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January, 2005 |
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Cover Story |
An Industry in Need of Creative Salvation
by Madan Lamsal & Keshav Gautam While the economic decline is reported on a daily basis almost across all sectors, the advertisers just don’t give up. Even the mind numbing news of daily political violence and deaths is preceded by the crass instant noodle commercial on television every evening. So what makes the advertising industry tick despite the appalling external factors and where does the industry stand in the commercial value chain quality and quantity-wise? Not too long ago, the Gorkhapatra, Radio Nepal and Nepal Television ruled the roost as the media channels. Not any more. These days every form of the media jostle for attention. Newspapers in the morning, internet in the office, television channels in the evening and then periodicals, hoarding boards while driving around in the city and direct mails recurrently. A combination of multiparty democracy, a relatively open economy and the advent of IT in the arena of advertising led to super transformation of the industry choc-a-bloc with bag toting individuals who defined advertising business as inserting print layouts in the media for the magic 15 percent commission. Traditional The advent of plug and play design technology for both print and electronic media enabled a number of new albeit inept players to join the market and allowed distortion to start and then continue, thus resulting in the changed structure of the Nepali advertising market in almost an unrecognisable way. This in a way has had a positive spin on many aspects and has most certainly contributed to the churning out of many players who were slow on technology uptake. The role of traditional advertising agencies primarily used to be media buying and releasing ads that were made with limited communication knowledge. They were basically desktop design ads. Other agencies’ roles were limited to ad placements in various media for multinational brands, the designs of which were developed by the agencies abroad. This created a sort of a “commission agent” image for agencies. Largely, this perception still exists among most advertisers. ‘Most advertisers are still unaware of the full function of the ad agencies so the minute you walk into some new prospective client’s office, the first topic would probably be how much of the 15 percent agency commission from media would be rolled back to the advertisers. There is certainly a scenario where advertisers have limited understanding about advertising in general and in dealing with newly emerging full-fledged ad agencies,’ states Rajat Rana, the Managing Director of Max Pro. This statement perhaps reflects the fundamental reason for stagnancy of the Nepali ad-world. While registered agencies is estimated to be well over a thousand even as there may be many more functioning unofficially, the continuing entry of new players in the market may indicate that this sector still holds possibilities of growth, yet, some observers think that there will be corrective indicators pretty soon, characterised by high rate advertising businesses closing down. One observer comments that while the entry of a new player in this sector is clearly noticeable, closures are clandestine. Advertising Fraternity—Not in Sync The instability of the advertising business is reflected in a way by these following facts. Though the number of registered agencies may be over a thousand, only about 10 percent are in operation. The number of members in the Advertising Agencies Association of Nepal (now Advertising Association of Nepal-AAN) is only about 120 and, moreover, many of them are said to exist only in name. If one carefully catalogues the agency names appearing in fine prints (key line) on the side of the print ads in the recent months, the number on the list will be restricted to not more than fifteen names and there are further murmurs that some big names are on the verge of biting the dust and filing for Chapter 11.
