In-depth: A tug of war between creative agencies and brands on remuneration

Shrinking profits, high rate of talent churn, looming threat from media and digital agencies and price competitiveness of smaller agencies. It’s been a double whammy for India’s creative agencies that have seen the remuneration from clients being stagnant for years and the business pie from the same client being distributed among various agencies.

There is a lot of hue and cry in the creative industry about not being paid well by clients despite the work load increasing. The agencies feel that these things will eventually affect the quality of work along with their balance sheets.

What has changed for creative agencies that were known to be the brain behind the brands?

Shiv Sethuraman

“The game has changed. Earlier, the creative agency always used to be at the top of the table, where they were considered the most important strategic partner,” said Shiv Sethuraman, Founder, The New Business.

“Today, the media and digital agencies are becoming more strategic. Also, not a lot of clients are spending as much on mass media as they used to. So, all of this has resulted in changing dynamics,” he added.

Sethuram said that agencies are equally to be blamed for their weakening position since they have been very slow to change which has led to casual erosion of their status and revenues.

Also, clients are not depending on only one agency and have empanelled a bunch of big and small agencies where the client fee gets divided.

Virat Tandon

“Clients are having to pay too many agencies. That is the new reality. Reducing the remuneration of the agency shows that probably the client doesn’t fully appreciate or understand their contribution. Or, that some clients are not getting their value from their agencies,” said Virat Tandon, CEO, Mullen Lintas.

In the hey days of creative agencies (the period between 1980’s and early 2000), brands had a single agency as partner to do media planning as well as creative work. Media and creative functions of the agencies disassociated with each other long time ago and became separate entities. Today, both marketers and agencies are trying to reach out to consumers through different mediums.

Prasoon Joshi

Prasoon Joshi, CEO and CCO, McCann Worldgroup India, Chairman McCann Asia Pacific, explained the changing scenario clearly. He said, “People are consuming content in a very complex manner. In today’s time, an agency is finding it challenging to build a brand and deliver its message and experimenting with various things like developing content and trying out different innovative ways to deliver the message. That world will definitely give birth to new revenue streams and it will also make certain ways of making money obsolete.”

Industry stalwarts feel agencies stuck with the business formula of 1980s are not going to stay in the game anymore.

Ashish Bhasin

Ashish Bhasin, Chairman and CEO, South Asia, Dentsu Aegis Network, added, “The inefficient dinosaurs are getting squeezed out. The people who have built the businesses on the 1980s’ formula and are not willing to change are going to feel the pressure.”

Besides competitive scenario, Dhunji Wadia, President, Rediffusion Y&R, cited value-engineering by clients as one of the main reasons behind the growing revenue pressure.

Dhunji Wadia

Wadia also held agencies responsible for not keeping the pace with the change and said, “If you always do what you’ve always done, you always get what you’ve always gotten. So, unless the agencies change their behaviour they’ll continue getting the same results. Today, most agencies have gone beyond the traditional advertising offerings. Those who don’t can keep complaining.”

Where does the problem lie?

GroupM, a global media management investment conglomerate, has forecast the country’s advertising expenditure to grow by 10 per cent and to reach an estimated Rs 61,204 crore in 2017 as compared to Rs 55,671 crore in 2016. Advertising expenditure of the brands is only increasing over the years. Then why is there so much cribbing about reducing profitability and not getting paid well by the clients?

The creative industry is one place where anyone with a laptop and ideas can open an agency. The urge to grow and the feeling of running independent cause dropouts from the bigger creative agencies and give birth to independent smaller agencies and freelancers. All this, in turn, opens up more options for the brands to choose their creative partners and leads to competition among the peers.

A senior industry person who didn’t want to be quoted and has worked on both the creative and the brand sides said, “We keep aside a fixed sum to be spent on the creative campaign and if the agency is not able to deliver a piece of work fast and in the desired manner, we give it to the freelancer. So, it is not that we don’t spend money on creatives but the amount gets distributed.”

Experts feel that the increasing number of small and independent players have hit the margins hard as the brands tend to go for anything that doesn’t cost them much.

Akashneel Dasgupta

Akashneel Dasgupta, Senior Vice-President and Executive Creative Director, ADK Fortune, said, “The advertising industry itself needs to be blamed because we tend to sell ourselves too cheaply. In advertisement, there is hardly an entry barrier. There is no infrastructure that you have to set up. There is no price for an idea. The whole advertising pie size has increased, but compared to that, the number of people who are staking claim of the pie has multiplied by 10 times.”

