Advertising Overview: Newspaper Rep Firms Give Their Forecasts for 1994

Article excerpt

WHILE MOST NEWSPAPER representation firms agree that 1994 will bring many chances to post gains from 19%, they say the opportunities will be in specific categories, rather than a general, overall improvement in advertising.

The following summaries give a comprehensive picture of what is expected in newspaper advertising in 1994. The three participants, Cresmer, Woodward, O'Mara & Ormsbee; Papert Companies, and Sawyer Ferguson Walker, based their predictions on their client lists, and the forecasts reflect the circulations, regions and markets of their clients.

Advertising categories not included by at least two firms were omitted. Newspapers First and Landon Associates did not present formal forecasts for 1994.

OVERVIEW

CWO&O: After two difficult years, newspapers are poised to mirror the growing economy and show improved profitability.

However, gains won't occur as a result of a booming economy or increases in advertising volume. Instead, improvement will come from efficiency measures that the industry has taken.

Despite the profusion of new products and technologies (audiotex, alternate delivery, database marketing, niche publications, on-line services), profits will be generated almost exclusively from the old reliables of full-run run-of-press, classified and preprints.

Setbacks might occur if newspaper executives are reluctant to continue experimentation and investment in programs that are struggling but critical to the industry's diversification and future success.

While 1994 will be a better year overall than 1993, major difficulties remain. Competition is closing in from all directions and the fundamental problem of commanding the attention of a generation that has been raised on television hasn't been solved.

Papert: The economic rebound that many anticipated in the latter half of 1992 and into 1993 has not developed. There is good news in some regions, but others are still in recession, and it isn't likely that there will be much change in 1994.

Some factors will contribute to a brighter 1994. Corporate restructuring is allowing companies to emerge from bankruptcy with less debt and with a proper deployment of resources, which will help in an increasingly global environment.

Increased trade, easing of trade restrictions and continued low interest rates will combine to stimulate growth.

However, retroactive taxes and a nationwide health care program may create huge hurdles for a growing economy, and too many details aren't clear. The picture probably won't be clear until next fall.

SFW: Many people still are waiting for the economy to take off and for businesses to bounce back the way that they usually do after a recession, but the economy has grown at a slow pace since spring 1991. The recent federal budget law will mean higher taxes and somewhat slower growth; however, the economy's current momentum will be enough to keep it growing through 1994.

There will be major regional variations. The Mountain states will boom, and the Southwest generally will be healthy as will the Midwest and South. However, the Pacific Northwest, California and parts of the Northeast will lag behind the national economy.

Newspapers will continue to ensure that they benefit from the emerging interactive services market, aligning themselves with cable and on-line computer companies. Joint ventures are being formed between newspapers and regional telephone companies, though these ventures are in the experimental stage. Whether they someday will cannibalize newspapers, serve as a companion to them or never become more than a niche market is not yet known. Also undetermined is whether they will be advertiser- or subscriber-supported or if they will be financially viable at all, but it is beneficial for newspapers to get involved with these ventures.

Classified advertising revenue will grow 4% to 5% from the 1993 level. Retail advertising will gain 2.5% to 3.5% as shoppers remain sensitive to prices. The advertising-to-sales ratios at the top 25 U.S. retailers will continue to decline. Newspapers' share of retail budgets will remain under pressure as retailers continue to reallocate budgets to other media.

National ROP ad revenue, the only component of newspaper advertising not to gain in 1993, will gain 2% amid stiff national competition among television, cable and magazines.

Ongoing problems include the national/retail rate differential, difficulty in implementing a multimarket newspaper buy and perceptions that newspapers are not as effective as television or magazines. Hopefully, the impending Newspaper Association of America system will alleviate some of these problems. Bright spots are domestic automotive and financial advertising and travel categories, such as cruise lines, hotels and resorts.

ALCOHOL

CWO&O: Not a positive overall outlook. Localized event-marketing and value-added programs may be successful in drawing some alcohol advertising dollars. Otherwise, with the exception of new product introductions or price promotions, newspapers' role will be minimal.

The top beer advertiser in 1994 likely will be Anheuser Busch with its new Iced Beer. Newspaper support for this brand should result in increased expenditures.