As the annual reports of AAN suggest in the recent years, there is a visible decline in the growth rate in the total ad-spend over the last few years. From a sustained growth of almost 45 percent for about half a decade, the growth was just 25 percent last year and hovering around 15 percent this year. This declining trend combined with the local trend where more and more advertisers are opting to contract media spends directly with media houses has left the agencies high and dry. It is estimated that as high as 50 percent of print media contracts are done directly with the publishers by the advertisers, therefore, the agencies are left to fend for themselves on revenues generated by creative development which in itself does not yield margins for the agencies to register growth. This problem also stems from the fact that the Nepali businesses are prone to react than be proactive on promotions, and agencies collectively rue that their clients do not create any annual Advertising and Business Promotion Plan. This makes the media planning function take a back seat in most cases. Reactive mentality and the consolidation in the media market has led to this abysmal stage where there is an almost “free for all” attitude even with media marketers. On the other hand, head of marketing of one prominent Nepali publication house states, ‘Of course, we would like to work with agencies, however, the agencies also must show some sort of value addition in the relationship rather than just play the role of middleman and pocket the commission.’ The corollary of this phenomenon is the frequent agency change by the advertisers who go on shopping for lower prices. As a recently conducted study for a PhD thesis by Bhoj Raj Aryal, Head of the Department of Marketing, Kirtipur Campus of Tribhuvan University, has reported, about 20 percent of the agencies feel that their clients are bargaining too much on the costs disregarding the fact that quality advertisements costs money. The problem is compounded by delaying tactics by the advertisers in making the payment to the agencies. Aryal’s thesis states that about 30 percent of the agencies surveyed for the study reported that they were facing such problems of delayed payments. Creative Mediocrity—The Public Enemy # 1 The advertisers are of the view that the agencies do not provide holistic services and look at the clients’ needs through their operational window and do not go beyond the box. This perception is probably directly related to the human resources factor prevailing in the industry. The PhD thesis by Aryal, based on a survey of 20 ad agencies, shows that 55 percent of the agencies contacted were operating with less than seven persons. The maximum number of employees in an agency was found to be 46 persons while the average number of employees per agency was only nine and this situation entails many key functions to be outsourced to numerous outside service providers. While outsourcing is not really bad in itself (in fact it becomes a necessity in such industries where every product is an outcome of a wide range of multidisciplinary activities), the advertisers complain that the agencies have no steady relationship with most of their outsourcing partners. For example, when an advertisement production requires a specialised creativity, the agency then starts shopping around the studios as most of the agencies do not have a standing agreement with any such studio detailing the arrangement for such aspects as the price, delivery time etc. Aryal’s research also unearths the fact that 35 percent of the agencies have a shortage of copywriters while 45 percent said there is a shortage of clients servicing personnel and 20 percent complained of the lack of graphic artists. Further, as was found during a snap survey by Nubiz, almost 60 percent lacked professional visualisers. Despite this acute shortage of human resource, only 25 percent agencies were found enthusiastic on enhancing the skills of their human capital through inputs of professional training, as Aryal reports. In a branding workshop conducted by the Clearsight Network in Kathmandu in July 2004, there were only five participants representing the Nepali advertising world whereas the total turnout was 105. This is perhaps a testament of the cocoon in which the advertising fraternity lives in. ‘This is similar to the “chicken and egg” story. They are not making money and thus they are not able to employ creative staff or cannot have that proper set up that is required. They do not have the extent of exposure that is necessary,’ says Sekhar Golchha of Him Electronics, the authorised agents of Samsung and Daewoo for Nepal and one of Nepal’s biggest spenders on advertising. ( see interview in box) A survey conducted in India on various parameters that denote the agency strengths and weaknesses came up with some interesting findings and a correlation of this viewpoint to the Nepali scenario highlights the obvious shortcoming. (See graphics in the next page: Necessary Agency Strength and Agency weakness from the perspective of the clients). Meanwhile...blaming the agencies only is, however, not enough. The advertising community play a significant role in promoting professionalism and creativity in the agencies and the level of demand also has to be ingrained in the business process. Whilst reviewing the quality of communication materials of the businesses owned by the leaders of leading business chambers and associations, it was found that they themselves need to internalise the quality aspect within their organisational consciousness. In this regard, everyone remembers how Nepal Lever contributed in the development of advertisement industry in the country by insisting on developing local resources for producing the advert materials and thereby helping the emergence of many Nepali professionals in the advertisement field, from commercial photographers to designers and models (see box). ‘To raise the standard of our advertising works, I think, every communication that we produce or air needs to be something our consumers can connect to. For example, our local consumers just cannot connect to the dubbed commercial that are being aired on our television channels,’ says Nabin Joshi, Executive Creative Director of MaxPro. But what