Marcomms sector continues to shiver in economic climate

New Zealand’s marketing and advertising sector continues to feel the effects of the Great Recession, with the latest results from the MYOB Business Monitor survey showing 20 percent of Kiwi firms have cut their marketing budgets over the last six months.

According to the April edition of the Monitor, a nationwide survey of over 1,000 New Zealand business owners and directors which is designed to research key areas of business performance, including profitability, cash flow, pipeline work and business confidence, only 12 percent of businesses across the country increased their advertising and marketing spend in the last six months.

In the main centres, the fall in advertising investment was most marked in Christchurch, with 28 percent of all firms decreasing their spend in the six months to March 2010, followed by Auckland at 19 percent and Wellington at 16 percent.

Almost a third of all larger enterprises (20 – 199 employees) reduced their advertising spend over the period, with mid-sized businesses (5 – 19 employees) the most confident in their spending, with 17 percent increasing their advertising and marketing budget.

Corresponding with a strong decrease in profitability over the last 12 months – with 49 percent of all businesses in the sector reporting a fall in profits – the construction and trades industry showed the largest percentage of businesses decreasing their advertising spend (29 percent), followed by the manufacturing and wholesale sector (28 percent) and retail and hospitality (26 percent).

MYOB New Zealand general manager Julian Smith says the trend is a concerning one, not just for the marketing and advertising sector but for the wider economy.

“The experience of previous downturns has proven that businesses that continue to market and advertise effectively through a recession, tend to emerge in a stronger position in a recovery,” he says. “What we are seeing currently is businesses trying to do more with less money, and that won’t be sustainable.”

But it’s not all bad news: according to the survey, which was conducted by Colmar Brunton, 23 percent of all Kiwi businesses increased their activity in new markets over the last six months, while 25 percent increased the variety of products and services they offer. And, although significantly more businesses are cutting marketing budgets than increasing them, he says the advertising industry can take heart from some of the results.

“Though there is a fair bit of volatility in this part of the market, the firms with the largest revenue – those earning over $5 million per annum – show more companies increasing budgets (28 percent) than those decreasing them (25 percent). Business owners who are under-40 are also slightly more likely to increase their advertising budget than cut it.”

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