Friday, January 02, 2009

Korean and Japanese clients treat agencies like ‘agents’ or ‘suppliers’

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Sprint across from telecom to consumer durables and the story is no different. In a sector dominated by just 5-8 major advertisers, the year 2007 saw 11 accounts coming under review. Insinuating at the frequent agency changes in the segment, a top-notch veteran of the ad-world, under condition of anonymity, fires: “Korean and Japanese clients treat agencies like ‘agents’ or ‘suppliers’. They believe that suppliers have to be changed every now and then... Worse, agencies are putting up with this rubbish.” Clearly, ad agencies have cause to worry. Their very raison-de-taire is under threat?

Besides, competition and media fragmentation is forcing advertisers to acknowledge that it’s really not easy to reach out to the masses with frugal budgets. If ad spends in 2007 totaled Rs.22,721 crore; estimates suggest that the sum will rise to a mind baffling Rs.36,731 crore by 2010. Rising ad spend is accompanied by an even greater weightage on accountability from the clients side. Every paisa spent on communication needs to count, be justified and superimposed with insane media costs, life is not getting any easier for marketers. “Margins are coming down. Competition is heating up. The business is getting cut-throat with cost-benefit ratio and value-for-money aspect taking on scary dimensions. Market dynamics have changed and most categories are swirling in turbulent markets,” offers Dentsu’s Gulu Sen, suggesting that the scenario is prompting (forcing?) clients to get sharper, clued-in and informed.

The perform or perish scene is adding to the already high churn-rate of CMOs in companies – average tenure of a marketing chief nowadays is at best 18-24 months in the high drama, high competition environment. Small surprise that a new CMO prefers to bring in an agency that he/ she is comfy with, so that he rakes in results quickly to please his new bosses. And here’s the biggest proof of the diminishing role of agencies. In the good old days, when agency was partner, creative hotshots had access to even the CEO, MD and Promoter of the company; now his area of influence has been reduced to just the brand’s marketing team, so the call for changing the ad agency can actually be taken at the CMO level. So while CMOs are lamenting the seeming lack of adrenalin-pumping enthusiasm from their agencies, the flustered agency guys are almost taking it as a personal insult.

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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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