Late last year, DaimlerChrysler projected a flat 2001 advertising budget.
Chrysler marketing chief Bud Liebler said in December that the total could vary 'plus or minus 5 percent' from last year's expenditures, estimated at $1.5 billion.
By Feb. 1, Daimler-Chrysler CEO Dieter Zetsche had announced sweeping cutbacks to stem red ink at the Chrysler group. And Liebler's language had changed. Hang onto the 'minus,' and make that 10 instead of 5.
'Our spending will now be down more like 10 percent from 2000 levels given the budget cuts and current environment,' said Liebler, the senior vice president for global brand marketing. He gave no hints of where those cuts might be.
Trimming ad expenditures when sales slide is typical, said Joel Whalen, associate professor of marketing in the business school at DePaul University in Chicago. When finance and accounting people are involved, they often make that kind of decision, he said.
'They use a percentage of sales to determine spending,' he said. When sales are down, so is spending.
'Studies have shown that maintaining an ad budget in spite of declining sales helps a company come out of a recession faster and strengthens sales along the way,' Whalen said.
There's another danger, he said. The auto industry's emphasis on incentives as a cure for slumping sales can hurt brands.
'The stronger message to today's buyer is the one affecting the pocketbook,' Whalen said. 'At the same time, discounts erode the sense of quality. They may raise sales, while sending the message that this product is cheap.'
In Rapid City, S.D., Dodge Town President Ed Rypkema said the next couple of years present 'a real challenge.'
'A cut in national advertising has got to have an effect on dealers,' he said. 'There will be sacrifices on both sides.
'If Chrysler is not healthy, its dealers aren't healthy.'
Rypkema doesn't expect a fast turnaround, but predicted: 'We're going to sell our way out of this.'
