Accounts Receivable

Ranjan Kapur, chairman of Ogilvy & Mather (O & M), is pleased. And it’s not only because his ad agency has just been named the most admired in India by a&m magazine. "Honestly," he says, "it’s the steadiness of the market. The simmering tensions of nearly a year-and-a-half are more or less over. I am feeling extremely bullish about the current trend which is extremely positive."

That could be anything between 21 and 24 per cent, bringing back the good old times of 1996-97 when the industry grew by a heady 25-30 per cent. For the last couple of years, shrinking budgets, higher operational costs and delayed outstandings from clients plagued the Rs 12,000-crore industry, limiting growth to less than 15 per cent. Suddenly, in the last three months, a plethora of fast-moving consumer goods (FMCG) brands have been launched - that’s new business - and there has been renewed movement among existing clients, implying progress of current business. And then there’s the www business. Internet companies are a whole new industry with aggressive advertising budgets.

"We have finally come out of the mess. There will be no boom but a continued phase of consolidation comparable with global trends," says Kapur’s colleague and Delhi Ogilvy head Vibha Desai. Agrees husband Santosh Desai, client servicing director of McCann Erickson, which has picked up a host of Internet business accounts in Mumbai, the complete Gillette range (including Braun, Duracell and Parker) and Tata Steel: "What the advertising agencies are witnessing now is a steady upturn. I could call it a gradual return to normalcy because the economy holds good and market sentiments are fairly positive."

Says Sandip Goyal, president, Rediffusion dy&r Brand Communications: "As long as the market grows, advertising is sure of success. It’s directly linked to the pulse of the market. As long as the market grows, the client is happy to spend." Rediffusion dy&r topped the big Indian agencies with the highest growth of 34 per cent.

Adds Sunil Gupta, vice-president, Hindustan Thompson Associates (HTA): "The advertising agencies are bouncing back because almost everyone has learnt to work under tremendous pressures. Millennium seems to be the buzzword and the companies are tagging almost all their brands to this million-dollar word. Besides, there’s a greater demand in Indian homes with increased spending among the middle class, something which helps the advertising agencies because more and more campaigns hit the stands."

Gupta, whose agency picked up a host of Internet-related accounts and other businesses like Van Heusen and a portion of Mattel, feels that not just advertising, the entire business of mass media is looking up with increased spending on media research, direct marketing and public relations. Analysts agree. Unlike the previous loyalty factor between advertising agencies and clients, current global trends have prompted quick movement of brands between agencies. Besides, with choices galore in both creative and other media related services, there’s a constant pressure on the agency to improve its performance, ostensibly to help the client understand the pulse of the market and also add value to its brands.

"And this will be the shape of things to come. Overall growth in the sector will hover around 15-16 per cent. And agencies will have to understand that there will be no more galloping growth," remarks Arvind Wable, executive director, fcb Ulka, which was unique in recording a 25 per cent growth despite the recession. "In today’s market, brands which offer the best value for money are likely to succeed. As a result, it’s imperative for an agency to evolve strategies and campaigns that match the needs of the brand. Campaigns which do not help the brand grow even if they are classy and creative will have to take a backseat," adds Wable.

Analysts admit that sooner or later, advertising agencies will be forced to work on a fairer fee-based system which guarantees that services are clearly defined and remunerated profitably. The agency can then deviate from the tensions of brand media spending and move on to a more accountable and fair system of activity-based compensation. Many also favour including the incentive element as an add-on to the commission system, something practised by big spenders like Hindustan Lever and Procter & Gamble, in which agencies have a chance to win additional percentage depending on performance. After all, the problem of clients’ demand and agencies working on special rates is likely to continue, primarily because the Indian system lacks proper monitoring for agency remunerations.

The Association of Advertising Agencies in India and the Indian Newspaper Society are strong votaries of the 15 per cent commission system but do not have the power of stopping commercials, especially in growing media like cable and satellite television.

And this has helped both the advertising agencies and the media to consistently duck queries regarding financial data, ostensibly because almost all agencies - big or small - work on special rates. And what complicates the issue further is the increasing entry - and success - of specialised media-buying shops which work outside the ambit of the advertising agencies.

"There is growth all right," points out Sandip Kumar, executive director, Enterprise Nexus Equity. "For the past two years, there was no light. Now we can at least see the light at the end of the tunnel. Therefore, the advertising agencies must work closely with the clients in a manner so that they can emerge out of it." Agrees Gullu Sen, national creative director, Rediffusion dy&r: "A whole lot of our clients have started activities, which is an extremely encouraging step. The flow has definitely started."

Two cheers for that.