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Increasing Ad Budgets Pays Off For Marketers


During the ad industry's worst downturn in a decade, some advertisers actually are spending more. And worrying less.

Never mind that industry forecasts say ad spending will shrink at least 3% this year from the $243.7 billion reported in 2000. Several major marketers are boosting ad spending during this downturn and seeing a boost in sales - and profit - as a result.

Coca-Cola

Coke added more than $350 million to its worldwide marketing budget this year. Investors chided the company for the one-time boost, but the increase is paying off. Second-quarter volume in North America was up 3% and net income was up 22%.

"Coca-Cola emerged at the end of World War II as a global icon," spokesman Rob Baskin says. "We couldn't have done that without increased marketing during a pretty turbulent time. You can take that idea forward."

Red Lobster

The restaurant chain's ad budget is up about 5% to $160 million. That helped boost June same-store sales by 4%.

"Despite the downturn, we're not taking any pressure off," says Ken Mills, vice president of advertising for Red Lobster. "To be category leader, you have to invest in good times and bad."

Heinz

Ad-spending growth of 16% helped Heinz boost its ketchup market share. For the fiscal year ended April 30, share is 59.2%, up from 55.9%. The firm also has new ads for its StarKist tuna, Boston Market supermarket products and Funky Purple EZ Squirt ketchup.

Gillette

The razor giant had taken a nick out of its ad budget in recent years. In 1995, ad spending topped $666 million. But by last year, it was $608 million. Gillette's new CEO, James Kilts, plans to reverse that.

Second-quarter spending was up 20% to $145 million. Big bucks are going toward promoting Cool Blue Mach3 and Venus, the company's biggest razor launches since the Mach3. Since its March debut, Venus has captured 45% of the women's razor market. Ads for Duracell CopperTop batteries started in June, and share is up for the first time since 1999, to 33.5%.

IBM

The computer giant said in March that ad spending for the year would climb by 17%, or $110 million, in 2001. Much of the focus is on its e-systems, which integrate software and Internet capabilities.

Not surprisingly, the ad industry's top cheerleader says more companies should follow suit. "If you hold and your competitor cuts, you'll come out ahead," says Burtch Drake, president and CEO of the American Association of Advertising Agencies (AAAA).

The idea has its fans: KFC hit the airwaves last week with a $200 million campaign; J.C. Penney added $100 million to its back-to-school budget.

But most marketers remain hunkered down, believing the downturn will linger. "I don't think anyone expects a recovery this year," Drake says.

 

Theresa Howard, USA TODAY. August 7, 2001

Copyright © 2001 USA TODAY, a division of Gannett Co. Inc.. All rights reserved.

 

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