While major U.S. corporations have put the freeze on hiring and spending, there’s one category in which they are actively increasing their costs: Advertising.
To understand why, we look to Rance Crain in AdAge, who says big companies cut back on everything but ad spending last year.
“According to Kantar Media, the biggest marketers boosted spending 3.3%, while smaller advertisers cut ad budgets 6.6%,” says Crain.
For some companies, Crain postulates, the additional advertising helps them stay one step ahead of the competition in the marketplace, rather than investing in relatively expensive research and development as a way to innovate.
For others, it’s about rebuilding consumer confidence and trust that’s been eroding in the early part of this century.
“If consumers understand that companies are enjoying record profits (and in many cases record stock prices), while putting a freeze on hiring, corporations might want to depict themselves as sharing the values of their customers,” explains Crain.
He cites Marc de Swaan Aarons of Effective Brands when he says “It’s harder to get angry at companies that stand for what their consumers care about.”
And with technology gradually replacing workers in many industries – particularly the automobile and airline sectors – advertising helps companies still look and sound like they are “putting America back to work” while investing in technology acquisition and the hires that go with them, rather than traditional jobs in those fields.
Crain notes “…if you’re building fewer cars and flying to fewer places — and making more money than ever — you obviously don’t need to hire any new people. But by all means keep spending more on advertising so customers know that your heart’s in the right place.”
It’s a rather cynical view, but has some validity. Consumer confidence in these massive U.S. brands has been shaken, but we need to understand that with change comes new opportunity, and ultimately this is how these companies can truly regain our trust.