Review of advertisement expenditures in 2012 and
TV Spot purchasing cost trend forecast until October 2013 by SPI Index

【Ⅰ】Review of advertisement expenditures in 2012

SPI reviews advertisement expenditure trends via our consulting & media audit services.

(1)Growing necessity to achieve transparency and accountability
There was an increase in advertisement expenditures in 2012 due to economic improvement following The Great East Japan Earthquake in 2011.
However, we strongly recognized the growing need to achieve transparency and accountability for advertisers.

These three factors may be considered relevant:
…Corporate governance
…Doubts regarding high advertisement expenditures amidst depopulation
…Expansion of the understanding of realistic ways to visualize efficiency in advertisement expenditure (labeled “Black-box” in Japan for a long time)

“Validating the efficiency of advertisement expenditure” is not only for “cost-cutting”, but also for providing the proof needed to increase its expenditure if found to be efficient.

SPI expects that this trend will increase further, in Japan as well.

(2)Wrong ways to improve efficiency
SPI has seen many cases where “action for improvement” delivers the opposite effect, negative results, unfortunately due to the erratic methods.

Typical cases include merely focusing on cost-cutting, with very little care for quality. There are some companies or consulting firms showing ways to decrease costs, however many of these simply use “agency competition focused cost-cuts” without any professional eye for quality (even if the method does appear doable on the surface).

Therefore, these services should be critiqued from the perspectives below:
…Were the risks in carrying out “agency competition” explained?
…Was the fundamental risk thoroughly understood, and once understood, was the method still acceptable?
…Were you also offered the choice NOT to do the “agency-competition” method?
…Was the total performance after “agency-competition” assessed, especially in terms of media & media planning quality?

SPI recommends utilizing agency-competition without a third party if only focus on cutting costs is required.
(Note: In Japan it is very difficult to judge media quality & media planning quality without sufficient experience, databases, and sufficient analytical methodology. There are few third party firms with this capability in Japan.)

It should be understood that advertisement expenditure is all about “INVEST”, not “cost”; many companies merely focus on “cost cutting” (meaning that of Media buying costs), which can be easily seen leading to failure due to the total absence of INVEST.

The fundamental issue, which is key, is “Prudence and thrift with small amounts of money can result in wasting large amounts of money in the process”.

Shiro Kokue
Senior consultant

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