afaqs!

Advertising in recession: Countering the pinch - Part I

By , agencyfaqs! | In | September 03, 2001
With the recession showing no signs of letting up, agencies of all sizes - big, small or otherwise - are learning to cope, the hard way


At last, light at the end of the tunnel. And then you realise it's the oncoming train.

It's a situation that the Indian advertising industry can easily identify with, what with the recession showing no signs of letting up. Senior executives at three of the Top 10 agencies told agencyfaqs! that the industry has de-growth between 10-15 this year vis-a-vis last year.

For the Indian advertising industry, therefore, it's been one never-ending horror story where clients have either postponed hikes in ad spends (which is good news, relatively speaking) or close cropped budgets (which is bad). Where new holes have had to be drilled in belts every month or so; where increments have been put on hold indefinitely (which is, again, relatively good news); where 'trimming the fat' has cost people their jobs and 'recruitment' is a foul word; where clients have been getting agencies to deliver on an 8-to-10-per cent commission; and where agencies have had to bend backwards (read extend credit periods and throw in free research) to retain accounts.

Big agencies, mid-sized agencies, small agencies… everyone is feeling the pinch, though most are loath to admitting it. But one look at the pitch scenario over the past year or so shows how desperate everyone has got. Take the example of big agencies. Times were when 'certain accounts of certain size' were not worth the time and effort for big agencies. Of course, big agencies did have 'small' accounts - but that was primarily because the account or the brand was in an 'interesting category', allowing for lots of creative work. Small accounts in uninteresting categories were left to small agencies. That apart, a lot of noise was made about the 'financial health' of the client. Heavyweight agencies would pick and choose only those businesses that were turning in a decent turnover.

All that has changed.

Take the JK White Cement account. Nothing remotely 'exciting' about the category - in fact, the cement industry has been stagnating for some time now. When the company made it evident that it was not happy with the incumbent agency (iB&W), McCann-Erickson, India's No 6 agency (according to the Eleventh A&M Agency Report) made a cold call and walked home with the account in July this year. And although the agency is working with a back-of-the envelope estimate of a Rs 5-crore budget, agencyfaqs! sources swear that it wouldn't push the Rs 1-crore mark. Another recent example is the Daewoo Motors pitch. Now everyone knows what the financial score at Daewoo is, but Euro RSCG, TBWA Anthem and MAA Bozell (all among India's Top 25) still found the prospect desirable.

Perhaps the most telling example is that of the Ministry of Rural Development. Early this year, the Ministry invited the Top 20 agencies to pitch for its estimated Rs 1-crore business. Twelve agencies responded, of which six were from the Top 10 list. And these were Lowe Lintas, O&M, Mudra Communications, FCB-Ulka, RK Swamy/BBDO and Grey Worldwide. "Had the same invitation gone out to these agencies two years ago, it would have been worth seeing how many of these agencies would have bothered responding," admits a source in a Top 10 agency.

The fallout of all this is that the small agencies are hard pressed defending their turf. After all, when big agencies unleash their artillery of credentials, small agencies start looking quite insignificant. So much so that small agencies are forced to look for smaller and smaller accounts, and, in the worst case, manage staying afloat by taking business on a project basis. Which actually means, releasing corporate ads.

A senior executive at Studio Communications puts it succinctly. "If you are a big agency willing to do research for free, have media clout to boast of and are willing to work on an 8-to-10 per cent commission, I see no reason why the client will not want to work with you. For instance, two years ago, the big names that now appear in the list of agencies pitching for Tata Infotech would never have bothered about the account, especially if the IT industry scenario was as it is today. Even Tata Infotech would not have expected such an overwhelming response. I am sure Tata Infotech is more than happy."

Of course, not all clients are swayed by 'big agency' credentials. Talking about the kind of agency that he would be interested in, in the context of an agency pitch at (Delhi-based) Monto Motors (makers of Avanti Garelli mopeds), general manager, marketing R. Chibber had told agencyfaqs!, "We are only considering mid-sized or small agencies. Simply because a mid-sized agency services a small account better than a big one. The interest of the big agency lasts till the time it gets the account. That is what my experience tells me. Maybe a small account is not inspiring enough for a big agency."

'Might not have been' is perhaps a better way of putting it. But the pressure is telling. In fact, if a recent report in The Economic Times is anything to go by, the amount of outstanding payments from clients this fiscal is on the rise, up 20 per cent over the third quarter of 2000. As one senior executive at HTA, who did not want to be quoted, said, "The ad industry has de-grown by 10 per cent, and we all know it. Worldwide, the scene is tough. WPP has held back increments and we have to do the same."

(To be continued tomorrow)

© 2001 agencyfaqs!