June 17 (Bloomberg) -- The Pentagon, facing an “unprecedented” surplus of troops, is slashing spending on recruitment advertising that has netted firms including McCann Erickson Worldwide hundreds of millions of dollars a year.
Enlistees are staying put as the 9.1 percent U.S. unemployment rate limits non-military job options, defense officials said, and as wars in Iraq and Afghanistan wind down.
“We’re seeing retention in the Navy the likes of which we’ve never seen before,” Admiral Gary Roughead, chief of naval operations, said in an interview with Bloomberg Government. The Navy is cutting 3,000 sailors from its ranks, Roughead announced in April. The Army, which spends the most among the services on advertising, has dropped its recruitment goal by 20 percent since 2008.
The shift means the U.S. is spending less to attract recruits to its all-volunteer armed forces. Advertising agencies including McCann, which produced the “Army Strong” ads under a contract won in 2005, saw the Pentagon’s advertising spending drop 40 percent to $621 million last year after peaking in 2008, according to data compiled by Bloomberg.
“There is definitely heightened interest in military service” because of the economy, Chris Laughlin, president of Arlington, Virginia-based branding firm Laughlin, Marinaccio & Owens Inc., said in an interview.
The company, which Laughlin said earns more than half its revenue from federal clients including the National Guard, had $53 million in government sales last year, compared with $128 million in 2009, Bloomberg data show.
Ad firms are responsible for helping the service branches meet recruitment benchmarks. “Once you hit that threshold, you can’t keep selling,” Laughlin said.
The Army is seeking 64,000 active-duty enlistees this year, a decrease from 80,000 in 2008. The Navy reduced its goal 13 percent to 33,200 recruits. The Marines last year aimed to recruit 28,000 active duty personnel, 26 percent fewer than in 2008. The Air Force increased its recruitment target, raising its goal by 2 percent to 28,360 last year.
The military is seeking $1.6 billion for recruiting and advertising next year, an 8 percent decrease from the amount Congress approved for 2011, even as the overall defense budget request represents a year-over-year increase.
The Navy will review the performance of 16,000 mid-career sailors in “over-manned” job categories and get rid of 3,000 of them as it faces “unprecedented retention and reduced attrition,” according to an April announcement.
Skimping on recruitment can backfire, said Cindy Williams, principal research scientist at the Massachusetts Institute of Technology’s security studies program.
‘History of Regret’
The military shrunk in size and reduced recruiting in the 1990s, she said, which added to the strain when the services ramped up for wars in Iraq and Afghanistan. A booming economy made signing people up difficult.
“The services have a history of cutting resources for recruitment when recruits are plentiful. They also have a history of regretting it later,” Williams said.
Campbell Ewald Advertising saw revenue from the Navy decline 64 percent to $58.9 million last year compared with 2008. Campbell and other firms should work to convince clients that advertising is a bargain compared with hiring recruiters, spending on military pay raises and offering recruitment bonuses, she said.
“It’s known to be a very effective way of reaching out to young people and their parents,” she said. “That doesn’t mean the services are going to keep the money flowing at a time when they’re pinched for resources and they’re flush with recruits.”
The Defense Department should learn from the 90s, when a significant reduction in military advertising “resulted in the false perception among the public that that services were no longer hiring,” Curtis Gilroy, the Pentagon’s director of accession policy, said in a June 17 e-mail statement.
“It is easy and quick to cut budgets, but it is difficult, time consuming and expensive to ramp back up when recruiting becomes more challenging,” he said.
Pat Baskin, public relations manager for Campbell, declined to make an immediate comment. McCann officials declined to comment, said spokesman Eric Pehle. Both firms are units of New York-based Interpublic Group of Companies Inc.
The biggest prize in military advertising, the Army’s $1.3 billion, five-year award, changed hands in 2005 when McCann replaced Leo Burnett Co., a unit of Paris-based Publicis Groupe SA. Leo Burnett in 2009 agreed to a $15.5 million settlement over allegations it overcharged the Army for work on its “Army of One” recruiting campaign.
McCann in March won a contract extension valued at $185 million for the first year. Leo Burnett didn’t bid on the contract, Amy Cheronis, a spokeswoman for the company, said.
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