Mumbai: India would see high growth, says Mark Patterson, Asia-Pacific chief of GroupM, the media planning and buying network of the WPP Group Plc. In an interview, he spoke on managing costs in the current slowdown and how clients are aggressively looking for better value. Edited excerpts:
Will GroupM’s ad expenditure be revised upward, given cheerier global cues and Indian markets?
Cautiously optimistic: GroupM Asia-Pacific chief executive Mark Patterson says the big issue in media buying business is managing revenues in relation to cost as 50% of the expenses are on employees. Ashesh Shah / Mint
We have this survey This Year, Next Year; it should be This Week Next Week. By the time we get the data, collate it and publish it, it becomes outdated. I met Martin Sorrell (WPP’s chief executive) four weeks ago in Hong Kong and looked at year-on-year projections by market, I got totally new projections. It’s getting increasingly hard to predict.
Based on the last two months, I would describe my stand as very cautiously optimistic, while before I was pragmatically pessimistic. There has been a sudden shift. When I look at our own projections in revenues and profit, I am more comfortable with the numbers I look at now.
I think we will be a bit shy of ad expenditure projections for Apac (Asia Pacific). India seems to be coping up though. I put Asia as three tiers of markets (as contributing to growth). There’s the top-tier growth and optimism—China, India, Indonesia and Vietnam. (In the) bottom tier, I put Singapore, Hong Kong, Japan. Others (middle tier) are Malaysia, Thailand, Taiwan, etc.
Mindshare was restructured last year. Will your other agencies also be restructured?
Mindshare announced in April last year the exchanges framework which involved a fairly fundamental change. This would take upwards of two-four years to inculcate in their business, as it involves different people, working in different ways and changing behaviour. The beauty of our (GroupM) structure is that they (agencies) are independent to create their own DNA, their own positioning, their own USP (unique selling proposition) in the way...they want to go to market.
It was announced mid-2006 that Ogilvy and Mather (a WPP agency) and GroupM were merging their OOH (out-of-home) businesses to form Kinetic in India. Then how is it that Kinetic still exists as an outdoor media brand under GroupM and Ogilvy continues to have its separate outdoor unit?
Kinetic is our global out-of-home specialist. We set up Kinetic in India several years ago under GroupM. For historical reasons, Ogilvy have their own separate business. We have been in discussions with Ogilvy semi-formally for some time now on putting both the businesses together. To be honest, it needs to be a priority on both sides, which has not happened. The advantage of such a merger is scale.
Some big GroupM clients such as Nokia and Britannia and Henkel have put their media business up for review. Reasons for so many frequent pitches?
The reality is that we handle so many clients that there’s always some business up for review. Clients review their business on a cyclical basis as per their contract. Nokia is a global review. Britannia is a cyclical review. The single greatest impetus to pitches is change of marketing director or change in ownership of a company.
Also in the current environment, some clients are capitalizing on the economic slowdown to pitch (for new agencies) because they know agencies are hungry and aggressive and looking for share. They know they can go out and get potentially better value.
What are the challenges you face as a leading media specialist brand in these times?
The big issue in our business is managing revenues in relation to cost. As revenues decline, we need to try and maintain a decline in cost in order to maintain profitability. Revenues decline rather quickly in our businesses; clients make decisions (on a) week-to-week and month-to-month basis. If their spend goes down, your revenues go down. It’s very hard to take out costs at the same rate, especially because 50% of our costs are on staff.
So, how do we cope then? We try and manage our staff costs. Across the region and not specifically India, one of the blessings is the turnover rate of staff. Turnover rates vary between 20-35% in some markets. We don’t replace them. You get some savings from natural attrition. But you have to also proactively reduce staff if you want to keep smart and skilled people in.