Miller is showing an increased interest in the Hispanic market and will direct funds to publications targeting that audience.

Though Coors occasionally uses newspapers as a couponing vehicle, recent ads have been placed through Valassis.

Individual Seagrams projects may include limited ROP in select markets, but spending again will be limited in 1994.

Scheifflein & Somerset business once enjoyed from Johnnie Walker and Tanqueray will not be repeated.

Paperr: Alcohol ad spending in newspapers will be flat in 1994 because most distillers and distributors are doing no more than trying to maintain share in a declining market. When there is advertising, the key variables influencing the decision will be location, product, price and consumer profit. Local influence can make a difference.

SFW: Alcohol ad spending will drop 2%. Consumption continues to diminish and along with it, advertising funds. Available funds are being placed into the outdoor medium. Regional funding is focused on point of purchase.

Brown-Forman most likely will give the Early Times, Canadian Mist and Jack Daniels brands some newspaper support in control states but to a lesser degree than in 1993. 1994 budgets have not been fully established, but there is an indication that there may be slightly more invested in outdoor.

The budget for the Jim Beam brand continues to diminish as liquor sales drop. Magazines are the medium of choice for national buys. ROP will be utilized in select control states, and outdoor is becoming a larger player in Jim Beam's plans. No ROP is planned, but some regional budgets/nay use it on an ad hoc basis.

E&J Gallo Wines/Bartles & James Wine Coolers will be couponing in FSIs, not ROP, in 1994. Their Sunday magazine schedule has been suspended and these dollars likely will be committed to network TV.

Seagrams' budget again has been reduced. Magazines and outdoor are the media planned nationally. ROP has not been planned, but if utilized, it will be regional in nature and primarily/in control states. ROP is used on an ad hoc basis, and there is increasing focus on point of purchase.

AUTOMOTIVE

CWO&O: Automotive is another category that has experienced fullscale erosion of national rate business. Though the tactical nature of car advertising hinders accurate forecasting, rate concessions by the newspaper industry should result in a volume increase in 1994. Revenue gains are less certain, but if factory dollars can be won back from other media, good news should follow for newspapers in the next few years.

The automobile category is being targeted by a number of national and regional newspaper networks. Some companies and dealer groups have responded favorably to the opportunity to make reduced-rate, all-encompassing newspaper buys with the convenience of one order/one bill. The longterm success of these networks is unclear, but their appeal is unquestionable to a newspaper industry that hopes to recapture the sizable factory expenditures now devoted to broadcast.

Domestic factory newspaper schedules are determined by new model introductions, cash incentive programs, etc. Factory sales of car models have little impact on newspaper schedules because the dollars allocated for media generally are not based on units sold.

Newspapers have at least two favorable opportunities in 1994 beyond new model introductions. Because of sharp variations in the auto tnix (with substantial gains in trucks and minivans), the need for local market support by the automotive factory plays into the strengths of newspapers as a medium.

The second factor is the growing trend toward leasing. Details of leasing and value pricing concepts will require legal explanation and extensive body copy that favors the print environment.

Chrysler has avoided newspapers because of their high CPMs, but an NAA proposal to capture factory dollars is under consideration.

Ford should show increased linage as will Lincoln-Mercury. Spending by General Motors should increase. Buick, Pontiac and Chevrolet continue to concentrate on auto shows. Cadillac and Oldsmobile both are launching new models, which may help newspapers.

Japanese imports are using regional marketing programs. This diminishes the role of the local dealer association, though individual dealers continue to contribute a percentage of the wholesale purchase price for advertising. The factory develops the creative work, affording more continuity to the advertising program.

European imports have had a year of agency switching. A struggling Japanese yen offers some hope in 1994, and a heavy emphasis on leasing will prevail. Newspaper schedules should remain steady and move slightly upward as the new agencies review their newspaper market depths.

Papert: Dealer associations will continue as the best source of new car advertising. Both Ford and Lincoln Mercury divisions use dealer associations for advertising in lieu of total factory-paid ads.

