"Historically, companies that have continued to advertise their products during a recession, end up higher after the recession is over," says Christie Nordhielm, assistant professor of marketing at J.L. Kellogg School of Management. "There’s plenty of data to prove that."

For instance, a study that Cahners Publishing conducted in 1980 in cooperation with the Strategic Planning Institute (SPI) of Cambridge, Mass., found that companies that increased advertising expenditures by more than 28 percent in a recession nearly doubled average increase in its market share, compared with companies that reduced expenditure.

Nordhielm asserts that during a recession there is a lot of consolidation and one way to survive being bought out or acquired is to be out in the marketplace through advertising. Many cash-strapped companies are reluctant to advertise in tough times because marketing expenditure can mean the difference between staying positive and running into the negative. But such a narrow focus does not recognize that continuing to advertise rakes in greater returns on investments in the long term, she says.

Many advertisers complain that companies that are currently employing them to do their campaigns have developed a risk-averse attitude, preferring to apply time-tested techniques. Dave Banerjee, director of strategic planning at L3 Advertising, says that current ads have no spark and cannot emotionally move consumers, because companies are shying away from pursuing new ideas.

“We think they should save their money if they are not willing to stand out,” says Scott Glaser, managing partner at The Planning Board, which provides marketing services and helps companies review their business model and funding strategies.

But this reluctance may also emerge from companies becoming more RoI-driven. Peter DeSouza, senior vice president of client services in Admerasia, says that financial accountability has become much more intense.

“Business as Usual”

There have been layoffs in the advertising industry as in most other sectors. But Anil Bathwal, creative director at Ogilvy & Mather asserts that despite the changes in the current climate, O&M’s approach to advertising has not altered.

“By and large it’s been business as usual,” he declares.
Although there was more money going around, no company wanted to see its money wasted even then, Bathwal argues. However, he believes that what will change is the tone and manner of communication. This is true especially because of the jolt the nation suffered on Sept. 11. For instance, the sharp and nasty jabs that technology companies often took at each other will need to be reviewed.

“Cynical or combative ads will not be well received,” warns Nordhielm of Kellogg.

Yet advertising is always done in a context. During the dot-com boom, online brokerages pounded financial and traditional brokerage companies, urging investors to go online and trade without employing middlemen. Now, in a period of extreme uncertainty, people are turning to their brokers for advice. Consequently, online brokerages have had to alter their messages .

U.S. Advertising Falling Behind

Many concur that although the United States pioneered advertising techniques, Europe and countries like Brazil are several years ahead in terms of quality and creativity. Banerjee of L3 Advertising, attributes this to a lack of passion.
However, this charge may be unfounded. Global advertising companies have divisions all over the world with people who are well aware of what works in a particular setting and what doesn’t. Nordhielm of Kellogg indicates it’s not so much an issue of lack of creativity and passion, as it is of tailoring a message to fit the nuances of a particular culture.

“Europe has an open mindedness that we don’t see in this country,” she observes.

Bathwal of O&M maintains that the best of American advertising matches up to its European and Latin American counterparts.

The Need for Ethnic Advertising

Since the mainstream culture in America is often radically different from the wide gamut of races that live in the country, the need for developing messages aimed at specific ethnic groups was increasingly felt. Of course, that multicultural marketing was a lucrative and viable option for companies to pursue has been proven several times over by census results.

The Census 2000 reports released earlier this year have been like manna from the heavens for ethnic advertisers. It recorded a 106 percent growth in the Indian-American population in the United States. Previously, ethnic ad agencies mostly targeted the Chinese, Vietnamese, Filipino and Korean populations in the United States. Now they are looking to target the 1.7 million Indians. And why not, considering this segment has the highest median household income in the country. DeSouza says that prior to the census reports, only the “enlightened marketer” recognized the potential in focusing on ethnic consumers. Some of those that have recently been proselytized are the pharmaceutical and automobile companies, he says.

