Does the advertising industry need a dose of its own medicine?: GCPL chief Sudhir Sitapati's full speech

A few weeks ago, Sam Balsara called me up to invite me for today’s talk. He said I was probably not born when Subhas Ghosal was around. To add salt to my wounds, but perhaps as a pitch, he assured me that my predecessors were more senior and of a different generation but it would be novel to have a younger speaker. So, I’d like to start this speech by thanking Godrej Hair Dye for making me look a bit younger than I am.

Like Groucho Marx who refused membership of a club because they had him as a member, I never go to an event where I’ve been invited as keynote speaker. I tried to politely refuse. But Sam is not easy to say no to as Subhas Ghosal himself realised as keynote speaker on the 25th anniversary of the Ad Club Bombay.

‘Just about 48 hours ago Sam called me on the telephone. The line was thin blooded and Sam’s voice was barely audible. All I could say to him was “Yes Sam, certainly come and see me but what is it about? Can’t I call you back?

Sam said, “I’ll be there in five minutes.”

You see, he had called me from a public booth very near the contract office. Thereby making sure I couldn’t call him back.

And sure enough he was there in five minutes shaking like an aspen leaf. The long and short of it (mostly short coming from Sam) was that he needed a chief guest for tonight.

I told him this was simply not done. I had been chief guest already and that at my last stage in life I hardly deserved to be dubbed a bad penny. Sam doubled the speed of his shaking-aspen-leaf act. My heart melted with compassion for my dellow-sufferer in a profession that has given both of us much but has taken even more of a toll in the process. When I agreed, Sam hugged me and disappeared like a bird on a song.’

Having accepted, I now had to decide a theme for my speech. I suggested a few themes, but Sam gently admonished me. There are cocktails before the talk and after the talk. So, nothing too serious or intellectual. And bring something of yourself into it. I thought I should also bring something of Ghosal into it. So, the speech had to be novel yet self-indulgent, flippant yet reverential. Sounded like one of the briefs clients give their advertising agencies.

To get me started, Sam very kindly lent me ‘The Makings of Advertising: Gleanings from Subhas Ghosal’. It has made a delightful bedside companion these past few days. Witty and wise; elegant and elite the gleanings of SG (I’m going to call him that, since I’ve now known him for what seems like a long time) are like whispering stones from a bygone era.

You feel he’s in your office today talking about the future of advertising but the glass walls have become wooden, there’s an ashtray by the fax machine on the desk and he’s speaking a dialect of English you recognise but don’t fully understand.

I think he would be upset that the identity of J. Walter Thompson, the agency that he spent 50 years working in, has now been subsumed in VML. Perhaps not for the name change itself but more as a symptom of what he would see as the decline of advertising. He would blame it on the change of the commission model where agencies would make 15 percent commission from media owners for the advertisements they bought in. The fortunes of advertising died with the current fee model that leaves no room for investments in people and research and no real incentives for agencies to push the business of the client to the maximum.

I would probably tentatively interrupt that he’s only partly tight. The fortunes of advertising and advertising agencies are not the same. Over the last 30-40 years, advertising has done extremely well in India.

In 1983, In an article titled ‘Advertising a Critique’ SG arguing for more spends on advertising wrote an article saying that the sector contributed to about. Two percent of GDP while in Indonesia it was close to .six percent. Forty years later advertising now contributes to about .five percent of GDP. Some rough calculations suggest that while in $ terms India’s GDP grew 6.5 percent, advertising has grown these four decades by 9.5 percent. If you add devaluation, it’s a stunning rupee growth of almost 15 percent.

FMCG is still the largest spender on advertising in India by a distance and advertising is the life blood of the FMCG industry. I would say that the Indian FMCG sector is stronger than in the rest of the world and this is in turn lead by advertising. The top five listed FMCG companies. Their EBITDA is on average 20 percent - 25 percent vs. global peers at 15 percent - 20 percent and they list at 60X P/E multiples vs 20X for their global peers.