Newspapers are not in the media mix for any of the GM factory divisions. Buick, Chevrolet, Oldsmobile and Pontiac have a factory-paid auto show ad budget, although there's increasing evidence with Chevrolet that auto shows are limited to the very highest attended.

Honda will use newspaper advertising in 1994 when it fits strategically into marketing goals. Local leverage can have an impact. Mazda's agency anticipates budget increases down the road.

At Mitsubishi, the agency has not yet received a budget for newspapers but said newspaper advertising is heavily influenced by the need for support of leasing programs.

Once the economy begins to show signs of growth, auto wholesalers should increase advertising.

SFW: Domestic factory advertising should increase spending 1% to 2%. Domestic dealers association advertising should rise 2% to 4%. Factory import advertising will remain even, and import dealers association advertising will rise 2%.

In 1994, sales of U.S. cars and light trucks will reach 14.5 million to 15 million. That would be the biggest year since 1987. Improved quality and the slide of the dollar against the yen have helped the domestic auto market.

Imports, except BMW and Jaguar, have experienced a loss of market share. Impact accounts continue to be Lexus, Infiniti and Acura because all three continue to compete for the same upscale consumer leasing customers.

COMPUTERS

CWO&O: A proliferation of costcutting PC manufacturers has established the computer industry as a commodity/price-driven arena, with a net effect of plummeting hardware and software prices and elusive profits for manufacturers.

The bulk of national computer and peripheral advertising occurs in national business and computer magazines. Most newspaper activity from this category is placed by retailers utilizing co-op dollars or their own funds. Peripherals and PC manufacturers may place some national newspaper advertising this year, but increases from 1993 are unlikely.

SFW: Computer advertising in newspapers will remain even in 1994. In 1993, the category basically was dormant in the national arena, with manufacturer funds spent in co-op and retail advertising efforts. All other manufacturer dollars are being budgeted for computer and specialty business/trade publications, such as PC Week, Business Week and the Wall Street Journal, for target marketing purposes.

New products such as Apple's Newton will create a more favorable climate for print-related advertising. However, this more than likely will resuit in co-op ad dollars for retailers in individual markets after the initial introduction push. Newspapers will not see a dramatic increase in national programs but could in co-op/retail.

Canon Computer Systems will introduce a new product in the fourth quarter, and advertising spending will rise 25% to 43% from 1993 spending levels.

Epson and Hewlett-Packard will remain flat, IBM will be down 10%, and Intel and Lotus will run little or no newspaper advertising. Microsoft used newspapers for the first time in years during 1993, but agency personnel are in turmoil, which could indicate major changes at the ad agency for this account.

FINANCIAL

CWO&O: Because of a major windfall to mutual funds, brokerage houses and other investment service companies, financial advertisers have turned to newspapers to expand and promote many different products. Major-market papers have profited most so far, but more papers will benefit as the investment industry further seeks to expand its reach to mainstream America.

Expansion plans at Dreyfus will ensure its place as a major financial advertiser next year. Newspapers are used to support local offices and 100 new openings are planned by 1995. Investment seminars also are promoted in newspapers.

The Wall Street Journal, Barron's and other major financial publications will continue to carry the greater share of print activity for Fidelity Investments. Daily newspapers will continue to function as a source of building traffic through local Fidelity Investment Centers.

Vanguard is another consistent advertiser in major financial publications that also is testing newspapers in different parts of the country. In most financial companies, ad response is monitored closely via 800 numbers; newspapers that perform well receive regular schedules.

Franklin Fund continues to run small schedules in states where it offers tax-free municipal bond funds. In its home state of California, Franklin maintains a consistent presence in top metro papers. The bulk of its national advertising runs in national business publications such as the Journal. ActNity from this account should be unchanged in 1994.

Merrill Lynch will continue to use newspapers primarily, with TV and radio receiving secondary support. T. Rowe Price may increase newspaper spending if economic recovery warrants. Wells Fargo, Great Western Bank, Home Savings, Bank of America and World Savings will be fiat if not lower. First Nationwide Bank has shown some interest in Hispanic publications and zoned editions concentrating on local areas.

Papert: Financial advertising holds potential for growth in 1994, although mostly for top 10 and nationally distributed newspapers.

