Even as other retailers cut back on advertising, Wal-Mart increased its media spending in 2008 by $300 million – or nearly 56% – which in part (in addition to low prices) likely explains its recent successes in a down economy.
According to AdAge, Wal-Mart spent $835 million and is set to become the second-biggest spender in the category (it was ninth) after Macy’s, according to TNS Media Intelligence data (excludes outdoor and national spot radio, and Dec. figures for cable TV).
Still, this great sum accounts for a mere 0.5% of Wal-Mart’s annual sales – compared with 4.5% for Macy’s – while competitors Target and Sears spent, respectively, 2% and 4% of sales on measured media.
Rival retailer Macy’s has, on the other hand, cut back all magazine advertising for the first half of 2009, and seems poorly positioned to make a comeback to the #1, despite consumer’s growing preference for large retailers*. In 2007, Macy’s took over Kaufman’s and the Chicago retailer Marshall Fields, stamping generic Macy’s branding on landmark buildings, enraging local consumers and paying for a monolithic national marketing strategy with a -1.3% decline in sales that year. This would suggest that although large stores offer price competitiveness for cash-strapped 2009 consumers, local preferences vary and retailers ought to take note.
Other brands making significant cuts or changes in media spending include Gap and Proctor and Gamble. Gap cut all TV spending last summer, calling it a “waste of money.” An 18% cut in ad spending coincided with a 40% increase in profits, suggesting that smart cuts can be better than bigger spends. Proctor & Gamble has cut traditional media by 19%, and increased digital advertising by 10%, a budget shift which coincides with the shift in consumers consumption from traditional to digital media.
Correlation never proves causation, but a smart media plan often goes hand-in-hand with smart business strategies. In this economy, media output should be considered critically. Trust the experts at Criterion Global for cost-cutting, smarter strategies to do more with less.
*According to Nielsen, consumer’s spending at supercenters grew in nearly every category in 2008, increasing as the economy worsened; and supercenters were the only retail channel to have unit growth over the prior year, at +1%.
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