The strength of India brand building struck me strongly a few months ago when I visited a Mid-sized grocery shop in Lagos. We have a soaps business there and it was obvious when I browsed through the aisle, that all brands looked approximately the same, said roughly the same four things on packs – cleans well, natural, good on skin and kills germs and were all the same price. A price that at-least for us makes no money compared to the healthy margins we make in India in soaps.

FMCG is the bell-weather consumption and compass for most consumer companies. It’s not unfair to therefore assume that if advertising has played such an important role in FMCG, its played perhaps a slightly less, but nonetheless crucial role in consumption in general.

So, I would say advertising has done a great job for media owners and Indian industry in general but has probably done less for itself. My friends in agencies tell me about the threat to the agency model. If I were to calculate advertising sector growth from SG’s 1983 speech to now, its probably about 5.5 percent in $ terms or just about double digit in rupee terms. Less than GDP, less than media and corporates but not bad in itself. But, if one were to assume that margins have eroded even more significantly, then advertising agencies haven’t been the best value creators in the last 40 years.

It's very common for sectors to do very well, but the individual participants not getting enough value out of it. The cause as we all know is commoditisation where low prices, competition and lack of meaningful differentiation prevent individual players from extract value. And the best way to fight it is by building strong brands – something all of us in the room are experts at.

But in the last four decades, while building strong brands for others in India, does the advertising industry need to reflect on its own branding and marketing. Possible yes. Possibly no. But at the risk of not getting any supper later tonight, I’d like to title this talk 'Marketing advertising : Does the advertising industry need a taste of its own medicine.'

I have three basic points to make to folks in advertising – spend more time with the CEO, CFO and other non marketing people, have a unique point of view on how advertising works and advertise it in a line and finally talk more numbers to us.

I think the first step in marketing is to know your target consumer well.

Who the consumer is depends on what you want. If your objective is to structurally reset the profitability of the advertising category, the consumer is not the brand manager or the marketing head but the CEO. What do CEOs want?

If I were to take a sample of one - CEOs are lonely, self-important, paranoid people craving the attention of others. We are extremely paranoid of people who sell to us but we love it when others study our business, praise us first and then criticize us.

Like consumers we want many things. And often what we say we want is not what what we really want. We want to be seen as being bold and disruptive. We believe in purpose and sustainability. We all believe that AI will transform the world and the future of marketing is Big Data. We love ads that win awards (even though they won’t admit it) and love it when our peers talk about our advertising. But the problem is that while we want all of this, we will not pay for it.

A decade ago, while operating at the intersection of business and marketing, to solve the Hamletian problem of what I wanted to do and what I was willing to pay for I allocated 5 percent of marketing budgets into a line item called F&G – Fun and Games. It sounded respectable to the accountants and usually passed the audit. It included spends on awards, sustainability, purpose, digital, big data etc. etc. Some of it like this iconic piece seen by everyone except consumers worked more for my career than for the brand.

CEOs are only willing to pay substantial amounts if they see something that drives their share price in the next 12-36 months. Management Consulting, Advertising’s rich cousin selling an even more ephemeral product – strategy - understands this well.

I for one consider myself as one of the advertising fraternity. So when I joined GCPL 2 years ago the very first thing I did was to increase advertising spends dramatically even if it came at cost of profitability .

Once you are talking to the CEO or promoter of a company on the one thing that really interests her, you’ve got to be able to articulate how your product works. How exactly does advertising link to value creation? It’s an age-old question. But in the past while different people had different theories, each went out and sold their theory as the gospel on the mount. SG himself takes a gentle potshots of the theories of his time “David Ogilvy proved conclusively that tasteful literacy, firmly based on research, was what it took to be successful. Rester Reeves then came and proved that advertising was a perfectly rational process simply requiring a good analytical mind and just as Reeves retired, Mr. Bernach came and said that all you need is honest conversations that talked about products in people language. You could even be disparaging your product because that helped create a rapport with consumer. Bernach was soon followed by Trout and Ries who forecast that “The positioning era cometh”, which proclaimed that USP was useless and creativity dead”.

