Yesterday, I had lunch with Shekar Swamy at his office. A simple, delightful vegetarian lunch.
But I digress already; the food is unimportant, the conversation we had is.
We spoke about RK Swamy, about Omnicom, about talent at RKS, all of it not for publication or discussion.
We also spoke about the issue of remuneration for advertising in India, which I can discuss over here.
We spoke about agencies agreeing to work on accounts on fees that are clearly unviable. Later in the day, I was at CNBC TV18 discussing yields and how they could be raised.
Both the issues have a common answer: a clear understanding of cost.
Many agencies and many publications and media products seem to forget about cost when they accept business.
For example, it’s naïve and careless to see only the salary of an individual as the cost. What about the real estate, the electricity, the tea and coffee and other corporate overheads? The travel, the conveyance, the entertainment, etc? Who pays for it?
And after you’re done with the ‘basic’ cost, what about the amortization of the capex, what about money invested in training, in offsites, in pitches, and so on? Who pays for it?
Finally, what about the profit?
In the magazine business, the costs of which I have a fair idea of, publishers often sell pages significantly lower than the actual cost (as defined above, not a simple paper+printing number) in the belief that if you look after the top line and the share, the bottom-line will look after itself.
In the publishing and media business, as also in the advertising and media agency business, it’s the reverse which is actually true: look after the contribution and the top line will take care of itself.
You need a positive contribution to invest in the areas that will make you better than the competition: better people, better training, better equipment.
If you can invest in these, you’ll get to sell more pages/more airtime/ service accounts better/ retain accounts/ win more accounts.
I’ve often written, especially in the dark days immediately after September ’08, contemptuously of the bottom line manager and in praise of the top line manager.
If this seems like a volte face, it isn’t. Because I meant real top lines and real bottom lines, top lines and bottom lines that truly reflect the costs of all inputs and truly reflect profit and loss.
Not top lines and bottom lines that hide and obfuscate, but serve to keep mandarins happy for the quarter that ended and the quarter that begins.
Maybe it’s time all in advertising and media underwent a course in accounts and finance. If the companies can afford to conduct them, that is, without hurting the precious bottom line.
