Here's what makes GCPL's Sudhir Sitapati think the Indian adworld needs a dose of its own medicine

Bringing something of himself and of Subhas Ghosal into his keynote address at Subhas Ghosal Memorial Lecture, Sudhir Sitapati, Managing Director and CEO, Godrej Consumer Products, shared his views on how ad agencies need to get a taste of their own medicine, that is do what they do best- ‘Building strong brands’, but for themselves.

The event was organised by Advertising Agencies Association of India (AAAI) and Subhas Ghosal Foundation (SGF) in Mumbai, last week.

Having read ‘The Makings of Advertising: Gleanings from Subhas Ghosal’ to prep for his keynote speech, Sitapati feels that if Ghosal were to think of the future of advertising, he would be upset that the identity of J. Walter Thomson, the agency where he worked for half a century, has now been subsumed in VML and perhaps not for the name change itself but more as a symptom of what he would see as the decline of advertising.

“He would blame it on the change of the commission model where agencies would make 15% commission from media owners for the advertisements they bought in. The fortunes of advertising died with the current fee model that leaves no room for investments in people and research and no real incentives for agencies to push the business of the client to the maximum,” he said.

But from where he looks at things, Sitapati feels that Ghosal would only be partly right as the fortunes of advertising and advertising agencies are not the same today.

“Over the last 30-40 years, advertising has done extremely well in India,” he opined.

Going back to one of the articles written by Ghosal in 1983, titled ‘Advertising a Critique’, wherein he argued for more spends on advertising and said that the sector contributed to about .2% of GDP, while in Indonesia it was close to .6%, Sitapati feels that forty years later advertising now contributes to about .5% of GDP.

“Some rough calculations suggest that while in $ terms India’s GDP grew 6.5%, advertising has grown these four decades by 9.5%. If you add devaluation, it’s a stunning rupee growth of almost 15%,” he said.

With this, he also emphasised that FMCG is still the largest spender on advertising in India by a distance and advertising is the life blood of the FMCG industry.

“I would say that the Indian FMCG sector is stronger than in the rest of the world and this is, in turn, led by advertising. The top 5 listed FMCG companies. Their EBITDA is on average 20-25% vs. global peers at 15- 20% and they list at 60X P/E multiples vs. 20X for their global peers,” he said to support his statement.

For GCPL’s Sitapati, FMCG is the bell-weather consumption and compass for most consumer companies and therefore it’s not unfair to assume that if advertising has played such an important role in FMCG, it has played perhaps slightly less, but nonetheless, crucial role in consumption in general.

He also shared the opinion that while advertising has done a great job for media owners and the Indian industry in general, it has probably done less for itself.

“My friends in agencies tell me about the threat to the agency model and if I were to calculate Advertising sector growth from SG’s 1983 speech to now it’s probably about 5.5% in $ terms or just about double digit in Rupee terms. Less than GDP, less than media and corporates but not bad in itself. But if one were to assume that margins have eroded even more significantly, then advertising agencies haven’t been the best value creators in the last 40 years,” he stated.

That being said, he pointed out that it's very common for sectors to do very well, but the individual participants are not getting enough value out of it and the cause behind this is commoditisation where low prices, competition and lack of meaningful differentiation prevent individual players from extracting value and the best way to fight it is by building strong brands.

He added, “But in the last 4 decades while building strong brands for others in India, does the advertising industry need to reflect on its own branding and marketing? Possibly yes. Possibly no. But at the risk of not getting any supper later tonight I’d like to title this talk Marketing Advertising: Does the advertising industry need a taste of its own medicine?”

Moreover, he also suggested that advertising people should spend more time with the CEO, CFO and other non-marketing people, to have a unique point of view on how advertising works and advertise it in a line and finally talk more numbers!

Outlining three points that he wanted to make as part of his speech, he said that given the fact that the first step in marketing is to know one’s target consumer well, but that depends on what one wants- If your objective is to structurally reset the profitability of the advertising category, the consumer is not the brand manager or the marketing head but the CEO.

Sharing an example of what CEOs want today, he mentioned that given their paranoia of people selling to them, CEOs love it when others study their business and praise them before criticising them.

“Like consumers, we want many things. And often what we say we want is not what we really want. We want to be seen as being bold and disruptive. We believe in purpose and sustainability. We all believe that AI will transform the world and the future of marketing is Big Data. We love ads that win awards (even though they won’t admit it) and love it when our peers talk about our advertising. But the problem is that while we want all of this, we will not pay for it,” he opined.

He also stated that CEOs are only willing to pay substantial amounts if they see something that drives their share price in the next 12-36 months and Management Consulting, advertising’s rich cousin selling an even more ephemeral product – strategy – understands this well.

“I, for one, consider myself as one of the advertising fraternity. So when I joined GCPL 2 years ago the very first thing I did was to increase advertising spends dramatically even if it came at the cost of profitability,” he recalled.

Going down the memory lane, he also opined that his own beliefs on advertising were shaped by two epiphanies.

“As a brand manager on Surf Excel in the mid tweens, I noticed that whenever a measure on our Milward Brown brand tracker called ‘Proven ad recall’ rose then a few weeks later our sales rates went up as well. In other words, all it took for a consumer to buy more was to be able to narrate the story of the ad impromptu. I call this principle “Be famous before you get persuasive”. Don’t sell, just be known for what you sell. Once you buy this belief system there are some necessary concomitants – the power of the big idea that helps you stand out, consistency, fewer copies, risk taking, etc.” he said.

The other one was when he was reading, ‘How Brands Grow’ by Byron Sharp and basis his thesis on it, Sitapato feels right to say that brands grow not by heavy users consuming more but by non users or very light users consuming a bit more.

“Penetration not consumption drives growth. Penetration is driven by salience, not equity attributes (hence fame > persuasion) and salience is driven by making your brand mentally available to the maximum number of people. In media terms its reach and not impact that matters,” he said.

The second advertising principle for him which is a media related has been- ‘It is better to whisper to many than to shout to a few’, but this too has its concomitants– never getting carried away by impact, keep looking at the cheapest media, at consumer cohorts who never see your brand ever and don’t over segment markets.

“My favourite brand in India is Wipro’s Santoor – It has stuck to its big idea of ‘Mistaken Identity’ for years and bravely stuck to mass scale wall paintings in order to reach very light consumer of TV in rural India,” he said.

With this, he also mentioned that it’s not just important to have a theory of advertising, but to have a proposition that the agency believes in and everybody in the agency repeats at all forums.

“With just these two principles consistently at play I’ve winged my way through marketing for the last 15 years. So my gauntlet to all my agency friends in the audience here is what is your one line agency proposition that atleast 50% of people will strongly disagree with. Does the entire agency believe it and live it? Can you articulate, as Piyush Pandey was fond of saying, on a visiting card?” he said.

Lastly, he also suggested that the agency world should speak a little bit more in numbers to CEOs.

“Agencies need an entire department on marketing effectiveness – you’ll have to invest in the databases and in people but I can assure you that whenever a consultant or an external advisor has proprietary data on my brand or company, I take her very, very seriously,” he said.

He also shared the viewpoint that an agency’s real customers are those who control the P&L and not those who control ad spends, which is why one should have a clear and succinct view on how advertising works in driving profits and stick.

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