Save the brand, spend on advertisement

It may be tempting for companies to cut their marketing budgets in difficult times. But those who make that decision will also take the risk of losing their market share due to reduced brand recognition from its customers.

Although many believe that there is a cut in consumer spending when times are difficult, figures from a recent handbook that Ogilvy & Mather, one of the world's largest advertising groups, sent to its clients showed that is not the case.

Yet, T. B. Song, chairman of Ogilvy & Mather Greater China, said companies should be careful if they plan to reduce their marketing budgets, as it sometimes results in cutting the spending that contributes most to their revenue.

Sitting in his office, Song, talked to China Business Weekly reporter Wang Xing about his perspective on China's advertising market and gave his advice on how companies should react in the global recession.

Q: How will the financial crisis impact China's advertising market?

A: I don't think there will be a significant impact in China. The advertising market here will continue to grow. It may increase at a slower pace, but I think the market could still increase at least 15 percent this year.

High technology, financing and luxury companies will become conservative in expansion. But they will still increase penetration into 3 and 4 tier Chinese cities.

I think multinational companies may reduce 10 percent of their advertising budgets in China because they are more impacted by the global economic slowdown. But domestic companies will continue to spend on marketing because their business are mainly in 3 to 4 tier Chinese cities where few people will feel the chill of the global economic slowdown.

Q: Will consumers' behavior change in difficult times?

A: From historical figures, we did not see any decline in consumer spending. Actually, consumers increased their spending in recessions, although at a slower speed. In fact, many consumers may become more cautious in spending. They will keep buying those products or brands that they like and reduce spending on those that they don't trust or are not familiar with. So if companies reduced their market spending, consumers may forget about select products or brands. And if at the same time your competitor continues to increase marketing spending, you may take a real hit. So it's important to get an idea of how your market spending contributes to your revenue.

According to our estimation, consumer behavior will not change much this year. In China, people will continue to spend, because China's economy is still robust. But some of consumers may prefer some low-end brands or products.

Q: Will advertisers change their ways of making advertisements in the recession?

A: Television is the most powerful medium in China and will continue be in the next five to ten years. So it will still get the most of advertiser's marketing spending. But online media and mobile media will grow at a faster speed because advertisers need more feedback on their spending. You may only be able get the effect report on your television advertisement six months after it was first aired. But on the Internet you could see how your money is being spent at any minute. In addition, advertisers may also spend more on public relations activities in difficult times to help them win more customers.

Q: What's your suggestion for advertisers in difficult times?

A: First, companies need to get updated information on their consumers. They need sophisticated investigation on consumer behavior. After that, they need to find ways to inject emotions into their brand to increase consumer loyalty, which can't be more valuable in a difficult time.

Second, companies could cut their marketing budgets if they have to, but remember they have to keep spending. For example, maybe you used to buy an advertisement in an influential magazine 20 times a year and you can only afford to buy an ad 10 times this year. But don't stop spending, otherwise consumers will forget you.

Third, you need to know your brand strategy and product portfolio and get an idea of which products contribute most of your revenue or profits. And then you could cut the spending on your weakest products and concentrate on marketing those that could bring you most cash.

Remember to innovate, both in your products as well as marketing strategy. And try spending more on digital media.

(China Daily 01/12/2009 page3)