The events of September 11 and the inevitable uncertainty it has fostered, on top of already faltering economic conditions, has led many economists to compare the situation to the recession at the start of the Nineties, which was exacerbated by the Gulf War.
However, the situation might not be as gloomy as it seems, as David Benady of Marketing Week, points out. The collapse of advertising revenues in the US and UK over the past year, coupled with buoyant consumer spending and declining interest rates could provide an excellent opportunity for pharmaceutical companies to increase their advertising spend. Some industry analysts argue that this can have the dual benefit of allowing brands to gain ground on competitors, while also keeping long-term strategies in place.
London Business School professor Patrick Barwise backs such a pro-active approach. He says, The most successful firms do not allow short-term economic conditions to make them abandon their strategy. Instead, they typically maximize long-term shareholder value by maintaining or increasing their ad spend when the economy slows down and their weaker competitors cut back.
However, an increase in spending may not even be necessary in the current climate for these objectives to be realized. IPA director-general Hamish Pringle says: If the cost [of advertising] falls by up to 20%, it presents brands with the opportunity to explore media that they wouldn’t have been able to explore before. We are not advocating that brands should increase their budgets, but that they look at the market and if it is ten per cent down, brands will gain an advantage if they maintain or not cut their spend by as much.
Moreover, a more targeted and discriminating marketing strategy in the current climate may prove even more effective. Increasingly, pharmaceutical companies are analyzing their customers more closely and thinking that if they split them into smaller groups, they can save money. Furthermore, they are investigating which are the most appropriate advertising and sales channels to reach customers.
There have been numerous brands that have reaped the rewards of increased marketing spending in lean times. It may be opined that these are isolated and brand specific. In periods of sluggish economic activity, there are always brands that increase their advertising spend when they need, either to reposition themselves or to undertake a relaunch.
The trend so far recently has been to reduce marketing funds, but pharmaceutical companies will be monitoring their competitors activities closely in the coming months. Pharmaceutical marketing strategists will have to decide which approach best suits their company and brands. What is certain is that right now, it is a buyer’s market. There has never been a cheaper time to invest finances marketing and advertising campaigns.