can the advertisers specifically do? The list is endless, but the prominent ones as suggested by the agencies is not different from what David Ogilvy, one of the legendary advertisement professionals of the world, has listed as his 15 mantras for the ad agency clients (see box). Where is the decline and the growth? A segment of Aryal’s research analyses the types of adverts over a period of time in the print media in Nepal. Public notices, displays and wanted ads (three types of ads that are generally inserted by ad agencies) account for only about 60 percent of the total ads that appear in the print media. The rest is accounted for by personal notices (condolences, congratulations, etc.), tender notices, notices of educational and training institutions, classified ads and notices of financial institutions. Aryal’s research has concluded that the total annual ad-spend in Nepal is to the tune of Rs. 2,378 million and about 50 percent of it goes to outdoor media (such as hoarding boards), nearly 32 percent to the press and 18 percent to the electronic media (such as radio and TV). It is generally regarded that the present growth in ad revenue is mainly in the electronic media. Whilst radio has come across as the favoured media of many media planners for the regional visibility whilst TV registers a healthy growth for many national brands because of its perceived value for money. However, nearly 41 percent of the a-spend on electronic media is still going to the state-owned Nepal Television and 24 percent to Radio Nepal, while the FM stations accounts for only 30 percent. Meanwhile, the authorities have decided to restrict outdoor ads by not allowing new hoarding boards and outright banning of wall paintings in the Kathmandu valley. Observers also feel that reduction of supply in the outdoor arena will increase the propensity of growth of the electronic media by shifting spends to electronic media provided the operators maintain and expand the viewership segments and the numbers. At the same time, there are further growth areas as well should the agencies work out their segmentation in a diligent way. For example the segment of education market has totally eluded the mainstream advertising markets. Similarly, social marketing (marketing of social concepts such family planning, campaigns against child labour and human rights awareness) constitute another growth segment. Barring a few instances, most of such ads are not being handled by agencies. One explanation for the lack of involvement of ad agencies in social marketing activities is the lack of understanding about marketing among the decision markers in the organisations that are involved in social marketing. As one advertisement professional points out, In most of these organisations, the communication decisions are made by people trained in sociology, rural development, public health, accounting or other disciplines, not marketing.’ This largely explains why such ads are, with very few exception, off the mark. Most of such ads focus on the name of the advertiser rather than the concept that the advertiser is supposed to be marketing. Whipping it up The ever-changing socio-cultural landscape in the consumer world has left an irrefutable mark on the horizon of Nepali advertising service providers though the uptake on the winds of change is rather slow. However, there are quite a few professionals who are breaking the barriers and striving to create quality oriented culture in the agencies. ‘How would you explain the concepts of human communication interface to a business owner who traditionally placed agencies on the same pedestal as his milk delivery man?’ says one creative director lamenting the state of things with his clients. Even within this disgracefully chaotic condition there are quite a few new players who have expanded the quality horizon to a new level thereby leaving a mark and creating an edifice for future direction. The observers of the ad market therefore think that the ad agencies in Nepal should now opt for enhancing their competencies to produce materials as per the cultural landscape, sensibilities, media, and technology and audience preferences. The way ahead Though the above points indicate to the factors that are limiting the development of the Nepali advertisement industry, they also work as pointers towards the opportunities for the advertisement agencies. But will the agencies reorient themselves? This question is more important for the old players than to the new ones that seem to be adapting to the new tide. Outdoor Games BY SANJAYA DHAKAL What will be the
effects of the government’s recent decision to do away with outdoor
adverts? Neeraj KC is not aware that his livelihood could be in jeopardy. An artist by profession, KC makes ends meet by painting ad slogans on hoarding boards, banners and on walls. After painting as per the customers’ demands he earns just enough to support his family of five who live in a rented apartment in Lalitpur.
His livelihood has been threatened following the government’s move to gradually ban outdoor advertisements. The government decided to ban wall-painting and posters before this year’s Dasain. ‘The government has also decided to gradually do away with hoarding boards,’ revealed Bhaskar Raj Rajkarnikar, President of the Advertising Association of Nepal (AAN). A notice issued by the Kathmandu Metropolitan Corporation indicates that no new hoarding boards, neon signs, glow signs etc. will be permitted and the existing ones need to seek special permission and the Corporation may standardise such ads. The move, if implemented, could snatch the livelihood of thousands of artists and painters like KC who eke out their living from this sector. The call for prohibiting outdoor advertisements has largely come from environmentalists, conservationists and the Federation of Nepalese Journalists (FNJ). While the environmentalists and conservationists contend that the random hoarding boards have made the city hideous and endangered the value of heritage and monument sites, the FNJ, on the other hand, is concerned by the state of media in the country and hopes that the ban on outdoor ads will provide newspapers, magazines, radio TV with a strong and sustainable source of advertisement income for survival.
