Cutting Credit Card Ads May Be Priceless

As recession-weary consumers are swearing off their credit cards, credit card brands are swearing off advertising.Measured media spending fell nearly 50 percent for the category in the first five months of 2009 versus the same period last year. That’s the largest decrease of the 50 highest ad-spending groups. Not even the beleaguered auto industry matched that rate. Advertising spending for light trucks and vans was down 40 percent (though spending by dealerships, a smaller category, fell more). Why? Ed Kountz, senior analyst of e-business and channel strategy at Forrester Research, said the credit card industry has been hit with a “perfect storm” of recession-related factors including decreased consumer spending, higher default rates and the increasing use of debit cards and cash. These factors hurt revenues and led companies to cut expenses. Marketing budgets were likely hit hard because a company “can only cut so much from operations,” he said.Joanna Lambert, a rep for American Express, said the company, which logged a 76.5 percent drop in ad spend during the first five months of the year, pulled expenses from many departments in order to set aside funds that will cushion the blow of defaulted debts. Luckily for American Express, competitors like Visa, Discover and MasterCard have also slashed their spending at comparable rates. Al Ries, chairman of Ries and Ries, a marketing consulting group, said if all credit card companies cut back on advertising, as they are now, “market shares won’t change an iota.” He added that marketing is relative in that it’s about what rival companies are doing. If everyone is advertising the same amount, nobody gains a competitive edge. Ries also said that a decline in marketing for a credit card company is different from an advertising absence for other categories. Credit cards are in a customer’s pocket and he or she looks at it everyday when making purchases. Other products could be “out of sight, out of mind,” but because of a card’s prevalence in a person’s life, it is “making a visual impression on you.”As the economy seems to be bouncing back, though, some of the credit card companies appear ready to increase ad spending once again. A MasterCard rep said that although overall ad spend will be lower this year than in 2008, it expects to spend substantially more on marketing during the second half of 2009 than it spent in the first. American Express is also stepping up its game [see sidebar]. The brand launched a TV spot featuring small business owners that highlights their ability to drive the economy. The spot, which is the company’s first brand advertising of 2009, is an indication that “we’re getting through the worst here,” Kountz said. AmEx’s Lambert said there were fewer defaulters than expected for the second quarter. Lambert said that if this trend continues, American Express would transfer provisions from the write-off fund into marketing.

Brand Marketing

Cutting Credit Card Ads May Be Priceless

Elana Glowatz

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Elana Glowatz