Monday, March 23, 2009

The Trade Promo Stimulus Act of 2009

There was an article in Brandweek last week advocating a stimulus plan for advertising:
The government's stimulus plan won't work as planned if we don't get consumers spending again. But in the nearly $800 billion package, there is one thing missing that would surely help accomplish this: advertising. To get people spending again, and the economy moving, the government needs to provide help for businesses in America to advertise their products and services.
The author says that companies should receive a tax credit for advertising.

I will admit that when I read the article, my first inclination was to make fun of it. After all, it seems everybody is jumping on the bandwagon (perhaps I should say “gravytrain” instead) and asking for some of the taxpayers’ money.

But there is at least some merit in the idea. It is a proven fact that maintaining advertising in a recession has positive effects for a company (I wrote an article almost a year ago for the Journal of Trading Partner Practices, "The Importance of Recession Marketing Remains Constant through Time", summarizing results of studies on recessions from 1921 through 2001).

The problem is that the positive effects of advertising are not always immediate. Though some of the studies indicate that companies that maintain their advertising do better during the recession, most of the effects are seen when recovery comes. The point of a stimulus package is to stimulate now, right? So what form of promotion is it that has an immediate sales effect? Trade promo, of course: co-op/mdf, TPRs, end caps – all are intended to drive immediate incremental sales. So suppliers should receive tax credits to encourage them to spend more on trade promo.

But that isn’t all. We know that not all promotions are successful. There are some great analytics and forecasting tools out there that will help suppliers and retailers choose better which promotions will work. But unfortunately, many suppliers have not yet purchased and implemented such tools and, because of budget cuts, cannot do so now. Since the government wants their stimulus money spent effectively, it makes sense that they should subsidize the purchase and implementation of the best available trade promotion forecasting tools, which will then assist suppliers and retailers in designing promotions that will drive greatly increased sales and therefore save the economy and the country.

That’s OK, you can thank me later. Well, actually, when this bill passes, I expect something a bit more substantive than a “thank you” from Oracle, SAP, DemandTec and the others who would be the principal beneficiaries. I prefer cash – it stimulates my bank account.

Just in case you’re wondering – no, I’m not serious. Though I do think it makes better sense than subsidizing advertising. Come to think of it, it makes more sense than a lot of the stuff I’ve heard.

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