Short-termism and investor pressure hits adspend, says guru

21 April 2009

NEW YORK: Periods of recession have a heightened negative impact on advertising expenditure levels in countries where companies are under greater pressure from investors and take a more short-term view, according to a new study of economic downturns from over the last 100 years.

Professor Gerard J. Tellis, of the University of Southern California Marshall School of Business, has analysed how shifts in GDP over the last century have impacted brand performance, as discussed in more detail here.

He found that a change in GDP of 1% in either direction is generally mirrored by a similar positive or negative alteration of 1.4% in adspend.

While this trend has been "evident across major world economies," it is typically more pronounced in countries where the main priorities are "short-term orientation" and "avoidance of uncertainty."

Similarly, it is also often more significant when "corporate managers may suffer pressure from investors."

Tellis also argues that television has proved less sensitive to changes in the economy than either newspapers or magazines.
Some private label gains in a downturn also turn out to be "permanent," while companies increasing adspend in a slump generally "experienced higher sales, market share, or earnings during or after the recession."

WARC Online subscribers can read more on Gerard J. Tellis's study by clicking here.

A full version of this analysis will also be published in the Journal of Advertising Research, more details of which can be found here.

Data sourced from WARC Online