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'Agencies today are only valued for their creative; all the rest has stagnated' : Santosh Desai - McCann Erickson president

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S antosh Desai does not fit into any of the stereotypes that you have in the Indian advertising world. At first glance, you would not think that he is at the helm of one of the top three creative advertising agencies in India. The young, suave McCann Erickson India president comes access more as a number cruncher. But a short while with him changes that first impression totally. And you understand why Sorab Mistry, the man who built McCann's India operations from scratch in the early nineties, handpicked him to be his second in command and run the agency.





Desai is a business, advertising marketing strategist to the core with oodles of experience in strategic planning and consumer insights having worked with agencies such as FCB Ulka and Mudra and FMCG major Pepsi. An apt professional to steer an agency in an era where clients are asking for greater value and accountability from their advertising partners, Desai is a voracious reader and also known to speak his mind. Indiantelevision.com's Sonali Krishna caught up with him to explore the future trends in the business of advertising and the current standing of McCann Erickson.





Excerpts:

2004 has been a very good year for McCann Erickson. What would you attribute it to?



I think it's the culmination of the efforts from earlier. We have reached a stage now where we are perceived as a serious contender. For most clients who are looking for an agency McCann is an agency which has become difficult to ignore. Our strategy has been to focus on doing better work and winning new business as a result; for instance we don't have a new business cell. We don't chase new business and we don't have business development people. We expect that the result of our work is that we create a pull of some kind. And that seems to be working. We get invited for pitches and there are times we have won businesses without a pitch. Reebok for instance is a case in point which was won without a pitch. Last year, we won Pears ( HLL) without a pitch and so on. So, this really is an output of the past efforts that have gone into building this agency.

Could you point out key accounts picked up in 2004?



It started with Marico early in the year which is significantly sized. Tata Indicom which is large, and likely to grow larger. There was VSNL, Metlife, MSN, Reebok, Monster.com, LG Washing Machines, Shaw Wallace, Western Union. About 15 approximately. And all of these are well established brands.

And going forward in 2005…



I think 2005 promises to continue in that vein. To my mind, the path forward looks very encouraging as increasingly agencies are not being measured by size, which is a yardstick but not the only one. In keeping with that, growth is key but if growth means that the kind of work one is doing is compromised then I'd rather not grow indiscriminately. I would expect a growth rate for McCann from 10 per cent to anything twice that.

McCann's sudden burst of success and fair share of limelight in the recent past; where did that come from?



We think McCann in the last few years has always been seen as an agency that has been strong in planning, consumer insights and thinking. When Prasoon came on board three years ago, we managed to convert that strategic strength into creative delivered on the ground. And this was not work done on obscure brands or award winning work which nobody has seen, but was on brands which were the biggest in the country starting with Coke, Perfetti, Dabur and NDTV. Eventually, I think advertising, which is really visible and talked about, creates a ripple of excitement. And that is really an advertising job well done. It is not juries agonizing over the technical finesse of the work. And that's the quality of our work; the bulk of our work on our showreel if shown in a public place would get responses and have an impact. So we become natural partners for clients who seek work that makes an impact.

This evolution has taken three years, the missing link earlier was creative. Also if we did not do the kind of planning and insight work we did earlier we would not have been able to take advantage of the creative resurgence. And without the creative ability our planning strengths would have been academic. I think it is the combination that has given us the boost.

What sectors today are major drivers for the business of McCann ?



Our mix is really of the FMCG and the emerging categories like telecom, IT and services. Today we have a portfolio which is equally balanced in the traditional as well as the emergent sunrise areas. But then again there is no game plan to chase specific sectors. To my mind, all brands talk to people so whether you are selling a room freshener or a home computer, one has to understand motivations and connect to people. I think too much is made of the category differences- which is why we don't approach brands like in this manner.

So, where is the growth going to come from?



The growth is going to come from both the FMCG and the emerging sectors. If one looks at telecom or the automotive and the two wheeler sectors, we see a lot of potential still to come. Consumer durables have also attained newer heights. It's clear if you look at the top 10 spends today Vis-?-vis five years ago, it's a completely new order that has come into being. So, unless you are well represented in these categories one will not grow as rapidly. So, the key growth will come from these sectors. FMCGs, we are beginning to see a revival and with a little caution and lag I think one will begin to see more money coming back into FMCGs.

Another opportunity that seems likely in the next three years is Indian brands going international and trying to make a go in international markets is one big gateway. Whether this will be in partnership with the worldwide agency or otherwise, this is definitely one area of potential growth.

Coming to potential sectors, I think broadband is a category which can be huge. Once one gets into broadband, one gets into an absolute parallel world of media. What form that will take, how big it will be, one doesn't know.

Devices for instance, with the mobile phone becoming increasingly the channel through which everything gets funneled. So, that one device may actually support 40 - 50 brands. So, when we talk about emerging categories because our ability to see the future is limited, one tends to underestimate the potential.

You didn't mention retail?



Yes, retail although is typically a little scattered and unless you get in FDI and there are chains that are organized I don't see the retail boom helping the larger agencies as much as the smaller agencies. I don't see it driving the kind of numbers like telecom has driven. So, I don't see retail adding to the growth kitty in the immediate future.

Another interesting aspect in 2004 was the switching of accounts rapidly from one agency to another. There seems be a certain insecurity all the time. What do you attribute this trend to?



