New York: Let the economists and politicians debate whether the American economy is in a recession. Madison Avenue is already battening down the hatches.
 
Since September, Wal-Mart Stores, the nation’s largest retailer, has built its entire current advertising approach upon this bald premise: “Save money. Live better.” Sceptics wondered at the time whether Wal-Mart and its new agency, the Martin Agency in Richmond, part of the Interpublic Group of Cos, were fixating on price at the expense of other attractions like fashion or breadth of merchandise.

But the economic problems that followed — falling prices for houses, tightening credit and the gyrations of the stock market — vindicated their decision. Amid widespread consumer anxiety, Wal-Mart weathered a difficult holiday season for retailers, reporting a 2.7% increase for December while many of its rivals, including Target, posted losses.

“We don’t profess to have any prophetic abilities to call the economy any better than the folks who do it for a living,” said Stephen Quinn, Wal-Mart’s chief marketing officer. Rather, “when gas prices spiked last spring,” he added, “we saw the pressure this put on our core customers.”

Those customers can find plenty of companies following Wal-Mart’s lead, with many campaigns speaking to Americans as if a recession were already under way.

But, while many marketers may be looking to adjust the contents of their campaigns, forecasters believe overall advertising spending will remain strong as a recession looms.

TNS Media Intelligence in New York estimates that ad spending will increase by 4.2% (fuelled in part by an estimated $5 billion in spending connected to the Summer Olympics and the elections), a steep increase over a 1.7% increase a year earlier.

“A large chunk of the core ad economy is in a weakened condition,” said Jon Swallen, senior vice-president for research at TNS. He cited retailers, especially “housing-related retail, from the big-box chains to the mom-and-pop home furnishings stores.” On the other hand, in “key categories like automotive,” he added, “ad budgets have been going up as sales have been going down.”

Those with long memories may recall other times in the last two decades that ads were devoted to encouraging consumer frugality rather than celebrating unchecked spending. For example, there were price-conscious campaigns after the 1987 stock market crash, during the 1990-1 recession and after the dot-com bubble burst in 2000-1.

This time, however, it seems the shift in tone is taking place earlier in the economic cycle. After all, a recession is defined traditionally as two consecutive quarters of contraction — and officially, there has not even been one.

The willingness of Madison Avenue to act as if a recession is underway may seem confusing, because advertisers usually reduce their spending during downturns. Overall, ad outlays have fallen in previous recessions — 6.5% in 2001 compared with 2000 and 1.2% in 1991 compared with 1990.

However, many marketers spend the same — or even more — during hard times as they do during booms, on the theory that they must make sure to be remembered by any consumers who are still shopping. And advertisers in competitive categories like automobiles, beer or fast food are reluctant to cut spending if their rivals are not.

Quiznos, whose chief rival is Subway, introduced Sammies, a line of flatbread sandwiches, in November. The $2 price is less than half the average Quiznos check, which runs “significantly above $5,” according to Steve Provost, chief marketing officer at Quiznos in Denver.

“Like all retailers, we’re now staring down the barrel of consumer spending actually declining,” he said. “We want to hold on to quality, but at a price point that appeals to a much broader target.”

The Sammies line already accounts for about 15 percent of Quiznos sales, Provost said. A campaign under way from Cliff Freeman & Partners in New York, part of MDC Partners, carries the theme “Love what you eat” and features a Sammies meal — two sandwiches, a side dish and a fountain drink — for $5.99.

“It has attracted a new customer, more value conscious,” he added, “also more women, and guys looking for a lighter lunch.”

Even marketers that usually aim products at consumers with more money in their wallets than Sizzler customers are playing “Let’s Make a Deal.”

For instance, the new campaign for the upmarket Club Med resorts emphasises the company’s “all inclusive” pricing policy with phrases like “Everything is taken care of.”

“What we are selling is good value for money,” said Henri Giscard d’Estaing, chairman, president and chief executive at Club Mediterranee in Paris, “especially for families.”

Source : Dna