The Hindu Business Line : Experience over exclusivity?

With brands competing fiercely on every front, the media planning and buying functions have become a bone of contention between advertisers and agencies. Clients insist on exclusivity, which agencies are finding harder to promise.

SIT in the lobby of WPP's Mindshare office in Mumbai's Lower Parel for some time, and you will notice a series of seemingly complicated entries and exits through various doors: the reason, as anyone there will tell you, is the separation of operations between the various divisions, Mindshare 1 and 2, Maximize and Fulcrum. In recent times, handling of conflicting accounts has become a thorny issue in the Rs 6,000-crore industry, particularly for larger agencies like Mindshare, Starcom and Zenith, which handle media planning and buying for multiple creative agencies.

Clients insist on exclusivity, as they fear leakage of sensitive information; agencies maintain that as long as confidentiality is ensured, exclusivity is unnecessary. Besides, agencies are sometimes compelled to handle multiple accounts in the same category as consolidation gathers pace and clients enter new categories, as categories begin to overlap, and because of the economics of the business, which operates on commissions of 2-3 per cent.

"Conflict is about two issues, confidentiality and exclusivity, but what a business truly needs is confidentiality, so if clients insist on exclusivity — which really is more of an emotional need — everyone loses out," says Ravi Kiran, Managing Director (West & South), Starcom Worldwide, which handles planning and buying for Leo Burnett, Ambience Publicis and Orchard. "It's a bit like choosing a heart specialist: would you rather go to someone who has a lot of patients, or someone who sees only you?"

Particularly in newer categories like financial services and telecom, where the learnings are still evolving, clients could lose out by insisting on exclusivity, adds Atul Phadnis, Director (S-Group), TAM Media Research, who has worked in Mindshare and Starcom. "It stifles the learnings that could come about from pooling of knowledge, experience and experiments for several clients," he says. "So a client's priority should really be going to a good agency rather than be exclusive."

Certainly, there are some ground rules: if a client is globally aligned to a media agency — like Hindustan Lever's to Mindshare or P&G to Starcom — then it would be an exclusive account. And, if the account is big and critical to the agency, then too, exclusivity is warranted. But the issue gets complicated because companies are getting into new categories: Gillette is a shaving brand, but also has pens. Essar, Reliance and others are in multiple product and service categories — so which categories can the agency promise exclusivity in?

Understandably, clients are concerned about confidentiality because the agency is privy to strategic and long-term information, and because the battle is increasingly being fought on the media platform — not just in traditional media, whose high costs necessitate the greater bargaining power of larger agencies but also in unconventional media such as events and sponsorships, where an agency's specialised skills become critical. But agencies maintain that these arguments don't hold water: "Clients are concerned because they don't want the agency they hired to also work for their competitor," says Andre Nair, CEO-South Asia, Mindshare, which handles the media function for JWT, Ogilvy & Mather and Contract, besides Equus Red Cell and rmg David. "They tend to look at agencies as being different from bankers, lawyers and auditors, who have a long history of managing conflicting clients. But conflict in our business is really a red herring because there aren't enough large media agencies to handle all the businesses in a category exclusively."

Certainly, agencies have developed systems to meet clients' needs: some have, like creative agencies did more than a decade ago, spun off second divisions. So Mindshare has separate divisions (with Fulcrum for HLL brands exclusively), Starcom handles competing auto accounts out of offices in different cities, and FCB-Ulka's Lodestar has two distinct teams.

Starcom is also considering setting up Mediavest, its global division. While the tools and methodology are common, planning is done independently, as is rate negotiation, but accounts may sometimes be pooled for lower rates or for a common property. At Starcom, the back-end — in terms of research, tools and techniques and HR — is common while client information is confidential, says Ravi Kiran.

At Lodestar, the "intellectual capability" and the resource centre are shared, while the day-to-day operations are independent, says Shashi Sinha, Executive Director. The agency applies this principle to such accounts as Henkel and Wipro.

Despite the best intentions and practices, however, there may be tough situations: so if there is one big property for a multiple-client category, then the agency would present it to all its clients at the same time, says Ravi Kiran. "But today, there are more media properties available than there is money, so not having enough properties is not a problem," he adds.

But the reality is not as simple, argue media experts: if the agency develops one great idea, who would it offer it to, asks Meenakshi Madhvani, who headed Carat Integra, and is about to launch an independent media audit firm. Besides, the pooling of intelligence to gain expertise also nullifies the scope of the client's need for confidentiality, she adds.

Indeed, several companies resist the idea of agencies handling competing accounts for these reasons. "There is less transparency, and we would feel a little insecure, and won't be able to trust the agency completely with getting us good properties or deals," says Sulajja Firodia Motwani, Joint Managing Director, Kinetic Engineering, which has an exclusive deal with Madison Media.

