The next couple of months will test the ability of various media owners to think innovatively — there’s a big slump in the advertising market, so to avoid cutting rates, new strategies will be required to retain clients; it’s a time when, if they play their cards right, digital media may gain more traction, according to Ravi Kiran, the Mumbai-based chief executive officer (South Asia) who manages the operations of media agency Starcom Mediavest in five major countries. The FMS alumnus tells Shuchi Bansal that estimates for 2009 ad spend may have to be lowered yet again, depending on how the next six months pan out. Excerpts:
How will the economic slowdown and the Mumbai attacks affect advertising growth?
In 2008, we’d expected the Rs 19,000 crore ad industry to grow 18 per cent, but it grew at just 14-15 per cent. Below-the-line (BTL) expenditure, which is around Rs 12,000 crore, was expected to grow 25 per cent, but grew by 18-20 per cent. In 2009, we’re looking at ad spend growing 8-10 per cent and BTL at around 15 per cent. Depending on how the next six months pan out, these forecasts will need to be revised. Elections 2009 and other political events will have an effect on the outlook as well as the level of marketing activity. I’ll stick to the eight per cent advertising growth despite the Mumbai attacks.
Uncertain and fickle demand will ensure TV advertising rates may decline somewhat. Dailies will be hit hard by high newsprint prices and demanding clients.
The very sectors which drove ad spends in the last few years — telecom, auto, financial services, real estate — will make ad spends more volatile in 2009. Packaged goods marketers, in our view, will not panic much — they may even grow their marketing activity and ad spend to take advantage of a soft market.
Are advertisers reducing their ad volumes?
Marketers will cut the unit size of messages. It’s doubtful if you will see too many 40 or 50-second TV commercials or double-spread newspaper ads. You may not see gatefolds in magazines either — it’s like a consumer who was buying a one-litre bottle of shampoo switching to a smaller pack, even a sachet. At the consumer end, a lower absolute price tag will be preferred.
Similarly, advertisers may now buy radio commercials for a month at a much lower cost than, say, a 10-second spot for Rs 3 lakh on television. It is possible that newspapers and TV stations may take initiatives to incentivize size and length to counter such client behaviour.
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But media owners are said to be discounting in a big way.
Rates have not crashed, but anything that carries a ‘luxury’ tag (read expensive media properties) is being questioned. This will have an impact on high-visibility iconic assets such as big TV shows that media owners launch.In general, media owners will avoid too much straight discounting as it is difficult to return to the original level of pricing. But if demand remains poor, they may have no option. Media will be proactive and try to lock in money by doing multi-year, multi-platform deals.
Will advertisers build brands or do tactical marketing?
Brand building is preferred when the economy is doing well. In tough times, marketers need to create the urgency to buy — a need fulfilled by tactical advertising. Most advertisers will stick to clear and hard messages. It’s not as if hard messages do not build brands, it’s just that they are less enjoyable and, therefore, do not remain in the mind for long. In most categories, this is the right time to look beyond visibility and awareness and focus on ‘change of consumer behaviour’, i.e., influence the consumer to buy.
Will brand launches be put off?
Yes. Unfortunately, tough times encourage inaction and maintaining status quo. In my view, this is the best time to do something new, launch brands and experiment with new marketing models. That’s what contrarian marketers will do.
Do downturns affect the endorsement market?
Yes. Many celebrities have already reduced their fees, some by 50 per cent or more. That’s actually smarter than maintaining a theoretical high price and getting out of public visibility. Endorsements help the stars as much as they help brands. Smart stars know that.
Will the below-the-line share rise?
Unfortunately, BTL is classically misconstrued as tactical and short-term. Relationship Marketing, for instance, is BTL, but it is not short-term. Yes, there will be shift from Above-The-Line (ATL or mass media) to BTL during the slowdown, partly because the absolute investments in BTL are lower and the flexibility to adjust the scale is higher. It’s difficult to quantify the shift from ATL to BTL but it could be anything between five and ten per cent, depending on the advertiser.
To many marketers, BTL also appears to be more productive since ATL has more reach but more wastage. In ATL or mass-media advertising, out of the 100 people you reach, only two to 20 may be your customers. On the other hand, promotions touch the consumer directly. Many clients are looking at radio, experiential marketing, activation and digital more seriously than they ever did. Almost every marketing company is more value-conscious than before.
All non-classical disciplines will see higher investments except big marquee entertainment events. Experiential marketing, activation, digital (internet and mobile), trade marketing, relationship marketing and entertainment marketing will gain.2009 will be a year of reckoning for digital.
How will ad agencies be impacted?
Some of the mandatory costs will be passed on to clients, but agencies will learn how to manage business in tough times. It is possible that new pricing models will emerge. I hope marketers realise their long term interest will not be satisfied by pushing down agency remunerations or by commercial indiscipline.
Any media-planning advice?
Reallocate budgets to grow market share. Market shares gained during tough times stay healthy when good times return. Do not stop marketing. If you forget consumers, they will forget you. Go aggressive on non-classical marketing disciplines. Measure, measure, measure — research is not a waste. It’s one per cent money well-spent to understand how well the other 99 per cent is working. Strike long-term deals with media owners. If everyone focuses on the short term, everyone will bleed. Set a recession objective and measure investment productivity as ROO — Return on Objective. Learn to react well to changes in market conditions, too much planning can lead to paralysis.
What is the upside of a downturn and how long do you think this one will last?
A downturn is the best time to experiment and fail; no one will blame you. It’s time to take risks. It will create a generation of brave and practical managers.
I wish I knew how long it will last. My hope — no more than 18 months.