-By Todd Wasserman, Brandweek

The studies were produced in tandem by the Verse Group and Jupiter Research and based on interviews in November with 101 marketers at companies with more than $250 million in annual sales. They show that the economy has already had a great effect how marketers do their job.

One study, which will be released later this month, reveals that agencies are seen as part of the problem. According to that study, 45 percent of CMOs say they are spending more time managing their agencies than just two years ago. Only 21 percent of respondents say they are getting the best work from their agencies.

While that report shows more friction with agencies, a report Verse and Jupiter released last month shows that 89 percent of CMOs say their marketing is under greater scrutiny because of the economy. Fifty percent of marketers say achieving ROI is their No. 1 priority.

“I would say that the ROI has always been there but it’s been ratcheted up,” said Randall Ringer, chief strategy officer for the Verse Group. “The first things that get cut are training and marketing.”

-By Kenneth Hein

The Dollars & Consumer Sense 2009 study, released today, finds that consumers often have a negative reaction when they see the price slashed for their favorite product or service.

In fact, 70 percent of respondents to the Yankelovich poll said such cuts probably mean the brand was overpriced in the first place. And, 62 percent said they assumed that the product was old and they were just trying to get rid of it.

“People are suspicious if you significantly discount your brand,” said J. Walker Smith, president of Yankelovich Monitor and executive vice chairman of The Futures Company. “If you make significant changes in your value proposition it can confuse them. You have to give them reasons to buy stuff as opposed to just lowering prices as a knee jerk reaction to the economy.”

Earlier this year Saks Fifth Avenue announced it was retreating from a discounting strategy after it lost nearly $100 million in Q4. CEO Stephen Sadove said the chain would add a mix of lower priced items instead. The assumption became “they are just overpriced all year long,” said Smith.

Brands that do not discount achieve a positive halo among many consumers, per the study, which polled 1,0002 consumers in January. Sixty-four percent of those polled said they assume the product is either extremely popular or a good value if they maintain their price.

Earlier this month, Brand Keys announced similar findings among the 26,000 consumers it polled for its Customer Loyalty Engagement Index. Consumer expectations regarding brand value went up 20 percent. In other words, many aren’t looking for lower-priced brands rather they are looking buy products that they consider a good value.

A potentially more damning result of lower pricing is deflationary expectations, per Yankelovich. This means consumers are postponing purchases in anticipation of prices falling further. Up to 60 percent of those polled believed companies that cut prices would continue to do so. “People are sitting around waiting for more discounts. That’s a really bad thing,” says Smith. “The deflationary cycle is very difficult to remedy once it takes hold.”

-By Kenneth Hein

Oh yes, by all means, let’s. A free meal? Great idea! And why not? Paycheck-stretching Americans will love you for it. Heads nod in agreement around the polished table. The number-crunchers figure out how much free grub they can give away while still getting solid publicity without the margins going to hell. They think about the short-term bump in store traffic, then those ancillary purchases once the offer “drives trial.” The numbers don’t look too bad, and so they go for it.

This scenario is imaginary, but I’ll bet something awfully similar to it has been happening in conference rooms around the country. In roughly the past month alone, Denny’s, Quiznos, IHOP, Jack-in-the-Box, Arby’s and others have offered free food or drinks in an effort to build both store traffic and good will for their brands.

So what’s wrong with handing a guy a free sandwich? Let me count the ways. First off, so many chains are handing out free grub that the novelty’s worn off—so much so that what had been a premium is fast becoming an expectation. First it was: “Wow, I get a free burger!” Today, it’s: “Hey, where’s my free burger?!”

But the larger issue is that food giveaways—aside from bringing X number of curious people into your units—have few strategic benefits in the long run. OK, sure, you did bump up your foot traffic. But when your customers have showed up just for the giveaway, it’s hard to engender a true brand experience that’ll make a lasting impression or deliver a quality message for the products offered. After all, people are only in there for the freebie.

This is especially counter-productive if your brand is trying to send a quality message. Giveaways have this way of cheapening a brand’s image, and that’s never a good idea. Don’t just take my word for it, either. “The fact is that 99-cent value menus and food giveaways are bad for business,” says Andy Puzder, CEO, CKE Restaurants. “At Carl’s Jr. and Hardees, we have stayed the course with premium-quality burgers—not low-quality gut fill—while containing restaurant operating expenses. CKE, by the way, boasts the second-best margins in the industry behind McDonald’s.”

