The upside of a downturn

Corporate India learned tough lessons as the global financial markets melted down in 2008. With economic data in the country suggesting the recent recovery may be affected by headwinds from the global slowdown, now is a good time to remember the lessons from 2008

After almost a decade of double digit growth the Indian advertising market took a big hit in 2008-09. Reports indicate that total ad spends actually shrunk by as much as 5 per cent during that year. This is an interesting phenomenon, especially when you juxtapose this with the overall GDP growth of India, which was at about 6 per cent during that year. Many theories abound. Some of them say that the Indian ad market grows only when GDP growth hits a 7-plus number; other theories say that ad spends got cut because corporate India ‘over-corrected’, only to remedy the situation a year later. But one myth was broken: Indian trends are not divorced from what happens in the rest of the world. So a butterfly flapping its wings in Brazil can cause a thunderstorm on Dalal Street. Well, maybe not a thunderstorm, but definitely a strong gust of wind.

So as the world gets ready to face yet another challenging year or two, what should Indian advertising industry be doing? What did we learn in 2008-09? What can we implement now? Here are my top five thoughts, as the storm clouds approach: 

• The biggest cost in advertising agency business is the people cost. So the solution to an oncoming slowdown is not slashing manpower and manpower costs, but to look at them a little more judiciously. For example, limiting expensive recruitments is a starting point. Do we really need that expensive creative director? Or can a younger insider be given that responsibility? Increments may be unavoidable in a year of 10 per cent inflation, but can we do them more judiciously? Can teams be redeployed to ensure better utilisation of talent? Can a better analysis of time sheets provide some solutions?
• The second biggest cost in the advertising agency business is the real estate cost. The last two years have once again seen rentals moving north. A slowdown is a great time to relook at rental costs. Are there opportunities to combine spaces? Isn’t this the right time to renegotiate rental costs?
• Do not fall victim to the ‘cut cost at all cost’ syndrome. This may be the best time to use talent to train other younger talent. So instead of cutting training costs ruthlessly, one should consider judicious training and HR moves. The storm clouds will pass away, and when the sun starts shining do you have a team that is all kitted out to take on the field?
• Every medium and large-sized agency has a portfolio of clients. During a downturn it may be a hidden gem that will out spend the regular big hitters. So a judicious analysis of portfolio is called for. Are there some clients who can actually benefit from the downturn? 
• Finally, we need to remember that the agency’s success depends on its client’s success. As we say in Draftfcb Ulka, we are in the business of creating ‘BrandWealth’ for our clients. During a slowdown clients need special care. What can the agency do to become more involved, to become more sensitive, to become more responsive. Should the agency focus on short term results? Should the agency look at other tactical moves that do not damage brand equity?

The above five mantras are by no means magic remedies for a slowdown. Obviously these can only work if the agency to start with has a stable structure, a strong team and a steady set of clients. The obvious first things such as improving cash management /collection systems, avoiding expensive acquisitions, indiscriminate diversifications, improving internal efficiencies and becoming more focussed on primary task will take precedence over the five points above.

That said, we should not forget that India’s growth story is not going to come to a halt. We may see some hiccups, but the economy will start roaring back. And to help speed up economic growth, brands will need the vital input of advertising. For instance, the mobile growth miracle would not have happened without the outstanding advertising that has been happening in that sector. Ditto for automobiles.

So storm clouds will pass. The sun will shine soon. In the efforts to bunker down, do not throw away those running shoes.