The Covid-19 induced lockdown caused a loss to various industries, which in turn has affected the ad and marketing sector as well. Business and work at agencies reduced after many non-essential category clients withdrew or reduced their ad and marketing budgets as they decided to remain silent during that time.
Now we are entering the third phase of the nationwide unlock with more relaxations. Consumers also have adapted safety protocols in their daily life and their evolving behaviour has led brands to advertise, launch and market their products, which brings a ray of hope for agencies.
In a conversation with BestMediainfo.Com, agency heads said business has increased from the lockdown period and most of it is for digital. Marketers are calling for a ‘short-term’ pitch and focusing on establishing a digital funnel for brands.
The cycle from the first lockdown to now, has been of a sense of denial to that of shock realisation, quick adaptation and now cautious optimism, feels Kapil Arora, Co-Chairman and CEO at 82.5 Communications. “It also reflected in business trying to go on as usual in March before the realisation of the enormity and immediacy of the problem sank in. This resulted in a reorientation of scopes, revenue pressures, in-pitch decisions getting delayed and a lot of work coming in the form of projects only,” he said.
The reorientation and cautious optimism were adapted and agencies were working toward achieving normalcy on the business of clients.
The concept of office timings has changed, working time keeps on extending and there is no physical barrier between office and home.
Anand Bhadkamkar, CEO of DAN India, said that after unlocking, certain brand categories opened up and gearing for new launches. The market is starting and so gradually advertisers are coming in.
“From a work perspective at agencies, execution has started across certain areas. After unlock, many things have started opening up, the economy has steadily started reviving and it’s going to be a long way ahead. The market is starting, so gradually advertisers are coming in,” said Bhadkamkar.
With more categories coming back, agencies are hopeful about business getting better in the coming months. Brands are following a phased reopening of shops and advertising will follow that plan.
“With the economy opening up, slowly but surely, our clients have got more active,” said Tarun Rai, Chairman and Group CEO South Asia at Wunderman Thompson, adding they are telling clients that this is the time to capture the pent-up demand and brands should be spending aggressively.
Gradually, consumer interest in multiple areas is coming back; industries & businesses have started getting back in market, there are new launches, initiatives such as in auto, there are a few car brands who have launched new models, thereby, slowly advertisers have started reaching out to consumers.
“With productions being possible now, new campaigns can be executed and can be more ambitious. Strangely, pitches just never stopped. Maybe it was to do with April being the start of a new year for many clients. However, decision-making was slow and there was a hesitation to commit in a hurry as no one knew till when the lockdown would extend. That has changed in the last few weeks,” said Rai.
The bounce-back curve is shaped differently for different categories but the good news is that it is on an upward movement from a month or so ago, Arora said.
Experts said in the last four months, there has been a drastic increase in digital communication, engagement ideas, internal communications work and crisis work, in addition to brand building work in the essential categories. All these meant a lot more work for agencies to stay in the same place.
Bhadkamkar said the interest is more from digital aspect than large format advertising. Team calls and brainstorming ideas continue over Zoom and Microsoft teams. Clients are keeping in touch with the teams in terms of planning and strategizing but actual spends in the market are yet to come back.
“The demand for digital marketing has surged. There’s been a massive uptick in brands that were already spending on digital to figure out economies of scale and then brands that were not spending on organic drivers of customer acquisition such as SEO and content marketing. So yes, there been an uptick in digital work,” said Prashant Puri, CEO and Founder, AdLift.
Categories deemed essential saw clients latching on to the period as a great opportunity. “We’ve seen rapid innovations; go-to-market strategies and deployment on the back of getting production and distribution up and running.”
April was the lowest month of businesses for agencies. “May was better and it’s improving month on month, which is very positive sign,” Bhadkamkar said.
Bhadkamkar said although people were expecting that after lockdown, the market will move faster but that could not happen because in July the nation saw a sudden increase in cases, which has made consumers more cautious and thus, movements are still restricted and resultant spends haven’t gone up as anticipated.
Due to monsoon being on track, rural and tier-II, III cities are seeing good economic activities and traction.
“We are hopeful about this spread to get contained and we get normalcy before Diwali this year. If it continues to remain the same as it is now and improve thereon, we will be in a good place as we approach the festive period,” Bhadkamkar said.
Even though we have not defeated the virus and cases continue to rise, the wheels of the economy are moving, Rai said, “The consensus is that the economy will continue to open up. There is a lot of pent-up demand that the smarter companies and CMOs are recognising it and therefore have started spending. We are also advising our clients that the companies that have greater ‘bounce-back velocity’ while coming out of the lockdown will gain market share. Having a higher share of voice always helps in securing a higher market share.”
Have pitches increased during unlock?
According to experts, pitches have increased and clients are looking at new ideas. The difference in pitches now is that unlike before, it’s not the large ones. Marketers are evaluating their strategies and the focus is on working with short-term activities. Pitches are being called more for tactical requirements, short-term ideas on the digital side. Clients are interested to know about what they can do on an immediate basis of their digital transformation.
Pitches have increased since the lockdown began, although large pitches are far and few during the period, says Bhadkamkar. “Marketers are evaluating their strategies and the focus is also short-term as every 10-15 days there is a new reality around us.”