I would like to think of it as a movement away from historical allegiances to agencies where one was involved with a large agency because one felt safer with them. I think now the belief has moved to people and output. The role of creative and the role of the product has grown. Ten years ago one was likelier to get sacked if the wedding invitation of the owner's daughter was not delivered on time but was very unlikely to get sacked if you had a bad campaign. Today, if you have two bad campaigns or two bad films in a row, everybody is shaky as it is not that easy to forgive.

Also, overall the last 2-3 years have not been good and there has been a certain churn and a sense of looking out for the best partner. Remuneration is the third driver very often to change. But I believe that the seriousness with which clients pursue creative solutions has really grown. They are buying solutions and not agencies. Agencies are attachments to solutions.

'Clients are buying solutions and not agencies'

But the trend is not very healthy, is it?



Of course it is not healthy. But to me saying that is an academic thing. The point is if we were really doing a great job and they were still looking out, then there is a problem. If we are not doing a great job, then we need to get our house in order. So, it is a two way thing. Yes, if clients are shopping for a good deal, then eventually they must suffer. And if they are not then it means that all we talk about in terms of quality is not true.

So are you saying that it is justified?



No, I am not saying that. All I am saying that it takes two to tango. I think it is imperative for the industry to demonstrate that there is value in quality. Because, if we are unable to do that, then price will rule. The problem is that so far clearly we have had no measures for it and we don't have the product for it. But otherwise our inability to hold a price line is to me mysterious and it cannot only be because clients are looking for better deals. That explanation is only partly true. There has to be a flip side, which is we are not doing our job as well.

How worrisome is the price war between agencies?



Typically how it takes place is one goes through a pitch and the price is discussed at the end. Sometimes when it is down to the agency of choice and sometimes when it is down to two agencies. Price does not get discussed upfront. So, maybe between two agencies pricing may tilt the scale. But, I have not come across a deal when an agency wins an account purely on the price game. Agencies not holding their price line is a problem but is not the central problem. The central problem is that we need to establish value and I don't think we are doing enough of that. There seems to be a staggering shallowness in presentations across agencies. I don't think they have changed in the last 15 years. The world has moved on and we seem to be talking the same language and addressing the same thoughts. The only value today is creative which has grown over the years. The other aspects of the agency product seems to have stagnated.

What are the other aspects to an agency?



We were supposed to be communication partners, strategic partners, consulting on brands. Today, all those qualities of an agency are not valued anywhere near as they used to be. And hence the whole agency-value equation has changed.

In terms of the overall advertising industry, the thread of concern seems to be growth. What are your comments on that?



Well, it was not growing till last year. Last year as an industry we grew by 12 per cent , this year we are going to grow by 15 per cent, so that does not hold true anymore. The concern really is the price-value equation and the profitability of the advertising business. Another big concern is the quality of people. Advertising pay scales, especially at the entry level, are a pittance. Our ability to pay for talent is low which is why we are not able to offer higher order advice. Eventually, water finds its own level and we have found a model where we make some amount of money. But in doing so we are selling ourselves short and eventually our clients short.



'The easing of pressure on profitability will happen only via bigger volumes'

A lot of agencies today are recruiting marketing professionals for their servicing side, to provide better insights to clients. Does McCann also have such plans?



Not in a very specific way. I don't think that is a solution. I think you need to have people who understand communication and they can come from anywhere including marketing. But that does not mean that every marketing person will make a good communications person. The point still comes down to the ability financially to afford good people. When was the last time an agency went to a good premier B-school, not that I believe that MBAs are the only good products ; in fact often they are not. But, we don't go not because we don't believe in MBAs but because we can't afford them. How can we be a world class industry if we cannot afford world class people?

Coming to profitability...



It was at a reasonable level last year, before that it was under extreme amount of pressure, so I think the industry will be looking at the easing of that in the next year or two. The easing will happen only via bigger volumes.

What about margins?



Margins will not grow, they will only become smaller. The way things are going with input costs going up, remuneration not rising where will margins grow?

But as an industry you will not be looking at taking a stand at increasing margins overall?



The industry has never taken a stand on anything and is unlikely to do so either. At least I don't see it happening and I see it as academic. When it comes to action, barring some ceremonial actions I don't think there will ever be any collective action. Margins getting smaller is a trend of business worldwide. And to plan for higher margins in the normal course of events, I think would be wrong unless one is able to move the price points up, which is a good aim, but cannot be depended upon.

What about non traditional media? Do you see that as a growth driver in the coming years?



In percentage terms, growth rates for non traditional media (NTM) are high, but in terms of share of revenue in a meaningful sense I think we are a couple of years away from NTM being a real driver for revenue. In terms of McCann specifically, we have a very good offer in the direct marking area which is Result McCann and it is among the top agencies in that area. One area that we have not tapped into is the events and the promotion area which is big and that's something which is a potential growth area. The second being interactive.

So, what's the vision for McCann??



We want to become a significant player by doing work that impacts people's lives and in doing so building a financially robust company.

What are the concerns for McCann today?



The priority is to have enough pool of talent down the line to sustain size; otherwise size becomes difficult to manage. Also, when you are a multi national agency there are some businesses that you hold that you have no control over because you can lose things somewhere else and the effect is quite severe.

On a more personal note, tell me something about you which the industry is not aware of?



What they don't know, can't hurt them!

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