Admen these days are facing a new tribe of people sitting across the negotiating table. More and more companies are sending their purchase and procurement executives in their negotiations with advertising agencies with the express brief to bargain hard and beat down commission rates.
"We have had to negotiate with procurement executives, and the number of companies resorting to this move is increasing. It is worrisome for the advertising industry and should not happen. Advertising decisions should be made by the marketing department," said Piyush Pandey, executive chairman and national creative director, Ogilvy & Mather.
If the trend catches on, it could fundamentally alter the way the Rs 9,000 crore (Rs 90 billion) Indian advertising industry has traditionally functioned.
The ad industry is worried as the hard bargainers are likely to be focused just on the price and not long-term brand building. Already a number of companies are looking for cheaper options such as promotions, direct mailers and events instead of the expensive mass-media creatives. "But the industry will have to change and learn to live with it," Pandey added.
"Standalone negotiating skills are necessary with advertising becoming a high investment head and companies, especially when there's great pressure on bottomlines," said C V L Srinivas, MD, Maxus, a Group M media buying firm.
The move has gained currency in the last 12 months as the rates for attractive properties such as cricket matches and prime-time soaps have skyrocketed, while most FMCG, automobile and consumer durable companies are engaged in a price war. Also viewership is getting fragmented with a host of news channels springing up.
Anita Nayyar, MD, Starcom, said is one of the most significant changes taking place in the ad industry. "While the procurement team making decisions is disregarding marketing wisdom, it will make the agencies a lot more accountable," she said.
"Negotiating with procurement poses an additional challenge for agencies. Advertising goes a lot beyond rates and we have to explain the brand building side of the business to them," Srinivas said.
Internationally too, big spenders like P&G, Unilever, Pfizer and DuPont follow the practice of letting the procurement department have a big say in media buying.
But companies using this strategy contend that every purchase -- be it raw materials or media -- has to be looked at in the same manner. "We have a standardised buying process across the world. Every purchase decision has to go through the same filter," said N Y Sanglekar, senior general manager (communications) GlaxoSmithkline India.
GSK's procurement team sits through media buying meetings and is an integral part of the advertising decisions.
Bharti Televentures, which spends an estimated Rs 100 crore (Rs 1 billion) on advertising annually, too uses its procurement department to negotiate commissions.
"We are spending a significant amount of money in the media and we use every resource we have, to get the best results," said Hemant Sachdev, corporate director (marketing), Bharti group. But he adds that the final decision is still made by the marketing team.
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