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‘Critical to get consumption back’

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It’s going to be a wonderful game between the marketers and consumers. Marketers will keep ploughing in with value propositions to woo consumers and the day marketers win the war, the slump is over..

From left: Pratap Bose (Chief Operating Officer), Madhukar Kamath (Managing Director and CEO) and Sandeep Vij (Executive Director), Mudra
From left: Pratap Bose (Chief Operating Officer), Madhukar Kamath (Managing Director and CEO) and Sandeep Vij (Executive Director), Mudra

Swetha Kannan

A slowdown is actually good for the economy. But how? The think-tank at the media agency Mudra Communications believes a slump forces an organisation to review itself, get rid of fluff and bring in the much-needed efficiency in operations.

As Madhukar Kamath (Managing Director and CEO), Pratap Bose (Chief Operating Officer) and Sandeep Vij (Executive Director) get talking on the current economic crisis, more interesting insights emerge.

“A slowdown once in a while is good for any industry. It cleans the company. It’s a great time to take stock of where you are,” says Vij. Whether it is rejigging of businesses, weeding out frills or just finding ways and means to do the job better, it all points to packing in efficiency into the system.

Kamath says it was virtually like a party the last five years for many companies. “Every entrepreneur and company talked of major growth. But the minute you start looking at things closely, you discover pockets that need to be cleaned.”

The advertising industry is also on a cleaning spree. There is certainly no room for under-performers, the three say almost in unison. A market which is on a downturn has to maintain efficiency standards and cannot afford people who fall below par. “It is essential to value people who are good, and ensure people get better. Underperformers are being dispensed with,” says Vij. Having said that, the industry has not shut its doors on talent. This is also a good time for good people. A talented person will certainly be picked up, he adds.

Marketers have reacted differently to the downturn. While some have gone about it making logical cuts in spends, some have illogically slashed their marketing spends. (Measured media spend has dropped by 20 per cent month-on-month from November.)

Mass media being the larger medium has seen the biggest cuts. Pratap Bose says brand advertising has seen the maximum cut — unless it’s a tactical decision or there is a marketing objective such as a car launch.

Sure, there has been a slowdown, but companies cannot defer what they have started off. Caution and rationalisation apart, marketers also have to spend when there is an absolute need. Capital-intensive projects have to go on. For instance, (Maruti) Zen Estilo had to be launched … Fiat too had to launch Linea. You can’t hold them back, says Kamath.

So it’s irrational to indiscriminately slash ad spends. There is empirical data to suggest that those who invest in advertising in a downturn actually do well. This is the best time to increase one’s share of voice simply because lesser people are advertising.

Says Vij: “Advertisers have to keep advertising. There is nothing beyond the old fashioned truth that if you invest in your brand when times are tough, it will stand you in better stead in the future.”

While some marketers may shy away from visibility, the brave ones are fighting for survival. And the fittest will indeed survive. Bose says finance as a category was the worst affected with everyone cutting spending, but you had the “bravehearts” in the form of public sector companies. Almost every public sector bank upped its ad spends.

Take the case of LIC and Union Bank, which are successful case studies in the downturn — in terms of growth, asset management and deposits, says Kamath. “LIC keeps on investing in brand building. Its recent policy had a mega sale. Union Bank’s third quarter results show an 84 per cent growth.”

A stronger value proposition

It’s true that there is a decline in consumption and buying, although not in all categories. People may not go on a fancy holiday and may postpone big purchases. One may hold back on salon visits but not on buying soaps and toothpastes. But overall, the market sentiments are low.

“The feel-good sense is not there. It’s all psychological, everywhere people are concerned. There was an entire generation of people living off on tomorrow’s income. But all that is coming down,” says Kamath.

So marketers will have to dangle a strong value proposition to woo consumers. Explains Vij: “During a downturn, most marketers globally look at investing in today and spend slightly less in brand building that is long term. Marketers have to divert money into stuff which works quicker rather than in the long term. They have to create a competitive edge by showing value. They must launch product categories that are value-endowed. Where people sentiments are low, it is critical to see that consumers get adequate value for the price they are paying. I’m not saying marketers must look at stripped-down products but they must ensure consumers find greater value than before.”

And here is where the role of communication changes to prove a competitive edge. “Advertising now must be competitive, showing differences vis-À-vis competition,” says Vij.

But marketers cannot completely ignore the long-term relationship. Even in a downturn, they must keep investing in the long term, “because whenever life becomes happy and rosy again, they will have to get back into relation building. You cannot completely ignore long-term goals; it’s only a question of how much money will you move from A to B to look at short-term goals.”

Vij says money will also move into the online space. “The expectation globally is that the online space will grow as this medium is critical for product comparisons. Experiential marketing and in-store communication will also grow for evaluation of results and accountability.”

He says it’s going to become a “wonderful game where marketers will try and enhance value proposition and consumers will desire to own that. Marketers will keep ploughing in with value propositions. The day the marketers win the war, the downturn is over. As consumers start spending, you have got back the cycle. So, it’s critical for any economy — whether it’s the US or Indian economy — to get consumption back.”

Recession or slump?

So, right now consumerism is low … there is less money flowing. All right. But is it right to call it an economic ‘recession’ as yet? “One can feel the recession. It’s recession if shutters are down, nobody is in shops, there are lesser cars on the road and everything is on 90 per cent sale. That is recession. India is not in ‘recession’,” argues Kamath, who believes the word has been much abused and over-used.

Vij agrees. He says in the Indian context, it’s just a slowdown. “The rural economy and small towns are least affected by the downturn. Sentiment is almost as normal as before. And India lives in small towns and rural areas. There is buoyancy in the agricultural economy, telecom is booming because small town and rural economy is booming.”

An economy with a 7 per cent growth projection cannot be said to be in recession. “Money flow is the key issue right now. But you must spend your way out of it. You have to just get used to lower rates of growth. That’s all,” sums up Kamath.

Related Stories:
Slowdown in its stride
Dealing with the slowdown
Tough times call for smart ideas

(This article was published in the Business Line print edition dated February 5, 2009)
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