The battle lines have been drawn, and some marketers are threatening mutiny. But is a widespread rebellion really in the works?
Certainly broadcast execs across North America must have been stricken last February following Coca-Cola president Steven Heyer’s speech to L.A. ad executives. ‘Where are we going?” Heyer asked the crowd. ‘Away from broadcast as the anchor media,” he answered provocatively.
Will Canadian marketing stalwarts follow suit? There are hints that at least some marketers are planning to make good on threats to scale back their TV spend if rate increases continue their upward march.
‘We just won’t pay those big increases,” declares Toronto-based Shelley Smit, media director of Toronto-based Labatt Breweries, referring to the rates demanded in the conventional TV upfront market this fall.
‘We can’t afford to pay them. If the broadcasters continue with this, then we’ll have to start looking at our mix. If it’s really the beginning of a trend, then we’ll have to start looking at how much we spend on TV.”
Helena Shelton, VP of broadcast operations for Toronto-based The Media Company, believes that a trend is taking root.
‘I think it’s going to continue,” predicts Shelton. ‘As long as broadcasters are paying top rates for shows like CSI and Friends, [ad] rates have got to go up.” Still, Shelton is among the many buyers who believe their clients will continue to shell out despite the initial sticker shock. At least for now.
‘None of our clients are scaling back. If it’s going to happen, it’s going to happen in the future,” she adds. ‘We’ll have to see more than one season of these rate increases before it really has an impact.”
Certainly there are many industry players who think that marketers and buyers are – at least for the moment – issuing empty threats.
Dennis Dinga, Toronto-based M2 Universal’s VP and director of broadcast buying, says so far it’s all just a lot of talk. However, he agrees that the climate could change dramatically if rates continue to rise. ‘I think broadcasters are smarter than that. They can’t continue asking for double-digit increases. If they do, they’ll be left with a lot of inventory that’s difficult to move.’
But looking back at the fall that was – it’s difficult to assess exactly what happened. Overall spending in the upfront market reportedly increased by 6%. Many broadcasters did fatten their wallets, but, anecdotally at least, they didn’t get anywhere near the kind of rate hikes that they originally tried to wrest from marketers at the negotiating table. David Stanger, managing director of Vancouver-based DSA Baron Communications, says one thing is clear: marketers who doled out the same amount of cash in tandem with rising rates got less value for their money.
He says clients were forced to cut corners by dumping markets they typically would have been in, or to cut costs by reducing the number of weeks that a campaign aired.
Like other buyers, Stanger believes that this fall’s soaring rates have prompted his clients to ask a lot of hard questions. ‘I’m being challenged in the boardroom as we go forward. The question that’s being asked is: ‘Do we have to be there [in TV]?”’
Alan Koval, Mississauga-based marketing and sales director for Pepsi-Cola Canada, says the rate hikes this year have only highlighted issues marketers have been grappling with for years.
‘Ten to 15 years ago, TV seemed like the best way to spend our money. But it really hit home for us this year that there are other effective ways to reach youth.”
In fact, Pepsi has been investing more of its marketing dollars in movie slides and event sponsorship as a way of targeting a market that is increasingly difficult to reach.
At Labatt, Smit says her company has been pulling back on its TV spend over the long term. However, TV is still a very significant part of the marketing mix, she says. The company now spends between 60% and 65% of its overall marketing budget on television.
The company is also weighing prime time versus more targeted programming. For example, this fall’s ‘Cheers to Friends” campaign for Labatt Blue is running more often on TSN and MuchMusic than on conventional television, Smit adds.
Toronto-based Mike Welling, VP brand development, food at Unilever Canada, says the desire to moderate the use of TV has become part of Unilever’s corporate culture. In 1999, TV accounted for over 90% of Unilever’s total media expenditure. Now that figure is 70%.
Earlier this year, Welling delivered a blistering attack on the medium in a speech to the Television Bureau of Canada. His main concern? That broadcasters had yet to come up with effective measuring tools. ‘I’m interested in knowing how many people saw my ad, not just how many people saw a program,” Welling says.
The way he sees it, broadcasters still have much to prove about TV’s R.O.I. Until then, Unilever will continue to diversify its marketing budget using other selling tools that are easier to measure.
David Strickland, Brampton, Ont.-based SVP of marketing for Zellers, says his company has also invested more of its marketing dollars in media that are more easily measured. But he says TV is still a vitally important part of the mix – especially in brand building Zellers as a ‘fashion-right” destination. This fall, Zellers is airing ads that focus on its trendy Mossimo and Request brands as a way of luring younger shoppers.
Currently, TV accounts for less than 25% of Zellers overall media budget, and direct marketing – through flyers – commands an increasingly important role and its effectiveness can be easily measured, Strickland says.
If this fall’s rate hikes are to augur any long-term changes, Strickland believes it won’t likely be the behemoths like Zellers or Labatt.
He says the big marketers will continue to use TV as an important part of their marketing mix. But smaller players – those with budgets of $2-million to $3-million – are likely going to be forced to change tactics if the rate hikes persist. The way Strickland sees it, non-competitive, smaller players will band together to do conjunctive buys in a bid to stretch their marketing dollars. And broadcasters will resist every step of the way, he adds.