But, OK, let’s just say that our marketer knows that his giveaway is just a short-term strategy. Isn’t it still good for a little PR? Sure it is—and it’s also an invitation for the unavoidable mistakes that happen with mass giveaways to turn into complaints. Oh, I’m being a pessimist, huh? Well, let’s just start with what happened to Dr Pepper a few months back.

When the Unabridged History of Brands is finally written, Dr Pepper is very likely to go down as the creator of the most ill-advised giveaway ever. Of course, it had some help—namely, Guns N’ Roses. Just in case you missed it, the soft drink brand made a bet with all Americans: If reclusive vocalist Axl Rose ever came out of the recording studio with the band’s forever-deferred album, Chinese Democracy, every citizen gets a free Dr Pepper.

Execs were probably high-fiving until the album actually came out in November. Then the havoc began. Dr Pepper’s make-good took the form of coupons, but the redemption window was tiny and the Web site that dispensed them crashed repeatedly. What started out as a mean-spirited joke pointed at a singer named Rose only ended up getting millions pissed at a drink named Pepper.

But at what cost? The TV spot cost the company $3 million. And while many people no doubt enjoyed a good meal on the house, there were still plenty of complaints on the Web about long lines and accounts of people leaving before they were served. There’s a saying that it takes 10 compliments to undo one complaint. That tends to get magnified when you weave the reach of the Web into the equation.

And so we return to Quiznos, which promised to give away a million free subs. All people had to do was visit a Web site and sign up—and then the troubles began. Allegedly, headquarters expected franchisees to foot the bill. Then it set a quota to lighten the blow. Finally, it just pulled the plug. Quiznos rep Rebecca Steinfort wrote off the complaints as a product of the blogosphere: “Certain blog sites think that everyone in the country had a bad experience, but the number of issues was very low. That’s one of the things about the Internet.”

It certainly is—and that’s the problem. Many people give equal weight to a blog post and a balanced news article. What kind of impression about Quiznos did they come away with?

According to Steinfort, Quiznos accomplished its goal of alerting customers to the fact that the chain has less expensive menu items to enjoy. She also points out, that brand can now uses the e-mail addresses it captured for direct-marketing efforts. So it’s not all bad.

Still, the fact remains that giving away free food is harder than you think. And which would you rather have: Customers coming in to spend money with a brand they love, or ones merely there to demand the latest freebie?

-By Robert Klara

Every day, hundreds of jets lift off from Runway 33 of the George Bush Intercontinental Airport, laying trails of gray exhaust across the muggy Houston sky. The planes climb steeply toward cruising altitude, and by the time they’re over the northern suburb of Humble, everything on the ground looks pretty small. Even the huge billboards that dot the city’s metro area are difficult to see. The lone exception is the roof of Humble High School. It’s a perfect 160,000-sq.-ft. box. And if Cynthia Calvert has her way, it will soon have an ad on it.

“We’re looking for an advertiser who wants to be under all those people,” she says. “We have found a company that’ll paint it.” And what will the school get from surrendering the very roof over its head? Calvert can’t put it more plainly: “Found money,” she says.

Calvert runs a new company called Steep Creek Media, which also is looking to sell ads in the school’s parking lot, its stadium, and even at the bottom of its swimming pool. If her ideas raise eyebrows, here’s another fact to ponder: If and when Humble High finds its advertisers, it’ll hardly be unique. Across our recessionary land, cash-strapped municipalities—their coffers depleted by a dwindling tax base—are suddenly in marketing mode, chumming up with companies ready to pay for the honor of having their ad, name or logo on a high-visibility civic property.

