Companies plan to advertise their way out of slump

Many Indian companies will spend more to advertise in the next two quarters even as the economy slows. Company executives and consultants say more ad spending can get their brands to stand out from the clutter.

Soaps and toothpaste maker Hindustan Unilever (HUL), the country?s largest spender on advertisements, its rival Godrej Consumer Products (GCPL), the third largest mobile telephone company Vodafone India and car, truck and bus maker Tata Motors will spend more on advertising as they launch new products, in contrast to when the global financial crisis struck in 2008. Three years ago, companies cut media and advertising budget anywhere between 10% and 20%.

?You are unlikely to see decline in ad spend going forward,? HUL?s MD Nitin Paranjpe said after announcing the second-quarter results on October 31. ?In general, the market is going to remain competitive and, therefore, the advertising intensity will remain high.?

The maker of Lux brand soaps spends 12-13% of sales revenue to advertise and promote brands every quarter. The company will soon launch Kissan cheese spread and Knorr soup variants to compete with rival biscuit maker Britannia Industries and ITC Foods. ?We will make sure that our brands get the right level of support,? Paranjpe said.

Advertisers say smart companies don?t cut ad spending but try new communication channels in trying times. ?In general, companies that reduce marketing activity in response to adverse economic indicators such as consumer inflation are either shortsighted or cash-strapped,? said Ravi Kiran, former MD, Starcom MediaVest Group, a media buyer.

?What smart companies do to recognise consumer difficulties is alter their value proposition, change messaging, optimise their allocation between different channels and push marketing to be even more accountable,? Kiran said.

?Looking at cutting cost as the only solution is too simplistic,? he added.

The Godrej Group, which acquired a string of companies in India, Latin America and Africa, will launch products made by its overseas companies in India. ?There will not be any cuts in our ad spend in the third and fourth quarters,? group chairman Adi Godrej said. ?Instead, we are hiking our ad budget to gain high visibility for our brands.” Last fiscal, GCPL’s ad spend grew by 30% to Rs 352.16 crore.

?Cutting down the ad budget during tough times will not help companies in the long run,” said Rajiv Rao, national creative director, Ogilvy & Mather (O&M), Indias largest advertising agency by number of clients. ?What’s required is to build the brand stronger to stand out in a clutter.?

Tata Motors will spend money to promote its existing brands and new launches. ?There will be no decline in our ad spend,” a Tata Motors spokesperson said. ?We would rather increase it.?

The other big spenders on advertising are mobile telephony companies, which want to attract more data users than cheaper voice customers.

?Vodafone chooses and plans its media and advertising strategy based on long-term marketing objectives,” said Anuradha Aggarwal, vice-president, brand communications at Vodafone India. “It is not based on the dynamic changes in the macroeconomic environment.?

Ayurvedic paste and hair oil maker Dabur India will increase its ad spend by 13% in the fiscal third quarter to promote hair oil and new variants of juices and health supplements.

?In the second quarter, in fact, we had put in place some price hikes and so decided to put more money in lubricating the system through consumer promotions and freebies to consumers instead of direct spends on advertising,? says Sunil Duggal, managing director, Dabur India.

The higher promotional spending by companies will translate into higher growth in the advertising industry. The industry, estimated at Rs 24,000 crore, will grow by 10 % in calendar 2011, said Satyajit Sen, chief executive, ZentihOptimedia India, a media buying and planning agency.

?Ad agencies will continue to learn to be smarter and more accountable,? O&M’s Rao said.