Fidelity Investments' 1993 newspaper budgets were up 50% from 1992. Newspapers should see a further increase in 1994, compared with Fidelity's overall budget, which is expected to be fiat.

Advertising for mutual funds and other nontraditional bank services (insurance, financial planning, asset management) is a potential source of bank linage in 1994, though not necessarily at the national rate.

SFW: Newspaper tinancial aclverttsing spending will improve 3% to 4%As the economy gains, growth and competition in credit cards and mutual funds should result in larger ad budgets.

American Express' spending will decrease by 2% despite the New Gold Card because the agency believes that newspapers are too expensive. Instead it will use radio. Charles Schwab Coast Federal, T. Rowe Price and Bank of America will stay at current advertising levels.

Newspaper advertising by Citicorp could post a 5% increase if the Citibank Visa promotion is successful. Dreyfus, Franklin Funds and Wells Fargo each will increase about 5%.

Advertising expenditures for the Resolution Trust Corp. will be about the same during the first six months but questions linger about the second half of the year. Spending could be down about 10% in 1994.

FOOD/HOUSEHOLD ITEMS

CWO&O: The food business is firmly in the hands of the FSI companies, and, with coupon prices falling, there's no reason to expect change. Broker and theme opportunities exist on a limited regional basis and slow-todevelop sampling business will continue to be pursued.

SFW: Food and packaged goods advertising will gain 1%. There will be a continuation of the trend away from ROP and toward FSIs. Coupon redemptions most likely will decrease, resulting in fewer promotional dollars being spent by the food giants.

The potential in the food category lies in locally generated programs (Best Brands, broker pages, themed ideas, etc.) These types of programs work, but timing and retail participanon is critical. Some markets have had great success; others have not fared as well. The bottom line is that extra revenue can be generated in this category through well-planned and timed local programs.

INSURANCE/HEALTH CARE

CWO&O: Regrettably, newspapers carry little insurance advertising except for disaster-relief announcements. Earthquakes, fires, riots, hurricanes and floods have spurred a windfall for papers in several recently stricken markets, but heavy image spending will continue in magazines and television.

Papert: The medical/health care category is in a state of "wait and see," pending federal legislation. Because of the Clinton administration's health care_reform proposals, insurance companies are in a state of flux as well. In preparation for this, 1994 should be an active year. Niche marketing seems to be the current insurance company trend, developing specialty business at a more rapid rate.

SFW: Newspaper insurance advertising will rise 1%. The biggest impact will be the go-vernment's initiative on health care and how that will affect the insurance providers. There could be major opportunities in corporate and, later, product advertising because newspapers offer the immediacy that will be needed when the health care proposals are finalized. There also will be regional opportunities through the various Blue Cross/Blue Shield state providers.

Newspaper ad spending by life insurance companies most likely will not grow. Direct mail continues to be a major vehicle for insurance advertisers, and telemarketing also is very strong.

Prudential has initiated some corporate advertising in the health care area, and Allstate, cut loose by Sears, will be able to do more regional advertising.

Health care and pharmaceutical advertising in newspapers should increase about 4%. Newspapers provide the immediacy to react to whatever health care initiatives the government is planning. There should be an increase in pharmaceutical prescription advertising to inform consumers that certain drugs, while expensive, are lifesaving. There also should be corporate advertising to announce mergers, such as Merck's with Medco, and Warner Lambert's arrangement with Glaxo and Burroughs, Wellcome.

TELECOMMUNICATIONS

CWO&O: If the past two years are any indication, newspapers will not play a large role for AT&T, MCI and Sprint. Less than 10% of the $378 million that AT&T spends in media goes to newspapers. Newspapers are used to attack competitors and introduce new services; buys rarely extend beyond the top paper in any 10 to 20 major markets.

AT&T's deep pockets and a highly competitive field should combine for an increase in 1994 newspaper expenditures. MCI's success and rapid growth will keep it a visible, influential advertiser, but little ROP is expected in 1994. Primarily, U.S. Sprint uses only USA Today and the Wall Street Journal regularly, and there's little reason to expect Sprint to give newspapers greater prominence in its 1994 media strategy.

