To Spend or not?

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During difficult times economically, we can not blame the director of marketing who wants to reduce advertising costs or to extract a higher value from them.Meanwhile, cutting massively the advertising spending is not an intelligent strategy. For an effective promotion, companies must invest in the right brands, in the right areas and send exciting messages through appropriate channels.

Few of the companies that have a portfolio of brands designed for a variety of market segments for several regions, differentiate their investments based on strategic priorities.The traditional process of establishing a marketing budget suffers from 3 drawbacks. First, they allocate a limited importance to the major differences between the intensity and sensitivity of appearing between market segments and different regions. Secondly, they do not recognize the important choices that have to be made regarding the growth, the development and strategies for each brand, market segment and region. Thirdly, the market share and the impact of investments in advertising on profits are not measured. For this reason, target market shares are not related to the advertising budgets.

For a better allocation of investment in advertising is essential a zero-based budget approach.This approach has the following practical observations:

- Minimum investment levels. Investment in advertising under the minimum level are usually ineffective and is it better not be made at all in this case.

- The costs of advertising. This can vary considerably from one category to another. Can vary from 5% of income up to 45% of revenue.

- The answer to advertising categories. The effects of excess investment in maintaining market share in one segment or another. The investments needed to gain 1 percent of the market share in one year, for example, can vary from 2 to 4 times the level of maintenance.

- Market share of the company. The necessary investments in advertising made in order to maintain the market share (maintenance level) are directly related to the scale and the competitive position. When the relative market share doubles, for example, the investments needed in advertising to maintain the market share may be reduced by 30%.


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In case of a competitive position that is stronger, belonging to a market with massive growth and the existence of some beneficial conditions, the company could consider an investment strategy.First, there should be a framework of solid innovations, together with other elements of the marketing mix to support the growth.Secondly, the consumers of the market segment should be quite sensitive to advertising, so that the additional investments be able to transform into an increased market share. If these conditions do not exist, a strategy developed to maintain the market share would be the best solution.

If a brand has a weak position on a market which recorded a growth or a contested position on a market with a lower growth, the company should invest in order to gain a market growth or to collect.If the intensity of advertising is significant on the relevant market segment, a collection strategy is preferable.Finally, a collection is suitable if a brand has a weak position on a market which registered a low growth.

This methodology can be a good tool to support a more aggressive difference of the investment levels, for a portfolio of brands designed for a variety of market segments and regions. Companies that have used this approach have forceful released almost 20% of investments in advertising.They could, instead, focus their spending to the areas where they were having a greater impact.

However, in order to implement this approach, the companies must be prepared to make some fundamental changes:

- Establishment of an evaluation based on the facts of the total advertising expenditure in terms of market share and profit impact.

- Shift from budgeting aggregates and the free discussion based on facts on the allocation of advertising expenditures (explicit involvement of the general manager and financial manager).

Before deciding to distinguish the levels of investment, the company should allocate the best people for the activities of collecting and maintaining the brand. In many companies, managing brands is perceived as being beneficial for a career manager. For this reason, most brands and segments are identified as having growth opportunities, even if the featured profitability of the strategies of maintaining and collecting can be much higher. The fact is that the defense position of leadership on the market, using limited resources and maximizing profit on a market that fails, having almost no resource, often requires a higher level of effort and talent than to grow the market share in an expanding market, using unlimited resources.

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Finally, it might be the right moment to evaluate the contracted advertising agency. The relationship between a client and an advertising contracted advertising agency follows also a life cycle, the inevitable pattern of growth and decline. It seems that your agency lost its original booming? Maybe it became too big?Does it produce sad campaigns, that don't excite anyone?Emphasis goes to collateral services, in order to hide the agency's creative bankruptcy? If you recognize the signs, it might be time to have a new start!

