The top of the consumer pyramid is growing: Sam Balsara

06 Sep,2011

Mr Sam Balsara, Chairman & Managing Director, Madison Communications Pvt Ltd, is one of the most influential people in Indian media. It is not only because he owns one of the largest media agencies in the country, and has a 51 percent stake in the other (Mediacom India), but because of his understanding of the Indian consumer and industry issues, and his ability to be one step ahead.

Ritu Midha of MXM India spoke with Mr Balsara on topics ranging from the current consumer sentiment, experiential marketing, industry issues and more. Excerpts from the conversation:

GDP growth at 7.7% is the lowest since December 2009. Besides, a recent AC Nielsen study shows that consumer sentiment has gone down. What does it augur for the advertising industry?

More than slowdown, I think the sentiment is getting a bit affected, and this, indeed, is going to impact the advertising industry. I would say advertisers, or for that matter categories, which do not advertise regularly would get seriously affected by the prevailing sentiment.

Talking of specific media, advertising on TV would be the last to be affected. Advertising in English print and outdoor would be affected first and in a slightly deeper way than advertising. The television, to my mind, provides far more flexibility, and tends to keep the inventory full… at whatever rate.

On the positive side, however, India continues to be a shining star on the global map. Many more foreign companies will come to India with their global brands and competition for the established brands will increase. It surely means new players will have to spend aggressively to carve a niche for themselves, while the established players will have to step up their spends to keep ahead. This would, in a way, counterbalance the ad spends.

We must not forget that India is an under-advertised economy. Our GDP-to-advertising ratio continues to be one of the lowest in the world.

Will the mass brands cut down ad budgets more than luxury brands?

Mass, specifically mass FMCG brands, understand that advertising is as important for them as raw material or packaging.

It is discretionary categories like financial institutions and real estate and not FMCG which could cut down or exit totally like financial institutions, and real estate. 50 to 60 percent of television advertising is FMCG advertising. In print, FMCG would be less than 15 percent. And that is the reason television would not be hit that badly.

Moving on to consumers, do you believe that the top of the pyramid is expanding

Yes it is. The rich in India are growing richer, and that too at a terrific rate. This has led to luxury brands coming in and doing good business.

But from a media perspective, these brands use more of events, CRM and experiential marketing. The impact of their advertising on typical mass media is a bit limited.

This, in turn, should give a boost to aspirational brands.

 

You just mentioned experiential marketing. Do you believe its time has come?

Experiential marketing is growing at a phenomenal rate. More and more companies are now focusing on integrated marketing and engagement. So directionally, it is the way forward.

Marketers now know that they need to engage their prospective target group in a more meaningful and deeper way to in order to convert them into customers and retain them.

Earlier, a television commercial would suffice, but things are changing now. In addition to traditional advertising, you need to seduce the customer in variety of different ways. Awareness about one’s brand is not enough. Marketing spends in experiential marketing are substantially increasing.


Are advertisers also reconsidering their retail and PoS strategies?

Most large advertisers now have a focused set of people to look after modern retail and merchandising. Though organised retail is pegged between 6 to 10 percent of the total retail, for many upmarket brands these figures would be much higher, and for them to succeed adequate expertise in the modern retail area is a must.

As per a few gurus, many purchase decisions are now made in the last seven minutes before the actual purchase happens.

This is definitely true for smaller value products  the way a product is displayed and merchandised makes a huge difference.

Indians, by nature, are changing. Earlier one wanted to use the brands that their mom and dad used. Now one can’t use the same brand that one’s mom and dad used, even if it is a very good brand. In addition to it, there is an increasing tendency to switch brands. If last month one used brand A, this month brand B would be the brand of choice. Loyalties are very difficult to come by, and experimentation is going to a higher plane it earlier was. People are not afraid to experiment with new brands and experiences. I think all this is putting the market on a boil.

 

Moving on to a term I am still trying to understand well  neuro marketing. Do you see it helping advertisers?

Given the two facts, a, world spends 400 to 500 billion dollars in advertising, and b, the phenomenal development in both medicine and technology  it stands to reason that we should spend a lot more effort in understanding why and how people buy.

I have no doubt that in next 15 to 20 years, we would have a set of dos and don’ts as well as aids. These would provide a scientific basis on what to say and how, and what to show and what not to show. All this would definitely trigger sales.

Right now in India, it is still in the parking stage. Not much happening as of now.


And in what stage is digital as of now?

Well, digital is finally at take-off stage. Last year, our digital arm grew at around 50 percent, and this year we are expecting 35 percent growth. Many large advertisers, including FMCGs, are now taking a serious look at digital as the medium to connect and engage with customers.

It is now moving to a more serious attempt at using digital, and spending serious money on it to deliver business results. Digital is going to get very important in the next one or two years.

 

Which of the Madison arms are growing faster in percentage terms?

These are obviously the new divisions  as they have a smaller base. However, our OOH and experiential marketing divisions have seen good growth last year.


Is rapid OOH growth a phenomenon across the industry?

It is not just outdoor; the entire spectrum of OOH, activation, experiential and events is growing at a fast rate. Increasingly, advertisers believe that they need to include these, over and above what they were doing before. Hence, they are allocating a little more of their overall advertising budget to this. This, in turn, is making these segments grow at a faster rate than traditional and conventional segments.

Moving back to Madison, how are your branches in Thailand and Sri Lanka performing?

They are performing alright, but I would not say they are doing spectacularly well. Thailand has seen a fair share of problems in last few years, and it has been a bit of dampener. The company over there also does a lot of experiential marketing, events and promotions, and there was a setback for the last few years. However, from the middle of last year, there are signs of stability returning to the country.

Now something about Mediacom. How have things changed for you from the time you picked up 51% stake in the agency?

This industry is all about change, and if you are in advertising you have to do things differently and do different things in order to make your clients win every day. If you keep doing the same thing every day, both your clients and your clients customers are going to reject you.

You must be a happy man, considering the achievements of Madison and Mediacom.

Mediacom is a part of global network, and it has its own set of international clients. Madison, meanwhile, is homegrown agency rooted to the ground here. Both have their unique strengths and are doing well. Mediacom, of course, has done extremely well due to the aggressive growth of multinational clients. Madison’s growth is largely thanks to large clients that we have picked up in the last few months.

Are there any more acquisition plans in the near future?

We are fortunate that people continuously talk to us. It is not that we rush into acquisitions, but we do look at them on and off.

One last question- a few agencies believe that they should not be penalised if their clients fail to pay channels for advertising

To the best of my knowledge, IBF AAAI holds the client responsible for non-payment and so the client is put on PDC or advance payment before a complete ban is placed on the client. We understand that, though it is the agenciesresponsibility  ultimately one can’t earn 3 percent and pay up 97 percent!

That brings me to another pain point raised by a few agencies: commission of 3%, which in many cases is 2% or less.

Large clients now understand that they made a serious mistake by reducing media agency commissions under pressure. They have now begun to take corrective actions.

At the top end, it is improving but at the middle and bottom end it’ll never improve. But as they say, If you throw peanuts, you’ll only get monkeys.

 

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One response to “The top of the consumer pyramid is growing: Sam Balsara”

  1. Sanjay Rakecha says:

    Dear Sam

    I am totaly agree with u, now people are ready to move other brands. They are not loyal to one brand. This is happen in all industry.

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