More channels and a recovering economy are leading to a free flow of marketing dollars, according to a study.
Posted Jul 10, 2006
Advertising budgets will increase across all industries in 2006 and 2007 due to a strengthening economy and a multiplying of advertising channels, according to the newly released "Advertising Ratios and Budgets" study by Schonfeld and Associates. This 30th annual edition of the study covers advertising spending in 2005, and forecasted spending and advertising-to-sales ratios for 2006 and 2007. Expenditures will continue to wax, with an expected 7.7 percent increase in advertising in the past fiscal year and an increase of 8.6 percent expected by the end of this year. Advertisers are looking for more ways to spend more money.
Carol Greenhut, president of Schonfeld and Associates and author of the study, explains the reasons for the recent upsurge of spending as a target-rich environment and easier availability of funds. "Since 2001 the economy has been recovering which is reflected also in ad spending," Greenhut says. "Also, there are more channels each year in which to invest."
Greenhut says that as advertisers find more valuable ways to promote their products, they are looking to spend more across multiple veins. The greater attention paid to such channels as web advertising and product placement has advertisers becoming looser with their pocketbooks to feed into them. Correspondingly, more traditional marketing spaces are upping their advertising to compete with new technologies. For example, direct mail catalog houses are expected to increase their budget to $1.3 billion in response to online competition.
The most spendthrift industry as a whole will be automotive, according to the study. Companies such as, Toyota, General Motors, Ford, and Fiat will each spend over a billion dollars, contributing to the total industry-wide spend of $30.6 billion, a 5.3 percent increase. Pharmaceuticals will come in at distant second; the industry is expected to spend $24 billion next year, up 10.5 percent. Greenhut cites this as one of the fastest growing industries as companies look more and more to selling both prescription and over the counter drugs directly to consumers.
The majority of other industries will look to spend more money on advertising as well. Advertising growth of the telecommunication service will continue to increase in the next year, jumping to 6.6 percent. Wireless communications will follow suit, with a projected budget of $12.4 billion after an 8.5 percent ascension. Retail department stores and variety stores will both increase spend, with a boost of 13.3 percent and 7.5 percent respectively. The study shows some downturn in advertising--specifically from photographic equipment and radio broadcasting stations--but indicates that these backslides will have little effect on the overall forward drive.
Greenhut sees these numbers as great news for the advertising industry. "At one point people thought that because traditional media spending was going down, advertising was going to be less of a force, but new media picked up and then some," she says. "It's nice to see we've recovered."
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