World newest Billionaires

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The old saying, "The rich get richer..." isn't always true in an economic downslide that is a recession and depression in our times. This year, Forbes announces it's well-known "Rich List", called Forbes World's Billionaires List 2009. Comparing my copy of last year's list to this year's list, it's clear that the rich aren't getting richer, and in fact, the world's richest people saw more than a two TRILLION dollar decline in total net worth for 2009 compared to 2008. Of course, sadly, Yahoo! reported that 18 members of the Forbes Rich List who were on the list last year died, and therefore are no longer included on the list. Death and depression both can cause a member of the Forbes Rich List to fall right off the list.To get a complete copy of the list, you'll have to pick up a copy of Forbes Magazine, like I did, but I can share some interesting people who made the Forbes Rich List.

 

First, let's look at the first woman on the list, Alice Walton. Ms. Walton is part of the Walmart heirs, and she is currently 59 years old. Her estimated net worth is over 17 billion. She was not the only 'Walton' family member on that list, and in fact, the Forbes Rich List has many Walton heirs and their families. Guess Walmart, a discount supermarket and hard goods store, is thriving, even in and especially in a tough economy.

 

Also on the Forbes Rich List, you will find Michael Dell, of Dell Computers weighing in on the Rich List at a cool $12.3 billion. Mr. Dell is among the youngest members of the Forbes Rich List, at age 44.

 

In fact, many of the Forbes Rich List members are over the age of 60, with a considerable number of the top 50 richest billionaires in the world over 70-80 years of age. Another interesting fact to note is the number of times some of the Forbes Rich List members have been married. Many on the list are stated to have been married three, four or more times. The Forbes Rich List does note the ones who were widowed, and then how many times each have been divorced, whether or not they are remarried, and how many children they have.

Makes me wonder... perhaps the rich aren't as happy as us poor working class might think!

Like Mr. Dell, other computer or internet related Forbes Rich List members include Larry Page and Sergey Brin, both making the list from Google.

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Again, much younger members of the Forbes Rich List, being 36 and 35 respectively.

 

Then comes our Microsoft Billionaires on the Forbes Rich List. Steve Ballmer, Microsoft, weighs in at $11 billion. Paul Allen, also Microsoft, comes in just under that at $10.5 billion. I wonder if he really missed that .5 billion he has less than Allen? So is there any guess who made the number one spot on the Forbes Rich List? It came as no surprise to me that, once again, Bill Gates was on the Forbes Rich List. In fact, William (Bill) Gates III is once again considered the richest man in the world. Even though he has stepped down from running Microsoft, and even though he reportedly lost $18 billion last year, he's still capping out at over $40 billion, claiming him that coveted top spot.

Dow up but would it remain up?

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The DOW opened in the black this morning for the first time in weeks. The 379-point rise, courtesy of good Citigroup news, gave some people hope. That hope has risen further, as stocks continued to climb, albeit modestly, throughout the day.

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The Dow Jones Industrial average has risen 4.80 percent, a large climb considering the recent economic conditions having left it tumbling lower and lower. A large number of companies are gaining a few percentage points here and there in the stock market today, a shining ray of light on the otherwise gloomy economy.

 

Does this mean we're seeing the light at the end of the tunnel? Doubtful, in my opinion. While perhaps things will stay steady at the rate they've risen to, economic forecasts suggest that things will not really improve until sometime in 2010 at the earliest. In a nation full of foreclosures, with nearly the highest unemployment rate since World War II, it's going to take a lot more than a nearly 400-point rise in the Dow to get things back on track.

 

Perhaps these little steps will affect the bottom line, and make a difference for the people who really need it. Maybe some of these companies who are beginning to climb the stock market again will be able to afford to hire more employees.




But one small blip in the radar isn't going to make a big impact. I believe that this is the first of several small blips, each momentary, but leaving the stock market a little higher than it was the day before. Eventually, we'll reestablish the financial backing we need to raise the stocks to the enormous heights they were before this economic collapse, but not any time soon.

 

I live in a small town that has been relatively unaffected by the huge economic crisis. However, I do find myself, and many others, shopping more cautiously now, attempting to save money, and holding our breath for the time it hits our community. It's going to be some time before these little blips amount to much of anything, but once they do, I have faith that the entire United States - and possibly the rest of the world - is going to let out one huge sigh of relief. In the mean time, we'll sit and wait, saving our pennies. Hoping.