Adding to it, Tandon of Mullen Lintas said, “Agencies are also at fault for undercutting each other to the extent that sometimes it’s unbelievable how they will pick up businesses for a totally unsustainable fee.”

Another senior creative professional said the problem of not being paid well by the clients has multiplied manifold due to demonetisation and implementation of GST. He said, “Earlier, it was due to demonetisation that we faced this problem of outstanding payments. Now, the brunt has increased with GST coming in. We need to pay our employees irrespective of when the clients are able to pay money. Even if they are giving us the money, they are trying to negotiate on the payment front.”

The agencies earn money from what brands pay them for their services. Till the time brands don’t increase the spend on the creative partners, these issues will continue.

Brands want creative agencies to re-invent

BestMediaInfo.com reached out to brands to know their point of view. We put forward the queries of creative agencies’ about remuneration to brands.

A senior marketer of a top FMCG company said, “Nobody is ready to pay the money agencies demand as there are so many options. Agencies are not in a position to negotiate. Negotiation happens when there are equal partners. There is so much of supply.”

BK Rao

While marketing spend increased at Parle Products, the brand agrees that the money spent on creative agencies has not increased to that extent. BK Rao, Deputy Marketing Manager, Parle Products, said, “Brands started negotiating on the commission bit and slowly the agency commission went on decreasing. The agencies also agreed to work on lower commissions.”

Earlier, the media spend by brands was very minuscule as compared to now. Therefore, a marketer was able to pay more to the creative agency. Till mid 90s it was only Doordarshan on which brands had to advertise. But now with more than 800 channels, TV as the medium has fragmented so much that on an average, to get decent visibility, one needs to spend more than Rs 8-10 crore per campaign.

The clutter level has also increased, which in turn has caused brands to be more accountable and here, the negotiation comes into play. A few marketers said that the mediums on which the marketing and communication money goes have also increased.

Subhrangshu Neogi

Subhrangshu Neogi, Director, Group Marketing and Brand, Religare Enterprises, said, “Marketing spends today have become much more fragmented and essentially are largely ROI-focused, especially in a category like BFSI. While you may still be spending on conventional media from the context of brand awareness and recall, you are also focused on performance marketing, social, affiliate marketing, email marketing and so on and so forth.”

Parle’s Rao also said that the market condition is extremely tight right now, especially in the last one year post demonetisation and GST. “All the clients have really gone low on communication and there are so many creative shops rising. There is increasing competition as far as creative shops are concerned. So, clients really don’t have a dearth of creatives now. It has become challenging for the creative agencies to keep winning accounts and retain clients at the same time.”

A few brands argued that there is no direct relationship between agency remuneration and media buying spend. Agencies are paid on a remuneration basis and the amount that a brand spends on buying different mediums is not related to each other and can’t be compared. On the contrary, agencies argue that the kind of return on investment the creative idea brings to the table by putting the particular campaign/creative idea on different mediums is huge and should be paid over and above the usual remuneration.

Brands say that they’re willing to shell out more money to creative agencies if they can show path-breaking work that they’ve done for other clients.

Sushil Matey

Sushil Matey, Director, Marketing, at Livpure, said, “A typical creative agency can be good in (a) strategy and (b) creative. The best agency is the one that excels in both. In today’s cluttered media sphere, a creative agency should deliver three things – create awareness, build memorability and break the clutter. Allocating money is directly dependent on the budget allotted for creative/ advertising agency. Also, a fact to be noted here is that category A agencies will charge fees as per their expertise and norms and the same goes for category B and C agencies. All these factors combined help an organisation to decide on getting the creative agency on board. However, if an agency can show path-breaking work done prior in a competitive category, the brand/ company can decide on allocating more money to that agency.”

According to Neogi, “The order is that the brands now don’t just want creative ideas but marketing solutions. Clients today are not just looking at a one-dimensional creative solution but are looking at holistic solutions for their business problems. So, the expectation from partners is obviously revisiting their skill and capability sets. And it’s not that people aren’t doing that. A lot of the traditional agencies have been working remarkably well in that direction.”

“It cannot just be a plain straight-jacketed solution that says, ‘I am a creative agency, I will only do creative’ or ‘I am a media agency, I will only do media’. Ideas/ thoughts can come from anywhere. Ultimately, what clients value and are looking for are people who can help them as I mentioned: ‘solve their business problems’,” he added.

