New Delhi: India’s advertisers are bracing for a slowdown by not only cutting spends, but also shifting to smaller and relatively new ad agencies to make their money go further.
For instance, Anil Ambani-controlled Reliance Communications Ltd (RCom) India’s second largest mobile-phone company, has replaced Leo Burnett India Pvt. Ltd with three-year-old, Mumbai-based Cartwheel Creative Consultancy Pvt. Ltd.
RCom’s Rs200 crore account was earlier shared between Leo Burnett, part of the international marketing communications conglomerate Publicis Groupe SA, and Cartwheel Creative, with the former being the lead agency.
“Cartwheel now is the lead account holder for RCom,” said D. Ramakrishna, founder and director of Cartwheel Creative.
Similarly, Nakshatra, a jewellery brand owned by Indian diamond firm Gitanjali Gems Ltd, recently broke its eight-year alliance with JWT India Ltd, part of the WPP Group Plc. and one of the country’s largest agencies, and handed its Rs15 crore account to Creativeland Asia Pvt. Ltd, a small agency launched a year and a half ago.
Besides Nakshatra, Creativeland also won Rs12 crore accounts of Medimix soap and Cuticura talcum powder on 1 January. Both brands are owned by consumer goods company Cholayil Pvt. Ltd and were previously serviced by Grey Worldwide India Pvt. Ltd, also part of WPP.
“We were absent from the media for nearly two years, but now we are trying to grow market share for our brands Cuticura and Medimix, so it makes sense to work with a smaller agency that will understand our needs in reviving the brand image and offer us a wide-range of services for a much lower cost than a bigger agency,” said V.S. Pradeep, managing director, Cholayil.
Additionally, Creativeland Asia recently won the account of Ramada Hotel, part of the international hospitality group Ramada Worldwide Inc., from its former creative partner Mudra Communications Pvt. Ltd.
“Smaller agencies have lesser overheads than, say, a large one, which has to pay huge rents, electricity and thousands of employees,” said Prashant Godbole, co-founder of Ideas@Work Advertising Pvt. Ltd, a one-and-a-half-year old advertising agency based in Mumbai. “While we do not offer cheap work, our prices are definitely competitive because our overheads are not as much.”
Although Godbole would not disclose names, he said his agency will soon sign on two prominent advertisers serviced by bigger agencies.
“Smaller, independent agencies don’t want a long list of clients, so we actually say no to more advertisers than yes, and by doing this, we automatically provide our clients more time and better quality in service, and hence, better value for their money,” said Sajan Raj Kurup, chairman and chief creative officer, Creativeland Asia.
Another example of a smaller agency winning a big ticket deal is the Rs150 crore election campaign account of the Congress party that went to Delhi-based Crayons Advertising Ltd.
Many big agencies such as Rediffusion Y&R Ltd, Percept Holdings, Madison Communications Pvt. Ltd, JWT and Mudra, were in the race to win the account. The Congress account in the last general elections in 2004 was handled by Orchard Advertising, a Leo Burnett agency.
Industry professionals say the cost of working with smaller agencies is cheaper by 10-50%, depending on the nature of the work and the account. Traditionally, agencies charged 15% of the size of the account as fees, but in the past few years, most agencies have been reported to be working for 6-10%.
Smaller agencies, according to a media buyer who didn’t want to be named, usually waive the commission and charge a single fee based on production costs.
To some advertisers, however, it’s the result that matters. “As long as the creative output leads to the desired impact in the marketplace, it does not matter whether the creative idea emerges from large organized conventional agency set-up or from a smaller unconventional creative hot-shop,” said Sanjay Behl, head of branding in RCom.
“For a lot of brands, once the creative thought has been firmed up, the rest of the campaigns is all about executing the same theme. For example, Nakshatra’s positioning is very clear in the market so now reproducing the same theme with an agency that is more flexible and more cost-effective is an obvious decision,” said Mehul Choksi, chairman, Gitanjali Group.
The latest advertiser to adopt this may be Bennett, Coleman and Co. Ltd, that publishes The Economic Times and The Times of India (ToI).
Most of the company’s many brands are handled by JWT. JWT’s chief creative officer Agnello Dias has recently announced the launch of his own agency in partnership with Santosh Padhi, another creative executive working with Leo Burnett.
“A large chunk of the ToI account is set to move to Agnello and Santosh’s new agency,” a person close to the development said on condition of anonymity.