The initiatives range from naming rights to massive vinyl ad wraps, and the examples abound: Chicago is currently taking RFPs that would allow companies to buy the right to name individual stations stops on its “L” transit line. New York’s Metropolitan Transportation Authority has already wrapped an entire subway train—inside and out—with ads, in addition to selling space on station columns, turnstiles and even the floors. Meanwhile, back up on the streets, a Brooklyn legislator has proposed selling ads on city trash cans, and the City Council may soon allow 8-foot ads to be stuck on construction scaffolding. The city of San Angelo, Texas, just gave the green light for advertising in its venerable 50-year-old coliseum. And, perhaps most controversial of all, several municipalities across the country have begun to quietly sell advertising space on the outsides of school buses.

Advocates say that, in times like these, such deals are a no-brainer. Brands get exposure in high-visibility locations that were never available to them before, and cities (most of whom are reluctant to raise taxes at a time when unemployment is already at historic highs) get a revenue stream simply by signing a few pieces of paper. “We’ve been seeing, for a number of years, a trend toward more partnerships between communities and advertisers,” observes Jeff Golimowski, the communications director at the Outdoor Advertising Association of America. “It’s an opportunity for advertisers to reach consumers in new, surprising and delightful ways, and an opportunity for communities to develop new revenues.”

Opponents, however, are somewhat less delighted. They maintain that taxpayer-supported, civic property is no place for a junk-food ad, and the proliferation of public-space messaging is, in the words of Vanessa Gruen, special projects director at New York’s Municipal Art Society, “unnecessary, visual pollution.” One thing’s certain: As the recession deepens, more cities are likely to explore these measures. If it’s true that you can’t fight city hall, you may soon be able to buy an ad on it.

“While this is certainly timely with the economy, we’ve been considering it for three or four years,” says Sue Skiffington-Blumberg, the city’s public communications manager. Though Blumberg says that the city “will not be putting signs up on everything,” plenty of ideas are on the table. For example, she says, “Naming rights for our new state park will be under consideration.” Though Blumberg maintains that it will take until the 2010 budget is in to “have a feel for the revenues,” the Denver Post reported that the city hopes to take in as much as $5 million from the effort.

In New York City, “signs up on everything” is already a status quo of sorts, which may be why the city government seems less concerned about buddying up to advertisers and making no apologies for it. In Brooklyn, city councilman David Yassky (a Democrat, by the way) recently floated the idea of selling the sides of trashcans and garbage trucks to advertisers, and is currently drafting his idea into a bill. Yassky spokesman Danny Kanner says that the legislator “made the proposal because it is a common-sense source of revenue during a time that the city should be taking full advantage of every potential revenue stream.”

A separate measure currently before the City Council would permit ads to be placed on the plywood skin of scaffolding erected around buildings under construction or renovation. For years, such signs were technically illegal, though the city usually looked the other way. The measure under consideration now would give the city a permitting fee and perhaps another slice of revenues, as well. The Municipal Art Society’s Gruen, who recently testified against the measure, says that in this economic climate, the proposal enjoys strong support. “All the council members of that committee said that this is a win-win, and why object? The city needs the money.”

Yes, the city does need the money. The subways especially need the money. “We have a budget deficit of $1.2 billion for 2009,” says Metropolitan Transit Authority deputy press secretary Aaron Donovan. “So we’re turning over every rock to identify new revenue sources, and advertising is one of them.” Numbers show just how many rocks have been overturned. In 1997, the TA’s take from underground ad sales was $38 million. By 2007, it had risen to $106 million. Last year, that figure climbed to $125 million. Brands that have signed column- and train-wrap deals include the History Channel and the Marriott-owned Eden Roc resort in Miami Beach.

The MTA has two other brand-friendly ideas on the drawing board. One is “station domination,” in which all of one stop’s available ad space is sold exclusively to a single buyer. The other is flip-book-style advertising on the tunnel walls, which subway systems in Atlanta, Montreal, and other cities have already experimented with. The optical illusion created when the train window passes a series of illustrated panels would make the ads “move.” To those who’d object to the wrapping of columns and cars, Donovan says the choice is simple: “More ads are simply a way to avoid fare increases.”

