Srinivasan K Swamy, Managing Director and CEO, RK Swamy BBDO (P) Ltd.

"We believe that the so-called classic advertising can only grow to a certain extent. Real growth has to come from the marketing services area, where the client spending is also increasing. While clients have been relying heavily on classic advertising, they also realize that their reserves are going to come from events and CRM and other issues that seem to have been taken for granted. To us, both these business groups are very important, to provide holistic solutions to advertisers."

Srinivasan K Swamy is the Managing Director and CEO of R K Swamy BBDO. A B Tech and an MBA, Swamy was instrumental in starting HansaVision in 1987, a premier TV software company in the South, and has led in the role of MD since its inception in 2000. HansaVision today is a marketing services company, having specialised divisions for TV programming, OOH, events, retail identity, MedCell, Infosource, Interactive, etc. His other business interests include market research (Hansa Research Group Pvt Ltd) and real estate development (Hansa Estates Pvt Ltd).

Swamy is also the current President of the Advertising Agencies Association of India (AAAI). He has also been the Chairman for the industry joint body relating to TV broadcasters and advertising agencies – the IBF-AAAI Joint Working Committee – for four years running. He is credited with steering the advertising industry for establishing sequential liability of advertisers relating to the TV medium. A past President of the Madras Management Association (MMA), he was the Chairman, Steering Committee, for the National Management Convention in 2001 conducted by the All India Management Association at Chennai. Currently, he is an active Council Member of AIMA.

exchange4media’s Gokul Krishnamurthy met with the enigmatic and down-to-earth industry leader to seek his views on the ever-evolving advertising industry in India, and the road ahead. Excerpts:

Q. Your thoughts on Media as an independent function.

At one level, it is becoming a standalone function. Historically, as we all know, media was part of the advertising agency. It became standalone primarily because the agency structure did not give them the importance that media should have got at that time. It was also the concurrent development that was taking place in the media. The media choices that were becoming available were not sufficiently recognised by the full service agencies. When you had one television channel, and one Hindu and one Daily Thanthi, you had no option but to take some of the publications or the channel by default.

Media was, therefore, not considered an important function – I am talking about 15-20 years ago. As media became complex, some agencies did not recognise the importance of media, and, therefore, the specialist shops came about. Independent media functions floated by companies with large networks, came up to defend themselves from the specialist media shops. If you are dealing in a media independent, I am also dealing with one media independent, with specialist people, run by media owners and managed by media heads – that had to be presented as a viable option to protect themselves.

The world seems to have come one full circle, and now media is recognised as an important function. Now how is it, or is there anyway we can bring it into the mainline fold and integrate the creative and media functions? Because, the cost of advertising is better served by looking at this holistically, and not just with an artificial division. The guy who is creating the ad should also have some media knowledge, to know about how it should be used, where it would be exposed, so that he can deliver creative appropriate to where the media is going to expose it. Similarly, a media guy with knowledge of the creative thinking process will be in a better position to do his job. I think there is adequate recognition of this fact coming about. But it is going to take a while for people to again re-integrate, if at all. I don’t know if that will happen or not, but the point is people recognise the need to put it together. Whether they will live with a disintegrated world, or again integrate, only time will tell.

I would answer this slightly differently. Larger agencies are more cautious about where the money is coming from. Whether they will get paid on time, among other things, is a consideration. Unless the brand is from a reputed money background, they are unlikely to get serious. They do spend lot of money. There is no point in being a banker for a startup unless you’re sure of the person or company itself. Ten years ago, advertising agencies were foolishly going and hurting themselves by giving credit to unknown entities. I think in the last 10 years that trend has significantly come down. We don’t hear of agencies closing shop because of some serious default of advertisers.

Services, real estate, education, financial services, and corporate advertising, and not necessarily in that order, have shown growth and will continue to dominate in the next three years.

I am confident it will work. As you know, AAAI has already passed a resolution in this regard and the Executive Committee has been authorised to determine the rules in this regard. This pitch fee concept would work because the agencies want it and the implementation of this is with AAAI-taking the money from advertisers and giving it to participants of the pitch.

On the one hand we are not able to afford them. On the other, they are also faced with more exciting opportunities elsewhere – with the money to back it. Money and excitement draws people to wherever these two are strong.

There are markets available for everything. Your company must structure itself to cater to that market. I cannot have a high-cost structure product from my side, to give to a low-cost buyer. I think it’s a question of economics. As a company, some are structured to offer low cost services. You have budget airlines, and you have full service airlines. There will sometimes be cost pressure on the full service airline. That kind of cost pressure is sometimes there in the agency business too.

2005 has been a good year – a satisfactory year for us, where we had better numbers. In 2004, we lost a very large advertiser. That has been made up in 2005. We’ve made good the loss and grown on top of that. We’ve had a lot of additions to the portfolio in the second half of the year.

Bigger challenges await us in 2006. We have a good base to grow on. We have the momentum and have put a lot of initiatives in place. Our multi-brand offering is being recognized as valuable by advertisers. I think the next phase of growth is ahead of us.

