 "Fighting to be heard")
There's a saying among ad folks: When the going gets tough, it is advertising that many turn to.
This adage is being borne out if the advertising spends to sales numbers of companies are taken into account. As a percentage of net sales, ad spends of top auto firms such as Hero Motocorp and Bajaj Auto showed a sharp increase in FY15 over FY14. It stood at 2.46 per cent and 1.49 per cent in FY15 over 1.95 per cent and 1.30 per cent respectively in FY14. Similarly, Mahindra & Mahindra and Maruti Suzuki saw ad spends as a percentage of sales touch 0.93 per cent and 0.92 per cent respectively in FY15 versus 0.69 per cent and 0.78 per cent in FY14.
While cumulatively, ad spends as a percentage of sales of the top auto firms in India was not as sharp, going up marginally to touch 2.45 per cent in FY15 versus 2.44 per cent in FY14, still four of the five increased ad expenditure, implying that visibility mattered, notably when the chips are down.
A similar trend can be seen in retail, paints and textiles, all of them big spenders, with advertising expenditure as a percentage of sales touching 1.75, 5.01 and 1.59 per cent respectively in FY15 versus 1.52, 4.73 and 1.48 per cent the previous year.
Other categories such as FMCG, telecom, real estate and consumer durables saw a marginal drop in ad spends in FY15 over FY14 but, analysts say that FY16 will see these sectors gathering steam. Abneesh Roy, associate director, research, institutional equities, Edelweiss, says, "Companies in FMCG cut their ad spends in FY15 to protect margins. This was more to control operating costs. In FY16, these firms needn't do this because they have the cushion of lower commodity costs. Many of them are ploughing these gains back into advertising and sales promotion expenditure so that they can improve sales."
Already ad spends as a percentage of sales have shot up for most FMCG firms in the first quarter of the current financial year. This will only pick up as the festive season nears. Ditto for the consumer durables sector which too has felt the demand slowdown. "We believe that this festive season will be a good one as pent-up demand prompts consumers to get back to the marketplace," says Kamal Nandi, business head & EVP, Godrej Appliances.
The same goes for real estate players as they aggressively woo consumers in an attempt to liquidate their stocks. Telecom firms, on the other hand, who've been struggling with falling average revenues per user (ARPU), see a ray of hope with the entry of fourth generation (4G) technology and the possibility that it will push up data usage.
The country's largest telecom operator by subscribers, Bharti Airtel, for instance, has been spending heavily to advertise its 4G services launched recently.
Estimates peg Bharti Airtel has sunk close to Rs 50-100 crore in the launch phase to advertise its services across media platforms. Media planners estimate that an even bigger advertising burst awaits consumers towards the end of the year when rivals such as Vodafone and Reliance Jio enter the market with their 4G services. That time the clutter levels are expected to be high as the operators fight for space in the consumer's mind.
Digital and television as media vehicles are expected to be big gainers of this windfall in advertising. Sam Balsara, chairman, Madison World, says that the second half of the current calendar year will see an extension of the double-digit growth (20.6 per cent) that TV saw in the first half. "This will result in a sharp growth in the TV advertising market, as high as 21 per cent for the full year. This growth has not been seen in the last five years," he says.
Apart from the collective might of the above-mentioned categories, there are a few more that will aid advertising growth, Balsara says. E-commerce, in particular, is one, which is estimated to be an over Rs 1,000-crore category. Backed by capital coming from private equity players, companies in this space are slated to up their decibel levels this festive season. Banking and financial services, says Balsara, is another category. With the Narendra Modi government placing high emphasis on financial inclusion plus urban consumers trading up, banking and financial majors are expected to use advertising in good measure to help them catch both ends of the rope.
This adage is being borne out if the advertising spends to sales numbers of companies are taken into account. As a percentage of net sales, ad spends of top auto firms such as Hero Motocorp and Bajaj Auto showed a sharp increase in FY15 over FY14. It stood at 2.46 per cent and 1.49 per cent in FY15 over 1.95 per cent and 1.30 per cent respectively in FY14. Similarly, Mahindra & Mahindra and Maruti Suzuki saw ad spends as a percentage of sales touch 0.93 per cent and 0.92 per cent respectively in FY15 versus 0.69 per cent and 0.78 per cent in FY14.
While cumulatively, ad spends as a percentage of sales of the top auto firms in India was not as sharp, going up marginally to touch 2.45 per cent in FY15 versus 2.44 per cent in FY14, still four of the five increased ad expenditure, implying that visibility mattered, notably when the chips are down.
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The auto market has seen signs of stress as consumers have cut back discretionary spends. Passenger vehicle makers saw a decline in sales volume in FY14, after several years of growth. This prompted them to spend aggressively on advertising and promotions in FY15, sector analysts said. The country's largest passenger vehicle maker, Maruti Suzuki, for instance, spent Rs 464 crore, over a third more than in FY14. The ad spends and an excise cut boost offered by the government helped the company grow domestic volumes by 11 per cent in FY15.
A similar trend can be seen in retail, paints and textiles, all of them big spenders, with advertising expenditure as a percentage of sales touching 1.75, 5.01 and 1.59 per cent respectively in FY15 versus 1.52, 4.73 and 1.48 per cent the previous year.
Other categories such as FMCG, telecom, real estate and consumer durables saw a marginal drop in ad spends in FY15 over FY14 but, analysts say that FY16 will see these sectors gathering steam. Abneesh Roy, associate director, research, institutional equities, Edelweiss, says, "Companies in FMCG cut their ad spends in FY15 to protect margins. This was more to control operating costs. In FY16, these firms needn't do this because they have the cushion of lower commodity costs. Many of them are ploughing these gains back into advertising and sales promotion expenditure so that they can improve sales."
Already ad spends as a percentage of sales have shot up for most FMCG firms in the first quarter of the current financial year. This will only pick up as the festive season nears. Ditto for the consumer durables sector which too has felt the demand slowdown. "We believe that this festive season will be a good one as pent-up demand prompts consumers to get back to the marketplace," says Kamal Nandi, business head & EVP, Godrej Appliances.
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The same goes for real estate players as they aggressively woo consumers in an attempt to liquidate their stocks. Telecom firms, on the other hand, who've been struggling with falling average revenues per user (ARPU), see a ray of hope with the entry of fourth generation (4G) technology and the possibility that it will push up data usage.
The country's largest telecom operator by subscribers, Bharti Airtel, for instance, has been spending heavily to advertise its 4G services launched recently.
Estimates peg Bharti Airtel has sunk close to Rs 50-100 crore in the launch phase to advertise its services across media platforms. Media planners estimate that an even bigger advertising burst awaits consumers towards the end of the year when rivals such as Vodafone and Reliance Jio enter the market with their 4G services. That time the clutter levels are expected to be high as the operators fight for space in the consumer's mind.
Digital and television as media vehicles are expected to be big gainers of this windfall in advertising. Sam Balsara, chairman, Madison World, says that the second half of the current calendar year will see an extension of the double-digit growth (20.6 per cent) that TV saw in the first half. "This will result in a sharp growth in the TV advertising market, as high as 21 per cent for the full year. This growth has not been seen in the last five years," he says.
Apart from the collective might of the above-mentioned categories, there are a few more that will aid advertising growth, Balsara says. E-commerce, in particular, is one, which is estimated to be an over Rs 1,000-crore category. Backed by capital coming from private equity players, companies in this space are slated to up their decibel levels this festive season. Banking and financial services, says Balsara, is another category. With the Narendra Modi government placing high emphasis on financial inclusion plus urban consumers trading up, banking and financial majors are expected to use advertising in good measure to help them catch both ends of the rope.