Advertising Still Feeling The Pinch From Recession

Advertising Still Feeling The Pinch From Recession: Myob Business Monitor

The end of the recession has not brought a great deal of relief for the advertising industry, as 20% of Kiwi firms continued to cut their marketing budgets over the last 6 months, according to the latest MYOB Business Monitor.

The MYOB Business Monitor is a nationwide survey of over 1,000 New Zealand business owners, across a range of small and medium businesses, from sole traders to mid-sized companies, and representing the major industry sectors. The MYOB Business Monitor is designed to research key areas of business performance, including profitability, cash flow and pipeline work, as well as business confidence.

According to the April MYOB Monitor, released today, only 12% 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% of all firms decreasing their spend in the six months to March 2010, followed by Auckland at 19% and Wellington at 16%.

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, as 17% increased their advertising and marketing budget in the last six months.

Corresponding with a strong decrease in profitability over the last 12 months – with 49% 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%), followed by the Manufacturing and Wholesale sector (28%) and Retail and Hospitality (26%).

MYOB New Zealand general manager Julian Smith says the trend is a concerning one, not just for the advertising sector but also 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,” says Julian Smith.

“What we are seeing currently is businesses trying to do more with less money, and that won’t be sustainable.”

According to the Monitor, 23% of all Kiwi businesses increased their activity in new markets over the last six months, while 25% increased the variety of products and services they offer.

Mr Smith says although significantly more businesses are cutting marketing budgets than increasing them, the advertising industry can take heart from some of the results in the MYOB Business Monitor.

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

The MYOB April Business Monitor, conducted by Colmar Brunton, surveyed a national sample of 1006 New Zealand business owners and directors in March 2010.

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