The World: Booming market faces crunch time over talent
campaignlive.co.uk, Friday, 28 March 2008 12:00AM
In the hyper-competitive, multibillion-dollar adland of India, keeping pace is getting harder. Anant Rangaswami reports.
In 1980, if you wanted to buy a car in India you could choose one from the three available. If you wanted to buy a scooter, you could choose one from the two being manufactured. If you wanted a telephone line, you needed to have connections in high places or pay a bribe running into thousands of dollars.
No advertising was required for cars, scooters, telephones, utilities, essential foods, schools, colleges, airlines, real estate, cement, iron and steel, medicine, or even for bars and restaurants.
India was then a shortage economy, where entrepreneurs and corrupt government officials thrived by ensuring that supply was way short of demand.
The shortage extended to media as well. There was only one state-owned broadcaster, no private radio stations and a print media controlled by regional (and private) fiefs.
That was a long time ago.
Today, the Indian edition of Haymarket's What Car? lists 400 car models that an Indian consumer could buy. The urban Indian can receive as many as 300 TV channels legally (and can watch six Barclays Premier League matches live every weekend) for as little as $8 per month. Three hundred licences have been issued for private FM radio stations in the past year, and every month witnesses the launches of a number of newspapers and magazines. The consumer has never had it so good. Nor has the advertising business.
Miles Young, Ogilvy's Asia-Pacific head, would not be surprised at the turn of events. For years he has been proclaiming that growth in India was inevitable as India was underadvertised. The reason for this underadvertising was because there was not enough media to create consumer awareness, and not enough retail infrastructure to sell the products once consumers reacted to advertising.
Today, the media exists to carry the message - and so does the retail infrastructure. A recent Confederation of Indian Industries-AT Kearney retail study says retailing is the largest contributing sector to the country's GDP, at almost 10 per cent. The study estimates India to have around 15 million retail outlets, making it the nation with the highest retail outlet density in the world, with a total market that is estimated at around $270 billion.
That's great news for the advertising business, which, at last year's Goafest (the annual festival for Indian adland) conclave, discussed how the business could grow from $3.8 billion to $12.7 billion by 2010.
This year, the focus of the conclave (to be held in Goa in the first week of April) will be far more rooted to the ground and far more pressing: value creation. If the previous year's motion was about the top line, this year's is about the bottom line, perhaps a far more meaningful and relevant area of discussion.
The heady intoxication that spurred the debate on the race to $12.7 billion distracted from the underbelly: that margins in all aspects of the business were under serious pressure.
While Excel sheets discussed in holding company head offices make for more than pleasant reading, this is not the most relaxed time for the suits in Indian advertising agencies and media buying houses.
The hyper-competition levels often see as many as 25 agencies pitching for an account and in this situation, too, it is the consumer, the client, who is king. Couple that with the fact that the holding companies are falling over themselves to "own" India and the competition becomes even more intense. WPP woke up to the opportunity earliest and Omnicom and Interpublic Group are desperately trying to make up for lost time and there have been no boxes reserved for bottom-line managers in the organisation charts.
That's what has created the Frankenstein monster. The battle for talent has seen remuneration levels go through the roof, which is all very well if organisations could find a way to retain those who've been hired - and that is getting increasingly difficult. When the economy is booming, it is not just the advertising industry that is the beneficiary; media, real estate, retail, finance and telecoms are all seeing zooming graphs - and all these sectors face a talent crunch.
Adland is a happy hunting ground for brand management, sales and marketing functions, and sectors that are funded by venture capitalists and fund managers are more than willing to pay more for those who deliver instantly.
So agencies first lose talent to other agencies, then to other sectors, and then to a third: new entrants to India. Wieden & Kennedy set up shop in India earlier this year and Naked and StrawberryFrog have made clear their intention to do so in 2008. There is more bad news. Key constituents of the industry are struggling to find common ground on fundamental issues. India's premier awards for advertising, the Abby's, will see McCann Erickson and Lowe staying away this year owing to differences of opinion on categories and judging criteria. Broadcasters have been at odds with media buying houses since last November, unable to agree to a rate hike that broadcasters had proposed.
Despite a number of meetings held to arrive at an amicable settlement, none has been found and broadcasters may stop carrying commercials to force negotiation if the status quo continues.
Hyper-competition and a talent crunch. Lack of consensus on key issues. One would have thought this was enough for the suits to deal with. No, there's more to come.
There's the scramble to occupy the below-the-line space, which had been abrogated to event management companies and small specialist shops. And holding companies, to save time, have taken to scouting for, and hopefully buying out, successful entrepreneurs. WPP bought a majority stake in Encompass Events and in 141 Sercon earlier this year, the former to be under JWT management and the latter under Bates. It's a great time for below-the-line shop owners, but not so great a time for agency chief executives negotiating with them. But it's not all bad news.
The creative quality is on an upswing, with more Indians on award juries, more entries from India that win more laurels at these awards; which probably is a pointer to why Donald Gunn will make another visit to the Goafest this year and why The One Show's Kevin Swanepoel came to India with his travelling show.
There's more good news, too. The Lenovo experiment using Bangalore as a hub for all global communications requirements has proven more than successful and will grow, not because India is a low-cost alternative, but because it is a high-quality alternative. Similarly, a lot of Nokia's global needs are being addressed at W&K's New Delhi operations. The Dell-WPP Da Vinci entity will see a lot of work, and revenues, heading India's way.
There is little doubt that business will continue to grow in double digits for the foreseeable future, and, therefore, there is little doubt that the talent shortage will be the largest worry in the business. If the ad industry wants to see this phase through with the least pain, it needs find a way to make itself glamorous, sexy and aspirational. A task that, in theory, ought not to be too difficult, as it is done each day for the hundreds of brands that they handle.
Anant Rangaswami is the editor of Campaign India.
This article was first published on campaignlive.co.uk
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