In War, Will Buyers Beware?

Clearly, recession-weary Americans, facing the current conflict with Iraq, have more complicated fears than they did during the Gulf War. The country is only too aware that unlike in 1991, when the battle was viewed from a safe distance on CNN, this is one confrontation that could explode at any time on U.S. soil.

Less certain, however, is just how that unprecedented anxiety will impact consumer spending, which, during the past 12-18 months, has helped keep the economy from sliding into an even greater decline.

“Now, people have worries about terrorism coupled with, ‘Am I going to lose my job?’ coupled with, ‘Am I going to have enough money to retire?’ ” observed Tony Wright, chief strategy and planning officer, Ogilvy & Mather North America. “But you have to be very cautious about cause and effect when you’re looking at this. Everyday items still drive 80-90 percent of the advertising business. You can make the argument that brands instill a sense of normalcy. People feel they can’t control what happens in the UN Security Council, but they can control things like buying diapers to take care of a child or spending time with friends over a beer.”

How marketers deal with that uncertainty depends greatly on the severity and duration of the Iraqi conflict. Marketers’ responses to current events tend to be tactical and short-term. With the ad industry seemingly on the road to recovery, many advertisers might want to be on the air now. If the major networks go to commercial-free coverage in the early stages of battle, the price of TV avails might even increase.

Ogilvy developed three possible communications responses based on war scenarios defined by the Center for Strategic and International Studies in Washington (see chart below). A “benign” scenario is based on an early, successful attack with no effect on Iraqi oilfields. An “intermediate” scenario would involve military and civilian casualties, major battles that go on for at least six months, and consumer confidence dropping to very low levels, with panic buying and hoarding. The “worst” case expects an Iraqi invasion to be met with resistance, stock markets dropping sharply, a decline in housing prices, a collapse in consumer confidence, rising unemployment and higher oil prices—with the latter, combined with the recession, causing sharply reduced demand by the end of the second quarter.

Some observers think they are already seeing indications of consumers’ intent to cut back. According to a Universal McCann survey conducted just over a week ago, respondents will spend less on discretionary purchases that include going to the movies and eating at fast-food restaurants. Not surprisingly, 33 percent of those surveyed said that now is a bad time to fly, and 30 percent said they felt that way about taking a vacation.

“War fears and … uncertainty about the economy are impacting people’s spending patterns,” said Jon Swallen, UM director of media knowledge. “Not only are they cutting back on big-ticket purchases, they’re also spending less on inexpensive entertainment.”

Further complicating matters is the rising price of gasoline, which could move even higher depending on how the conflict develops. NPD Group conducted a survey during the first week in March in which nearly a third of those queried said they are being “very careful” in their discretionary spending. Respondents blamed soaring gasoline prices more than they did impending war.

Consumer attitudes toward the media and TV commercials also appear to be more cautious. In a study released last week, MediaVest USA found that in these difficult times, consumers are not seeking an escape to mindless frivolity. Nearly 67 percent of those surveyed said they will not watch reality TV shows during a war, compared to 16 percent for family shows, 28 percent for sitcoms and 29 percent for dramas. Similarly, respondents showed they do not want to see frivolity in commercials either, with 60 percent giving a thumbs down to humorous spots in the early hours and days of war.

Another reason why consumers might be less inclined to watch reality programming during a conflict is that it often requires weekly viewer interaction, so a change in regular programming due to war coverage could disrupt that. (For example, people might not be able to vote for their favorites on shows such as American Idol.) And according to the MediaVest survey, 67 percent of consumers will pay significantly more attention to the news, with younger audiences and women making up a large part of that number.

Laura Desmond, CEO of MediaVest USA, said marketers need to navigate the media landscape carefully rather than retool advertising. “I don’t think this is a creative issue,” she said. “Many of the ads have already been made, and advertisers are limited in what they can do. It’s more about managing and adjusting their media schedules to be sensitive to what programmers are doing and to what viewers want.” —NOREEN O’LEARY