But the point is that each of these gentlemen had a theory and made a lot of money of it.

But in today’s post- modern world we recoil at a definitive answer on how advertising works instead listing the various ways it could work . We are more concerned with being never wrong rather than being often right. Just as Truman asked for a ‘one handed economist’ in response to his economists punctuating all their advice with ‘on the other hand’, CEO’s need definitive answers and decisive advisors.

There may be many roads to advertising heaven, but an agency must choose one of these roads and convince the CEO that their religion is the true one.

My own beliefs on advertising were shaped by two epiphanies. As a brand manager on Surf Excel in the mid tweens I noticed that whenever a measure on our Milward Brown brand tracker called ‘Proven ad recall’ rose then a few weeks later our sales rates went up as well. In other words, all it took for consumer to buy more was to be able to narrate the story of the ad impromptu.

I call this principle “Be famous before you get persuasive”. Don’t sell, just be known for what you sell. Once you buy this belief system there are some necessary concomitants – the power of the big idea that helps you stand out, consistency, fewer copies, risk taking etc.

My second epiphany was shaped around that same time when I read a book that now seems to be on everyone’s book shelf – ‘How Brands Grow' by Byron Sharp. His thesis is that Brands Grows not by heavy users consuming more but by non users or very light users consuming a bit more. Penetration not consumption drives growth. Penetration is driven by salience not equity attributes (hence fame > persuasion) and salience is driven by making your brand mentally available to the maximum number of people. In media terms its reach and not impact that matters.

The second advertising principle for me which is a media related has been “It is better to whisper to many than to shout to a few”. This too has its concomitants – never getting carried away by impact, keep looking at the cheapest media, at consumer cohorts who never see your brand ever and don’t over segment markets.

My favourite brand in India is Wipro’s Santoor – It has stuck to its big idea of ‘Mistaken Identity’ for years and bravely stuck to mass scale wall paintings in order to reach very light consumer of TV in rural India.

It’s not just important to have theory of advertising, it is equally important to have a proposition that your agency believes in and everybody in the agency repeats at all forums. With just these two principles consistently at play, I’ve winged my way through marketing for the last 15 years.

So my gauntlet to all my agency friends in the audience here is what is your one line agency proposition that at-least 50% of people will strongly disagree with. Does the entire agency believe it and live it? Can you articulate, as Piyush Pandey was fond of saying, on a visiting card?

The final suggestion I have on Marketing Advertising is for the agency world to speak a little bit more in numbers to us.

During SG’s time advertising , media and market research were all housed under the same roof. So, in SG’s writing you see him seamlessly talk about all the three. That’s just not the case now though perhaps all this consolidation in the advertising industry may take us back to that time.

We as clients would love it if you had more data at your disposal on how an ad is working than we do. If you came to us and said this isn’t working, pull it off or it is working, you’ve got to spend more money on it. Not based on gut, which you do quite often but based on hard facts. Agencies need an entire department on marketing effectiveness – you’ll have to invest in the databases and in people but I can assure you that whenever a consultant or an external advisor has proprietary data on my brand or company, I take her very, very seriously.

To summarise my completely unsolicited advice to a fraternity that I love and almost feel part of is this – your real customers are those who control the P&L, not those that control ad spends, have a clear and succinct view on how advertising works in driving profits and stick.

I’d like to end my speech with the first lines of the book ‘Making of Advertising’ .

SG says, ‘When I was asked to speak on the subject for this session 'Advertising Strategy – How to Make it Work’. My instant response was, what a wonderful opportunity to combine experience and discipline into a presentation from which the speaker was bound to get more than the audience.

This of course is almost always true, because the speaker tends to take his subject far more seriously than the audience does. Just like in advertising.’

Amen to that!

Read More: Sudhir Sitapati on why advertising agencies need to reinvent themselves