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Last Updated : Aug 22, 2019 09:10 PM IST | Source: Moneycontrol.com

Slowdown impacting ad spend but outlook positive for festive season; no slump seen in digital

Although, companies will be cautious while spending on advertising yet there are no signs that they will stop spending. In the current situation, a lot depends on what medium the brand chooses.

Answer: 4 Ps or Marketing Mix
Answer: 4 Ps or Marketing Mix

For many sectors, growth is lower than expected due to a slump in demand. From biscuits to cars, people are not keen on loosening their purse strings. In such a scenario, even companies are thinking twice before spending big on advertising.

Keeping the sluggish growth in television and outdoor advertising in mind, the Pitch Madison report for 2019 was revised. Its earlier forecast of advertising expenditure to grow at 16.4 percent was revised to 13.4 percent.

According to a recent KPMG report, television advertising grew at a rate of 12 percent – slightly lower than expected.

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The growth for the next financial year is expected to be relatively lower than FY19, owing to a macroeconomic slowdown being observed since the last few quarters, which has led to a fall in domestic consumption.

A recent report by AdEx India, a division of TAM Media Research, noted that advertising on television came down by three percent between January and June this year as compared to the same period last year.

Talking to Moneycontrol, Harikrishnan Pillai, CEO and co-founder, TheSmallBigIdea, a digital media agency said, “Categories are definitely affected, especially auto. Less ad ex (advertising expenditure) will be coming from those categories. There will be an impact on spending due to the slump in demand.”

Auto is the second largest contributor in the overall advertising pie, with FMCG at the top.

While auto contributed Rs 4,755 crore last year, FMCG had spent as much as Rs 14,717 crore on advertising.

Earlier this year, another AdEx report pointed out that across print, television and radio, Maruti Suzuki was reported as the top advertiser for the first three months of 2019.

Television, print and radio saw growth in ad volumes of cars by 17 percent, 15 percent and 7 percent respectively between January and March 2019 as against the same period last year.

However, it was estimated back then that spending by auto on ads would come down due to the dip in sales volumes.

Industry estimates suggest that the advertising spend by the auto sector was lower in the first half of 2019, but it is expected to pick up pace during the festival season.

“Around 40 percent of the entire ad ex comes during the festival season. I don't foresee that brands will let go of this opportunity. Durations are going to reduce. Traditionally, August is when the spending starts. It is safe to say modest growth is expected during and after the festive season,” explained Pillai.

Although, companies will be cautious while spending on advertising yet there are no signs that they will stop spending. In the current situation, a lot depends on what medium the brand chooses.

On the other hand, Rajesh Patalia, Chief Strategy Officer at AGENCY09 thinks that advertising spends are likely to increase in scenarios of slowdown.

“Economics dictates that to generate demand in a slump, more advertising rupee is required or the advertising rupee has to work more to divert the spending rupee of the consumer from their savings accounts into the market,” he said.

He added that “as the target audience set is finite, brands will have to shout harder and more innovatively to get their attention, hence, the enhanced advertising budgets.”

Talking about auto, Patalia pointed out,  “At the start of the year, at least 30 new car launches were scheduled, with a mix of new variants from existing players to the entry of new ones in India. A major portion of their advertising budgets was allocated for the big three events –Indian Premier League, Lok Sabha elections and ICC World Cup. Due to this reason, TOM (top-of mind) recall led communication from the auto brands took a back seat as it was simply unaffordable. Now that these three events are over; TOM awareness led communication will now be more visible.”

So, when it comes to the medium, experts say that digital is and will be the more preferred medium and that there seems to be no decline by companies while spending on digital for advertising.

“As of now, they (brands) are maintaining the ad spend on digital. I am not seeing the slump on digital spend. As an agency, overall numbers are growing and the trend is upward," said Prasad Shejale, Co-founder and CEO of Logicserve Digital.

He thinks that brands might cut their budget on traditional media and spend more on digital.

Concurring with Shejale, Patalia said, “We are already witnessing a diversion in allocation of budget from traditional media such as print and television to digital. Digital medium offers more flexibility on budget outlays, accountability and return on investment. It definitely is fast becoming the medium of choice.”

Shejale believes that going forward, a quarter of the ad spend will happen on the digital medium.

While BFSI allocates higher budget for advertising on digital platforms, FMCG, which has traditionally been a top advertiser on television followed by radio and print, has now increased its digital ad spend.

The KPMG report suggests that digital advertising market is set to become the largest among all media – television, print, radio, OOH- at Rs 42,300 crore by FY23.

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First Published on Aug 22, 2019 09:10 pm
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