Rs 500 crore ad accounts shift in 3 months

Agencies unleash rate war.

Over two dozen top media planning and buying accounts worth Rs 500 crore have changed hands in the January-March quarter as ad agencies have unleashed a discount war. The country's consumer durable companies alone shifted their media business estimated at around Rs 300 crore during the period.

"The commissions are at rock bottom levels and they can't go any lower. As companies face an increasing amount of pressure on their bottomline, they have become very insecure about the choice of their media buying agency. That has forced promiscuity to set in," said Sandeep Vij, president (corporate media solutions), OMS, which lost key clients like Samsung and McDonalds.

According to an OMS estimate, during the financial year 2003-04, accounts worth nearly Rs 1,000 invited new pitches. "In the current environment, clients are forcing media agencies to accept lower remuneration. Agencies are accepting that to achieve growth targets, and soon enough, the relationship sours," explained Sam Balsara, CMD of Madison Communications. He agreed that the number of changes over such a short span of time was higher than usual.

"Obviously clients are dissatisfied with their current arrangement. Given the intense competition in their markets, clients want to make sure that they are dealing with the best agency," Balsara said.

Some of the account changes also happened due to the global advertising realignment decisions taken at companies' headquarters. Samsung for instance decided to entrust its media buying globally with its in-house agency Cheil. As a result, OMS ended up losing the Rs 125 crore account.

"Clients like LG and Hyundai were with their respective agencies ever since they started operations in India. So after five-to-six years, companies do look for fresher and newer ideas," said Ashutosh Srivastava, MD, Mindshare.

According to an LG executive, having shifted its creative account from Lowe to O&M last year, the company felt that a media buying outfit from the same group would offer more synergy.

Anita Nayyar, MD, Starcom (north India) lamented the fact that despite value-added services and better strategic planning offered by agencies, it all boils down to the rates. "In any relationship, the two sides can tend to take each other for granted. Complacency also sets in after a while," she said.