Another space where brands are spending the money on creatives is that even after having agencies on record, they are letting out important brand campaigns on a project basis as and when required.

Parle Products has Everest Brands Solutions and Thoughtshop Advertising on its roster but got its last two campaigns done by Taproot Dentsu on a project basis because they thought Taproot made more sense to do the brand campaign for Parle Products.

The reason that Rao gives for hiring agencies on a project basis is that the AoRs will no longer be given work on a platter. They need to fight for it and each time we want a creative campaign, a pitch will be called, when we want a creative campaign. It will be the game of the survival of the fittest.

Suggestive solutions

 

Neelima Burra

Neelima Burra, Chief Marketing Officer and Business Head Health & Wellness, Cargill Foods India, has a pretty good solution for agencies if they could deploy that in practice. She said, “The creative agencies have to relook the model of service. Probably, the old-fashioned retainership model where their risk is protected while business nowadays is far more volatile. The industry is far more dynamic with higher inflation and the cost to serve is also increasing. In such a scenario it is good if a creative agency comes up with a model where they can take some part of incentive or bonus to deliver better results or ROIs of the campaign which they are promising. Who doesn’t like incentives and bonuses? If the team that is working on the account is put on the performances, higher bonuses and incentives, they would not leave the agency.”

Wadia said, “An idea without execution would be just a hallucination. According to Steve Jobs, ‘It’s the disease of thinking that a really great idea is 90 per cent of the work.’ And if you just tell all these other people “here’s this great idea,” then, of course, they can go off and make it happen. And the problem with that is that there’s just a tremendous amount of craftsmanship in between a great idea and a great product. For me, ideas are worth nothing without execution. Great execution would be worth millions. And agencies that imbibe this caveat will stand to gain.”

Sethuraman said, “The only real solution that I can see for creative agencies is to strive for a much stronger integration with the data and digital side of the business. There are few agencies who have a good creative reputation and who will continue to make decent revenue but over a period of time I don’t think it is going to sustain.”

DAN is a 26-agency network and eight of them are in the area of data, technology and media. 1,400-1,500 out of 3,500 people are in digital. Search and performances are going to be the key.

Bhasin realised where the brands are willing to invest their monies quite early in the game. He said, “When I started the journey a few years ago, people were saying that digital is only five per cent of the market. We found the field opened for us. Some of the large legacy kind of agencies didn’t see the wave coming and couldn’t act as fast as we could. The competitors were also not looking at the out-of-home areas where the world is moving, as the infrastructure is improving. You have to follow where the consumer is and where the client spends are going.”

Tandon of Mullen Lintas said that an agency should be clear that the value it can create for a client, no other agency can and no businesses should be picked for an unsustainable remuneration.

“I know at Mullen Lintas, we have lost a few pitches because we refused to be beaten down on pricing. We are quite confident of what value we deliver to our clients,” he said.

Wadia suggested that one must evolve and adapt. The best way to address this is to find a correlation between profit margin and revenue tracking. Agencies that track revenue per client will have higher profit margins than those that don’t. So, unless the agencies change their behaviour they’ll continue getting the same results. Today, most agencies have gone beyond the traditional advertising offerings. Those who don’t can keep complaining.

Piyush Pandey

In a recent interview, Piyush Pandey summed up the discussion well. He said, “I think each agency network is trying their best to keep up the pace as they are all competent agencies. There has to be good discussions with the clients about being open with the budgets if they want great creative output. The client will have to partner me in getting better people. It’s all about understanding, negotiation and managing your businesses properly while making efforts to increase profitability.”

[“Source-bestmediainfo”]

Indian Naval War College launches second international course

The participants of the eight week programme include officers from Bangladesh, Maldives, Myanmar, Oman, Sri Lanka and Indonesia. Naval War College, Goa, is one of the three War Colleges of the Indian Armed Forces.

New Delhi The Indian Navy’s War College at Goa on Monday launched the second international programme for naval officers from friendly foreign countries, an official statement said.

The participants of the eight week programme include officers from Bangladesh, Maldives, Myanmar, Oman, Sri Lanka and Indonesia. Naval War College, Goa, is one of the three War Colleges of the Indian Armed Forces.

The programme, inaugurated by Goa University vice chancellor Varun Sahni, will see the participants deal with international relations theory, geopolitics, concepts of maritime security and strategy, International Maritime Law and management of ocean resources, amongst others.

