Wednesday, January 21, 2009

gyanendra kashyap moves amidst the marketers this festive season and discovers that it really is the best of times and also the worst of times...

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Be it India or the US, the fun and frolic of the festive season will be far from what it used to be. Haigh offers his candid view, “This year’s festive season is most definitely going to be a less merry period for high street retailers. With consumer credit shrinking, retailers are going to feel the squeeze as consumers look to cut credit spending habits on gifts by looking for alternative, cheaper, value for money options.” However, in the case of India, experts are grasping at potential silver linings. Shushmul Maheshwari, CEO, RNCOS E -Services, spells optimism, “The recent pay hikes and arrears given to more than 5 million government employees after implementation of 6th Pay Commission report can bring back the lost momentum in the industry. Rising advertising expenditure, various promotional schemes will give further boost to industry sales.”

But while an increase in advertising and marketing spends by companies have upped sales in a majority of categories, yet the distressing fact is in the weakening rate of acceleration. Take Agro Tech Foods (Sundrop, Act II, Rath), which increased its ad spend by 70% in 2007-08. Its sales have tanked correspondingly by 2.64%. Similarly, P&G Hygiene and TTK Healthcare, which increased their ad spends by 11.44% and 5.45% respectively, saw a corresponding drop in sales by 6.14% and 6.45% and the list continues with the sorry saga.

So is advertising the pivotal point which governs sales? Maheshwari explains, “More than ad spending, consumer purchasing power plays an important role in driving sales. Although various companies have increased their ad spending by 15% to 20% in the past but high inflation, sky rocketing consumer loan rates and shrinking disposable incomes are slowing growth rates in 2008.” To overcome the tumultuous phase, Titus, Senior Creative Director, O&M, suggests, “Companies could have a meltdown budget. Keep money aside. And if there is no fall, then the money can be classified as savings.”

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Source : IIPM Editorial, 2008

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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