Radhika Joshi
Jan 15, 2010

Why is the focus on 2% rather than on the 98%?

If we sit and do the sums, the total amount spent on measured advertising in our country is woefully small. For a $ 1.22 trillion economy, our ad expenditure is about US $7 billion. (BSE market cap is about $500 billion).More than 400 hundred agencies are said to operate in this area. Small, competitive and mostly helpless to carve out new spaces. They spend time fighting each other to grow. Or sucking up to potential clients. Hence growth is governed by zero sum processes rather than brand building innovation.

Why is the focus on 2% rather than on the 98%?
If we sit and do the sums, the total amount spent on measured advertising in our country is woefully small. For a $ 1.22 trillion economy, our ad expenditure is about US $7 billion. (BSE market cap is about $500 billion).

More than 400 hundred agencies are said to operate in this area. Small, competitive and mostly helpless to carve out new spaces. They spend time fighting each other to grow. Or sucking up to potential clients. Hence growth is governed by zero sum processes rather than brand building innovation.

Problem is that advertising is the most visible portion of the marketing mix; it gets more attention than it deserves – especially while budgeting.

The first obstacle is whether or not there should be an advertising budget at all! Next, agency remuneration. How can it be squeezed especially in light of the annual pitch? After the lions and clowns of the pitch circus depart comes the media buyers’ extravaganza followed up with the trump card flasher – the Celebrity Agent!

So 0.2 – 2% of the firm’s revenues at ‘risk’ are debated against performance of 100% of the task. What about the other 98%? Is the positioning competitive? Is there an innovation for the consumer to respond to? Is the price right? Is it distributed well enough?

Our country is hungry for well made products which are perceived as value for money. Honda is value for money and so is Nirma. The equation changes dramatically with people trading up or down depending where they find the next VFM point. This happens in a growing market; especially where the manufacturer is lagging in the reality stakes. They create a brand but stop
investing in it. Double Diamond, Spartek, HMT, DCM, EC TV, Rajdoot, Panama, Charminar, etc.

Brand Equity reports that eight of the 10 Most Trusted Brands in India are not invented here! And only 37 of top 100 are, in fact, Indian!

The product is 50% of the risk. If people don’t buy it, something is wrong with the price or the distribution or the promotion. It is creditable to have a strong belief in one’s product but it should be equally lightly held. Should I quibble with my agency for 2% or should I develop my product?

30% of the risk is in distribution. There are strongly held beliefs that retailers, chain stores, etc. will accept our products without issue; only inferior products need to negotiate. This still holds good only in some areas of scarcity. Competitive distribution makes for more consumer reach. Impact of malls and department stores on the institutionalised high street shop? Shoppers’ Stop, Pantaloon, Lifestyle et al account for a fraction of retail; but lurking behind this statistic is the rate of growth and the amazing capacity of a wife to ditch her favourite brand. So it is in the favour of the manufacturer and marketer to rationalise the risk in distribution without taking sides.

Well known apparel brands have found private labels a nuisance. They advertise and bring the customers into the store and the private label walks away with the bride. Nothing can be more damaging to the corporate ego! Ask again. Should I quarrel with my agency for 2% or should I build distribution of my brand?

15% of risk is in the pricing. Pricing today is some science and a dash of pride - which forms the premium. The longer my moustache, the bigger the premium.

Pricing is a relative issue; it has some correlation with cost or profit and has much to do with perception of satisfaction. How else do we account for differential pricing for the same cars…one branded American and one branded Japanese? Or why take your firang buyer to a hideously expensive 5 star and your desi buyer to an expensive four star?

Few companies invest in pricing research; when they do it is combined with other research so it is difficult to make out the impact of one particular element of the marketing mix. Should I kick my agency around for 2% or should I build a better pricing model?

Seen holistically, there is so much to be done in the marketing area; so why hack at the agency?

Advertising is an art and science that has promise of much. Marketers need to work harder, spend less on celebrities and take a broader view of how Ad monies should be made to work best. Flowers grow in with the right amount of water, sunshine and freedom. So do consumers. So do brands. So do profits.

Rajesh Pant is an ITES worker with some experience in advertising

 

 

 

Source:
Campaign India

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