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Ajita Shashidhar

FROM the advent of a fee-based system, which is increasingly replacing the 15 per cent commission traditionally charged by most agencies, to large-scale unbundling of services, with divisions such as creative, media, direct marketing and public relations becoming separate profit centres, the advertising industry has undergone significant changes over the past 10 years.

Industry analysts say the breakdown of the commission system has made the agencies much more accountable.

Clients also seem to have become far more demanding, with loyalty and emotions no longer key reasons for agencies to hold on to clients.

"There has been an absolute metamorphosis in advertising over the last 10 years. The major changes have been on the technology front, and business models have been altered. The benchmarks of success in advertising also have changed dramatically. Billings are no longer key to an agency. Rather, it is operating profits that have assumed more importance now," says Mr Gopi Menon, Vice President, Media, TBWA Anthem.

"Advertising 10 years back only seemed to be responsible for the brand's health. But now advertising has become more accountable. With the stakes involved being very high, the profession has become more demanding," says Mr Suhel Seth, CEO, Equus Advertising. Mr U. Jayraj Rau, Vice-President and Client Services Director, J Walter Thompson (JWT), observes that the exit of the commission system has also pronounced the end of the three- to five-year contracts with the clients.

"We started working on short-term projects and the extension of the project now completely depends on our performance in the previous project. We also started picking up small clients and doing projects for them."

On the other hand, Mr Vijay Subramaniam, General Manager, Marketing (Laundry and Home Care), Henkel Spic India Ltd, says that ad agencies have moved from a situation from where they were merely producing advertisements.

"Their role is becoming one of advancing brand ideas across all areas. They have virtually become marketing experts."

Unbundling of services

From an era when advertising agencies were one-stop shops, which did everything right from doing ad campaigns for their clients to space-buying and even organising press conferences and exhibitions, the past decade witnessed a trend of unbundling of services.

"With the advent of television and multimedia, the agencies did not want to let go any area of revenue, but at the same time they also realised that they did not have the competence to provide quality service in all the areas.

"Moreover, clients also began to feel that the agencies were losing their cutting edge. This was when agencies decided to go in for a re-orientation of business thrust and individual profit centres in the form of separate creative, media, direct marketing and public relations divisions emerged," says Mr Rau of JWT. Apart from the existing divisions becoming separate profit centres, the industry also witnessed the creation of new specialised divisions. Agencies such as JWT and Euro RSCG, for instance, set up specialised IT divisions, which focussed on IT branding; Ogilvy and Mather, similarly, picked up expertise in healthcare branding.

"The emergence of these specialised divisions resulted in clients hiring agencies according to their skill-sets, and this also gave further impetus to the fee structure," says Mr Rau of JWT.

While the early 1990s, according to advertising gurus, was an era of straightforward and formula-based advertising, creative in the last five to six years has got its rightful throne.

Says Ms Suguna Swamy, former Creative Director, Ogilvy and Mather:

"The creative product is way better than it ever was. Even the old integrated marketing gurus have upgraded their product into 360-degree advertising, a far better and do-able notion than merely cobbling together a bunch of services, one that recognises that brands are built on the backs of great creative ideas and execution."

Mr Suresh Kumar, Director, Mindspark Consulting, also feels that creative skills have been at their peak over the past few years.

"In the shrinking global village I see an opportunity for our creative talents to generate ideas for clients anywhere in the world by being based in India. It is possible for an Indian coffee commercial idea to be adapted for Brazil or Spain if the idea connects with the audience there."

Outsourcing of activities

The mid-1990s, according to Mr Rau, also saw a number of agencies outsourcing activities such as research, language work and so on. "Agencies wanted to cut costs to make profits and, therefore, started outsourcing. This worked out cheaper for them as they could get a lot of work done by paying a smaller fee," says Mr Rau.

In fact, Mr Rau feels that agencies are soon going to outsource more and more of their activities.

He says the agencies will go to the extent of even shedding their digital studio and film production units.

"All these activities would be outsourced. The ad agency in the forthcoming years will merely comprise a planner-cum-management person and a creative team comprising a copy-writer and an art director."

The advertising agency, says Mr Rau, will become an `ideas factory', where all that one needs to do is come up ideas.

"However, the ad agency would continue to be the custodian of the brand. We are going to be like a dot in the circle and around us would be all our outsourced suppliers," says Mr Rau.

(With inputs from Ratna Bhushan)

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