Survey: Marketers To Slash Ad Spending, Focus On Buzz

by Erik Sass, Feb 22, 2006, 8:30 AM

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A survey the 2006 marketing spending plans of top business executives forecasts an almost 10 percent drop in the portion of marketing budgets allocated to traditional advertising in comparison with 2005. Most of the shift will go to new media and alternative marketing strategies such as word-of-mouth.

In 2005, according to Blackfriars' principal Carl Howe, companies allocated about 31 percent to traditional advertising, but this number will fall to 22 percent in 2006.

The report, titled "Marketing 2006: 2006's Timid Start," to be released by Blackfriars Communications on March 1st, cites execs' dissatisfaction with existing marketing returns as a major cause for their reallocating budgets away from "traditional" marketing techniques like advertising to "non-traditional" approaches including "word of mouth, buzz marketing, and viral marketing."

According to the same report, those "non-traditional" approaches are expected to see a further increase in their share of overall marketing budgets over previous years. "At the end of fourth quarter 2004, non-traditional spending was 8 percent of the overall budget," Howe recalled. "At the end of fourth quarter 2005 it was 14.5 percent--so it almost doubled in a year."

Blackfriars projects a 13 percent increase in overall marketing spending in 2006; this absolute increase might mitigate the large percentage fall in traditional ad budgets somewhat, but the shift from traditional to non-traditional approaches is still ominous for old-school advertisers.

Blackfriars' 2006 report marks the first time these "non-traditional" approaches have been measured in its annual analysis and forecast, out of recognition of their growing popularity among execs. Howe emphasized that the interviewees were not marketing executives, but "business executives of all flavors. These are owners, directors, senior VPs." Howe agreed with a characterization of the interviewees as "decision-makers," as opposed to marketing executives who have an incentive to put their own spin on budget numbers.

Speaking of the decline in traditional advertising dollars over 2005, Howe remarked: "We were tracking it for a while, and we watched it descend all year. The first time we saw it we thought it could be statistical variation--but it's not. It's large enough, and consistent enough, to be a major trend showing a big shift away from traditional advertising spending."

Howe also detailed a major difference in reported dissatisfaction between executives whose companies measured marketing results--for example, using click-through and impression rates in Web advertising--versus those who didn't. Executives whose companies measured results showed a 13 percent dissatisfaction rate, versus a 37 percent dissatisfaction rate for those who didn't.

Curiously, Howe pointed out that many of the increasingly popular "non-traditional" methods like buzz and word of mouth are not easily measured; he attributed their growing percentage of overall marketing budgets to an "experimental" attitude among business leadership.

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