Ad Counsel

With the economy slowing down, gift retailers have been confronted with a climate different from the one they enjoyed one or two years ago, when boom times meant customers with pockets full of cash earmarked for luxury purchases. In this new environment, the focus on advertising intensifies: Not only is it much more important to create advertising that will draw in customers, but there is often less cash in advertising budgets. Thus retailers must craft their marketing plans wisely and well. And they must also grapple with concerns about what type of advertising is appropriate in a newly sensitive world.

Gift retailers have already begun to tailor their advertising to meet the new conditions. The 2001 Gift Report from Pennsylvania-based research firm Unity Marketing indicates that the typical retailer in this industry spent 8 percent of his or her gross sales on advertising and promotion in 1999; in 2000, the figure dropped to 5 percent. A full 14 percent of gift retailers reported slashing the percentage of sales devoted to ad budgets over that period, the greatest percentage to do so in recent years. However, it should be noted that belt-tightening is not a universal phenomenon: Roughly 35 percent of retailers increased their allocation to advertising, and half did not change their allocation at all.

The Grove Homescapes in Pacific Grove, California, has reduced its ad budget slightly this year. According to co-owner and design coordinator Thompson Lange, the furniture and decor retailer devoted roughly $8,000 to advertising in 2000. By this fall, Lange had spent only $4,000 on 2001 advertising, and he estimated that the year-end figure would be about $6,000. He is tackling the tougher economic times in two ways: by taking proactive steps to make Homescapes' advertising work smarter, and by employing defensive cost-cutting measures when it comes to the ad budget. "I did not scale back my advertising so much as change the focus," Lange explained.

Homescapes' most successful ad strategy this year was to increase the emphasis on its in-store art shows. "Because of the economy, people are looking for something either cheaper or free to do," Lange noted. "We specifically made a bigger deal, saying, 'Free music, music by such-and-such,' to make them seem more like an event and not a sales pitch." The goal is to make Homescapes seem like "a fun place to go, something to look at, almost like a museum," to "make people feel like even if they didn't want to spend money, they could come in."

Dick Scheller, owner of the Tannenbaum Holiday Shop in Sister Bay, Wisconsin, has employed the same strategy. In 2001, Tannenbaum increased the number of artist signings and open houses it did. While Scheller hasn't been negatively affected by the economic slump and this year devoted the same 10 percent of sales to advertising that he did in 2000, he felt that it would be a good idea to hold more events. "It was just something to create a little more excitement and a little more attraction," Scheller explained.

According to V.T. Wood, CEO of Parker & Wood, a Texas advertising agency that deals with gift companies, this is sound strategy. During an economic downturn, he recommends "becoming involved in the community — 'community' being defined as both the community of the product and the local community — so that awareness of the product and/or products is heightened by public relations as opposed to advertising and traditional marketing."

In economic down periods, when individual customers start spending less, one solution is to bring in more customers. Thus another good proactive strategy is to cast a wider net, tailoring the store's advertising so that it attracts consumers from a wider region. Accordingly, David Riordan, owner of OOP! in Providence, Rhode Island, decided to advertise his gift store in a summer events calendar for Rhode Island's South County. "We did it for June, July, and August, thinking, You know, it's a 40-minute ride away, but it'll give people that are visiting the area a place to go on a rainy summer day'" He feels that the campaign was very successful, judging by the number of visitors who came in and mentioned the ads. "It tapped us into a different market, just a different audience. In the past, we didn't really give South County much consideration at all," Riordan commented. OOP!'s ad budget has stayed fairly consistent since last year, with roughly 2 percent of sales going to advertising and about 4 percent going to marketing and promotion.

Thompson Lange also employed the regional strategy. He advertised in a magazine called Central Coast Adventures, which reaches readers up to 100 miles north of The Grove Homescapes. Another step was "taking advantage of — as hokey as it sounds — the chambers of commerce around the area and the tourist bureaus, because they'll take your rack cards, and people are looking for something to do."

Rack cards and other handouts are part of the other prong of Lange's strategy: defensive, cost-cutting tactics. "I actually put out a lot more [advertising] than I used to, but they are less expensive things that I produce in-house," he said. Another economical measure was to shift his ads from the larger area newspaper, the Monterey County Herald, to a smaller local paper, The Carmel Pine Cone. Not only did Homescapes save money with the move, but also new customers responded to the quaint appeal of the small paper.

Lange also cut back on expensive mailings and shifted more of his attention to the Homescapes Web site. He stopped placing phone book ads, which he felt were ineffective. And he used one last strategy for making his ad dollars work more efficiently: By preparing camera-ready art and giving it to upscale publications to keep on hand, he was able to take advantage of ad rate specials that popped up when the publications had advertising space open up at the last minute. When publications are desperate to fill pages, Lange explained, a retailer might get a $2,000 ad space for $500.

The terrorist attacks of September added a new wrinkle to gift retailers' dilemma. In addition to making their ad budgets work smarter, they had to contend with subtler issues. Should ads address the attacks and the changed national climate, or go ahead as though nothing had happened? Were advertising and promotion themselves unseemly in the wake of a tragedy?

"We haven't advertised or focused on national-flag-type things, but those things certainly have sold," commented Dick Scheller, who has opted to maintain the normal tone of his advertising. "I think we've just tried to stay positive and present that type of an image."

David Riordan has also eschewed any mention of the attacks or the resulting surge in patriotism. After September 11, he heard a local radio ad for an open house that went on at length about "going back to an old way of living, and there used to be so much more community, blah blah blah." He commented: "It was all about 'coming and visiting,' but really it was just about moving mattresses. I think it comes off as being very shallow."

Ad executive V.T. Wood is also in favor of adopting a business-as-usual strategy. "I believe that the terrorist attacks of September 11 did dramatically change the way Americans are going to view their life and their retail experience and their shopping habits, but it isn't a time for business to change its attitude about attracting customers. This is a time to try even harder to attract customers, and to be almost to the point of ignoring the situation, because that's the way we will eventually get over this and move forward and get back to a normal way of life."

In fact, Wood's view extends not only to dealing with terrorism, but to weathering the economic slump in general. "One shouldn't really pull in their horns, but should maintain a consistent marketing communications plan," he said. "Spend in the most efficient way possible, be smart about the spending, look at all the communications plans for their effectiveness." His final piece of advice: "Be wise, but don't stop marketing and advertising."

In these changed and still-changing times, the recipe for successful advertising consists of trimming the fat, making the most out of the lean, and applying a healthy dash of creativity to whet the consumer's appetite.