World: Stuart Elliott in America
By Stuart Elliott, the advertising columnist at The New York Times, campaignlive.co.uk, Friday, 08 October 2004 12:00AM
There's a saying that when the going gets tough, the tough get going. The parody version claims that when the going gets tough, the tough go shopping. Now, some leading marketers of what you'd call FMCGs are weighing in with their own version: when the going gets tough, the tough get spending.
In recent weeks, one giant advertiser after another has announced plans to increase marketing expenditures, effective either in 2005 or immediately, through the end of this year into next. Among them: Coca-Cola, Colgate-Palmolive and Unilever.
Putting the bicycle pump to the ad budget isn't something that happens every day. Au contraire. Most of those companies had been holding on to their marketing dollars so tightly that poor George Washington was blinking "help" in Morse code. For years, the consumer-product powerhouses could drive earnings growth by tamping down ad spending while sharply reducing costs in areas from salaries to procurement to IT.
And sometimes, when it appeared as if the quarterly target numbers were not going to be met, there would even be a mad scramble to pull back on previously committed advertising initiatives in order to fatten the bottom line.
Colgate-Palmolive and Unilever were "notorious", according to a recent front-page article in Advertising Age, for such last-minute axe-wielding.
Now, analysts say, virtually all the profits that can be wrung out through cost-cutting have been attained, leaving only one way to grow: increase sales. And how to do that? Earmark more funds for advertising, direct and interactive marketing, public relations and point-of-sale activities.
"We have sharply increased marketing spending to build market share and aggressively improve our brand franchises here and abroad," Reuben Mark, the chairman and chief executive of Colgate-Palmolive, said in a statement on 20 September, as he warned that second-half profits would fall well short of previous estimates.
A similar caution came the same day from Unilever as once again the so-called "path to growth" seemed to be leading down a dead-end street. And a week later, Coca-Cola's new chief executive, Neville Isdell, said he will raise ad spending next year as part of efforts to get flat sales of Coke fizzing once again.
It was lost on no-one that at the same time those warnings were surprising investors, companies such as Procter & Gamble, which have strived to maintain or boost marketing spending, were basking in positive press coverage. "P&G has rivals in a wringer," Business Week magazine declared, partly because its ad budget "is now 10.7 per cent of sales".
The rush to refocus on ad budgets was underscored by a couple of moves by VNU. Its Nielsen Media Research unit agreed to offer improved access to TV ratings data tracked minute-by-minute. That information will sharpen pencils in media agencies across the country.
And VNU's ACNielsen unit is hooking up with Arbitron to develop a national marketing research service combining data from portable people meters, which measure TV and radio audiences, and Homescan, which tracks household shopping habits.
Guess who's going to help ACNielsen and Arbitron design the new service? If you didn't guess P&G, wash your mouth out with a bar of Ivory soap.
This article was first published on campaignlive.co.uk
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