Marketing budgets flat to up for 2004

According to a new study from the Institute of Communications and Advertising (ICA), things in the ad industry are looking up. But marketers are telling a less optimistic story, with the majority contacted by Strategy citing flat budgets, in keeping with the country's flat economy. And in most cases, there has been a concerted effort to reallocate media dollars in search of a more effective and efficient marketing mix.

According to a new study from the Institute of Communications and Advertising (ICA), things in the ad industry are looking up. But marketers are telling a less optimistic story, with the majority contacted by Strategy citing flat budgets, in keeping with the country’s flat economy. And in most cases, there has been a concerted effort to reallocate media dollars in search of a more effective and efficient marketing mix.

In its first publicly released survey of marketing budgets, the ICA found that budgets across Canada have increased steadily as business confidence, profits and sales improve. A significant number of budgets were increased every quarter for the past three quarters, it says, with 23% revised up in Q1 of 2004 (vs. Q4 2003 data).

Conducted by U.K.-based NTC Research, the study surveyed more than 270 senior marketing professionals from Canada’s top corporations and found that total budgets for 2004 are also trending upwards: 39% of companies reported an increase in budgeted spend for 2004, while 25% reported a decline.

‘Historically when there is a recession or hard times, marketing is one of the areas [companies] seem to look at first. With an absence of hard facts overall as to what’s going on across Canada, we needed to give them some perspective,’ says Jacques Duval, president of Montreal-based Marketel and chair of the ICA, adding that the study will be conducted and released quarterly to aid companies in their planning.

‘We want to take the temperature every quarter – to analyze the results and see trends. Marketing budgets are usually an indication of things to come in the general economy. This is a key indicator of the optimism of decision-makers. While the economy is flat or slow, marketing budgets are indicating there is optimism out there.’

But marketers across several different categories, including the banking, retail and automotive sectors, told Strategy their budgets have remained unchanged for the first quarter of 2004. Their stories more closely reflect recent figures released by StatsCan which show the Canadian economy actually faltered in the first two months of the year – with gross domestic product growth stagnant in February, and even weaker than previously thought in January.

‘Our marketing spend is flat,’ affirms Michael Beckerman, chief marketing officer at BMO, Toronto. ‘We’ve been financially prudent over the last few years.’

‘There’s more shuffling of dollars and resources across the mix than any meaningful variations in our budget year over year,’ he says.

Others, including Sears Canada and Zellers, echo his view, citing significant shifts in spending to lower-cost, more easily targeted and accountable marketing activities – a trend that was indeed uncovered in the ICA’s research.

According to its findings, mainstream media ad spend (TV, print, radio) showed a weaker gain than sales promotions, direct marketing and ‘all other’ activities. The latter includes all Internet-related marketing activities, which showed the highest rate of increase.

BMO, for instance, continues to rely on direct marketing, as well as in-store and in-branch advertising, Beckerman says, adding that it recently featured specific messaging around the Toronto Maple Leafs in each of its GTA branches; and likewise in Calgary branches around the Flames. ‘We have 900 branches coast to coast. The unique opportunities of localizing those messages are very compelling.’

‘We are optimistic and we will continue to be opportunistic – evaluating our existing investments; figuring out how to leverage them better, or looking for new properties that will generate results; or unfortunately, divesting out of properties that haven’t met expectations,’ he adds.

David Strickland, SVP at Brampton, Ont.-based Zellers, says inflationary pressures such as the rising cost of TV media and the inevitable spike in print costs, will continue to force marketers to re-evaluate their spend – likely forcing them to cut back in certain less-efficient areas and to drive budgets up in others. ‘The fundamental issues for us are how do you offset the inflationary impact by having a more effective mix of vehicles?’

Like many marketers, Toronto-based Scotiabank has used technology and analytics to a great extent to eliminate costs in certain areas. According to Rick White, Scotiabank’s VP of brand and marketing management, the company doesn’t spend nearly as much on printed materials and brochures, for example, so it can spend more in areas where it has spent little recently – including traditional national media and local media like newspapers and weeklies.

‘A lot of the things we would have spent money on over the last three or four years – infrastructure costs, Internet sites and even building our brand – are done, so now we’re really able to focus on the art of marketing and advertising,’ he adds.

Even Future Shop, which indicated an increased marketing budget for this year, driven by strong sales growth (22%), identified several new vehicles it has been testing to drive efficiencies, says Lori DeCou, spokesperson for Future Shop and Best Buy.

‘We are strong supporters of mainstream – TV, radio and print (flyers) – but there are some new things we have been doing. Specialty channels – like Showcase and W Network – have allowed us to reach out to customers much more specifically than mainstream broadcast; and electronic advertising is bringing us closer as well,’ she says. ‘For example, we know that over 70% of people who purchase in our stores, have gone on our site to research before buying – that’s where the eyeballs are now.’

The pressure to be efficient is also top of mind for Nissan Canada, which also significantly increased its marketing budgets over the last several years. ‘We need to make sure we are increasingly getting more for our money, which can sometimes be interesting in the media area – there is supposedly more time available in TV, but costs are not coming down. You do what you can,’ says Ian Forsyth, director of marketing.

That being said, Nissan has maintained the exact same marketing mix, he says, maintaining its media spend on TV and newspaper, followed by radio and magazine.

The Richmond Hill, Ont.-based auto maker experienced a 10% increase in sales last year of its Nissan brand and a 5% increase for its Infiniti brand – in an auto market that witnessed a 5% drop in sales in 2003 versus the previous year – particularly among the domestic auto brands.

Chris Travell, VP of the automotive group of Maritz Research in Mississauga, Ont., credits Nissan’s success to its renaissance of product – new styles targeting new segments – as well as strong management. ‘Marketing budgets are driven by sales. Toyota, Mazda and Nissan have done very well. But as you might expect, many others have decreasing sales and have had to cut their marketing spend.’