In recent years, newspapers have seen a declining share of the Baby Bell dollars as many systems have shifted to outdoor advertising, Yellow Pages, direct mail and interactive market programs. The Baby Bells represent some potential, but 1994 most likely will not vary much from 1993.

Papert: In 1993, telecommunications ranked eighth in advertising expenditures, spending $29.1 million with newspapers. The industry is changing so fast that experts can't predict what it will look like in two years. However, two things are certain: prices for telecommunications will come down and types of services available will grow and grow.

SFW: This category will increase 2%. Increased competition and new product introduction should mean that companies will be advertising more to tout their competitive advantage. Historically, AT&T, MCI, Sprint and the regional Baby Bells have spent most of their budgets in broadcast, but some of the new products will be very complicated and will be a natural for print.

AT&T will increase newspaper spending 6%. The Baby Bells believe that cellular services will be strong, and that's good for newspapers. MCI will have virtually no newspaper impact. Sprint will run some international and business service ads, and more products should mean 5% growth.

TOBACCO

CWO&O: Tobacco companies have directed the bulk of their advertising budgets to magazines and outdoor advertising. The one bright spot in 1993 occurred when Philip Morris ran two full pages in practically every U.S. newspaper for Marlboro's "Get the Gear" promotion. An additional ad focusing on winter events is anticipated. Consideration also is being given to a targeted newspaper effort supporting a new discount brand, Basic.

With no plans for brand advertising in 1994, R.J. Reynolds will use daily newspapers only for event support. RJR does have a print budget for alternative weekly publications.

Papert: The tobacco industry will continue to use newspapers as it has in the past: to test products, introduce merchandise promotions and promote locally to support strong brand loyalty.

RJR has announced that it will cut up to $700 million in advertising costs in 1994. The company faces a $900 million drop in profits because of tobacco price wars in 1993.

Tobacco companies will continue to compete on price, therefore they should maintain their advertising at 1993 levels. With Philip Morris promoting Marlboro and its new lower retail price, hopefully, Winston and Camel will respond.

SFW: Ad spending will drop 5% because ads have become a casualty of the price war among the major tobacco manufacturers. The industry could be in for a tremendous hit if the Clinton administration can push through its health plan next year and raise "sin taxes" on tobacco.

The industry's lower prices do not permit the same level Of product promotions that have been sustained in the past; there will be cuts in the measured media in 1994.

American Tobacco will use newspapers only for strategic purposes, such as line extensions and/or new brands. The Liggett Group does not anticipate any major newspaper activity in 1994. Philip Morris and RJR will be very quiet in 1994, except for any new brands or extensions.

TRAVEL

CWO&O: After nearly two years of record domestic losses, American Airlines, United Airlines and Delta all turned quarterly profits in 1993 and are cautiously optimistic about a return to consistent profitability in 1994. This alone should increase advertising expenditures. However, the domestic carriers have learned that they must take a more strategic approach to marketing. Most have abandoned the "systemwide" advertising support plan in favor of targeted efforts in their key cities. For some carriers, that's eight markets; for others, 20. The result is virtually no advertising outside the top 20 U.S. markets by the majority of established carriers. Newspapers in those key markets, however, should expect growth from the category in 1994.

The newest opportunities for U.S. newspapers lay with the various niche and regional airlines, such as Southwest, Kiwi, Morris, Reno and others. As this segment grows, competition will mandate more advertising. Market-specific fares, in turn, will dictate newspapers as the medium.

International advertising will continue to play a limited role in the U.S. advertising scene; it will be flat and limited to a few major gateway cities.

Overall in the category, top newspapers in major markets will do best, but if a fare war breaks out, there could be widespread gains.

Though frequently used for image and early booking campaigns, newspapers continue to rank as the cruise industry's most powerful marketing tools to fill discounted ships. This scenario benefits newspapers today but raises concern that cruise ad revenue will evolve in a manner similar to that of airlines.

Newspapers will continue to garner nearly half of cruise advertising dollars. Carnival Cruise Lines is the largest cruise industry supporter of newspapers. New ships and new markets will help the company grow, and newspapers will continue to play a major role for package price promotions.

