COMMENT:

Five of the biggest names in New Zealand advertising recently threw their hats into the ring for a chance to claim the $38 million Lotto advertising account.

Pitches of this scale often provide a glimpse of the desirability of an account, and with Colenso BBDO, FCB, Ogilvy, Assignment Group and DDB all getting involved, the competitive stakes were high with this one.

According to Nielsen's ad spend figures, Lotto has spent $38m on advertising for the year to September in each of the past two years, and $28m the year before that.

Advertisement

Lotto previously had its creative account split into separate parts, with as many as five agencies working on the business at any given time.

DDB has long been at the centre of this arrangement, serving as the core creative agency partner for the better part of the past decade.

This partnership is set to continue, with Lotto NZ chief marketing officer Annemarie Browne confirming to the Herald that DDB has successfully managed to hold onto the account and will now be working alongside Assignment Group, which will take care of Lotto's Instant category.

"We wanted to consolidate our creative work to one or two agency partners who are best placed to support the current and future needs of our business," said Browne.

According to Nielsen's ad spend figures, Lotto has spent $38m on advertising for the year to September in each of the past two years. Photo / Supplied
According to Nielsen's ad spend figures, Lotto has spent $38m on advertising for the year to September in each of the past two years. Photo / Supplied

DDB's recent work on the "Imagine" platform – which includes the pirate ship ad and the more recent heist-themed spot – is well-regarded in the industry, and the agency would have no doubt been disappointed at seeing the account go up for pitch.

The Herald approached DDB for comment on the pitch, but the agency declined.

It is relatively rare in the industry for the incumbent to successfully retain an account once it goes up for pitch, with research showing that fewer than 10 per cent of agencies hold onto business in those circumstances. The issue is so widespread that some agencies, such as US-based Crispin Porter & Bogusky, have a strict no-defend policy, refusing to spend money and effort on pitching when their clients choose to review the business.

While there's always a risk in chasing business, in this case, DDB's investment in the Lotto pitch will be considered money well spent.

Signs of economic jitters hitting the ad industry

There's an adage in the marketing industry that when business starts to wobble, advertising is normally the first department to feel the squeeze.

So far, the dwindling business confidence figures haven't been reflected in the real-world economic statistics. Car sales, electronic card spending and even the GDP figures have all been impervious to the downward pull of the business community's bleak outlook.

However, the same can't be said for the advertising industry.

Data from research firm Standard Media Index (SMI) shows that advertising spending, through the big media agencies in New Zealand, has declined in each of the past five months.

"Although the NZ media agency market started the year reasonably strongly, in the last five months we've seen a significant fall in demand, which obviously reflects a loss of business confidence within the market,'' SMI managing director Jane Ratcliffe told the Herald.

The data tracked between April and September shows a drop of 6.8 per cent compared with the same period last year, to $570.1m, with the digital channel suffering the biggest drop - down $17.2m to $158m.

The only media showing higher ad spend in this period were outdoor (up 1.3 per cent) and cinema, which has risen by 14 per cent, though off a relatively small base.

Ractliffe doesn't anticipate this trend turning around before Christmas, citing historical data suggesting that dips of this nature last 10 or 11 months on average.

Media agency veteran Rufus Chuter, who recently set up the independent agency Together, suggested that the drop could be attributable to a number of factors.

"There's certainly a sense of the market softening, in part due to uncertainty about where the economy is heading," Chuter told the Herald.

"This can result in a slightly shorter-term approach to media investment, as businesses become cautious of committing to mid- or longer-term approaches."

He did, however, add a caveat, saying the latest figures have dropped from what was a big year, which included an election and the Lions Tour.

"You always have to bear the previous year in mind when it comes to year-on-year comparisons," he said.

Pointing to the drop in digital spend, Chuter said this could be a case of the pendulum swinging back to counter what was perhaps a case of over-investment in some forms of digital marketing in recent years.

But he added that the SMI data only provides a snapshot of the media spend moving through agencies and doesn't account for the money marketers might be spending on other areas such as customer experience or media buying they undertake in-house.

These sentiments were shared by Gill Stewart, the newly appointed chief executive of the Interactive Advertising Bureau (IAB), who told the Herald that the digital category had already reached total revenue of $766m over the first three quarters and was on track for a record year.

This will, however, do little to appease the growing concerns of the agencies who would have hoped to see their revenues climb from last year.