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Mid-sized ad agencies lose people, clients

Mid-sized ad agencies lose people, clients
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First Published: Fri, Sep 04 2009. 12 24 AM IST
Updated: Fri, Sep 04 2009. 12 24 AM IST
New Delhi: In October, Awanish Kumar, 37, quit as head of Tequila, the marketing solutions arm of ad agency TBWA\India to start a marketing consulting firm. Nothing was working for him in advertising, not the “compensation, learning, and appreciation”, he said.
Kumar’s is just one story of a talented employee leaving a mid-sized agency to start a company, but it is representative of a larger trend, one that comes even as these agencies, with between Rs10 crore and Rs50 crore in billings, are losing clients to large firms.
Since the beginning of this year, TBWA\India has lost accounts such as Sony Entertainment Television’s (SET) Max channel, Platinum Guild, American Tourister and Samsonite. Another mid-size agency Grey Worldwide has lost accounts of Cholayil Pvt. Ltd’s Medimix and Cuticura brands, in the same period.
The advertising industry used to be a good place to work, said Kumar, but is no longer so and “talented people have moved on to fields where they can be paid better”.
One reason for that could be the changing modes of payment in the business. In the past, agencies used to earn a fixed 15% commission on all advertising routed through it. Now, most agencies are usually paid a fee based on results.
“Earlier a Rs100 crore account would give an agency around Rs15 crore, but now the same agency gets Rs10 lakh a month, that too if the work delivers results,” said Prathap Suthan, national creative director at Cheil Communications India. “Advertising is today a tougher-than-ever game, but the compensation is not commensurate to the kind of services delivered.”
The bigger agencies have had to cope with this too, but their business has largely remained unaffected because of international alignments— most big agencies here are part of international marketing services conglomerates and handle, in India, the accounts of large clients of their global affiliates—and, as a result, these agencies aren’t seeing as much attrition as the mid-sized ones.
Positions in these agencies are being filled with entry-level graduates who have little or no prior advertising experience, a phenomenon that one advertising executive says has lowered standards in the industry. “Some of the people we have working in ad agencies today could very well be working in banks or any other field of business,” said Gullu Sen, vice-chairman and chief creative officer of Dentsu Communications Pvt. Ltd. “The fact is that today we are not getting the same quality from business schools as we once did. There are many more management schools where communications and media are playing a big role, but the quality is not the same and advertising has just become an alternate career where people come in for a few years and eventually move out because it’s a lot of hard work with little returns.”
Sen added that at any given time, four of 10 employees in ad agencies are looking for opportunities elsewhere.
Among the mid-sized agencies worst hit by these developments are TBWA\India, Grey Worldwide India Pvt. Ltd and Euro RSCG Advertising Pvt. Ltd.
A senior executive, who recently exited TBWA and doesn’t want to be identified, claimed the agency is “in a mess”.
This person added that the agency has lost accounts such as SET Max and Malayala Manorama and that other large clients such as Pedigree and Bajaj Allianz “have drastically reduced spends”. The agency has had “no option but to close operations in Cochin, Hyderabad and Pune”, this person said.
Executives at TBWA\India admit that some clients have scaled down spending, but denied that the agency is in trouble.
“There have been some changes, and some of our clients have reduced spends, but we are still growing more than many other agencies around,” said Nirmalya Sen, chief operating officer (North) at the agency.
“I cannot comment on any movements, but our main aim as a medium- to small-sized agency is to make sure we don’t suffer too much in the downturn, and when growth comes around, we are ready,” added Shiv Sethuraman, chief executive of India operations at TBWA.
Grey Worldwide has, in the past 18 months, witnessed the exits of Naresh Gupta, vice-president (strategic planning); Sarita Srikanth, head of Chennai branch; Hari Krishnan, general manager (Bangalore office); and Preeti Nair, national creative director. Among these, Krishnan left this very month.
One former executive claimed that the agency is losing “a lot of business”.
“The Delhi office was generating business worth Rs100 crore, but now it is not worth more than Rs5-6 crore and it is the same story for Mumbai and Bangalore offices,” added this person.
Grey Worldwide declined to comment.
Another mid-sized agency, Euro RSCG, has seen around a dozen exits in the past year, according to a recruitment firm that works closely with it. Two creative directors Navjyoti Pegu and Abhishek Chaswal left the agency in August and another, Kamal Bhatnagar, could follow suit, said an executive from the recruitment firm, asking that neither he nor his agency be identified.
Suman Srivastava, CEO of Euro RSCG, declined comment on individual exits, but said that attrition level at the agency this year is lower than what it was in 2008. “There is less talent and more demand in this industry, which leads to a fair amount of attrition across the board,” he added.
According to Usha Hephzibah, a human resource consultant, most people leaving advertising agencies are doing so because of no raises or an insignificant raise. “However, the bigger problem facing mid-level agencies is that while they are hiring, the salary packages on offer are too low for senior people—so they end up hiring internally or recruiting fresh graduates.”
That may not always work, she added. “But until that changes, the problem is here to stay.”
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First Published: Fri, Sep 04 2009. 12 24 AM IST