Stressing the importance of maritime security in nation-building, Sahni said that in a dynamically changing geo-political scenario, there is a need for navies in the Indian Ocean Region to forge stronger ties and collaborate in developing an efficient security architecture in the maritime domain.

The statement said that during the course, participants will be exposed to subject matter experts and eminent speakers and familiarisation visits to the Indian Navy’s operational and training commands.

The participants are also put through simulation exercises on regional security scenarios including Humanitarian Assistance and Disaster Relief (HADR).

 

 

[source=hindustantimes]

How the world is reacting to war of words between Trump and North Korea

Image result for How the world is reacting to war of words between Trump and North Korea

This week, tensions between the United States and North Korea hit a boiling point.

Things ratcheted up Tuesday when President Trump told reporters that the United States would respond with “fire and fury the likes the world has never seen” if Pyongyang continues its provocations. (He later suggested that his world-rattling words might not have been “tough enough.”) Those comments came in response to U.S. intelligence reports suggesting that Pyongyang had the capacity to fit a nuclear weapon to a long-range ballistic missile.

On Wednesday, North Korea struck back, calling Trump’s statement a “load of nonsense,” and accusing the U.S. president of being senile and spending too much time on golf. The country also warned that it is working on a plan to deploy four missiles that would envelope Guam, a U.S. territory with several American bases, in a wall of fire.

Though senior U.S. officials rushed to calm Americans and allies, the president did little to cool tensions Thursday, announcing that his administration is reviewing its options and that the military is “locked and loaded,” ready to #fighttonight.

Here’s a look at how other countries are responding to this tense situation:

China

In the past, China has tried to act as something of a mediator between the United States and North Korea, urging restraint and caution on both sides. As The Washington Post’s China correspondent reported, “China has become deeply frustrated with the regime in Pyongyang, and genuinely wants to see a denuclearized Korean Peninsula. But it has always refused to do anything that might destabilize or topple a regime which has long been both ally and buffer state . … That’s because Beijing does not want to see a unified Korean state allied to the United States on its border: Indeed, hundreds of thousands of Chinese soldiers died during the 1950-53 Korean War to prevent that from happening.”

But on Friday, Beijing said in no uncertain terms that it would not come to North Korea’s defense if the Hermit Kingdom launched a preemptive strike against the United States. An editorial in the state-run Global Times reads, in part, “if North Korea launches missiles that threaten U.S. soil first and the U.S. retaliates, China will stay neutral. … If the U.S. and South Korea carry out strikes and try to overthrow the North Korean regime and change the political pattern of the Korean Peninsula, China will prevent them from doing so.”

Japan

Japanese Prime Minister Shinzo Abe has long argued for a tougher line on North Korea, pushing to strengthen Japan’s military and antimissile defense. In recent days, Abe and other senior officials have reiterated their support of the U.S. president’s strategy. Trump is “putting all options on the table,” Chief Cabinet Secretary Yoshihide Suga said to the New York Times. “Our government approves of that stance. It’s extremely important that the Japan-U.S. alliance further strengthens its ability to deter and respond.”

That might not sit so well with Japan’s electorate, which largely does not share Abe’s bellicose position. “If it looks like the U.S. set off the chain of events that led to escalation, and Abe didn’t use his relationship with Trump to moderate that, it’s easy to imagine that there would be a domestic price to pay,” Tobias Harris, a Japan analyst at Teneo Intelligence, told the New York Times.

South Korea

On Friday, South Korea said that the country’s national security adviser had been in touch with his American counterpart and had been assured that the White House will not do anything on the Korean Peninsula that would “catch the South off guard.” “Both South Korea and the United States reaffirmed their promise that as they take step-by-step measures to ensure their security and the safety of their peoples, they will coordinate with each other closely and transparently,” a statement from presidential spokesman Park Soo-hyun said.

Russia

Russian Foreign Minister Sergei Lavrov reiterated Friday that Russia will not accept a nuclear North Korea. But he blamed the current tensions on the United States and Kim Jong Un’s regime, saying that there has been an “overwhelming amount” of “belligerent rhetoric” from Washington and Pyongyang. Lavrov also advocated for his country’s preferred solution to the crisis — a “smart plan” developed by Russia and China that would have Kim freeze his country’s nuclear tests in exchange for the United States and South Korea freezing their large-scale drills.

Live on state television, Lavrov said that “there are direct threats of deploying [military] power” and that “the side that is stronger and cleverer” will take the first step to defuse tensions.

