New Delhi: With an eye on shoring up revenues, advertising agencies are forging partnerships with data and tech platforms, launching new business models and devising strategies to help brands better communicate with consumers.
Pandemic-induced lockdowns have not only disrupted manufacturing and supply chain of companies but also severely impacted consumer demand which is mostly restricted to essential goods. The trend has forced companies across sectors to cut their advertising budgets and save cost.
Barring digital, every other vertical in an agency is barely drawing 20% of business since majority of brands have cut down on offline advertising with outdoor taking the biggest hit. Agencies working on a retainer model (long term partnership with brands) have taken a fee cut of anywhere between 15% and 25%. The ones on commission model have been severely impacted with limited cash flows.
“There are no two ways about the fact that agencies have taken a hit," said advertising veteran Pratap Bose. “Although I do feel that to change the fundamentals of an agency is the most difficult thing to do but these firms don’t have an option."
According to Meenakshi Menon, chairperson of media audit and advisory firm Spatial Access, agencies’ initiatives in the tech and digital space help them improve margins and profitability. “In digital, agency margins could be as high as 30%. In traditional media, they do not work on more than 3-4% margins. So it makes sense to pivot to digital at this critical juncture," she said. Besides, many agencies are also picking intellectual property rights for events in a bid to reinvent their business models, she added.
Advertising agency FCB Ulka, has partnered with experiential digital agency XPND Interactive to help organise events, conferences and product launches online. Under the partnership, the agencies have executed virtual music concert Sangeet Setu organised by the Indian Singers Rights Association (ISRA) as well as recently concluded AGM of Reliance Industries Ltd.
The agency has also associated with NetworkBay which helps retail and food service brands to create stores of the future by using technology.
“Brands are struggling and they need new understanding of the changing behaviour of the consumers. Such partnerships will help us devise creative strategies and technology solutions to help build consumer confidence and sense of security," said Rohit Ohri, chief executive, FCB Ulka.
Before the lockdown in March, Dentsu Aegis Network (DAN) said it has already accelerated the digital business transformation of its clients.
“One specific manifestation of this is a surge towards direct to consumer (D2C) and e-commerce outcomes," said Narayan Devanathan, chief executive, DAN Solutions, India
The agency is actively working with advisories and data driven firms to create bespoke solutions for clients aimed at greater efficiency (and cost savings) and profitability in the short-term, and growth in the mid- to long-term.
Meanwhile, MullenLowe Lintas is leveraging hyper-engagement model with a suite of proprietary strategic tools under ‘Restart and Restrat’ model which will focus on creating long-term relationships with consumers instead of making ads that hardsell.
“We have divided teams in ‘Now’ which will address the immediate needs of the brand while the ‘Next’ team will work on how the business of the brand will evolve in the next three to six months. A separate team will work to reimagine the brand proposition in a post-covid world as well," said Subramanyeswar S., group chief strategy officer, MullenLowe Lintas Group.
Although Bose is not sure how much the new initiatives will negate the accumulated loss over the past few months, he admitted that it is the perfect time for agencies to build capabilities in areas which currently are and will be relevant in a post covid world. “It could be in healthcare or retail 2.0. Covid has given opportunities to agencies especially the big scale ones to either buyout or acquire a stake in futuristic firms and build themselves further," he said.
Click here to read the Mint ePaperLivemint.com is now on Telegram. Join Livemint channel in your Telegram and stay updated
