Brokerages Narrow Ad Focus as Budgets Plummet by 35%
Ackermann, Matt, American Banker
Brokerage firms focused on targeted, specific advertising last year as they continued to slash their television and print ad budgets.
The brokerage industry spent $268.5 million on advertising in 2003, down 35% from 2002, according to Competitrack Inc., a New York firm that monitors television, newspaper, and magazine advertisements. It was the third consecutive year the industry cut ad spending (it fell nearly 20% between 2003 and 2002).
More than half of the top 10 brokers reduced ad spending last year, and spending by the top 50 as a group fell 35% to $259.1 million.
As a whole, the industry spent $134.3 million on TV advertising, down 40% from 2002, and $134.2 million on print ads, down 28%.
Industry insiders and analysts say that when equity markets are falling, it is important to analyze where and how brokers' ad dollars are spent. For instance, though the industry pulled back significantly from TV and most print mediums, advertising in trade publications held relatively steady at $17.9 million last year, according to Competitrack.
Beth Stelluto, the senior vice president of marketing and communications for Charles Schwab & Co., said Schwab and many other brokerage firms focused on "more specific advertising" in 2003.
"It was really about getting directly to consumers via print and online media to where we could generate responses," she said.
Schwab, the No.1 ad spender in both 2003 and 2002, spent $74.6 million last year, down 44%. (See table on page 13.) But even with the sharp budget cut, Ms. Stelluto said Schwab launched two successful ad campaigns in 2003 that were both focused on educating potential customers about specific products.
"We had to spend more specifically in 2003 to generate leads rather than to generate awareness about our firm," she said.
Dan Sondhelm, a partner at SunStar Inc., a financial marketing firm in Alexandria, Va., said many brokers cut traditional advertising spending last year, but did allot more money to other forms of marketing.
"Brokers have to communicate with their customers," he said. "They are spending more in other areas such as marketing, sales, online, and communications. They are being more creative in terms of client-retention strategies.
"Traditional ad spending is just one piece of the pie," he added. "In an up market it is a big piece of the pie, but it is still only a piece of the pie."
At Merrill Lynch & Co., advertising spending declined 44.9%, to $35.2 million in 2003. Nevertheless, the New York firm held onto the No. 2 spot for ad spending among brokerages. In January 2003, Merrill kicked off a major campaign to promote its new Total Merrill platform, a retail account designed to appeal to banking customers by offering cash management and mortgage services. …