Australia

In a statement to 3AW, an Australian radio station, Prime Minister Malcolm Turnbull said that if North Korea launches an attack on the United States, Australia will have our back. “America stands by its allies, including Australia of course, and we stand by the United States,” Turnbull said, according to ABC. “Be very, very clear on that. If there’s an attack on the U.S., the ANZUS Treaty would be invoked and Australia would come to the aid of the United States, as America would come to our aid if we were attacked.”

He also called on Kim’s regime to stop its “illegal, reckless, provocative conduct.”

Germany

German Chancellor Angela Merkel has called the escalation of rhetoric “the wrong answer.” She has pledged her country’s support to “any nonmilitary solutions,” telling reporters in Berlin: “I don’t see a military solution to this conflict . … I see the need for enduring work at the U.N. Security Council … as well as tight cooperation between the countries involved, especially the U.S. and China.”

United Kingdom

British officials have called on the United States to dial back the rhetoric. First Secretary of State Damian Green has said that it is “obviously” in Britain’s interests for the the two countries to avoid war; he also called on Trump to “be sensible” and go through the United Nations before undertaking military action. According to the Sun, an unnamed government source has said the U.K. won’t support a U.S. military strike. “The Americans are more than capable of doing what they might want, or have to do, in the region without our help,” the paper quoted the source as saying.

France

On Wednesday, government spokesman Christophe Castaner told reporters that his country was “preoccupied” by the situation and urged “all sides” to “act responsibly.”

Guam

Guam Gov. Eddie Baza Calvo has endeavored to calm nerves and reassure the island’s 160,000 citizens that they’re safe. In a video address, he said, “There is no change in the threat level resulting from North Korea events” and that “there are several levels of defense, all strategically placed to protect our island and our nation.” But Guam also released a two-page pamphlet advising residents on how to react to a North Korean strike.

“Our island has been a target since 2013, and even before that,” Dee Cruz, a senior watch officer with Guam Homeland Security, told The Post. “We’re ready, and prepared, as much as possible.”

Source:-washingtonpost

Syria war: Evacuation begins in besieged towns

A rebel fighter stands near buses carrying people evacuated from the two villages of Kefraya and Foah

Dozens of buses are being used in the evacuation

The Syrian government and rebel groups have begun an operation to move people away from four besieged towns, activists say.

People from Foah and Kefraya, two government-held towns in the north-west, have arrived in Rashideen, west of Aleppo, AFP news agency reports.

Similar operations have begun in rebel-held Madaya, near Damascus. It is not clear if nearby Zabadani, included in the deal, is also being evacuated.

More than 30,000 people will be moved.

Last month, the UN described the situation in the four towns as “catastrophic”, with more than 64,000 civilians “trapped in a cycle of daily violence and deprivation”.

Many people are reported to have died as a result of shortages of food or medicine.

  • ‘Starving to death’ in Madaya
  • Madaya, where children resort to suicide
  • Why is there a war in Syria?
People evacuated from the two villages of Kefraya and FoahImage copyrightREUTERS
Image captionPeople evacuated from Foah and Kefraya have been taken to Rashideen

Foah and Kefraya, most of whose residents are Shia Muslims, have been encircled by rebels and al-Qaeda-linked Sunni jihadists since March 2015.

Madaya and Zabadani, which are predominantly Sunni, have meanwhile been besieged since June 2015 by the Syrian army and fighters from Lebanon’s Shia Islamist Hezbollah movement.

The evacuation deal has been brokered by Iran and Qatar. But critics say it amounts to forced demographic change.

Some 4.7 million people live in hard-to-reach and besieged areas in Syria, including 644,000 in UN-declared besieged locations.

Map showing control of Iraq and Syria (13 March 2017)

Meanwhile, the foreign ministers of Russia, Syria and Iran are due to meet in Moscow in the first meeting of the three allies since the US fired 59 cruise missiles at a Syrian airbase near Homs.

The US says its strike was in response to a Syrian government chemical attackin the rebel-held town of Khan Sheikhoun, in which more than 80 people were killed.

Media captionMr Assad, in an interview approved by the Syrian presidency: “A 100%… fabrication.”

Syrian President Bashar al-Assad has denied carrying out a chemical attack, calling the reports “fabricated”.

The ministers meeting in Moscow are expected to consider their next move, including what sort of investigation they might back, the BBC’s Ben James in Beirut reports.

[“Source-bbc”]