Brands demand more creativity in return for ad spending

Reuters: Major brands are demanding greater creativity from advertising and proof that it will work in return for a commitment to maintain or grow spending in the face of increasing doubts about the global recovery.

Bosses from some of the world’s largest advertising groups and brands such as Coke meeting at the Cannes Lions International advertising festival, told Reuters companies were not cutting their spending as they needed to maintain or grow market share.

While that is an improvement on a few years ago when companies slashed marketing budgets in the middle of the economic downturn, many challenges still remain.

Visibility on future bookings has dropped and much of the advertising growth is being driven by the faster growing markets of China, Brazil and India, as they pull even further ahead of countries in western Europe in terms of growth rates.

Those companies in western Europe and the United States which are still spending strongly on advertising are doing so instead of spending on more fixed costs such as staff and infrastructure, showing a still heightened sense of uncertainty.

“At a macro level, there are worries but has that translated into any data that suggests that our business is changing? The answer is no,” Martin Sorrell, Chief Executive of the world’s largest ad group WPP, told Reuters.

“In the West, people are terrified of making mistakes post Lehman. So instead of investing in a new factory they will invest in the brand. I was speaking to one big retailer who said retail sales are so tough I want to figure out some clever ways of advertising.”

William Eccleshare, President and Chief Executive of Clear Channel International, said the annual conference had drawn more brands than previous years which was an encouraging sign for the industry.

“But you get a sense that it is becoming a more business and performance-focused event, and not just a celebration of creativity for its own sake,” he said. “They want a strong return on investment and they value strong creative ideas but they’ve got to demonstrate that they can build business.”

Eccleshare said marketing directors were inevitably under pressure to prove the importance of advertising at a time when doubts linger over the economic recovery, particularly in the United States, given the size of its deficit, and in Western Europe.

But both he and Sorrell said any slowdown in mature markets was being more than outweighed by the rapid growth elsewhere. And any concerns that China will not maintain that growth should be seen in the correct context.

“China is becoming a much more consumer driven economy and there is a significant appetite for brands and brand differentiation which will sustain advertising there,” Eccleshare said. “Even if you decide that China may not grow as dramatically as it has, you’re still going to want to be there.”

That sentiment was backed by Joe Tripodi, Chief Marketing and Commercial Officer of Coca Cola.

“In mature, developed markets we believe in continuing to invest in our brands and we’ve increased our spend,” he said in an interview. “But there hasn’t been a downturn everywhere, there certainly hasn’t been one in China and India and Brazil and Mexico. “And we’ll be spending a lot more money in India and China where the rate of growth will be.”