Marketing spend to bounce back

28 October 2010

LONDON: Marketing spend will bounce back strongly post-recession but the industry that emerges will look very different, according to John Quelch.

The Lincoln Filene professor of business administration at Harvard Business School, speaking at the Brand Finance Forum 2010 in London, set out the reasons the marketing communications industry should be positive about the future.

Top of the list is the role of advertising within emerging markets, and the rise of digital.

He argued that there was a "per capita adspend upside in emerging economies", with huge potential for investment in marketing.

In turn, this shifting investment trend could lead to a shift in the centre of power in global marketing.

"There is potentially going to be a shift in the fulcrum of creativity to Bangalore and other emerging-world markets," Quelch said.

China, which has already become the world's second-largest advertising market.

Consumption makes up 36% of GDP in China, compared with 70% in the US.

The Chinese government's goal is to lift it to 47%.

Moreover, the Chinese shop for nine hours a week, compared with three in France.

Quelch also pointed to the huge social mobility within China and other fast-growing economies.

As people move from rural areas to cities or climb the social ladder, brands will be strong symbols of status.

That requires continued brand-building activity by manufacturers.

But Quelch added that a lack of local talent remains the biggest challenge facing marketers in emerging markets.

Talent, he said, "is not keeping pace with need", and this may limit the ability of local brands and agencies to expand outside their home markets.

"They will be focused on internal, not external markets," he added.

Turning to digital, Quelch argued that advertising-funded business models will continue to dominate subscription-funded models, with Google being the prime example.

Greater media choice, he added, generally led to greater media consumption, and as a result more opportunities for advertising.

But the issue of optimising allocation of spend between media remains, as does the fact that the complexity of the media market is outpacing optimisation technology.

"It is possible to optimise allocation among apples, it is not yet possible to optimise allocation among apples and oranges, especially when the number of oranges is growing every five minutes," Quelch said.

Data sourced from Warc