For smaller municipalities—especially ones that depend on natural beauty to draw tourists—such deals with advertisers usually come in subtler forms. For example, the city of Huntington Beach, Calif. (which has trademarked the name “Surf City” to apply to its three miles of pristine beachfront) recently reduced its budgetary burdens by inking a deal with Toyota. Signs, however, are off limits. In the arrangement, the city took delivery of 17 showroom-new 4WD vehicles that lifeguards now use to patrol Surf City’s public beach (and occasionally issue parking tickets). So what’s in it for Toyota? “Low key advertising,” says Development and Concessions manager Dave Dominguez. “Toyota’s the official vehicle of Huntington Beach; they can say that, and they have the right to use the Surf City moniker in their advertising.” Dominguez says the city wanted to avoid “littering the city with banners and logos.” He estimates that Huntington Beach saves as much as $500,000 a year—the money it would cost the city in taxpayer dollars if it had to go out and purchase the vehicles it now has donated.

Cynthia Calvert started Steep Creek Media when she discovered that Texas permitted school-bus advertising but that no companies were taking advantage of it. (Besides, Calvert also owns three local newspapers, and was looking for an added revenue source of her own.) Today, her firm holds the exclusive five-year contract to sell bus ads for 20 districts. The deal is straightforward: Bus ads come in two sizes—a large panel on the rear that sells for $350 per month per bus, and a narrow strip above the windows that goes for $150. The company handles everything from the artwork to the actual installation. The district gets a 60 percent cut of gross revenue, and Steep Creek keeps the rest. “Every 45 days, we send a check [to the district],” says Calvert. “You can quickly get into several million dollars.”

Calvert asserts the school superintendent “did not receive a single negative comment” from the public about the ads, and rhetorically asks would-be objectors if doing without the ad revenue would be preferable to them. “Our district is looking at no [money for] the band, or the golf team. If that’s your choice, then ads on buses seem nice and friendly.”

Signs of danger
But civic-space advertising doesn’t seem so friendly to people like Matthew Johnson of the watchdog group Media Awareness Network, who claims that cities selling off their spaces violates an implied social contract. “In the same way that governments have a duty to protect wilderness areas, they have a duty to preserve some areas as being free of advertising,” he says.

Robert Weissman, managing director of Commercial Alert in Washington, is especially exercised about school buses and academic settings becoming venues for brand advertising. “School districts should not be complicit with the further bombardment of children with commercial messaging,” he says. “It’s contrary to the development and educational mission of schools.”

There’s also the risk that an ad will end up in a location that’s inappropriate. Calvert recently had an inquiry for a local Halloween-costume shop that wanted to buy an ad on the side of one of her school buses. She was interested until she saw the store’s logo. “I said, ‘We’re not putting a grim reaper on a school bus,’” she recalls. Scenarios like this are why most cities and school districts have a review process in place for all prospective advertisements.

Opponents also charge that these arrangements are not as simple as the win-win they’re made out to be. For one thing, the “found money” that cities get is sometimes a mere pebble tossed into the gaping maw of budget shortfalls. New York’s scaffold-ad permitting, for example, would furnish the City of New York an estimated $4-6 million for this year—hardly enough to patch a handful of potholes. “It’s nothing,” Gruen says. “The city budget is billions of dollars.” (It is, to be precise, $43.4 billion, according to the mayor’s latest estimate.)

What’s more, civic-property advertising has its share of skeletons in the closet. Back in 2003, a number of police departments signed on with a company called Government Acquisitions, which promised to supply police cruisers for just $1—in exchange for permission to place advertising on the doors. A few major brands including Wal-Mart and Johnson & Johnson said publicly that they would not get involved with police-car advertising. In the end, not a single car ended up being delivered.

Huntington Beach’s Dominguez also learned a hard lesson about entrusting a civic service to the fiscal vagaries of a private brand. Before Toyota agreed to supply his lifeguard vehicles, Chevy had done so. But when GM fiscals took a nosedive, “They said, ‘We need our vehicles back in 30 days.’ That was tough for us.” Had the city not found a replacement sponsor immediately, Dominguez says, “We’d have had to go out and buy the vehicles—and we’re looking at $30,000 apiece.”

Meanwhile, Calvert will keep looking for a brand that wants to buy the roof of the local high school. And if they don’t want a 400-foot-long space, well, she’ll sell them the side of a school bus instead. “I’ve had calls from all over the state of Texas,” she says. “Districts are hurting, and if they can make $1,000 or $100,000 [from these ads], well, hallelujah.”