The year 2015 has started with optimism. India is on an economic upturn with forecasts for most industries looking encouraging. Companies are looking to invest more in their business in order to reap benefits from the positive outlook of the market. But is everything really hunky dory in the advertising industry? A closer look at the agency model tells us that agencies need to now embrace change for good.

Among many aspects, growth is much-talked about – in industry forums, board rooms or even internally to energise and motivate talent.

But do agencies have the right growth strategy in place? Are we putting too much focus on winning new businesses and losing the plot as far as organic growth is concerned?

The fact is most agencies are after growth through winning new businesses or business development as a new business immediately adds to the topline. But, in my view, organic growth has its own merit, and agencies overlooking it are flirting with danger.

Large or mid-size agencies, for example, cannot derive all the growth they desire from business development. It is not possible.

Let’s assume that an agency handles ₹100 crore of business and that its aim is to achieve 20 per cent growth. For it to achieve this 20 per cent growth it will need to acquire new businesses worth ₹20 crore “at least”. And that ₹20 crore is more or less the size of a small agency operating independently. In such a scenario, the only sustainable and consistent way forward is to grow organically.

But this is easier said than done.

Refresh for brands, not fees So what are the problems agencies face on the growth front? Most clients demand a brand refresh every year, but the retainer amounts paid out to their agency are seldom revised significantly. While clients might be willing to spend more on media, the remuneration for the agency often stagnates. Furthermore, clients are not willing to pay better for a new TV-print-radio campaign because they perceive that the same amount of thinking is required each year. To add to this there is a new people reality. The consumerscape has changed and is constantly evolving. People get their information and entertainment in different ways. The classic TV/print/OOH mix in most cases is no longer sufficient for brands to engage with consumers. And, the fact is that today there are numerous agencies that offer specialised solutions (such as digital and activations) which is further eating into the revenue of mainline agencies.

What needs to be done? Well, if agencies are to thrive and grow, playing ostrich won’t work. Agencies will need to change their approach. They will need to be integrated solution providers. And provide solutions that drive the brand’s purpose across various consumer touch points. This does not mean developing a mainline campaign and adapting it to web banners, so on and so forth. Instead, agency thinking needs to be expanded to effectively convey the central idea of communication through relevant touch points. At a time when consumers are becoming increasingly sceptical of mainline advertising, this approach is an absolute necessity.

The role of digital Digital has a significant role to play in providing integrated solutions to clients as it can help create the much required momentum after a short burst of TV and print campaigns. Digital campaigns, unlike traditional media, can run throughout the year without costing the client too much.

The good news is that we have already started to see agencies creating exclusive content for digital, which includes videos as well. Leveraging digital with on-ground events can further improve effectiveness and allows the agency to play a larger role in the delivery of a campaign.

In the mid- and long run only those agencies that adopt the new evolving forms of storytelling and leverage their integrated capabilities are likely to grow their businesses and the brands handled by them. A win-win.

(Samarjit Choudhry is Chief Growth Officer, Leo Burnett)

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