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< Back to News Home"Our India offering more competitive today"
BBDO's Robertson says in the current scenario, agencies need to plan and execute over a shorter time horizonerAndrew Robertson, CEO, BBDO Worldwide spoke to Campaign India on the sidelines of the Asian Marketing Effectiveness Conference in Hong Kong recently. Robertson brushed upon the current economic downturn and how it is impacting consumer spending behaviour in the market place today which is, in turn, impacting the way brands are communicating to consumers. He also spoke about the role of India in the current economic scenario.
What is your perspective on the current economic slowdown /recession? Is the worst over yet?
I don't know the answer to that question but I do have a lot of visibility, through clients, in various categories in different markets. There are indications from some clients in certain markets that we may be hitting the bottom. But there is no indication yet that things have started to go up again. We just need to plan and execute on a much shorter horizon and work month to month, week to week and day to day. Recently BBDO conducted a study on consumer behavior, on how that has been impacted in response to the current downturn. The interesting thing is that this crisis started as a credit crisis, and not a consumption, or consumer spending one. As such, it was massively important to a relatively small number of people and very important to a lot of businesses. But, it had both a direct impact on some categories and a much bigger indirect impact on almost every other category. As an example of direct categories any business brand that is operating in a category where consumers need credit, like auto and consumer durables consumers have traded out of those categories.
In your view, how has consumer spending behavior been impacted during the recession?In broad terms, there have been three buckets of shifts in consumer spending behaviour- trading out, trading down and trading up. It's the last which has been a surprise. That's why you are seeing such cataclysmic reductions in the market for automobiles. In a market like USA, for the auto market to drop from 18 million cars to 9.5 million cars is a huge drop, and cannot be explained simply by higher unemployment. In the case of examples of trading down, if consumers can perceive a small drop in quality for a substantial drop in prices, they are making that change. This is evident in increased levels of private label share and the growth of second tier brands. Of course, this is not a universal phenomenon. In China, people are sticking to the same premium brands but they are buying less frequently. The third example is of trading up; where inspite of the current economic situation, people want to treat themselves, especially when it comes to their family and kids. Instead of spending a lot of money in a particular category, they spend less but buy up in a lower category. So instead of indulging in a $50 dinner, they would have dinner at home and buy a $20 wine, something they would not have done earlier. Sales of expensive chocolates are up, as are cosmetics. Those are the three big trends. There is also the end of what we term sleep shopping- mindless purchases. It has been observed that people are now taking 20 times longer to get out of a supermarket. They are spending the same amount of money but now, they are looking at labels and the small strips on the shelves. That's important from a communication perspective, because it changes what we have to say, and the way that we are going to say it. Even in the most emotionally charged categories you have to give people the reasons to justify the decision that they are making. The second impact has been the need to reframe the value proposition of brands for consumer to better address the current market reality.
What is the role of India for BBDO in the current economic situation?
India is a growth market for us, because it is an economy that's still growing. We have been investing a great deal in BBDO India, in parallel with RK Swamy BBDO. We got new opportunities; we have won a few accounts. But that's based on what I call share growth, rather than the tide coming in, which is where the focus should be. I passionately believe that the biggest determinant of agency performance and growth is competitive not market based. We have agencies that are in very mature, depressed markets which are actually up year-on-year. Similarly, there may be markets where you expect to see growth, and they may not be performing as well they are. In India, we are making progress because we got a more competitive offering than we had five years ago with a combination of the two brands there.
How is BBDO placed to deal with the next six to 12 months?
We took a very hard look at where we were going in the fourth quarter of last year as we knew what was coming. We did the right thing at the time, which was to recognize and accept that agencies were going to come under pressure due to the pressure that clients were inevitably going to face. So, we had to ensure that we were in the best shape possible, which meant focusing on activities that added the most value for clients. We made some fairly significant and painful cost cuts and we did it, bottom up. The biggest lesson for me has been that you need to face up to the truth and then move fast.
Reprinted with permission