Advertisers look to consolidate

ADVERTISING: Businesses concentrate on increasing the efficiency of ad-spend

In these times of recession, advertisers are looking to increase the efficiency of their ad-spend. Besides a cut in outlay, they are consolidating their accounts and moving from multiple advertising agencies to a maximum of two-three agencies. There are also plans to shift regional-level accounts from regional-level agencies to national-level agencies.

“Though clients can’t cut their regional language advertising, as it gets them a specific target audience, consolidation is evident. It is taking place especially on BTL (below the line) activities as on these clients work with multiple agencies,” says Mona Jain, India head, strategic investments, India Media Exchange, (a division of Publicis Groupe Media in India). Below the line promotional activities refer to forms of non-media communication, even non-media advertising. Direct mail is a typical example.

“Clients are moving their regional activities accounts to their national-level advertisers,” says Tarun Nigam, executive director, Starcom MediaVest Group (North),

Advertising agencies like Mudra, O&M, Leo, Lintas, Publicis and others are well-placed to benefit from consolidation as all of these have a diversified portfolio (these have dedicated arms for rural marketing, BTL, etc).

Fast moving consumer goods , consumer durables and telecom, particularly, spend substantial amounts on regional-level promotions. Experts rule out a cut in this category. Other sectors might cut spending. “National-level advertising is always a priority, regional-level promotions take a back seat. Advertisers might even tend to cut regional spends,” says Arvind Sharma, chairman and CEO, Leo Burnett India.

“Clients are looking to consolidate their activities not only on a regional-level, but on the national-level as well,” says Prabhakar Mundkur, COO, Percept/H.

Clients are also thinking about reducing the number of agencies they retain on panel. On-panel agencies have to be paid either a retainer fee (a fixed income), or a percentage of creative commission (the expenditure on creative duties), or both. The number of agencies retained on the panel is set for a reduction.

Most large businesses like Hindustan Unilever Ltd, MTNL, Reliance and Bharti have a panel of agencies. Up to 5 creative agencies are there on panel. One of these leads the account, while others take care of specific duties according to expertise. Experts say that while large businesses will retain the panel, mid-level businesses will either scrap the panel or reduce the number of agencies on panel.

“Small clients have reduced the number of agencies on panel, especially in sectors like retail, real estate and travel,” Pratap Bose, COO, Mudra Group, says.

Payments getting delayed

As the liquidity crunch intensifies, advertisers are delaying payments to advertising agencies.

“Generally, agencies follow a 60-day credit cycle. However, some clients have delayed payments by 2-3 weeks. Beyond this time frame, we are putting pressure on clients to pay on time,” Prabhakar Mundkur, COO, Percept/H, says. “There are some clients who are delaying payments, but these are sporadic incidents,” admits Madan Mohan, CEO (West), TBWA\India.

The Indian Broadcasting Federation has also issued a circular in this context, which mandates advertisers to make timely payments and asks agencies to maintain a 60-day credit cycle, especially for retail and real estate clients.

“Agencies should be cautious while pitching for new clients. They should select a strong brand and closely monitor clients activities,” Arvind Sharma, chairman and CEO, Leo Burnett India, says.