With the Indian economy on a strong growth path, marketing services industry is witnessing good demand as corporates open their purses. Here is a lowdown.

Market-ing potential

According to a CRISIL report, the marketing services market in India grew at a CAGR of 5.6% between fiscals 2019 and 2023, reaching ₹ 1,936 billion in FY23. Corporate revenue of 740 listed entities grew at a CAGR of 8.9% during the same period, which resulted in companies spending more on marketing activities, where advertisements form the biggest chunk of the overall marketing services market.

On comparing marketing spends of companies in the Middle East, Southeast Asia, the US and Europe with Indian companies, we see that the latter spend lower than companies in the US, Europe and the Middle East, but their spends are slightly higher than companies in Southeast Asia. The gap in marketing and advertisement spends between India and the developed economies shows there is plenty of growth potential and reflects under-penetration of marketing and advertisement spends in the country. 

Decoding basics

At a gross level, integrated marketing communication segment is fragmented with media companies and marketing services companies being major contributors to the market. Rest of the market is made up by celebrity management companies, production houses etc. At a net level for advertising service providers, more than 80% of the market is composed of integrated group companies such as, Dentsu, Havas IPG, Omnicom, Publicis, RK Swamy Limited, and WPP.  This segment is expected to grow to Rs 260-280 billion, almost doubling from current levels.

Digital advertisement spends and investments in Customer data analytics & MarTech are expected to drive growth of the overall industry. Customer data analytics and MarTech, which counts players such as Affle, Convonix, Course5, Latent View and Capillary, is poised to grow to Rs 230 billion segment by 2028.

The third key component of the industry is full-service market research and customer experience (CX) measurement which involves customer/ audience segmentation, consumer surveys, customer experience measurement, brand equity and customer satisfaction indices, consumer intelligence and syndicated reports etc. This niche space, dominated by the likes of Hansa Research, Neilsen, IPSOS, GFK, Kantar, is projected to grow to Rs 48 billion in next 5 years. Within the full-service market research (including customer experience measurement) and syndicated studies, the top 10 companies contribute to nearly 50% of the market, the rest is catered by mid to small market research companies.

Big spenders

Banking, financial services, and insurance (BFSI) emerged as the highest spender on marketing as a percentage of its net interest income. Spending ranged between 11 and 14% over the last five fiscals in terms of net interest income. With banking credit expected to grow in double digits in the coming fiscal, marketing spends of the sector are expected at 13-15% over the next few fiscals.

Media, fast-moving consumer goods (FMCG), consumer durables, retail, and e-commerce, too, spend a considerable percentage of their revenue on marketing activities. Overall, marketing spends as a percentage of revenue in FY22 were lower compared with FY18 levels as companies were still recovering from the effects of the pandemic. With the outlook for most sectors being positive and double-digit growth expected, marketing spends are expected to grow by FY28.

‘Government’ hand

Apart from corporates, government a key stakeholder in the Indian marketing services industry. The primary objective of the government’s advertising spending is to create awareness about its policies and schemes among the people of the state, especially the population residing in the rural areas. Advertising is also used to spread awareness related to key segments such as health and education.

State-wise government spends have seen an increasing trend over the years with the advent of different advertising means such as digital and social media. Some of the biggest states in India in terms of population, such as Uttar Pradesh and Maharashtra, are among the leading states in overall advertisement spends.