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Thursday, December 27, 2001

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It's toil and roil for ad agencies

Harsha Subramaniam

Purvita Chatterjee

CIRCA 2001 - The death of dotcoms, the end of ITs dream run, the 9/11 tragedy and its aftermath. All these have contributed to the bloodbath of sorts for the advertising business. With clients squeezing their ad spends, agencies have been forced to bend backwards to retain accounts. Some even have had to work on 10 per cent commission, offer value-added services as freebies,cut flab, check spending and implement a host of cost-cutting measures. In short, agencies have been made to work harder to earn the same monies.

Weve been having far more detailed sessions with our clients than we ever did in the past 20 years, says U. Jayraj Rau, Vice-President & Client Services Director, HTA. He explains that the downturn has forced the agency and the client to research every aspect of the marketing inputs to find out if they have worked.

M. Venkatraman, Senior Vice-President, Euro RSCG, Chennai, points out that recession has made agencies a lot more accountable to their clients. Today, a client asks questions for every rupee he spends, he says. Ad spends are down globally, too. In the US, for instance, ad spend for the year 2000 rose to a robust 9.6 per cent to $240 billion and analysts predict that spending this year will fall by 6-7 per cent. In the Indian context, not many are willing to hazard a guess. Many agencies are going to show negative growth, says a senior advertising executive. The Chennai branch of one of the biggest agencies in the country, which grew at 25 per cent last year, is looking at a conservative 10 per cent growth this year.

From a clients perspective, short-term issues such as sagging sales have taken precedence over long-term brand-building objectives. However, Suguna Swamy, Creative Director, Ogilvy & Mather, points out that the recession has reiterated the need to invest in brand-building. Clients who invest in their brands will easily ride the recession wave, she says.

She believes that consumers have not stopped spending; instead, they have only shifted priorities in what they want to consume. If you earlier wanted to buy a car, now you are settling for a holiday. This has resulted in some sectors doing much better than the others. Pranesh Misra, International Client Director, Lowe Lintas & Partners, believes that different industries have responded differently to the recession. He says that certain sectors, where the bottomlines have fallen drastically (the dotcoms, for example), have stopped spending. In consumer durables, he says, "Though there has been a drop in spending, funds have been diverted to promotions to achieve sales targets. However, not many marketers have seen this period as an opportunity to back a big idea and rise above the clutter.Even if the client decides on a campaign the attitude is to follow the market leader and play it safe,says Suguna Swamy.

From an agencys viewpoint, the biggest fallout of the downturn has been that of meeting cash flow requirements. Collecting payments has been a tough task. When your clients money is clogged in the market how will you get your buck?asks a senior advertising executive. However, agencies with huge cash reserves have bucked the trend. The downturn has also forced agencies (the big ones, in particular) to approach middle- and small-sized clients. Today MNC agencies are willing to work even with local retail clients if they have the budgets.

The year ahead

Dont plan anything beyond the quarter, is Jayraj Raus suggestion to his clients. He believes that the unpredictable nature of the market and the business environment is not conducive to long-term planning. M.G. Parameswaran, Executive Director, FCB Ulka Advertising Ltd, says, We are advising our clients to stay focused on their core brands and customers and to stay away from segmentation, variation and new experiments.

Both believe that there has to be a balance between brand and promo spends. One should not be at the cost of the other,says Parameswaran.

 
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