Orange County’s marketing executives are going to have to prove their worth this year if they want to bring in more business or just keep the accounts they have.
The weakness in the economy,caused in part by the slowed housing market,has put pressure on local advertising agencies and public relations shops to convince companies to continue to spend on advertising, which is often one of the first things to go when cost cutting.
“Advertising budgets are an easy target for marketers to cut when profitability suffers in an economic downturn,” said John Puchalla, analyst at Moody’s Investors Service.
Total ad spending in the U.S. dropped 0.5% in the first three quarters of 2007 versus the year-ago period, with network radio and newspaper advertising the hardest hit, according to the Nielsen Co, which tracks advertising spending.
TNS Media Intelligence, another tracker of advertising and marketing, forecasts a 4.2% increase in total U.S. ad spending in 2008.
OC ad and public relations executives are watching these predictions closely.
“We must prove our value,” said Rebecca Hall, principal at Mesa-based Idea Hall. “If the marketing is effective, it stands less of a chance of being cut.”
Many companies have seen “competitive pressures increase, sales stall and purchasing decisions become delayed,” said Ryan Rieches, principal at RiechesBaird advertising shop in Irvine. “Because of this, advertising has to work harder and be more effective than ever.”
Mixed Outlook
The outlook for this year is a mixed bag. Most shops are optimistic and say they are seeing clients hold or increase their budgets.
Others are starting to feel the effects of the economy, with real estate and some technology clients slowing up on spending.
“Uncertainty combined with the desire for aggressive growth will put 2008 spending levels flat versus 2007,” said Rick Eiserman, who heads Young & Rubicam in Irvine, OC’s largest ad shop. “The focus is increasingly ‘how to spend the ad dollars more effectively’, not ‘where should we cut.'”
Jon Gothold, partner and executive creative director at Santa Ana-based DGWB Advertising & Communications, said his staff will work “more collaboratively and closer than ever” with clients to encourage them to take “advantage of the tumult and reinforce their brand position.”
“Our clients are smart enough to know that the last thing they can afford to do is disappear when times get tough,” said Gothold, who expects his shop to increase billings this year.
The big focus: producing more measurable results and being more targeted with marketing plans, Gothold said.
“There is less of an appetite for untested marketing ideas and more desire for proven advertising solutions,” Gothold said. “We are currently in television production with almost every client on our account roster, a first for us in our 20-year history.”
But it’s not always easy to get companies to commit.
Many are “short sighted” and “do not view marketing as an investment for growth,” Rieches said.
“In reality the best time to take market share from your competitors is in a slowing economy because the weak and short-sighted companies tend to fall behind or become insignificant,” he said. “It’s simple,either you grow or don’t.”
Not all industries are in the position to grab more of their markets, taking a toll on the ad shops that catered to them.
Elliot Light, president of Irvine-based L & A; Marketing and Advertising Inc., said business has been a little “slow” the past few months, since the bulk of the shop’s clients are in the homebuilding and financial services industries.
“We have not lost a lot of clients but the majority of our clients have drastically cut their marketing and advertising budgets,” Light said.
The shop has been going after new work, primarily focused on major retailers and manufacturers, he said.
Bob Ochsner, principal at Newport Beach-based public relations shop XPR LLC said some of his existing technology clients “may not grow their budgets as quickly in 2008 as they did in 2007.”
“This is being offset by a growth in new-business inquiries from non-tech and consumer clients,” he said.
Advertisers are also putting more of their focus on the Web. TNS Media Intelligence said in a recent report that the Internet will see the biggest growth in 2008,expected to jump 14.4%,and outpace spot TV, Spanish language media, outdoor and print, which is expected to drop.
“What companies really need to consider is ‘What will happen if we don’t market?'” Hall said. “There are opportunities in a slowdown to grow market share, attract talent and differentiate, putting companies who invest in a strategic program in a more advantageous position when things pick up again.”
