The Hindu Business Line : Slowdown in its stride

Sure there’s no jingle that will drown all the bad news, but the advertising industry is taking the slowdown in its stride. The optimistic ones are even hoping that the tough times ahead will up creative standards.

Many of them have broad based their offerings to clients, with services and even specialist arms offering design, activation and customer relationship management services.

In fact, clients are already coming back to agencies, hoping to renegotiate. Some agencies even claim to have offered fee reduction for clients struggling to cope with the downturn. While the speed at which the bad news has hit may have knocked the breath out of a few sectors such as real estate, while others such as consumer goods and telecom companies are expected to keep investing.

Mahesh Chauhan, Rediffusion Y & R

This is also an opportunity, say marketers and advertising gurus, to bring in a much needed realism. “We were going through this romantic phase where ambition seemed to have no ceiling. It’s time for reason to creep into businesses,” says Mahesh Chauhan, Group CEO, Rediffusion Y & R. The agency has had a fairly good year, growing at 40 per cent, and doesn’t hope to do too badly next year, says Chauhan. It has also augmented its customer relationship management (CRM) and digital space, and announced a design unit, in a sense “widening its net to offset any decline that may happen”.

Prasoon Joshi, McCann India

Rediffusion is certainly not the only one. Mudra Group, in line with its ambition to grow from an agency into a communication group, has announced a host of units. But that’s not a reaction to the state of the economy today. “We have been adding three new businesses every year and started restructuring in April,” says Madhukar Kamath, MD and CEO, Mudra Group. Other launches included the brand strategy and design consultancy Water announced in August, the integrated rural solutions Terra in September, an event solutions unit Celsius in October and the sports marketing unit 10 integrated in November. It hopes to close the year in March 2009 with a topline growth of 15-20 per cent, with all its businesses kicking. There could be a scaling down of non performers too, but that’s a rational and healthy process, and there will not be any huge retrenchments, promises Kamath. The industry, he believes, will come out of this trimmer and hungrier for talent. Meanwhile, having acquired the event and brand activation agency Encompass early in the year, JWT launched its design unit Honk mid-year. McCann Erickson launched a second brand T.A.G. in November which would not only come up with media neutral approaches but offer solutions with both fixed and variable costs. McCann WorldGroup India, Chairman, Prasoon Joshi, says the agency will also focus on its somewhat dormant brands, MRM in the CRM space and the experiential marketing agency Momentum.

Despite all these efforts, it’s really difficult to pull it off if you have not already been concentrating on these lines of businesses. “In this media, you need different competencies, culture to create a team that offer services beyond communication, and an approach that’s different from advertising,” says George Mathew, Founder Director of the design consultancy Icarus.

Below-the-line (BTL) specialists are equally sceptical. “Given how often larger agencies have failed in the past with their BTL arms (unless they have acquired a successful one), am not sure … While in advertising, an idea can be created in one room, produced in another, in BTL an idea is worth nothing if not executed well. It’s all about getting your hands dirty, and that requires a different attitude,” says Atul S Nath, Co-founder and MD, Candid Marketing. The 13-year-old agency claims a growth of 40-45 per cent and is expecting 50 per cent growth next year.

What is certainly likely to happen is that a lot of clients who have so far not looked at BTL seriously, will now save their budgets BTL seriously, will now save their budgets for BTL too, says Vijay Singh, Managing Director, 141 Sercon, the activation agency under Bates. “If the last four months are any indication, then we expect a lot more business in the next six months to a year,” says Singh. The activation agency of Bates is also developing products and broad basing its services for clients from new sectors. It’s also ensuring accountability in marketing with a focus on lead generation. BTL is growing at 30-35 per cent. The rate is likely to be maintained only because overall budgets will be reduced. “The trend is to move from mass marketing to precision marketing,” adds Singh.

If agencies are gearing up to meet new demands, companies are also firming up their expectations from ad agencies. For example, Airtel is looking for a superior decision, more sharply defined audiences or a better frequency, from its buying agency. On the creative side, the telecom service provider will expect messaging, which incorporates the idea of affordability or value for money. But for telecom, cost-consciousness was always part of the philosophy explains Sanjay Gupta, Chief Marketing Officer, Mobile Services, Bharti Airtel. “Telecom has seen prices go from Rs 4-5 to Re 1 and 50 paisa a call. As a category, I would say we have been trained to handle recessionary times,” he affirms.

“Sometimes the best solution is to stick to proven areas, and sometimes it’s better to experiment, and there are companies grappling with reduced consumer spending who are taking that chance,” says Punitha Arumugam, CEO, Madison Media Group. Rediffussion’s Chauhan is betting on mobile as a medium gaining from this rethink. “The inertia to move away from television will finally be overcome, and there will be greater willingness to migrate to media that is both, more niche and more converged at the same time,” he says.

R Josy Paul, BBDO India Prasoon Joshi, McCann India

“Agencies are, of course, being cautious themselves. It is not like we partied every day, but yes we are making sure that we are spending judiciously,” says McCann’s Joshi. Though they (advertising gurus) are all quick to add that contrary to popular belief advertising executives don’t party as much as they are made out to. Rather than a commercial fallout, advertising right now is undergoing a cultural change, says Josy Paul, Chairman and National Creative Director, BBDO India. At BBDO seniors are hoping to lead by example, they are flying economy to start with; after-work dinners take place in non-five star restaurants. This restraint is self-inflicted; the relatively new agency has no HR department. There are advantages. Interns, who earlier were allowed to fly for their projects, are being asked to take a ‘rail yatra’. “Rather than sending them from department to department, we are sending them from compartment to compartment,” says Paul. Servicing FMCG clients primarily, BBDO says its plans to hire and open new offices remain unchanged.

A slowdown is a good time to take stock of how business was being done, go back to the drawing board, rework costing structures, and come out leaner and stronger, say marketers. It’s also cyclical, the two years following the 1994 stock market crash were bad, the 2001 dotcom bust was another lean time. And some feel that although the speed at which this one’s unravelled, the fallout, particularly on the Indian market, may not be as dramatic. At JWT, in some parts of the world, a word of caution against hiring and expenses has been passed on. “But this is performance based, and India is being seen separately. At JWT India we have had one of the best years ever,” says Rohit Ohri, Managing Partner, JWT.

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