<strong><font color="#ff0000">Special: </font></strong>What agencies learnt from the economic slowdown (Part II)

In the first part of the article, we talked about how the economic downturn has forced the media companies to relook the way they work and reconsider the future. The slowdown has equally affected the advertising agencies be it a creative agency, a media agency, and below-the-line communications agency, an interactive agency or even a public relations firm.

afaqs! picked one company from each of these sectors, and spoke to these agency heads to find out the strategy adopted by them in the last eight months of economic slowdown, the learnings during this period and its effect on future game plan. The agency heads also talked about the different industries that will fuel the growth for advertising in India in the coming times.

Toughest moments: We had decided to turn some of our tools to a pay-per-use model starting January 2009, as we pay a licensing and developmental fee for many of those. Given the tough times some of our clients were facing, we decided to defer that decision until later. That was tough.

What you will remember: I would remember this as a bite-the-bullet phase. Many of us learnt new tricks of managing business without panicking.

Lessons learnt: I love what I read about Shantanu Khosla of P&G saying at Goafest – “The things you should do in bad times are exactly the things you should have been doing in good times. If you have not been doing them, it’s too late.” Most of the lessons I have learnt recently is when I have heard other people groan. I thank our team for not having been extravagant in the good times. I believe tough times are a test of the mettle of smart businessmen. Laying off people, slashing costs, doing things that make the business bleed in the long run may look heroic, but it’s stupid. You will be forced to get rid of fat only if you have allowed yourself to get fat in the first place.

Whether the rules of business have changed: In some ways, yes. Many of us are seriously thinking how to charge customers for value rather than our efforts. The focus is more than ever on outcome rather than output. A slowdown teaches you the benefit of scale and nimbleness. It is certainly encouraging us to distinguish between good and not-so-good business. It is making us firmer in our belief that some businesses must be walked away from, even if they look sexy on the surface.

Revival of demand: India is not in recession, so it is wrong to assume that there is no demand, which continues to be strong in many categories and in smaller geographies.

Categories that will revive demand: Most product and service categories are grossly underpenetrated in India, so it won’t be one or two categories that will lead revival. When the tide turns, they will all turn together. Since some categories like air travel, banking and consumer credit seem to have been affected more, it will appear that they are bouncing back faster.

We have also rationalised discretionary costs without compromising on the quality of our work. We have made fresh recruitments only where absolutely essential. Finally, we relooked some of our work practices.

Toughest moments: The suddenness with which the gloom descended. Overnight, the needle of sentiment – across categories - moved from positive to negative. Some of our assumptions and plans needed a complete relook and for two to three months, the uncertainty was enormous.

What you will remember: The humungous collective efforts made by everyone - clients included – to bounce back to normalcy.

Lessons learnt: One, never underestimate the reserves of resilience in a good organisation. Two, regardless of good times or bad, there is only one right way to run a profitable organisation.

Whether the rules of business have changed: Thankfully, no. However, the slowdown has pushed both clients and agencies to refocus on the fundamentals.

Revival of demand: Going by media reports and industry feedback, things should start picking up in the third or fourth quarter.

Categories that will fuel demand: FMCG, telecom, white and brown goods, retail, certain product groups within financial services, education, media and entertainment and travel.

When growth returns: The new world economic order is still getting shaped and no one seems fully clear about the contours of the ‘new normal’.

Toughest moments: When we had to decide that there would be marginal increments and bonuses would have to be deferred this year.

What you will remember: It will be remembered as the period when companies got realistic about how they run their businesses, valuations got realistic and there was a focus on profitability rather than valuations.

Lessons learnt: One, focus on the basics. Two, cash is king, so conserve it. Three, if you take care of your team, the team takes care of you.

Revival of demand: I would expect next quarter to be the start of a very good pullback.

Categories that will fuel growth: Financial services and internet-based businesses will largely continue to dominate online advertising. However, the growth will come from consumer durables, FMCG, media and entertainment, automobiles and technology.

When growth returns: Overall growth will not be at the same pace as before but it will be steady. However, the internet will buck the trend and see a high growth phase as the user base is now 50 million and it is an affluent, consuming class.

Toughest moments: There haven’t been any, it has been business as usual. However, we did feel the pinch in our international operations much more than in India.

What you will remember: This is when marketing services came of age. It is a period when brand owners understood how the last mile plays a critical role in ensuring overall success of the brand and that they cannot afford to take it lightly. I would also remember it as a period when the overall marketing and advertising related resource allocations were re-invented.

Lessons learnt: I have learnt the importance of being media neutral and marketing solution focussed.

Whether the rules of business have changed: In a lot of different ways. The top three - one, there is going to be caution on spends, with a focus on results. This would lead to more sales-oriented marketing. The CMO would need to be on the revenue table. Two, customer retention will be more important than acquisition. And finally, brand experience will take prominence over brand awareness.

Toughest moments: The (PR) business had been slow. Some clients had not responded well citing liquidity reasons. Budgets were pretty tight and we had to curtail costs. But we did not have to do anything drastic.

What you will remember: Well, in business, one must be ready to take the ups and downs. We had seen this kind of recession during 2000-01. The economy was reeling after the dotcom bust and 9/11 complicated the issue. This time around it is overspending and mismanagement by certain global financial institutions that created the situation. What we will remember is how well everyone at the agency came forward and pledged to fight the slowdown as a team.

Lessons learnt: Plan properly and execute those plans no matter what.

When growth returns: Things will improve gradually, but don’t expect instant results.

With inputs from Chhavi Tyagi, Devina Joshi, Kapil Ohri, Neha Kalra, Sumantha Rathore.