Firms double direct marketing spend to beat slowdown

Direct marketing is where the action is. A growing number of companies, especially in the sectors that have seen a demand slowdown, are doubling their expenditure on below-the-line promotions.

Take Tata Indicom, for example. The wireless internet service provider has increased its spend on direct marketing by over 1.5 times in the past one year.

Abdul Khan, vice-president, marketing, says direct marketing delivers immediate response. Gone are the days when a 60-second commercial would be enough to ensure sales.

Khan, however, says there are very few good agencies for this segment of advertising as it is still considered quite unglamorous compared to television advertising.

Real estate, telecommunications and consumer durables companies feel direct marketing is much more measurable vis-à-vis traditional advertising on television and print.

Besides, the money required for direct marketing such as retail activation and point-of-purchase promotions is much less, giving better returns on the money spent.

Vijay Singh, managing director, 141 Sercon, the marketing services arm of Bates Asia, said, “In some sectors like information technology or consumer durables, a term called ROBO is used to refer to consumer behaviour. ROBO stands for research online, buy offline. Consumers are often found to practise this since the actual buying decision takes place at the last mile.” Sercon’s clients include Hitachi and LG laptops.

Kidstuff Promotional Marketing, a specialist agency in the promotional marketing business for the Mudra Group, has seen its billings going up by 30 to 40 per cent this year compared with the previous year’s.

Jai De Costa, the president of the company, said, “Since marketing services are more measurable, clients want to invest there. The purpose of promotion has changed. Earlier, companies were satisfied even if there were no sales involved in promotional activities. Now they are hoping to get some sales during the promotion too.”

Consumer durables companies, which on an average were spending 10 to 15 per cent of their budget on below-the-line activities last year, are now spending about 30 to 40 per cent.

For fast moving consumer goods (FMCG), the share of these spends has remained more or less unchanged at 10 per cent as sales during the promotional activities may not make a big difference. But for sectors such as real estate, a sale of even one property is enough to cover the cost.
 

COMMERCIAL BREAK-UP
* Sales to adspend ratio remains flat in the last two years.
* Adspend by top 24 firms was over Rs 100 cr each
* Adspend to cost of production has declined by 14 basis points in two years
* Hindustan Unilever (HUL) remains at pole position
	2005-06	2006-07	2007-08
Ad spend by 296 listed firms	7,630.77	8,930.49	10,843.85
Sales/ad spend ratio	59.73	65.45	65.56
Ad spend/expenditure	1.63	1.53	1.49
Growth in net sales	21.38	29.92	26.03
Growth in advertisement	23.55	17.03	21.43

Kidstuff, which had been making campaigns for FMCG heavy weights such as Hindustan Unilever and PepsiCo, is now getting many requests from real estate builders for building promotion campaigns.

“Real estate players and educational institutes had not approached us earlier for making promotional campaigns. However, in the last one year, we have already got six requests from real estate companies and 12 from educational institutes” said De Costa.

Neetal Narang of Parsvnath Developers said the company did a promotional activity called Home Fiesta for the first time. “We realised that such activities make the customers feel more important. We are now planning more such campaigns.”

Sercon says direct marketing spends are growing at an average of 30 per cent a year compared with the above-the-line spends growing at 15 per cent.