Recession may squeeze ad spending

Advertisement spending in the local market may decline 8 percent by the end of the current fiscal year, as the global meltdown is putting strains on the country's economy, analysts say.
The meltdown is expected to reduce the annual revenue of the local advertising industry from Tk 1,200 crore to Tk 1,000 crore. The financial crisis may downsize other internal expenditures, including new recruitment, according to the analysts.
According to a research carried out by Ryans Archive, a media monitoring company, the advertising spending on TV commercials alone declined from Tk 135 crore in December to Tk 54.3 crore in February.
Advertising spending by major brands in Bangladesh declined by 7 percent in the last three months.
Currently, there are around 3,500 billboards around the capital and its outskirts, with around 1,000 having no ads.
However, mobile telecom operators are still the top spenders in terms of advertisement, with Grameenphone being the largest, according to Ryans Archive.
The research revealed the advertisement spending of different multinational companies (MNCs) including the fast-moving consumer good (FMCG) companies operating in Bangladesh have already reduced their advertising spending in the face of the global financial crisis.
Industry experts say many MNCs would cut their advertising costs mainly due to the global financial meltdown and it would decline further in coming months. Advertisements in several media forms, including billboards, have already reduced significantly.
Aly Zaker, advertising expert and CEO of Asiatic JWT, says the advertisement spending of FMCGs declined and is expected to gradually drop further. His agency handles Unilever, the largest MNC of FMCG in the country.
“The first and foremost focus of an advertisement is to reach out to consumers. When the livelihood of the target groups have been affected by the recession, spending on advertisements must also decline,” he says.
The local advertising agencies mainly target the middle- and lower-middle income groups.
“In times of crisis, the purchasing power of consumers would decline, so they would cut back their spending on non essential items, like shampoos or brightness creams,” Aly Zaker says.
“If the recession takes its toll, the target groups will have lower disposable income to spend on goods like shampoos," he says. "When an RMG worker loses her job, she will not use even sachets of shampoo."
Aly Zaker says most companies have cut back their advertising expenditure by observing these factors. The spending of FMCG producers would decline further for this reason.
Zulfikar Ahmed, CEO of Unitrend Ltd, another agency that is affiliated with McCann Erickson, earlier predicted that the impact of the global financial crisis would affect local advertising spending by early 2009.
“As the primary yearly budget of the MNCs has been curtailed globally, expenditure by the local agencies would decline ultimately,” he says.
Apart from cutting back on advertisements, the advertising agencies have also decreased internal spending, which has stopped fresh recruitment in the industry.
Sanjiv Mehta, chairman of Unilever North Africa and Middle East, sees every crisis as an opportunity and advises companies not to cut advertisement spending in the face of global financial crisis.
“Companies should not cut their spending on marketing and advertisement during the recession. You should keep on spending money on advertising because now the clutter is less and you will get better value from your space," he had earlier said in an exclusive interview with The Daily Star.
“During recession, most companies promptly cut down spending on marketing and advertising, and expensive brands can go down,” he said.
Aly Zaker suggested that the media, including print and television, lower the cost of advertising.
“Satellite TV channels need to reduce the airtime cost per second, which now stands at Tk 3,000 per second on average,” he said.