Recession chokes advertising industry in Puerto Rico.

Total 2008 ad investment expected to reach $767.4 million in real dollars; ad execs blame politics for economic woes; few bright spots offer relief.

“Advertising in a Recession” was the title of a panel discussion held during the early 1980s, when oil prices drove interest rates to more than 20%. Just like today, advertising executives reinforced the time-tested strategy that those marketers who continue to support their brands through stormy weather, bounce back more quickly-and with a bigger share of the market-when the sun comes out.

Twenty-five years ago, the discussion revolved around brand advertising vs. promotions, recalled Jorge Rodríguez, JWT Puerto Rico president. “If we had that panel today, it would be a much more complex discussion. Today we have come to realize that everything constructs the brand: below the line (BTL), above the line, no matter how you do it, everything builds the brand.” In advertising jargon, “below the line” refers to promotions, events and marketing tactics while “above the line” takes in TV and radio spots, newspaper and magazine ads and billboards.

“The reflex reaction of marketers nowadays when facing an adverse economic situation is to cut the advertising budget,” said Erasto Freytes, president of Badillo Nazca Saatchi & Saatchi. “Consumers don’t stop shopping altogether during tough times, they just shop more judiciously. Those who advertise in difficult times take advantage of their competitors who reduce or eliminate their advertising altogether since their brands, products or services will have a greater presence in the minds of consumers, and the emotional ties between the consumer and the brand will have strengthened.”

At the end of April, package goods giant Reckitt Benckiser reported sales jumped 11% in the first quarter of 2008. CEO Bart Becht credited the growth to high levels of advertising and promotion dollars invested in its brands which include Lysol, Airwick and Clearasil. Advertising Age headlined the story: “Reckitt says heavy ad spending paid off in spades; sales, profits soar in first quarter behind increased marketing outlay.”

Freytes said, “It has been proven that those companies that have maintained or increased their advertising investment in difficult times are those whose sales and market share increase during and after an economic crisis or recessionary period.” He cited a 1982 study by Cahners Publishing and the Strategic Planning Institute from Cambridge, Mass., showing companies that increased advertising during a recession increased their market share by an average of 1.5%. “Failure to support a brand in moments of economic recession can throw overboard what took many years to build,” he added.

During the first recession, in the mid 1970s, the defunct Housing Investment Bank was stuck with more than a billion dollars of housing to sell, a staggering amount at a time when real estate was not moving. The bank, a subsidiary of Chase, hired the fledgling Lopito Ileana & Howie (LIH) to create a campaign to sell the projects. At the time, the agency came up with new solutions by renaming the housing developments and selling an experience, offering attractive prizes with the purchase as part of the strategy, explained José Luis Álvarez, chief operating officer of LIH. At the end, their promotional efforts helped to sell more than a billion dollars in real estate, he said.

“Our times require more creative ideas to lower the risk factor and to bring confidence to consumers to make them receptive to what the advertising is offering,” Álvarez said. He suggests using a multitask approach because of the multitude of offers received through the same communications channels.

“The challenge remains the same: get effectively in touch with consumers,” said Carlos Carbonell, Y&R president. “What changes is the way in which they consume media, and so we keep learning how to exploit the new touch points. The Olympics always offers great opportunities for promotional tie-ins and for showcasing creative work.”

“Promotions are more engaging-if done right, the essence of the brand will be there,” said Rodríguez. He recalls in the ’80s how Pepsi built the brand to be No. 1 in its category, based on innovative promotions.

ERC Integrated Communications has bolstered its promotions by reorganizing the agency to provide clients with a variety of options. Promotion partner Intacto is up and running and the agency has enlisted the services of Media wit, part of Aegis Group’s Carat, the largest independent media network in the world, to offer clients a better deal on media placement.

“You can see we are putting together a lot of time for having an experience with the consumer, to have two-way communication all of the time,” said Elliott Ramírez, ERC president. The business is more sophisticated, more targeted. You have to be able to identify the consumer and talk to him in the way he wants to hear from you.”

“Nowadays, you can’t just talk to people, you have to become part of what they are and what they do,” Rodríguez said. And this has to be done without making them feel you’re trying to sell them something, he added.

New business helps agencies to grow in any weather. You have to keep in mind that at the end of each year, one of your accounts will no longer be with the agency, said René de la Cruz, CEO of de la Cruz & Associates. So always be fishing for new business.

“Be positive,” said Carlos García of Sajo García & Partners, president of the Association of Puerto Rico Advertising Agencies (AAPPR, by its Spanish acronym). Attitude is very important.
“Tough times are tough times,” said Ramiro Millán, president of BBDO Puerto Rico. “You have to be very creative in cutting costs. You have to reduce everything. We started reducing costs two to three years ago.” That included reducing personnel drastically, from 85 employees to 60, he said.

During this recession, agency heads have become experts on cost-control measures. “At this point we’ve become experts in energy efficiency,” de la Cruz said.

“It is critical that the communications industry, media, agencies and clients work together to find solutions that will fuel stability and growth,” said Carmen Cedré, president of DraftFCB. “Our goal as an agency is to keep our brands relevant in the consumer’s mind to win at the point of sale.”

Millán believes the U.S. will pull out of its recession, and so will Puerto Rico. “This is temporary stuff,” he said. “Those who make it through the storm will be stronger in the near future.”

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BY LORELEI ALBANESE

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