Will Ad Budgets Get Whacked?

Failure to reach consumers spells trouble for marketers

Talk the talk, and companies fill their coffers. Dis the consumer, and they wave goodbye to future profits. Sound simple? Maybe. But according to some of the nation's top marketers, the industry has failed to get the message.

At the 4As Media Conference in Orlando, Fla., advertisers bemoaned a lack of return on investment, TV's inability to reach the public, and how to measure creative output.

The solution, said Jim Stengel, who heads ad marketing at P&G, is "permission marketing. Make your message consumer-acceptable. Otherwise, you're history." Between TiVo and media choice, consumer nixes unwanted messages. "Strive to be invited into consumer homes," he said, or kiss your ad budgets goodbye.

Amid growing fears that ad dollars will get whacked, Stengel issued marketing's report card. The overall grade: C-. The reason? Today's marketing model "is broken." Too often, it offends, harasses, and turns off the consumer, he said. Bottom line: Marketing tactics just aren't in touch with the public.

The much-maligned 30-second TV spot has taken a beating over the past year. Outraged media buyers and advertisers have complained bitterly about paying more for less. Audience fragmentation has lessened overall ad effectiveness.

It wasn't just marketers that got slapped. TV endured its fair share of abuse at the conference. Yes, it is an essential part of the media mix, but Stengel warned advertisers not to "over-rely" on it. P&G got the message. In the past, many of the company's brands have spent up to 90% of ad budgets on TV. But 2003 changed the ground rules. P&G launched Prilosec and dealt only 25% of its ad spending to TV.

One of the biggest problems with all media—TV, radio, print—is verifying how many eyeballs ads actually reach. The bigger question: Do the ads influence consumer choice?

"Accountability is the top priority," said Andrew Jung, senior director of media services for Kellogg Co. Without it, advertising and marketing strategies are "meaningless." Most troubling to Jung, he doesn't know how many viewers are watching the commercials Kellogg airs.

Scott Berg, worldwide media director, global branding and communications at Hewlett-Packard, agreed. "We have executive management asking what have you done with those dollars from a return on investment perspective?" It's sometimes difficult to support the spending in ROI terms, he admitted, because the research tools can't measure it.

"My biggest fear is the next economic downturn," said Berg. "If we don't get the metrics right today," the research tools for measuring return, odds are good that advertisers will slash their ad budgets by 25%-30%.

Page Thompson, CEO of OMD North America, believes advertisers may have to buy media on "pay for performance basis," Advertisers would pay for the ad time (or space) based on the number of sales the ads generate. "That's a win-win situation," he said. (The loud sucking noise heard after his remarks, claimed Berg, was the sound of rapidly evaporating ad dollars.)

The other critical point in the age of TiVo, Berg said, is volume. "If I know who is watching my TV ads, why would I pay for anybody who isn't? If I can track that I got a million people who saw my TV commercial"—vs. the 15 million who tuned into the show—"maybe that's how I should start paying for my media."

Who will pay for the research tools to measure exact response? How will advertisers determine how creative translates into bottom-line consumer spending? Thompson says advertisers should fork out the cash to find out. "If you spend $100 million in advertising, why not take $1 million to really find out what works."

What doesn't work, he said, is Nielsen: "It's insanity to rely on 5,000 people meters."

The opening dinner was sponsored by the Cableadvertising Bureau. Pre-dinner cocktails were courtesy of broadcasting's Television Bureau of Advertising. Later, O. Burtch Drake, president and CEO of the American Association of Advertising Agencies, quipped, "Who says cable and broadcasting can't co-exist peacefully as they did tonight? … I think."