertising, your objectives haven’t. Entrepreneurs take calculated risks based on an understanding of their customers, and carefully targeted messages will be what most brands were already aiming for. ROI has long been the Holy Grail of marketing. However, when your customers are spending less money, the stakes are much higher and there is even more pressure to prove that investment is leading to sales.
“Everyone has always wanted their marketing to be successful and accountable, but the downturn has forced everyone to up their game,” says Piri Ramazanoglu, MD of online marketing agency Minute Steak, which launched earlier this year to cater for companies that typically have smaller marketing budgets than its sister agency, Steak.
While online advertising has taken a hit, Ramazanoglu says the paid search industry is proving robust, with around 60% of online ad spend still ploughed into this channel. Research from different bodies predicts varying levels of performance, with some agencies anticipating 17% growth and others expecting stability this year. As yet, no one has forecasted a decline, making it notably more resilient than other sectors.
One of the reasons search is thriving where other channels flounder is due to the level of accountability that it affords, says Ramazanoglu. You can target those who are actively seeking your product or service and easily gauge the success of a campaign. It’s also responsive and easy to put the brakes on if it’s not working.
“People are willing to put money into search because for every penny they’re spending, they know exactly what’s associated with it,” he says. “Of course, two years ago that would still have been at the back of their minds, but it’s been pushed to the forefront as people have no choice but to be a lot more focused.”
Ramazanoglu has seen directors taking an unprecedented interest in the returns being delivered by their marketing campaigns. “With the big clients at Steak and some of the smaller clients at Minute Steak, we’re seeing reports going right up to board level. Two years ago, that would never have been the case.”
Knox has seen this heightened desire for a tangible return all over the industry. “As many companies assess their marketing plans and look for the most efficient way to communicate messages to their target audience, we are undoubtedly seeing some shifts in the allocation of budgets. Across all the marketing channels there is a trend towards real accountability and demonstrable ROI,” he says. “Those in charge of marketing budgets are looking more carefully at how their money is spent and what it is generating in return. This behaviour has brought digital into the forefront of marketers’ minds.”
However, cost-per-click has fluctuated and is sector dependent. In some areas, such as finance, it has dropped, while others, such as travel, have seen the costs increase, particularly surrounding terms such as bargain holidays, Ramazanoglu adds.
He concedes that in some sectors search may be a victim of its own success. “The quick, easy wins are not there anymore. Now, more and more people are flooding online, and there’s more competition. In some cases people are seeing their ROI plateau.”
Getting flexible
Outdoor revenues are down about 19% year-on-year. However, Peter Charlton, national sales director at CBS Outdoor, says the industry is adapting to the changing needs of advertisers. What this means is greater flexibility in the way you can plan campaigns and buy space. “We’ve become more flexible,” he says. “There’s something for every purse and something for every brief.”
Gone are the days where advertisers would want a big broadcast campaign to hit everybody, frequently on buses or billboards nationally, he says. “We’re now finding that people are buying much more bespoke opportunities. All our planning tools allow you to target people in a much more customised way, whether it’s discreet target audiences, close to a retail outlet, or just in certain areas,” he says.
While a national bus campaign, which would hit around 80% of the UK, might set you back £350,000, smaller businesses can now buy bus adverts regionally, to hit their local high street. CBS has also introduced a ‘Supersides’ package covering the 10 busiest high streets in the UK. Similarly, on the roadside you could now buy posters just outside Sainsbury’s stores, for example.
Like other sectors, Charlton has seen clients becoming more expectant of a return. He believes this is partly down to the growth of the internet, which is a highly accountable medium and can be particularly well targeted. “It does mean that clients tend to tighten their budgets, and feel more comfortable if they’re more tightly targeted and spending less cash.”
According to Charlton, one of the areas that is performing quite well in outdoor is the sale of six-sheet posters on the roadside, which are close to the point of purchase. “I think they feel that product is more accountable,” he says.
“I think advertisers, when they’ve got less budget, feel it could work harder for them if it’s close to where somebody’s going to enter their premises or buy their products. We’ve seen a bit of a trend in that route. We’re seeing that on buses, too. They’re pretty close to the point of purchase, and on every high street we’re carrying more fast-moving consumer goods (FMCGs) on the side.”
Charlton concedes that deals are more “cost-effective” than they were before the downturn hit, but he believes that outdoor is adapting to the market and rising to this challenge.
“I think people have become much more aware of what advertising delivers, and what bang for their buck they’re getting. Even down to smaller clients, because they’ve got less money to spend, it has to work, and we’re reflecting that.”
Part of this new-found flexibility has followed investment in digital technology, which makes them more competitive with other channels. CBS manages all the ads on the London Underground and is currently finishing the roll out of cross-track projection. Unlike the more traditional outdoor channels, CBS’ digital revenues have grown 50% year-on-year in the first quarter of 2009.
Digital outdoor works well in conjunction with other media, and can help drive you to the point of purchase at a pivotal moment, Charlton says.
“If you’re a beer brand, you could run a campaign that’s just up on Thursday, Friday and Saturday evenings, or just at tube stations that have major drinking venues outside,” he says.
“People are buying one day campaigns, which makes us competitive with the press, and we sell our digital product like you would traditionally buy a TV broadcast campaign. You have the opportunity to change your copy daily.”
Another advantage of using outdoor is that it is one of the few mediums where the audience is growing. “It doesn’t matter what the economic situation is, there’s less money around, consumers are spending less and therefore advertisers are spending less. But traditionally, revenue follows audience. If you’re an agency planner, their job is more difficult than it was a few years ago, because everybody has got less audience, but we’re all spending more time away from home,” Charlton says.
Part-exchange
Many businesses may have a shortage of money to spend on marketing at the moment, but what they may well have is excess stock. Boyan set up media bartering business Miroma six years ago to allow companies to part-fund their advertising using their products or services.
Bartering is the oldest form of currency and even media bartering is nothing new, but Boyan says the industry has a bad name and he’s trying to change that. While others typically take stock off a company’s hands and issue a media credit (which they then find isn’t valid with many media owners), Miroma has strong relationships in the media and does not take a clients’ goods until the desired space has been booked.
It seems to be working. The UK barter industry is expecting 60% growth this year, while according to a recent report by The Advertising Association, traditional ad spend is expected to fall to £14bn, down from £19bn in 2007. Miroma believes that, by the end of this year 5% of all media deals will include a barter element. Miroma turned over £9.1m in 2007/8, almost double the 2006/7 figure of £4.3m, and Boyan is anticipating this to rise to £30m by 2010.
With budgets being slashed left, right and centre, Boyan believes that businesses are becoming more open to the idea. “Now there’s a need to be,” he says. “They’ve got nothing to lose. Lots of companies have excess product, stock they can’t sell, cars they can’t sell on the forecourt, and there’s a lack of cash for media buying, and what we do is offer them a solution where you can use the cars as a currency to buy the media.”
When it comes to deciding on what channels you should be using, this will always depend on your target audience and your objective. “There’s no such thing as one definitive marketing channel,” says Knox. “It’s about getting the right channel for the right message, so your ideas and target outcome should influence the decisions you make on using your marketing budget.”
Social awareness
Don’t forget social media, which, if handled with care, can offer you an attentive audience for no real cost. Twitter is surging in popularity. Will King, overall winner at this year’s Fast Growth Business Awards and founder of King of Shaves, swears by it. “I’m massively on Twitter at the moment, because it is growing exponentially, it’s free and you can have a one-on-one dialogue with individuals, but lots of people can see them.”