“Clients with a long-term partnership continue and that’s not changing. Many marketers are taking a route of e-commerce to reach out to the final consumer. So, more work on digitizing the marketing funnel, brand journey and digital transformation, and people at the agency are assisting clients on that aspect,” said Bhadkamkar.
There are more immediate responses to evolving situations and how you get ready for immediate challenges and that’s where the entire efforts across businesses are. In industries such as healthcare and FMCG etc, which have relatively remained stable during this phase, there has been more stability during this period, said Bhadkamkar.
Top-of-the-line home care products such as dishwashers and vacuum cleaners have disappeared from shelves, leading to huge unmet demand, so there will be a change or there might not be. In any case, brands have to be ready for all eventualities, therefore more work for agencies.
Hemant Misra, Founder and Managing Director of MagicCircle Communications, (a full-fledged advertising agency) sees it as a new trend emerging where the uncertainty of the future is leading more new clients to discuss projects rather than a regular retainership. The understanding is implicit that if the future improves, the project will transform into a retainership. This is mostly from brands that are launching their operations or are beginning their communication journey, not from well-established clients.
According to experts, the lockdown 3.0 guidelines may give them more strength.
Bhadkamkar said to look back at spends in the lockdown, it is coming back gradually because now we can see positive movement in the situation and consistent messaging on unlock from the government authorities too.
All these things together bring back a lot of confidence and everyone has started creating awareness back again. It will be a slow and long walk ahead but in a positive and concrete state, he further adds.
Has cost of work increased to pre-Covid levels?
Ever since the coronavirus-induced lockdown happened, ad and marketing agencies reduced unnecessary costs and relooked their structures to arrive at a more efficient method of servicing clients.
“Reducing cost of work is something which everyone is doing in challenging times. As more and more markets start to open, we will start getting normalcy in costs,” Bhadkamkar said.
“There is an acknowledgement that this is an act of God that couldn’t have been planned for. On the growth side, we are also trying different engagement models such that the value propositions we propose make sense for clients and us in these times,” said Arora.
The second quarter is bringing back the fee levels at most agencies as clients too see improved top lines. The return is slow but has begun.
Experts said celebrations are going to be muted this year as more people will be wary of venturing out and meeting. But if cases are in control, a good bounce-back in business can be expected.
“I use the term cautious optimism because this is an artificially induced shrinking of growth rate. We know that the potential and the money have reduced but we know they exist,” Arora said.
Arora says celebrations could be muted this year as more people will be wary of venturing out. But there is a sense of optimism that festivals bring with them to our country, which should fuel better consumption. “One is only hoping that the scale and spread of the pandemic are brought under better control over the next month or so for such a scenario to pan out.”
Bhadkamkar said advertising is not going to be as normal as during pre-Covid times.
“As we have seen progress from June to July, we should see a bounce back, provided cases continue to decrease like it has happened in Mumbai and Delhi in the last few days. That way we would see a good recovery path to festive period. But we need to monitor the situation on a daily basis,” he said.
“I think we’re on the up and up now. We’re going to see a stellar Diwali and beyond,” said Puri.
“We need our ears to the ground and ensure we can see the changes as they begin. I am a born optimist and I believe whatever the future brings, it will allow the economy to evolve and prosper,” Misra said.
Sentiment in the industry
We are cautiously optimistic, says Bhadkamkar, adding April-May was extremely bad across all the businesses. “People are very well aware that is year is not going to be like previous years. Moving forward, while there is a bit of optimism and positivity coming back, there is also a lot of cautiousness on how things would be in coming months.
Arora refers to the crisis phase as a constructive catalyst. He said the period got the agency to introspect on how it is geared for the future.
“We are seeing FMCG demand back in rural India, a good monsoon, new launches, festive season coming, the e-commerce big daddies lining up their sales in August and the IPL scheduled in September-November — so lots of green shoots to hold on to,” said Arora.
Puri said a much-needed rebound is happening and the sentiment at his agency (AdLift) is very bullish.
Increase in biz now compared to lockdown
From April to May, there was 40-50% increase, says Bhadkamkar. He said May saw the most jump in business as April was completely under lockdown restrictions with no relaxations and so marketers didn’t choose to spend in April.
“May to June was 30% and June to July was 15-20%, but still, we are far from what we used to be. If we compare to last year, there is a big drop in business,” said Bhadkamkar.
Every month since April has been an improvement over the previous month. “We are looking forward to the second half of the year, which in any case, is the more important part due to the festival season,” said Rai.
“Interestingly we’ve had significant front-door project revenue come in for 82.5 during the period of the lockdown. It doesn’t completely offset the organic backdoor shrinkage during this period, but it does tell us that demand for good talent and partnership exists, perhaps more so in these times,” Arora said.
What’s with hiring at agencies?
New hiring at agencies has always been fuelled by the ‘shopping around’ by employees who believe growth comes only through jumping, said Misra. “Hiring freezes are normal and expected in most network agencies, however much they deny it, since that system is geared up to protect agency margins. I see new hiring at an all-time low. With so much uncertainty, most employees are happy to sit where they are rather than shop around,” he said.