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Reinventing
Indian advertising Agencies
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REINVENTING
INDIAN ADVERTISING AGENCIES
Worldwide, advertising agencies have not changed much
in the past few decades, avers Sorab Mistry. The writer
assesses the workings of a typical Indian ad agency
and stresses the need for the agencies to reinvent
themselves in order to improve efficiency and productivity
and move up the value chain. |
We
are today witness to unprecedented levels of change,
the economy is in a heightened state of flux, we have
shed our historical reticence, the mood is one of
cautious optimism and we are confronted by a consumer
who refuses to conform to preset norms and operate
from predefined behavior codes.
The speed and trajectory of change is the subject
of wild and willful speculation; we have sprouted
a new vocabulary in our attempt to not be done in
by its vagaries. Its easy to see that reinventing,
reengineering, redesigning, recasting, are all prominent
members of this new change vocabulary.
It is therefore imperative that we address the issue
of reinventing advertising agencies by first characterizing
the agency business and the changing environment that’s
prompting an adaptive response and then articulating
the envisioned change.
Its interesting to note that worldwide, advertising
agencies have been pretty much the same since the
early 1940’s/50’s. There has always been
a lot of talk of change without there being any real
change either structurally or culturally. There have
been a host of cosmetic changes like people being
given new titles, playing around with management &
reporting structures, new divisions being launched,
but in essence we have merely changed the envelope
and not the letter.
Let us begin by looking at the mechanics of running
a full service-advertising agency in India.
Our real estate costs are amongst the highest in the
world, therefore accounting for a much higher proportion
of the total revenue than the international norm of
six percent.
The small scale of our operations, low budgets and
our labor intensive work methods has resulted in low
rates of efficiency and people productivity. Against
an inter-national norm of one person per million dollars
in billing we operate at 4.5/5 people per million
and not too long ago this was as high as 7/8 people
per million.
Profit pressures and cost cutting measures have ensured
that our clients operate leaner marketing departments.
As a result more and more jobs are getting transferred
to the advertising agencies & there is greater
reliance on the agency for input and advice. Though
the clients are asking for more, the 15 percent gospel
has gone, margins are being constantly squeezed and
we are getting paid less.
We are seeing a meteoric rise in salaries and perks;
this trend is completely out of sync with the realities
of revenue and profit growth and exerts enormous pressure
on the bottom line. More importantly it is unsustainable
even in the immediate term.
Our billing cycle is back ended. Diwali (the Indian
New Year) and the marriage season contributing disproportionately
to the total revenue (a recent report put it 45 percent
of all profit for the period sept-dec). We carry costs
through the year in anticipation of this spending.
As a result there is no protection against unanticipated
events like the nuclear testing we did a few years
back, the September 11 bombings last year, or the
Gujarat riots which took place this year, which can
lead to sudden and dramatic cuts in spending.
Our annual receivables and collections are also quite
dismal, against an international norm of over 70 percent
being collected inside 30 days we tend to have a high
percentage of over 90 days outstanding. One has already
made a loss on that money before there was even a
chance of making a profit.
Lets now pull back and take a macro view of the industry.
Reforms were initiated in 1992 exactly ten years ago.
Budgets grew exponentially and industry growth rates
were as high as 36.5 percent in 1993, 37.4 percent
in 1994 peaking at 49.5 percent in 1995. This growth
came more out of coincidence than any design. There
was real haste to book profits. The agencies took
the money and the growth without making the investments
or developing a vision or plan.
Lack of adequate political reforms, infrastructure
bottlenecks, and slowing down of economic initiatives
has ensured that the growth rates have tapered off
following the classic bell shape formation. The opportunism
in booking profits and being driven by short-term
tactics and not long-term strategic vision has resulted
in growth being highly inflationary and unsustainable
on a long-term basis.
We have an increasingly large pool of poorly trained
people who add little value to the agency product
but expect a very good salary. To add to the problem,
agencies constantly poach from each other resulting
in an inflation of costs and egos. As a result the
expense and experience curves show inverse behavior.
The “VP at 27” syndrome refers.
From the above it is easy to infer that the business
is financially unviable on a real-time basis. The
market is in a high state of flux, The consumer a
misunderstood and misquoted animal, and India which
was meant to be the new utopia of consumerism has
turned out to be the proverbial graveyard for multinationals.
Reinventing Indian Advertising Agencies in not just
an academic nicety but a business imperative.
Design Principles for Reinventing Indian Advertising
Agencies:
The imperative is to increase efficiency and productivity,
to focus efforts on the real value-added thus moving
up the value chain, ensuring that we can charge more
and not constantly have to bargain. To professionalise
our service/product by evolving and implementing “best
practices’, get organised into an effective industry
with a strong voice and a vision which transcends
narrow sectarian interests.
Training and development and taking care of talent
are key to any sustainable business model. For instance
when in Canada, I came across an excellent program
run by the advertising industry, which certified you
as an advertising agency practitioner (CAAP), not
unlike a CA or ICFA. Why can’t we run something
like that here? A projection of people requirements
and setting about attracting the right talent and
equipping them with the right skill set would go a
long way in ensuring that we are able to set and maintain
good industry-wide standards.
The other thing that concerns me is that we in India
operate on borrowed theory and models. I have not
seen a meaningful communications model for India;
all that we have here are ones that have been grafted
from abroad. Given the culturally specific requirements
of a complex and textured culture like India, its
imperative that we build from first principles a point
of view on what works and how it works.
The way I see it, the planning, creative and media
triad would be the hub of all activity; focus would
be a lot more on developing the product than on the
administration end i.e. on the creators rather than
on the managers. A few specialists would be responsible
for generating ideas.
Creative people would, along with being good craftsmen,
need to understand consumer psychology a lot better.
Media people would need to be more integrated into
the brand thinking and develop their plans from a
brand perspective and not just a cost and reach maximisation
perspective. Planners, while continuing to be the
voice of the consumer and plumbing the depths of the
human psyche, would need to develop expertise at the
representational end of the spectrum to ensure that
each brand finds its own distinctive language. For
instance, at McCann Erickson we are introducing the
concept of commu-nication architects.
Finally my construct of the agency business is one
where there will be a few very highly trained, highly
paid specialists and a support services team which
includes a few business managers.
To conclude, we need to fundamentally reinvent the
way we do business given the emerging marketplace
realities; the emphasis would have to be on the product
and on value creation and gains will accrue to those
who find and invest disproportionately in the right
people.
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