Gone Are the Days of Farsighted Advertisers

Swedbank, the Swedish banking giant, rolled out a 35 million ruble ($1 million) brand awareness campaign last fall to herald its entry into the Russian retail market.

The bank's slogan, "For Comfortable Living," accompanied by a wholesome image of a pretty blond woman in a winter hat holding a hot cup of coffee between two hands, was hoisted up on hundreds of aboveground and metro billboards in Moscow, St. Petersburg and Kaliningrad, the three cities where the bank has a presence in Russia. Ads were also placed in newspapers and on the Internet.

The economic crisis didn't derail the long-planned, fourth-quarter campaign. But it has caused Swedbank to make big changes to its 2009 marketing strategy.

"We had had plans to open more branches and launch aggressive, mass-market brand campaigns, but that is no longer our goal for this year," said Irina Filozopova, marketing director for Swedbank in Russia.

Now, she said, the bank will focus narrowly on "short-flight" product promotion and will revisit its advertising strategy every three months.

"If there were no crisis, we would have already planned our campaign in Russia for the whole year, but now nobody knows what will happen in three months," Filozopova said.

Gone are the days when companies plan their advertising budgets and advertising campaigns a full year in advance. Instead, short-term, supersegmented advertising campaigns are becoming common for big and small companies alike as they grapple with issues like exchange rates, access to loans, cash flows, advertising agency fees and changes in consumer spending habits.

"The only thing certain now is complete uncertainty," said Dmitry Bartenev, chief executive of the advertising agency OMD MD & PHD Group, whose clients include PepsiCo, Mercedes, Chrysler, Siemens and Canon.

At Swedbank, Filozopova couldn't agree more with that sentiment.

"We are re-evaluating results quarterly and planning more targeted, short-flight campaigns," Filozopova said.

"We want to grow our loans and deposits" in Moscow, St. Petersburg and Kaliningrad, she said. "So our campaigns will be very segmented and targeted directly at whom we know as our audience and clients."

On Monday, the bank launched its first 2009 short-term product campaign, promoting retail deposits. The budget for the campaign, and others that will follow later this year, totals about 10 million rubles, a third of the amount spent on the fall campaign.

Swedbank will re-evaluate the success of the campaigns every few months before planning further advertising activity.

"We cannot spend money for the sake of our brand now. We need optimal effectiveness," Filozopova said.

Many other companies feel the same way. Coca-Cola Russia, for one, is also planning its ad campaigns quarterly, company spokesman Vladimir Kravtsov said. Coca-Cola declined to comment on the size of its advertising budget in 2008 and 2009.

Advertising budgets are among the first to undergo cuts when times get rough, prompting many companies to demand that advertising agencies put a "very large" flexibility margin in their contracts. The margin indicates the maximum percentage of the media budget that a company can cut without having to pay penalty fees to the advertising agency.

In previous years, the margin was typically 2 percent to 5 percent of the company's budget. This year, it is 30 percent, said Bartenev, the advertising executive.

"Companies are saying, 'Yes, we are ready to sign, but we need to prepare for the worst because we don't know what will happen to our sales,'" Bartenev said.

Some companies are holding off from signing in hope of better deals. While a down market means lower revenues, it also increases bargain-hunting possibilities because media agencies that design, print, secure and handle the placement of commercial advertising are more likely to give discounts on their services.

"Before the crisis, in a market with hyperinflation the earlier you came to the media seller, the better price you would get," Bartenev said. "But now ... the expectation is that the situation will get worse and worse, so the later you come, the better the deal."

Companies are also reconsidering where they will advertise. Television for now is in a much better market position to withstand the crisis than radio, print and outdoor media, Bartenev said.

"Everybody is cutting costs, and big mass-market advertisers dispense with supportive media, outdoor, radio and print, in order to keep their TV ads, because TV is the only truly national media," he said.

While outdoor advertising agencies saw profits slump 40 percent in February compared to the same period in 2008, television was only down about 10 percent, said Andrei Beryozkin, head of advertising research agency Espar-Analitik.

Advertising industry insiders, however, said companies with smaller ad budgets might decide to take their limited resources out of television and put them into outdoor and print media, where more discounts are emerging.

"Soon we may see the opposite effect. As outdoor ads cost less and less, a large category of advertisers -- for brewers and mobile phone companies, for example -- will evaluate the new possibilities and choose to spend more there," Beryozkin said.

Albert Teplitsky, deputy general director for Olimp, the largest media handler for the Moscow metro, said his agency is holding negotiations with advertisers who before the crisis "never considered the metro as a serious place for ad placement."

"When you have a big budget, you just spend it on TV commercials. You cover the whole country, and the brand managers are content," he said.

"But when working with a limited budget, advertisers start looking to segment, to re-evaluate and choose media that are the most cost-effective," he said.

So far, however, there is no rush to outdoor media, and the competition among advertisement agencies and media buyers for existing clients has turned cutthroat.

"Large agencies never used to be interested in taking on clients with small budgets of say, less than $1 million. But now, everyone has small budgets, so the big and small agencies are competing with one another for the same clients," said Daniil Borodin, advertising market analyst for LBL Communications.

"While only two or three agencies participated in a client tender before, now there are 10," he said.

For advertisers, however, the increased competition is nothing short of a boon.

"When I see the spring figures from agencies, we will decide whether or not we will use outdoor media," said Filozopova of Swedbank.

"But there are discounts now. Yes, they are finally ready to give them."