New York Life is one company that has been targeting the Indian-American community for several years. Ashwin Verma, corporate vice president says that the response to the focused campaign has been very positive.

“It’s been very good, knock on wood,” he says.

Advertising companies are also jumping on the bandwagon. L3 Advertising, which was the first ethnic ad agency in America to have implemented an Asian-American campaign for a Fortune 500 company, launched 1947 Communications in April to cater to the needs of the South Asian (i.e., Pakistani, Indian and Bangladeshi) consumer.

“A lot of prominent Asian ad agencies in the U.S. have been marketing to South Asians, but they have just considered the South Asian market to be an add-on,” explains Seema Trivedi, vice president and director of 1947 Communications. “There has been no focused effort dedicated to this market.”

Bathwal of O&M feels that ethnic marketing is a logical extension of marketing in a capitalist economy. He believes that ethnic audiences rely far less on the spoken word and more on the visual element. Moreover, they speak different languages and targeting them necessarily requires strategies different from those used in mainstream advertising. To fulfill that aim, ad agencies are consolidating. Young & Rubicam for instance, bought Kang & Lee. In some cases larger companies are partnering with their ethnic counterparts in specific campaigns. DeSouza says that Admerasia partnered with O&M, Bromley Communications (a Hispanic ad agency) and Chisholm Mingo (an African-American ad agency) in an anti-drug campaign.

Consolidation and partnership, says Banerjee of L3, also point to the fact that companies want a one-stop shop to handle different marketing campaigns.

The Flip Side of Technology

Last year, technology companies were the second-largest spenders on advertising, accounting for 39.2 percent of total revenues, following the automotive sector. In fact, Fortune, Forbes, Business Week and other technology and business magazines ballooned as dot-com businesses, flush with venture capital, poured money into a vast array of media outlets. Currently the lean, mean look of business magazines proves that the tech meltdown took its toll on them, too. The demise of the once, nearly phone book-thick Industry Standard is the epitome of this malaise.

However, technology has affected advertising in quite another way. With its proliferation, campaign execution especially in terms of television commercials, have become remarkably simple. Graphic artists have mushroomed, many of who are not advertising professionals. This, in turn is reducing quality and brand differentiation. Take away the logo and one technology company’s ad is no different from another, says Banerjee.

Besides creating innumerable graphic designers, technology allowed “everyone and their dog to download design software,” Nordhielm says. Thus, emerging information technology companies got their “techies” to do their marketing campaigns. That didn’t pan out, reinforcing the fact that you need more than fancy graphics to get your message across.

The nexus between technology and advertising has yet another facet - online banner ads. While it is debatable whether banner ads are effective, Dilip DaSilva, president and CEO of Tribal Fusion, an online ad agency, believes the efficacy of an ad campaign may be tested in a less expensive manner online than offline.

Advertising in the Years Ahead

Nordhielm expects the challenges facing the ad industry in the 21st century will be the same as before: understanding consumers and providing the solutions they need. The test however, will be to deliver them rapidly, without becoming too engrossed in the technological tools, she suggests.

Bathwal feels that technological developments such as TiVo will present a significant hurdle. TiVo is a digital video recorder that works with every TV system (cable, digital cable, satellite, antenna) to give viewers complete control over live television. In other words, viewers have the option to fast forward commercials as they are watching television shows.

Jim Ruiz, a Chicago resident who uses TiVo, is a happy customer. By skipping commercials, he can watch a two-hour movie in 75 minutes.

“It’s completely changed the way I watch TV,” Ruiz raves. “Saves time, and money, too, because I no longer have those irrational urges to buy products I don’t need or want.”

But Nordhielm of Kellogg feels that TiVo is a blessing in disguise because viewers will ignore bad commercials, which will inevitably cause them to be replaced with better ones.

“It will be survival of the fittest,” Nordhielm predicts.

TiVo however, has a long way to go in terms of capturing significant market share. For now, ad agencies have to wrestle with the effects of the macro economy.