Advertising in Slowdown

Advertising is a communication tool used by companies to sell their products and services. Through advertisement companies try to persuade consumers to buy their products or services.

It was expected that during downturn advertising will be the first thing to be axed but figures show something else. Ad spends by top five FMCG companies have raised by 55% in the 2nd quarter of the year 2009-10. 70% of the total revenues generated by advertising sector come from top FMCG companies.

Instead of curbing their expenditure on advertisement, companies started launching their old existing brand in market. Henkel did this by relaunching its soap brand, Margo and also increased advertising and communication spending to 11 percent of the total sales.
The one of the main reason to increase expenditure on advertising is retain existing customers, who might switch to cheaper product.

Companies want to increase their market share by spending more on advertising and marketing. Relaunching and brand promotions lure customers to stick to brand and also attract new customers. During recession times customers become careful in spending. So each company wants to convince customers to prefer their brands. Research shows companies that slash advertising by 50 per cent take three to four years to recover their sales post-recession.

Marketers are wooing consumers with instant gratification, therefore they are using promotion such as discount sales, test drives of cars and get free assured gift(by Hyundai ), buy “a shampoo get a soap free” etc. In apparel retailing, discount plays magnetic role in enhancing footfalls. End of season sales lead to 30-45 per cent jump in sales. Especially in case of kid wear where parents prefer to shop during discount period as kids outgrow clothes fast.

Companies have understood that value retailing appeals to customers so they spend lot on advertisement to increase customer buying, in store promotions helps in impulse buying. Brands like Arvind has also received benefit of impulse buying in their store by introducing range of accessories, where by their average ticket size has increased by Rs 400.

Result too show that increased spending on advertising paid off. HUL’s net profit rose 19.6% from a year earlier and sales were up 21%. Marico’s revenues and net profit grew 28% and 15%, respectively. GCPL’s revenue jumped 26%, although profit was up just 1%. At Dabur, revenue and net profit grew 12.2% and 25%, respectively