How India Will Do to Advertising What It Did to Call Centers

Reckitt Benckiser’s (RB) plan to charge ad agencies a fee to pitch its business in India, coupled with a Hindustan Unilever (UL) executive’s suggestion that ad agencies ought to work for free, has people in the advertising business fearing that India may kill off the advertising business as we know it.

I’m being facetious, but not by much. India’s ability to do almost everything more cheaply than the West — Tata makes a car priced at $2,500, for instance — has already ground to dust large sections of U.S. marketing. Think telemarketing call centers. Or tech help. The Nielsen Co. outsourced much of its accounts payable functions to the East months ago. There’s no law that says venerable agency brands such as WPP (WPPGY)’s Ogilvy & Mather or Omnicom (OMC)’s BBDO must stay in business forever, in Manhattan, and be paid handsomely for doing so. Which is why developments in Indian advertising should be watched closely in the U.S. That’s where the future is.

Rahul Welde (pictured), Unilever’s vp of media for Asia, Africa, Middle East and Turkey, triggered a wave of rage among admen when he gave a speech in which he said he regarded agencies as little more than interchangeable vendors who should be chiselled on price or asked to take a hike.

The news came in a column by “Uncle” Les Margulis, an American media veteran who worked at BBDO back when it was still only Benton & Bowles:

I expect to be paid for my labor. If those points do not fit into your playbook, then I don’t want you as a client. And for sure I would not pay five lakhs (about $10,700) as a submission fee, as you had suggested, for the privilege of working my team to the bone for two weeks for a Lever pitch.

No, thank you, sir. You are definitely a pass.

This is unusual: agency bosses never criticize clients by name or by company, especially clients as large as Unilever, the global household goods giant that rivals Procter & Gamble (PG) outside the U.S.

If you read the comments section you can get a taste of the distaste that Welde has left. One person suggested Welde’s attitude is a product of India’s caste system; another claims “almost half” the big advertisers in India have the same attitude towards their agencies.

And Reckitt’s pay-me policy was coupled with the fascinating demand that “The winner [of any pitch between competing agency bidders] would also have to rebate to Reckitt volume discounts paid by media owners.” That suggests some agencies in India may not be currently returning volume discount rebates to their clients — a practice which is illegal for any agency owned by a company whose shares are traded in the U.S. The whole thing smacks of bribery, said one commenter:

creativeo: This is one of the most unethical things I’ve heard of. How about giving each one of the clients on the pitch board a brown envelope with $1000 dollars in as well. It’s the same as a bribe. You can’t pretend it’s anything else.

It couldn’t happen here, could it? In fact, it already has. Western agencies have given up considerable ground — and cash — to their clients as advertisers employ procurement professionals to go over contracts and bills, line by line. The U.S. ad business is probably still at the top of the slippery slope. It was back in November, for instance, when media buying shops complained that their clients were asking them to get the price of advertising to go down.

The same thing is happening on the creative side, as more clients use free crowdsourcing to generate marketing ideas. Yes, professional agency staff can produce higher quality product in the long run, but consumers will inevitably produce more ideas, at a lower cost, than any agency could hope to do. Agencies will have to start seeing themselves as the executors of other people’s ideas, rather than the sole font from which ideas spring.

So yes, Welde’s idea that he should be in the business of “screwing all costs down to zero, so if a supplier does not want to work for zero, he will find someone else who will,” is repugnant to those who have made a living selling their labor for a premium. But just because the messenger was undiplomatic does not mean his message should be ignored. If we’re not all Indians now, we may soon be in the future.

By Jim Edwards

Source: bNET


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