With business still not picking up, agencies are now willing to work on margins close to half those charged just a few years ago.

If you're looking at launching a new ad campaign, this is clearly the best time to do it. Not only will the job-starved agencies fall all over you, their commissions are down to, in case of the middle-rung ones, around half of what they were even a year ago.

Few, if any, agencies are even talking of the standard 15 per cent commission on all advertising booked through them, minimum billing clauses, or even baulking at taking on small-change clients. According to Preet Bedi, Lintas India's Director (North), today the top agencies are willing to take on clients with ad budgets as low as Rs 50 lakh. Nor are too many agencies insisting on the standard INS regulations of a 60 day credit period for all practical purposes, they're willing to go along with credit terms of anywhere between 90 and 120 days.

What's worse, for the ad agencies that is, is that it doesn't look as if things are going to improve in a hurry either. While the poor state of the primary capital market has ensured that financial advertising is yet to pick up, it doesn't look as if the consumer durables market is picking up that fast either. In fact, it was just a few days ago that Confederation of Indian Industry director general Tarun Das told a newspaper that demand has not picked up even for seasonal products such as refrigerators and air-conditioners.

Much of the problem lies in the fact that the ad companies just didn't see it coming. So, while the industry grew by 17 per cent in 1990-91, this went up to 25 per cent the next year, and further to around 36 per cent for the next two years. And if that wasn't good enough, the industry's billings grew by a mind-boggling 50 per cent in 1994-95. And then the bubble began to burst. 1995-96 saw growth decline to 30 per cent.

By then, says Karunendra Mathur, managing director of Montage Advertising, the agencies had become spoilt, and thought this was nothing but a temporary blip. The entry of multinationals who spent large amounts made up for the loss of business from local companies, but this was nothing but an artificial boom. And with MNCs also rethinking their marketing strategies, their ad spend isn't growing that fast anymore either. The last financial year confirmed that the slow growth of 1995-96 wasn't just a blip, with growth in billings down sharply. While Bedi believes net billings increased by 10 per cent, others like Nikhil Nehru of McCann-Erikson (India) believe the growth was around 20 per cent. ``Take a few per cent here and there, the fact of the matter is that the industry has got booted out of its masti and is introspecting,'' says Vivek Srivastav, account director Triton Communication

Advertising agencies spent wildly on hiring more hands / talent and technology. Employers splurged to keep people. The salaries of even average performers doubled or tripled while the fast trackers hit the multiple of four to six during these heady years. The industry that uses to boast of flat organizations became infested with multiple designations including silly ones like "Supervisor". Agencies even invested heavily in digitising information and creatives as well as communication.

What added to the pressure was that MNCs started picking marketing talent from top agencies at fancy salaries and the agencies had to fatten their pay packets too. The worst thing that happened, according to Nehru, was that agencies had to beef up their staff to cope with the work. ``Lack of adequate trained or tested talents made agencies offer even crucial positions and fancy salaries to a lot of people who were not really good investments in the long run,'' says he.

Booted out of their sweet dreams, the agencies are now hard at work. The survival strategies are being formulated and implemented with missionary fervour. ``Essentially the areas that need urgent attention are costs, efficiency, expanded service package and business development,'' says Nehru.Cost control of fiscal discipline is the mantra being chanted by everybody. While technology costs are treated as investment and actually can't be trimed, agencies are targeting wages in a big way. Wages account for about 60 per cent of agencies' costs. The boom time saw the wages in advertising grow manifolds. According to Preet Bedi, during the boom years wages went up 60-70 per cent annually for the better performers. The wages increases in 1997 have crashed in comparison a growth of a mere 10-15 per cent.

Wages are also being cut by restricting hiring and even laying off people. By and large agencies have frozen fresh recruitments and the situations vacated by people leaving the agencies are not being filled. While nobdoy accepts it on the record most agency big wigs agree that there is a drive among the agencies to trim down their staff levels. McCann-Erickson has laid off people after its lost the Coke account recently. Clea's Delhi office has shed staff during the last week. Even the communcation and travel expenses are being scrutinised. Most of the account servicing people in agencies are miffed with their STD lines being either disconnected or calls being restricted. The outstation visits to clients' are no longer picnics for teams. Executive class tickets are harder to come by.

On the positive side, the agencies are trying to increase their business portfolio. According to Vivek Srivastav it has been realised that agencies have to offer the full spectrum of communication to their clients. Today almost all agencies are in the process of setting up public relations / corporate communication, direct marketing and promotions divisions. According to Nehru, most of whose clients are multinationals, typically a multinational coming to India is looking for total comunication package and it makes sense to have high margin fee based businesses like public relations and direct marketing in ones fold. Today agencies are also working harder on servicing their clients. Suddenly the account planning function has gained importance. Earlier typically the account planning department was looked at as someone who just provided research inputs for presentations, today agencies are treating the department to improve the level of delivery i.e enhancing advertising's contribution to brands' performance in the marketplace. According to Sanjay Garg, director account planning at Enterprise-Equity, agencies are now offering business building ideas to the clients like new products, line extensions and such.

Though the agencies have been hit by the slowdown, they are taking it as a blessing in disguise. ``The swing in fortunes have just made agencies sit up and take notice of the bare facts of life of business. According to Nehru the most important lesson learnt by the agencies in these times is that the equation is not revenue minus expenses is profit rather revenue minus profit is expenses. ``If the lessons of this slowdown are learnt the agencies will be more profitable and stronger than ever before,'' concludes Nehru.y

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.