Advertising in the recession - perfect storm or perfect opportunity?

2010 looks like it might be the year when the UK advertising industry emerges from its worst slump since detailed records were started in 1982. According to the Advertising Association, total advertising spend in the UK is expected to increase by 2.8% in the third quarter of 2010, the first increase since the start of 2008.

The recession in the UK has been particularly painful for businesses that rely on advertising income. For those businesses that see the decline in advertising rates and costs as an opportunity to get better value for money and build their customer base, the recession couldn’t have come at a better time! Hence, the strategic implication of the advertising slump as either a “perfect storm or perfect opportunity” as mentioned in the AA announcement.

The data indicates that Internet and Cinema advertising were the only two growth areas in the advertising sector in 2009. Television advertising and print (newspapers, magazines) fell substantially. That’s good news for Google and Vue Cinema’s, but very bad news for ITV, national and regional newspaper proprietors and the many struggling magazine publishers.

The decline in advertising spend during the recession really has two parts:

(1) A cyclical part - where firms reduce their advertising spend in response to a reduction (anticipated or real) in demand. Advertising is one part of the marketing budget which is relatively easily and quickly cut, in order to reduce costs and conserve cash.

(2) A structural part - where firms re-evaluate the effectiveness of their promotional spending. There is now a well-established trend for firms to spend increasing proportions of the advertising budget online (where response is much easier to track and where customers are easier to target), at the expense of traditionally popular advertising media such as newspapers, radio and magazines.

A specific firm’s marketing response during the recession tells you much about their growth strategy. Those students looking at Domino’s UK, for example, will see a business that saw the reduction in advertising rates as a tremendous opportunity to accelerate the organic growth of the business.