Clients also do not favour the pooling of knowledge that can benefit their competitors: "It may work to the advantage of smaller players or new entrants, but not for older or larger players," says V. Chandramouli, Vice President-Sales, Marketing & Service, Mirc Electronics, which has an exclusive arrangement with Mindshare.

Even in newer categories, players are doubtful about the gains from non-exclusive deals: "Pooling of learning is exactly what we don't want — the agency has to make a call on what strategy to apply for which player," says a spokesperson for a large online lotteries player which has an exclusive arrangement with its agency. "This is a new category, and there's very little learning, and media strategy has become a major competitive edge, so we would want to keep the competitor out."

Also, while the agency may have the best intentions and systems to protect critical information, it could still get out sub-consciously, adds Nalin Mehta, GM-Marketing, (Automotive Sector), Mahindra & Mahindra, which has an exclusive arrangement with Interface. "We share strategy and sensitive information, and if they take on another auto client, there is a danger of that information getting out — because the agency is duty-bound to use the knowledge they have," he says. "And I don't think anyone can do enough to guarantee that no information is lost."

Certainly, there is a double standard on the clients' side: they want exclusivity, but also the benefits of working with a large agency — such as greater economies of scale, consolidated buying and proprietary research and tools. However, these benefits will only accrue from agency investments as a result of more business, Nair reminds. But underlying the more apparent issues of conflict and exclusivity are also concerns over attrition and a diminishing talent pool in the industry, which again fuels fears over confidentiality, and which the industry is attempting to address.

Clearly, the onus is on the agency: at Mindshare, there are Chinese Walls, firewalls and "physical walls", so that one team or division does not have access to information on clients handled by another team or division, Nair says. They also sign separate Non-Disclosure Agreements, which don't just lay down rules, but also penalties for reneging on them; Mindshare is also putting in place the ISO BS 7799, an industry-recognised confidentiality standard.

Still, the various teams and divisions use the same resources and knowledge base — and the same server — so there's bound to be some slippage, Madhvani says. But agencies have "a vested interest" in ensuring that confidentiality is maintained in order to keep the business, Nair counters. "Besides, increasingly, knowledge is not considered power, as it available universally, and is easily accessible — it's managing and applying the knowledge that's key," he adds.

Indeed, some experts say that somewhere along the way, clients have lost sight of the central purpose of exclusivity, and now insist on it more to pander to their own egos. Setting up separate divisions to appease clients is "a futile exercise, and not a long-term, sustainable process", cautions Ravi Kiran. It is far more realistic for agencies to commit to maintaining confidentiality and having separate day-to-day teams for conflicting accounts. "Ultimately, clients need to trust us more and realise that they don't stand to gain from being exclusive," he says.

Also, given the pace of consolidation, there will only be four or five large groups handling all business, Nair says. "So globally, concerns about conflicting accounts are receding, and people are recognising that it is okay for an agency to handle more than one account in the same category."

So the way forward — as in the more developed media markets — is for agencies to handle the No.1 and No. 2 player in each category exclusively, and to convince Nos. 4, 5 and 6 to come on board, as well, Madhvani suggests. Agencies must all discuss the issue with clients openly, rather than try to hide the fact that there may be conflicts, she adds. And with time, clients will get more comfortable with the idea. So the elaborate entries and exits at Mindshare will stay, but the paranoia will go away `... because it's always been a matter of trust.'

Churn, churn, churn

A MEDIA planner spends an average of 18 months to two years at an agency before he/she is poached upon by another at a considerably higher salary - or moves to the client's side, or to an agency in Singapore. While some agencies have tried to set up campus recruitments and training systems, others are so hard pressed to fill empty slots even as business grows, that they simply poach. And this is common across hierarchies.

"The paradox is that the industry works on 2.5-3 per cent commissions, and when you poach, you have to offer higher salaries, which you can't afford because your margins are getting squeezed," says Shashi Sinha, Executive Director, Lodestar Media, which has consistently hired from the IIMs and MICA. "So something has to give, sooner or later."

The media industry in India is beginning to resemble that of Hong Kong's, where salary inflation was rampant, and the dearth of talent meant that even planners with limited experience were made directors, says Andre Nair, CEO - South Asia, Mindshare. "We don't have enough people coming in, and people are jumping even before they're fully trained," he adds. "So we have a diminishing talent pool, and it's getting expensive."

While the upside is that individuals get to learn from different formats and systems, and the intelligence gets diffused in the industry, the downside is the almost incestuous nature of the business, and the low levels of loyalty. Also, proprietary tools and techniques are leaked: in fact, people get poached for their domain expertise and specific knowledge, Sinha says. So alongside replacing talent, agencies also have to create new knowledge so fast that the information that an employee may take becomes redundant soon, says Ravi Kiran, Managing Director - West & South, Starcom Worldwide.

More importantly, the industry today is not considered as attractive as others, and does not attract the kind of talent it did a few years ago, Nair says. So agencies need to "create traction" to bring more people in.

Illustration: Vincent Raja

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