FMCG companies change agencies most frequently

A startling 557 accounts witnessed a change of ad agencies last year, as opposed to 414 in 2005, that is, an increase of 35 per cent in account shifts. Some intriguing analysis follows

It can perhaps be surmised that clients’ dissatisfaction with their agencies was on a high in 2006. A startling 557 accounts witnessed a change of ad agencies last year, as opposed to 414 in 2005 (an increase of 35 per cent in account shifts). The growth in agencies winning new accounts could also be attributed to the increase in the number of new advertisers (20 per cent).

An audit done by the Meenakshi Madhvani-owned Spatial Access Solutions shows that out of the 557 account shifts, 286 were purely creative movements (this in itself is an increase of 21 per cent over 2005). In addition, 120 businesses shifted media agencies, an increase of 33 per cent over the previous year. Interestingly, the number of joint creative and media account movements grew even faster, from 88 in 2005 to 151 in 2006 (up 72 per cent). The reason for this could be that clients chose to move media and creative functions to a single entity rather than work with two different agencies to cut costs.

FMCG companies change agencies most frequently

Meenakshi Madhvani

By moving their business every year or two, advertisers sometimes force agencies to adopt a short term view, according to the report. When the pitch actually takes place, biases, personal preference, past experience and gut instinct are perceived to affect the decision. However, it isn’t clients alone who are to blame; agencies often resort to price discounting or undercutting to hook clients. Sometimes, the agency team that is instrumental in winning a business disappears from the scene after the pitch. This in effect means that strategies presented in the pitch process often don’t see the light of day.

The report says some advertisers inflate figures to entice agencies into preparing a pitch. This is more common with new advertisers.

Also of interest is that in 2006, there was a significant shift of business from large creative agencies with a national presence to local indigenous outfits, possibly because the latter serve local needs better and faster. Specialised design firms such as be positive 24, Brand Portrait and By Design, won several accounts last year.

Among the various categories of advertisers, FMCGs saw the greatest flux (80 account movements in 2006). This can largely be attributed to the introduction of new brands (such as Marico’s Sparsh or Hero Honda Glamour F1) and the revival of old brands by major FMCG players (for instance, soap brand Evita was revived with new positioning and a new look last year). After FMCGs, a lot of media brands (42) witnessed a change of hands, equaled by another category, miscellaneous (42). This was followed by retail (37 account shifts), apparel (35), real estate (34) and consumer electronics (26). The spurt in the last four categories is attributed to the emergence of new players, both domestic and multinational.

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