India Inc. cuts advertisement budget by over 40 per cent
Advertisement budget of India's Inc. for brand promotion has reportedly been curtailed by nearly 40-45% in fiscal 2011-12 due to high cost of credit, increased raw material prices, hike in interest rate, weak demand in domestic and export market, and poor infrastructure, etc.
Due to this reduction in ad budget newspapers, magazines and visual sectors especially the less popular dailies, magazines and channels were worst affected. Though the newspapers and TV Channels are officially not reducing the ad rates yet heavy discounts are being offered to the advertisers, adds the survey.
“The subsequent increase in interest rate adversely affected industry as its cost of borrowings increased, investments dried up and profit margins took a hit. The subsequent rise of interest rates seemed to have hurt the industry more (as their costs of borrowings increased) than it helped in bringing down the rise in prices. The overall inflation for the year 2011-12 stood at 10.7 per cent against the 9.6 per cent growth seen in 2010-11,” said DS Rawat, Secretary General, Assocham.
Out of nearly 500 companies in large and medium segment. which participated in the Internal Assessment Exercise of Assocham held in last 25 days of June 2012 at Delhi, Mumbai, Chennai, Hyderabad, Bangalore, Pune, Kolkata, Ahmadabad and Chandigarh; around 370 participants said that for the quarter ended March 31, 2012, the advertising expenses declined by 40-45 per cent in rupee terms on a year-on-year basis.
At each place, over 55 executives shared their experience with representation from corporates in the areas of Fast Moving Consumer Goods (FMCG), Home and Electronic Appliances, Real Estate, Textiles, Gems & Jewellery, Oil and Gas and Luxury Products.
Assocham said that not only the private sector's ad and entertainment
budget got shrunk by 40-45% during the entire fiscal 2011-12, but the situation would more or less remain likewise in public sector, especially in its Scheduled B, C, D category companies.
According to the survey, automobile and FMCG sectors during the favorable time would spend 15-20% of their total earning on advertisements on electronic and print media.
The survey further reveals that big companies are cutting back on big brand advertising campaigns and focusing on “quick win” sales promotions such as coupons and point of sale discount promotions to win over cash-strapped consumers.
The industry lobby group also said that both television and radio networks are staring at tougher times as advertisers cut back on budgets for brand marketing and promotions in the face of deepening economic gloom.
The situation is so bad that despite electronic and print media curtailing their ad rates by nearly 25-30% with luring offers of heavy discounts, corporate earnings declined so much in 2011-12 that majority of them are still dithering to fix allocations for ad and entertainment.
The survey found that though the companies have slashed budgets for ad, entertainment and charitable activities but they have consensus that the employees should not get hurt.