Home Corporate Governance BDC bumps advertising spend 173% post-recession

BDC bumps advertising spend 173% post-recession

Is Don Draper on the file?

I’m sure that you’ve noticed already, but our friends at the Business Development Bank of Canada have been spending big sums on TV and airport advertising of late. What’s fascinating about that (to me, anyway) is the timing of this new awareness campaign.

Between 2006 and 2009, BDC cut its advertising budget by 28%, from $1.98 million in 2006 to $1.43 million in fiscal 2009 (BDC’s fiscal year end in March). During that same period, BDC grew its loan book by $3 billion, or 36.7%. It is safe to argue that BDC’s advertising had no impact on its business development activities: how many firms can cut ad spend by 28% and sell 37% more product?

Then, starting in the summer of 2009 (BDC’s fiscal 2010), BDC more than doubled its advertising spend. If you think back to that period, the stock market had begun its impressive recovery and the recession was slowly to fading in the rear view mirror. And what did BDC managers do over the next two years? They spent big:

– more than $2 million on television spots (versus zero in the prior four years)
– $1.163 million on ads in key airports and inflight seatback TV placements (versus zero on the prior four years)
– $1.047 million on billboards (versus $245k over the entire four previous years)
– $1.3 million on newspapers (versus $175k during the prior two year period)

Over 2010 and 2011, BDC’s advertising tally was $7.6 million, an increase of $5 million over fiscal 2008/09. If you consider that BDC’s net income in 2010 was merely $6 million, or that BDC made just $30 million in aggregate dividend payments to the Federal government over the 2009-2010 window, the huge ad spend ramp is all the more surprising.

Not so, however, if you consider that this big ad spend coincided with Parliament’s 10 year review of BDC’s activities. BDC execs lobbied up and down the corridors of power during this period; The Senate held formal committee hearings in 2010 (see prior post “BDC snows the Senate part 6” Mar 25-11), and the House of Commons is slated to do so later this year.

Historically, according to internal BDC documents, the Crown Corp. spent its ad budget on industry magazines. When the spending ramped 173% during the 10 year Parliamentary review period, the new focus was on television, traditional newspapers and airports (covering every angle of Ottawa International Airport, for example).

You don’t think BDC mangers were subtlely but intentionally targeting Parliamentarians, do you? It is hard to come to any other conclusion.

If the average BDC client has a borrowing of ~$200k, how much time are BDC’s prospects spending in airports, travelling to see potential customers? A bus, taxi or subway are more likely. And, with 103 offices in every corner of the land, and 28,000 current customers, is there a SME founder out there that doesn’t know the BDC exists?

Hard to imagine. But, with the private sector complaining about unfair competition (see prior representative post “BDC Fact #4” Dec 5-07), and a collapse in Canada’s venture capital market (see prior posts “Venture Capital advances drop 33% at BDC in fiscal 2010 part 2” Sept 27-10 and “What happened to the VC $ at BDC?” June 18-08), one can understand why BDC’s senior leadership wanted to bombard members of a minority Parliament with fluff about “Entrepreneurs First”.

If Treasury Board Minister Tony Clement needs another idea for his Expenditure Review as he works to reduce the national deficit, he need look no further than the BDC ad budget.


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