Merrill Lynch Sees Ad Spend Rise in 2003

NEW YORK — Merrill Lynch issued a survey last week of 17 unnamed national advertisers that expects a rise of 4 percent in ad spending next year over 2002. No dollar figures were given. For 2003, 70 percent of respondents expect to increase their ad budget, 18 percent expect their budget to remain flat and only 12 percent expect their budget to decline. Seventy percent of respondents do not expect to exercise their cancellation options for their upfront commitments; all of the respondents use TV.

Also, Merrill found that a full 88 percent of respondents have either changed their agency compensation arrangement and/or are discussing it with their agency, largely because purchasing departments are reviewing vendor by vendor to gain efficiencies and establish benchmarking. Forty-seven percent of respondents set their ad budget as a percent of sales, 18 percent base their budget on volume forecasts, 12 percent based on corporate goals, and the rest based on a variety of metrics.

If budgets are not met, almost one third, 31 percent, said that they will cut spending to make budgets. By contrast, about one in five, 23 percent, said they might increase spending to stimulate sales. Corporate goals also impacted whether respondents would change their spending, as were market share and competitive issues.