Corporates curtail ad budgets by 45 per cent in FY12: Assocham

NEW DELHI: Indian corporates cut their advertisement budgets by about 40-45 per cent in 2011-12, due to high cost of credit, increased raw material prices and weak demand in domestic market, said a survey by industry body Assocham.

In its survey, industry body Assocham said sectors like banking, telecom, and insurance, which account for major share of ad expenditure in India, have reduced their spending during the last fiscal.

Increase in interest rates have adversely affected industry as the cost of borrowings increased, investments dried up and profit margins took a hit, it said. It added that other reasons for reduction in advertisement budget includes, increased raw material prices and weak demand in domestic and export markets.

Majority of nearly 500 companies, which participated in the survey, said for the quarter ended March 31, 2012, the advertising expenses declined by 40-45 per cent in rupee terms on a year-on-year basis, it said.

It also said the public sector units too have reduced their advertisement budget.

During better times, the survey said, automobile and FMCG sector would spend 15-20 per cent of their total earnings on advertisements.

"Big companies are cutting back on big brand advertising campaigns and focusing on quick-win sales promotions, such as coupons and point of sale discounts, to win over cash-strapped consumers," it said.

Sectors like newspaper, magazines and TV channels are impacted because of this trend, it said.