When there is shortage of talent, some movement is inevitable. To encourage talent to enter the industry, we at AAAI are soon embarking on an advertising campaign, which presents it as a desirable interesting profession. We believe this problem can only be addressed in the long term and have, therefore, addressed it in a conceptual framework

Yeah. We would not work for anybody for example, without a service fee of at least Rs 2 lakh to Rs 3 lakh a month. It doesn’t make sense. I am not going to design letterheads or visiting cards. I am not a shop to do work of that kind. So, we are looking for engagement, which will give us a significant fee. So I can justify my cost. We can provide them design inputs, marketing inputs, brand-consulting inputs; they would, therefore, see value, and realise the composite benefit we give them.

I don’t see any discernible trend of design or creative shops being taken over by a larger advertising company. As I see it, larger advertising companies are at best looking at small shops more to acquire talent rather than to acquire business. Volume of business these small shops provide would not be material for the larger agencies. Large companies would also have large retainers of large advertisers while smaller shops would never have large advertisers in their portfolio. I don’t see this being a serious trend at all.

On the other hand, there are companies wanting to start a design cell for a variety of other reasons. That doesn’t mean they go after small advertisers. The cost structure of an advertising agency is fairly high and typically a small advertiser wants to spend small monies that would not justify a larger agency to work for it.

They are different. More often than not, we don’t even compete with the smaller agencies. Nor will the smaller agencies compete with us. More often than not, the advertisers would not call small agencies and larger agencies for the same pitch, unless it’s the government. In the case of the government, they will choose to appoint, by design, a large agency or two large agencies and two smaller agencies. Most large advertisers would be comfortable working for medium and large advertising agencies than with small agencies.

Industry estimates place the growth rate between 12 per cent and 13 per cent. But I am not sure about this figure. Yes, there is apparent growth. But where is the real growth? Some advertised categories are not growing, rates are falling, a lot of activity is seen in the media, but this is not really bringing in revenues.

According to AdEx data, the FMCG sector upped its ad spends considerably during 2005. More so because the sector as a whole showed a positive growth rate from a negative base. However, many categories spends have actually declined in 2005. The consumer durable industry is a classic example where most spenders spent less. Also, if you take a look at the festival season, the dhamaka that is expected around Diwali was missing last season. For one, the time period of festival exposure ads decreased to just a fortnight prior to Diwali. Also, retail, which is a big spender during Diwali, did not unleash the fireworks. I would place the real advertising growth rate at 7 per cent.

It is actually quite simple. Don’t permit use of liquor or cigarette brands on any other product. You shouldn’t have had the case of Wills Lifestyle or Kingfisher Airlines running genuine businesses, as they indirectly promote products that ought not to be promoted. And you will also not see any surrogate advertising based on imaginary products!

Fact is, in the last 15 years, advertising has not attracted people from the IIMs of the world for a variety of reasons. Advertising is no longer the paying job it used to be, till about the early 90s or so. The second reason is that while we are not able to afford them, there are a lot more avenues that are available for the IIMs. The last 10 years of the telecom boom, the financial sector’s boom, have virtually taken away all the products from the IIMs. People naturally migrate towards opportunities that are more interesting, more exciting, more ‘with it’, than an opportunity in an established set up. Lots of dotcoms also came into being, those also attracted the so-called better talent. All these are why perhaps the advertising lost out on the IIMs.

I think awards are important. It is recognition of the good work we do. Having said that, in our own agency, we believe that award is a by-product of success that takes place in the market place. We will not seek awards for the sake of awards. We believe in making sure we create work that works hard in the market place, works for our clients, and improves market share. Even if that is at the cost of winning awards, we will keep doing that. The sole purpose of advertising is to make a product work in the market. We don’t want to lose out on that.

Speaking for ourselves as a company: I don’t want to play the game by rules set by others. If somebody says that they want to win an advertising account based on creative, I’d say, that works for them. What works for me is the ability to create work that works for the client in the market.

As a company, we have developed two brands – one for marketing communications, and one for marketing services. All RK Swamy BBDO will do is marketing communications. Hansa brand is being utilized for marketing services. Under RK Swamy BBDO, which offers classical advertising, we have Proximity, which is CRM, we have Media Direction, which is media services, we have HR communications under the HR Services Group, we have Social and Rural Communications, and we have a Pharma Services Group.

Under the Hansa brand, we have Hansa Research, Hansa Television, Hansa Events, Hansa Outsell, Hansa Retail ID, Hansa Medcell, Hansa Infosource, and Hansa Loginads (Interactive).

We have specific people driving each one of these businesses, these so called verticals.

We believe that the so-called classic advertising can only grow to a certain extent. Real growth has to come from the marketing services area, where the client spending is also increasing. While clients have been relying heavily on classic advertising, they also realise that their reserves are going to come from events and CRM and other issues, which seem to have been taken for granted. To us, both these business groups are very important, to provide holistic solutions to advertisers.

I think that is the way the industry is structured today. By and large everybody has come to this conclusion and everybody is trying to do all of this. Somebody is slightly ahead, someone is slightly behind, but everybody is moving in this direction.

SMS is all said and done, a one-on-one interactive medium. I would like to add that it is also emerging as a medium for news alerts, social messages, and in a nascent way promoting targeted advertising too. Targeted advertising is likely to grow in the future, say a buzz could be created in a new product launch or an event. However, an ‘Economist’ issue talked of technology advances being experimented on cellphones, such as adding a ‘weightless mini keyboard’ on to the mobile phone to ease ‘SMS-ing’. This could change the very concept of SMS services leading to infinite opportunities.