Sunday, December 14, 2008

How the meltdown will affect advertising.

If the M-word hasn’t entered your vocabulary yet, you probably live in another planet. Or may be you’ve just been plain lucky.Either ways, allow me to spill a national secret: the only reason India hasn’t bombed Pakistan is the domino effect it will have on the Aam Aadmi’s India.

The meltdown has already started wreaking havoc on the advertising industry. Budgets have been slashed. Pay cuts are being contemplated. The bloodbath has begun. Even heads have started to roll.

Is this the end, then? No mate, this is just the beginning. It’s gonna get worse. Now, before you accuse me of scaremongering, I shall analyze the market threadbare and show you why I am bearish about the future...

1. All the IPO-obsessed clients have seen their dreams take a deep tumble. They’ve realized that the life-saving public issue is not going to happen for at least six months. This has caused a funding jam which in turn has resulted in a liquidity crunch. No working capital means, no money to pay suppliers. By definition, that includes ad agencies. Now do yourself a favor. Think of the client list of your ad agency. Jot down the names of those who were talking of an IPO. Make a note of the money they owe you. Safely assume that that money won’t flow in, even after 3 months.

2. I can see that ‘uh-oh’ expression in your face. WAIT. There’s more bad news. One sinking company can drag six other companies down. So a chain of negativity will get transmitted all around. A pall of gloom will pervade the economy and soon even champions of recession advertising will get into a shell. What that means reason will take a backseat and silly sentiment will take over.

3. How does one stay afloat in these choppy waters? Simple. Steal clients from the other agency. And how does one manage this? Under cutting. No brainer, no? So an Agency War will ensue - where the winner will again be the clients.

4. Retainer fees and media commissions will experience a free fall.

5. Clients will use this as an excuse and squeeze even more juice from their agencies. To avoid this squeeze, the account management will become more and more pliant. Therefore pandering will become the official agency policy. Options will rule!

6. With their new found freedom, clients will start dictating the course of their brand. Panic Sales will be announced. Every brand will use this as a recession-busting tactic. Jaw dropping discounts will become the order of the day. Expect more 70% offs.

7. Those sagacious clients who’ve saved for a rainy day, will be the only ones with any money to do commercials. Even they will be tempted to ask for shorter durations, lower budgets and harder working TVCs.

8. Celebrity endorsement contracts will be reviewed. Most celebrities will face the hatchet.

9. Lack of celebrities will force the client to be more alert about the scripts they approve. Some edgy scripts that never found expression might find takers. To me, that’s the BIG NEWS. Wouldn’t all you hungry buggers want a good low-budget film on your show reel? If you’ve always wanted some nice films, then 2009 will be your year.

10. The sad bit is, even though you might make some good films you will never be able to enter the films for awards as the awards budget will be pared. The upside is, Ad Clubs will be forced to lower the entry fee to attract more entries.

11. Without awards, what does one do? The pitch will be your new saviour. More pitches will happen in 2009 to find agency suitors who are willing to charge lesser. So your portfolio is bound to look great.

12. And which categories are bound to see more pitches? Condoms (as people have more sex to bust stress), Underwear (everyone has to wear them), Indian government banks (as they will never collapse), Fuel Efficient Cars and Bikes, Astrologers, Shrinks, Lawyers, Agarbattis, Pain relievers, Yoga Classes, Hospitals (stress related diseases will experience a spike) and FMCGs that use celebrities. Value brands in all these categories will rock.

13. Lastly, the meltdown will consume many small agencies. Mergers will become the preferred survival strategy.

I’ll leave it at the ominous 13 as I want you to worry more. After all, it’s a question of our survival.

Posted by Anantha

No comments: