Thriving and not just surviving

For the third consecutive year, the industry has seen a lower rate of growth than theprevious year. During 1997-98, the Rs 700-crore advertising industry is said to have grown at a rate of around 15 per cent. During 1996-97, the business grew by 22.4 per cent as compared to 30.4 per cent during 1995-96. Despite this steady downturn, agencies seem pretty optimistic about the current FY, hoping that things cannot get any worse.

Certain small agencies and new comers managed impressive growth rates. For instance, PSL Universal McCann — a 50:50 joint venture between McCann Erickson Worldwide and Mahindra and Mahindra — has grown at the rate of 50 per cent each year, since its inception in 1996. Its turnover rose from Rs 20 crore in 1996-97 to Rs 30 crore in 1997-98. "We hope to reach the Rs 45-crore mark this financial and by the year 2000, ours should be a Rs 60-crore turnover company," says Tapas Gupta, President and CEO, PSL Universal McCann.

"Bad times are good times for a new agency," says Shivjeet Kullar, National Media Director, Joint Communications Asia Pacific Private Limited.Kullar, along with Arvind Bagga of Everest Advertising, had set up JointCommunications smack in the middle of the slump. But Kullar is a happy man today for his nine-month old agency has bagged big accounts like Goodyear tyres, Telstra, Officer’s Choice whisky and Coral fashion watches (Jayco).

"Clients will come to you for a solution during a slump. And we are able to provide them with a strategy that works," he adds. According to sources, since the advertising budgets of companies had shrunk drastically, it became non-viable for big agencies to handle these accounts. So such business automatically went to small and new advertising agencies.

But Tapas Gupta has a different reasoning. "During a slump, clients look for immediate results. And a new agency is perceived as a new product in the market and companies are eager to try it out," he says.

In fact, big agencies find it increasingly difficult to procure new clients. Sunil Gupta, Senior Vice President and General Manager, HTA, New Delhi, elaborateson this point. "Since we already have Nestle, we can’t get another chocolate account. So new products invariably go to the new agencies," he adds.

"Most big agencies have a mixed bag of clients," says Virat Mehta, Client Service Director, O&M, New Delhi. So if consumer durables were cutting their advertising expenditure due to poor growth rates, they could look towards FMCGs to cover up the loss. Fast moving consumer goods have been least affected by the recession and some FMCG manufacturers have, in fact, managed impressive growth rates. But even in the category of consumer durables, some companies like Hero Motors and LML managed impressive growth rates last year.

Agencies who had financial institutions as their clients were the worst hit. Several financial institutions have wound up and there is no new issue in sight. "Some companies have slashed down their advertising expenditure. But more than that, it is delayed payments that kill agencies," says Mehta.

Ogilvy & Mather is said to have grabbed thenumber three slot during the last FY. It was number four on the A&M agency reports of 1996 and 1997. The agency grew 39.4 per cent during 1995-96 and 19 per cent during 1996-97.

Many large agencies have had to diversify into new areas — like public relations, media buying and event management — to keep their bottomlines going. Says Sunil Gupta of HTA: "Of late, we have diversified into rural marketing, retail advertising and event management." The agency has also started buying media to give its clients the best rates along with a wide reach.

Despite retaining the first rank on the A&M agency reports, HTA has seen a steady decline in its rate of growth. The agency grew at a rate of 20-22 per cent during 1997-98, as compared to 29.4 per cent during 1996-97 and 46.4 per cent during 1995-96. This FY, the agency is targeting a growth rate of around 25 per cent. Sunil Gupta feels that HTA’s stress on "effective advertising" has helped it in retaining the top slot in times of trouble.Commenting on thequality, Kullar says that "advertising has given way to discount advertising" over the last two to three years.

Direct marketing has also gathered pace during the slump. Though not essentially a cheaper medium, direct marketing targets prospective buyers and lures them through schemes to purchase the product. Sunil Gupta cites the examples of Apollo tyres and Glaxo where HTA got in touch with truck owners and doctors. "For Johny Walker whisky, we formed a club," he adds.

According to Kullar and Tapas Gupta, most big and very small agencies have managed to sail over the tide. "The losers were primarily those agencies that didn’t have proper strategies and were delivering mediocrity. Several mid-size agencies fall in this category," says Kullar.

It’s not always Tapas Gupta’s "new product" contention that helped new agencies. According to Kullar, many agencies acquired new clients due to international alignments. Since an agency is globally handling a brand, its joint venture here automatically got theaccount when the MNC brought the brand to India.

If new products went to the smaller agencies, it is the old relationships that came to the aide of big agencies like HTA, FCB-Ulka and O&M. "Most of our long-term relationships are with clients whose brands are strong," says HTA’s Sunil Gupta. The agency has been handling Smithkline Beechem for 70 years and ITC for 45 years. It took on Nestle in 1982 and HTA’s other old clients are HLL, the Hero Group, Pepsi and Godrej.

But according to Tapas Gupta, such long-term relationships are increasingly being questioned. More so, if the advertising is not effective.

Mehta is of the view that as of now, nothing catastrophic has happened in the Indian advertising industry. Only the rate of growth has gone down. "It is the sentiment which is worse," he says.

"In the West, the advertising industry grows at a rate of 3 to 5 per cent annually. Keeping that in mind, a 15 per cent growth is not bad by any standards," says Mehta. Kullar, however, feels that unless thesefigures are deflated with inflation, the growth rate is quite unrealistic.