‘In 1996, the total ad turnover was around Rs 2 billion. And in 2004 as well, the total ad turnover was around Rs 2 billion. But in the meantime, dozens of new radio/TV stations have cropped up who are fighting for a share from the same pie. . Therefore we believe that the resources used in outdoor advertisements should be diverted to the print and electronic media to help the latter sustain,’ said Tara Nath Dahal, President of FNJ. At a time of stagnant economic growth, media sector has, indeed, been suffering. Likewise, the conservationists and environmentalists claim that randomly placed hoarding boards hurt the aesthetic beauty of the city’s traditional architecture apart from causing what is known as ‘visual pollution.’ Besides, a lot of them are considered a security threat. In times of storms they may collapse because they are not strongly built. Moreover, they divert the attention of drivers increasing the risk of traffic accidents. In the end, the whole debate boils down to money. The total annual expenditure on advertisement in the country stands at just over Rs 2 billion. Recently, a study conducted by Bhoj Raj Aryal, a lecturer at the Tribhuvan University who has earned his PhD degree on ‘Effect of Advertisement in Electronic Media,’ put the figure at Rs 2.25 billion. ‘Out of the total ad expenses, 32 percent are used on print media, 18 percent on electronic media and the remaining 50 percent on hoarding boards, displays, pamphlets and so on,’ the study pointed.
Though Rajkarnikar’s estimate is slightly different (he says 30 percent of the total ad expenditure is spent on outdoor advertisements—wall-painting, hoarding boards, banners, kiosks, posters etc.), it means that around Rs 600 million is spent on this sector, which, according to Dahal, ‘could have been better utilised if diverted to print and electronic media.’ The advertising agents, on the other hand, believe that the haphazard decision to ban all outdoor advertisement could boomerang. ‘Nowhere in the world is the outdoor ad totally banned,’ said Sudip Thapa, managing director of ANS Creations, a leading ad agency. ‘But, of course, we also support the idea of making it systematic and limiting it to certain places. We agree with the conservationists that a hoarding board of alcohol ads at heritage areas like temples, stupas and mosques cannot be justified,’ he added. Thapa’s agency is engaged in a lot of outdoor ad activities. ‘In fact, 40 percent of our job is related to outdoor ads. They constitute Rs 17.5 million of our annual transaction,’ he said. Thapa believes that around 2,500 commercial painters across the country depend on this sector for their livelihood. In this contest for ‘visibility’ and ‘control,’ the crucial issue of what is at stake for common people like KC seems to have been left out. ‘There are thousands who make their living out of the huge money spent on outdoor advertisements. We do not have the exact figure but, make no mistake, it is not a small number of people,’ said Rajkarnikar. In fact, it is the government that needs to look into this aspect by exploring ways to provide them with alternative opportunities—if it, indeed, wants to implement its decision to ban outdoor ads. ‘A million-dollar question at this point is: would the banning of outdoor ad automatically result in the diversion of the resources to the print or radio and TV and the answer to that is : not necessarily,’ said Satish Shrestha, Managing Director of Ad Dot Com—an ad agency. ‘When all advertisement agencies are prevented from investing on outdoor ads, then a different approach of brand awareness could be explored. There is no hard and fast rule that if you do not have the option of outdoor ad, you must put all your ad expenditure on newspapers, radio or TV,’ he added. The entrepreneurs of advertising business point to the likelihood of the growing use of outdoor events like promotional concerts, sponsorship, programme endorsements, to fill the void left behind by the banning of outdoor ads. Rajkarnikar agrees, ‘It (the banning) would not be followed by full and total diversion of resources to the print or electronic media. Only a certain portion of that resource would definitely go to these media.’ Sujan Raja Shrestha, Marketing Manager of Himalayan Snax, the producer of the Mayos brand of instant noodles, a company that invests 10 percent of its ad resources on outdoor activities, also shares this view, ‘There won’t be a 100 percent diversion to media,’ he said. The major outdoor advertisements are those of liquor and tobacco products. These ads are not allowed in electronic media. But as these ad are already present in the print media, the increase in their ad-spend on print media will only be marginal, if any. They are more likely to search for other platforms. The established brands will have little problem if such a ban is actually effected, but new brands are likely to face difficulties in introducing themselves. Interestingly, even after the government decided to ban wall-paintings and posters, its has not been able to implement the decision. Whether they would be able to do so in the future remains unclear. One difficulty will be controlling wall printings and posters of the political parties. Meanwhile, the future of people like KC—who have no other alternative means for survival—hangs in balance. |
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