15 Jan,2013 17:24 IST
Going Full Speed Ahead
The slowdown has not hit marketing spends. It has only made companies smarter
But that was only until 2011. That year, the European crisis affected all economies including India’s; but marketers chose to not bury their heads in the sand to tide over bad times.
A study by Businessworld’s research team of the advertising and sales promotional expenses by the top 50 spenders in India reveals that they actually increased marketing spends by nearly 18 per cent overall in 2011-12 (FY12) over the previous year. Remember this was the period when India’s GDP growth declined from 9.6 per cent in 2010 to 6.9 per cent in 2011.
Despite the slackening pace, only 10 of the top 50 spenders on marketing spent less in FY12 compared to what they had spent in the previous financial year. Marketing consultants attribute this to the sea change in the attitude of Indian marketing professionals to how they respond to a consumer slowdown.
“Clients have not backed off from spending or investing in their brands,” says Sharda Agarwal, director, MarketGate, a Mumbai-based marketing consultancy. “The difference between the previous slowdown and the present one is that clients are being a lot smarter about marketing investments. They realise that in a tight market you have to continue investing in the brand.”
Other market observers such as Vispy Doctor, founder, Ormax Consumer Research and Brand Consulting, believe that the relatively small spenders are the ones who have cut outlay. “The top spenders realise that their biggest strength is advertising,” says Doctor.
Outsmarting The Slowdown
Ramesh Chauhan, chairman, Bisleri International, says that in order to retain marketshare, companies will spend. “You have to maintain the asset value, hence you cannot stop advertising for long,” he points out. It almost sounds similar to the message cautioning against drunk driving — drink, but be responsible. And it’s not just India; the phenomenon is global (see interview with Preyas S. Desai of the Fuqua School of Business on page 40).
A lot, however, also depends on the sector. K. Ramakrishnan (Ramki), president of marketing at Café Coffee Day (CCD), or even Bisleri’s Chauhan, believe their businesses have not been hurt by a slowdown. But for those in the consumer durables business, like Alok Bharadwaj, senior vice-president of marketing at Canon India, it’s life in the slowdown alley — one where the next quarter threatens to be worse than the previous one.
But the key, be it a CCD or a Bisleri, is to keep growing and remain salient, irrespective of market conditions. Bisleri, for instance, is in a growing market for bottled water; one where the demand is large and reaching ever more places is key to growth.
Canon, despite the decline in the industry’s growth, is still growing at 23 per cent annually. Though that number is way below its 50 per cent growth the previous year, the company has managed to retain consumer attention through innovative marketing strategies. “In testing times, smart companies increase their relative share of voice that correlates into a higher marketshare when the cycle turns around,” says Ashish Bhasin, chairman at media buying house, AegisMedia.
Marketing in a slowdown, or even otherwise, is not only about increasing or decreasing marketing expenditure. It is also about deploying the budget effectively. “People have been less wasteful. They are raising the quality of advertising,” says Doctor.
Many companies have come up with smart marketing strategies. Those operating in markets where growth is in decline are looking at ways to market more effectively to an existing customer base, and to increase the lifetime value of a customer — where he keeps coming back to buy a lot more from the same brand over a period of time.
In digital cameras, for instance, buyers are known to accumulate nearly 20 lenses over a period of 8-9 years after their first buy. So, it makes sense to keep them effectively engaged rather than splurge on mass media in a bid to enlarge a brand’s consumer base.
Others like consumer goods company Hindustan Unilever (HUL) are looking to increase the return on their marketing investment. Yet others, such as Piramal Healthcare, which may not have the marketing muscle of Unilever, are employing smart placement strategies to compete in categories such as deodorants.
Big Bucks, Big Bang
What about promotion? Clients of advertising agencies often talk of getting more out of every advertising rupee. In fact, many large marketers like HUL are now actively letting investors know how they are squeezing costs out of a gigantic marketing machine.
In a presentation made to Goldman Sachs a few weeks ago, HUL showed what the company meant by getting more out of its advertising buck. In calendar 2011, HUL had managed to shave off a significant 9 percentage points from the fees it paid its creative and media agencies. Given that HUL spent nearly Rs 3,000 crore on advertising in 2011, the savings would have been significant. Even if one assumes that the company paid production fees of around Rs 200 crore, its savings on production and media fees would be Rs 18 crore (an amount equivalent to a mid-sized brand’s annual advertising budget).
“Many clients now insist on cost-per-rating-point deals. Three years back, 1 per cent of clients insisted on such deals; now about 20-30 per cent do so,” says Bhasin of AegisMedia.
At another level, HUL is focusing on driving up the return on investment in marketing — it claims an improvement of 200 basis points in the past year. The FMCG major also says that its advertising preview scores have improved by 800 basis points. As most consumers, particularly in global markets, gravitate towards companies that are environmentally responsible, HUL’s marketing messages talk about its green agenda, such as environment-friendly sourcing of tomatoes for ketchup, and so on. HUL did not wish to participate in this article.