Irish companies' boards underestimate power of advertising, forum told
Many Irish boards seriously underestimate the impact of advertising to the detriment of their companies, a group of accountants heard yesterday.
Cuts to advertising budgets have serious implications for a company's market share and profit, the head of Ireland's biggest marketing communications group told the Association of Chartered Certified Accountants' (ACCA) Business Leaders Forum.
"There can be scepticism among the boards of Irish businesses, particularly finance directors, about the importance of advertising.
"It is often viewed as an expense rather than an investment," said Alan Cox, chief executive of Core Media.
"That is a serious mistake. Innovation and marketing are the two most important things a company can invest in.
"When the going gets tough, marketing is often the first thing that gets cut.
"That is a short-term decision with long-term consequences."
A study by consulting group Data2Decisions found that if a company stopped all marketing spending for just one year, it would take five years for sales to recover.
The world's best brand-builders, Mr Cox added, do not make the mistake of neglecting advertising, even when sales are squeezed.
Coca-Cola spends $3.5bn (€3.07bn) per year on advertising, some 6.9pc of sales.
Spending on advertising fell dramatically among Irish companies in the wake of the recession but has recovered significantly in recent years.
Core Media' billings rose from €115.9m in 2009 to €194.2m in 2015.
The industry is worth around €5.3bn a year to the Irish economy, according to a study by Deloitte.
It has been a major contributor to the Irish economy's recent recovery, Mr Cox said.
"We are beginning to see real signs of recovery in tandem with the regeneration of advertising which indicates the power of the industry.
"The economic impact of advertising is profound. It is a major driver of economic growth and multiple studies prove it."
A study by McKinsey found that advertising fuelled 15pc of growth in GDP for G20 economies between 2002 and 2010, though it only accounted for 2pc of economic spend.
Despite the value of advertising, many marketers are still in the dark about the impact of their efforts, the ACCA Business Leaders Forum heard.
Just 0.2pc of advertising budgets are spent on analytics, Mr Cox said.