Though national-rate business remains at risk because of increased coop partnerships, overall newspaper volume should increase in 1994.

Also, increased cabin capacity, new ships and expanding markets bode well for newspaper advertising from Royal Caribbean Cruise Lines, HollandAmerica, Norwegian Cruise Line, Princess Cruises and others.

Hotels are another travel category well matched both demographically and editorially with newspapers. Intense competition in the industry because of oversupply and a soft economy will necessitate heavy ad spending as individual companies battle for discriminating leisure and travel dollars. Hotels and resorts remain a category with growth potential and newspapers should see an increase in 1994 spending.

Though limited to top papers in major markets, Marriott is a steady newspaper advertiser and should maintain its pace in 1994. Hilton recently has shifted a bulk of its advertising to television, but preliminary plans call for an increase in newspaper spending, pending client approval. Holiday Inn does national campaigns in USA Today. Limited regional and local funds will be available to newspapers as well. Radisson is growing, and that will ensure a consistent level of newspaper ad spending. Ritz Carlton ad spending will mirror that in 1993, and Hyatt is expected to continue to spend primarily in its top four markets.

Papert: Image campaigns for the airlines could play a big role in all media, including newspapers, in 1994. The majority of airline ad spending will continue to be market-by-market price-oriented campaigns, in which a specific airline is competing against another on a certain route.

For cruise ship advertising, Carnival is negotiating with Wait Disney Co. to become "The Official Cruise Line of Disney World," which would lead to heavy advertising in the family market. Also, American Family Cruises is going to have a major impact on the cruise industry.

SFW: Airline advertising will remain even to plus 1%. Any airline advertising in newspapers is the result of low load factors, new routes, increased frequency, availability, etc. Mainly, newspapers are a sales promotion vehicle, not a long-range marketing partner for airlines and their agencies. Preliminary findings indicate that airline advertising will continue to show strength because of predictable fare wars and an improving economy.

Newspaper ad spending will remain the same at Air Canada, Alaska Airlines, British Airways and Continental. Spending is expected to dip slightly at American and USAir. Increased spending is expected at Reno, TWA and United.

Cruise line advertising will rise 2% in 1994. In the past, newspapers have been an effective medium for securing last-minute bookings. Because of the advance purchase programs, there may be fewer "fire sale" ads. However, newspapers should benefit because cruise lines need to promote and detail new pricing programs.

One standout will be a new cruise line, American Family Cruises; newspapers will be important to promote this brand. Another bright spot will be Costa Cruises, which ran no consumer advertising in 1992 and 1993. Newspapers are expected to be an important medium for this line in 1994.

Carnival Cruise Line, Princess Cruises and Royal Cruise Line will be flat. American Hawaii Cruise Line will drop about 20% because of a shift to more image ads and more ads directed at increasing calls to receive their brochure.

Hotels tend to have two budgets. One is corporate and is controlled by headquarters. The local budget is controlled locally and generally uses a local advertising agency. The corporate budgets tend to spend in newspapers in their top 20 markets. There still is a surplus of hotel rooms and it still is an extremely competitive industry. The category will be up 2% to 4%.

UTILITIES/GAS & OIL

CWO&O: Gas and oil companies are heavily into broadcast and sports sponsorship, with newspapers used only on occasion for new product announcements. Texaco, Mobil, Shell, Chevron, Exxon and others are expecting little this year in the way of new products. The minimal amount of advertising that this category produces for newspapers will be off in 1994.

Papert: There will be little change from 1993. Shell has indicated some "proactive/new" possibilities. The biggest criticism of newspaper advertising in market plans is cost. The emphasis on change/enhancement is related to better "price deals."

SFW: This category will be down 2% because of limited new products and cutbacks in research and develop| ment. Promotions and sponsorship of such events as hydroplane boat racing and NASCAR racing offer regional possibilities. More control will be wielded by regional managers in terms of the impromptu kind of advertising that newspapers may receive in 1994.

No newspaper advertising is planned by Amoco and Shell. Chevron's newspaper advertising will be down, and Texaco has no increases planned though it may do more regional advertising. Mobil has limited op-ed advertising in selected markets.

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