I don’t think there is such a thing of undercutting and squeezing competition out to get 100 per cent market share -- that is neither going to happen, nor that is a game we want to play. More importantly, we don’t take any business where we could lose money. We have worked hard on building efficiency mechanisms, because for our scale, if we don’t have our act in order, it is embarrassing. A smaller agency can still take an excel sheet and work its way around, but we cannot do that. We don’t need tactics like undercutting when we are investing in growth strategies.
Vikram Sakhuja has been with the WPP group since 2002. He started there as Managing Director of MindShare Fulcrum, went on to become Managing Director of MindShare South Asia; and is now CEO of GroupM South Asia. Sakhuja graduated from IIT Delhi and did his MBA at IIM Calcutta. He joined Procter & Gamble, where over his eight years there had held positions in Marketing Research and Media. Next was Coca-Cola, where during his five-year stint he was responsible for brand marketing. From there Sakhuja spent a year with News Corp as Executive VP Marketing for the Star TV Network in India.
He is proud to have been part of the team that has shaped GroupM into becoming India’s largest and most awarded one-stop shop for marketing investment. He also sits on several industry body boards/ committees, including ASCI, ABC, NRS, ISA-AAAI, IBF-AAAI, INS-AAAI, CII Marketing and FICCI Marketing.
In conversation with Noor Fathima Warsia, Sakhuja speaks at length about the GroupM factor, the evolution of media agencies over the years, how size can be leveraged to make a real difference, and more…
Q. There has always been a debate on what a holding company’s role should be, when it is the operating companies – in your case, Mindshare, Maxus, MEC and Motivator, that are client facing?
The raison d’être for media agencies was to consolidate businesses volumes and be able to deliver benefits to clients. GroupM was formed by the same token, so you could leverage volumes of several media agencies for client advantage. If ‘leverage’ was going to be the underlying principle, we wanted to explore where all we could apply it. And there are several areas where it works – trading, naturally, but also in talent, in putting systems or building new practices.
Q. But given that these are also functions that happen at individual agency level, and these agencies compete with each other due to cases of conflict management in some instances, how do you develop an ecosystem where they work together and compete?
We are clear that we want each of these agencies to run on their own. We respect the concept of conflict management and each one must strive for that line. But from a media agency holding company view, the starting point is to have a robust case for managing 100 per cent of the clients’ marketing investment. For that, we have to earn their trust, and that requires a few things. The first is more internal, an all of us believe in it very strongly -- Values. There are six values that everyone in GroupM embraces. For people outside, these values may just be words, but for us, they are guidelines. The second is Vision. Vision is more of a mission statement that includes choreographing convergence in three key areas -- Brands meet Consumers, Inventory or Content gets fully valued, and People meet their Potential.
The analogy of an anthill is apt for us. While there is a matrix system, GroupM’s culture and the way KPIs (key performance indicators) are structured make it more fluid, and allow people to go beyond a fixed framework. However abstract this may sound, it works brilliantly for us. Very early in our life, we had said we want to move from media to communication planning, and that means investments to consumer insights. You need people who have a brand marketing profile or a creative agency profile rather than just media planners.
Q. Which is something you have been doing for a while now…
Precisely! We have been building teams with multifaceted capabilities since 2003. When people speak about communication planning today, it sounds outdated and old to us, since for us, that is the very basic thought process. But once that is the game, you have to equip yourself to not only be able to meet the demands of that moment in time, but also invest in the future. And we are committing that investment because the knowledge you get from it will help with newer ideas, better execution and communication effectiveness. Things like data analytics, for instance, can quantify the steps you are taking. Some things people do by intuition, and that has a role to play, but you still need to measure it. And we have been doing these things for years now. Hence, we now have a strong activation arm in Dialect, well-built rural and mass programmes, robust content piece with entertainment and sports, sophisticated digital offering, which has an evolved mobile practice and so on…
Q. But the digital part is at the operating agency level as well, isn’t it?
We started the mobile practice four years back. At that time, it wouldn’t have made sense for any one agency to invest in it. Given the demands on their time and the costs this would entail, agencies wouldn’t be able to invest in building new practices. That is where GroupM comes in. At the GroupM level, we incubated display advertising, banner advertising for the internet medium in 2003. By 2007, we started integrating it in the agencies. So now in 2011, there are earmarked digital resources for each of the agencies. Mobile was incubated four years back and today it has become large enough to be given dedicated resources. GroupM manages the ‘incubation to agency-level integration’. Search and mobile are incubated and we are incubating social now, though I can see these reaching agency-level integration much faster.
Q. Let’s discuss the trading part of GroupM…
We feel very good about our trading piece. The first great thing that we have done is demystified inflation. We have a logical deck, which explains how inflation takes place – we do that well for TV and we have taken it up for print as well, though print, given its current currency, is difficult. We establish market inflation and we can peg how it affects clients. This is an initiative that we have been driving for the last two years in earnest. In 2008, when we began seeing the first signs of the slowdown, I called Prasanth (Kumar, Managing Partner, GroupM) and said this is the time when GroupM can add value with a win-win approach. We do not want to adopt an 800-pound gorilla approach, where we are trying to squeeze anyone. If that happened, media owners would want to stab us the minute they got the opportunity. The game was going to be inclusive -- media owners must realise their growth comes from us, and equally clients must realise that we are going to drive accountability and demonstrate value.
The objective is to do what you say. I have heard people make loose statements such as TV would grow 20 per cent, and inflation would grow 7 per cent -- will someone mathematically tell me how that’s possible. By the very definition, if inflation is measured by CPRP (cost per rating point), inflation is 7 per cent and spends have gone up by 20 per cent, that means the entire GRP (gross rating point) supply has grown by 13 per cent. GRP supply itself won’t grow by 3 or 4 per cent. It is upsetting when you see so-called industry reports saying things such as these. But a company like GroupM is in a position to make a more informed statement on such subjects.
Q. That would be something that clients would value, but despite GroupM taking all of these steps to differentiate, and offer value, it is still perceived that this is a rate and commissions game, and GroupM agencies are amongst the first to undercut.
I don’t think there is such a thing of undercutting and squeezing competition out to get 100 per cent market share -- that is neither going to happen nor that is a game we want to play. More importantly, we don’t take any business where we could lose money. We have worked hard on building efficiency mechanisms, because for our scale, if we don’t have our act in order, it is embarrassing. A smaller agency can still take an excel sheet and work its way around, but we cannot do that. We have spent significantly in systemising operations, and using technology for commercial, human resource, internal communication, backend and so on. Right now, we have an intelligence dashboard giving competitive reports to our clients. All this needs investments. We are focussing on systems, talent, incubating new businesses and training. Bureaucracy is not there in our DNA. Red tape has not come in and will not come in. I want to encourage the thinking that this is our suite of services and let’s see what we can do for clients. We don’t need tactics like undercutting when we are investing in growth strategies.
Q. Despite all this, advertisers constantly speak of how media agencies have not evolved in the last two decades, and the fact that the business model has not changed is evidence to that. What is your view on this?
If there are clients who still feel that, then we are probably not communicating it well enough. We can showcase to clients that we bring value and make a difference to their business. As for the business model, we will remain a trading or a buying organisation and that is what clients will come to us for. It is difficult to monetise the consultancy or the planning part of it, and most of the money will come on the implementing of the plan. Having said that, the next business model change will happen over digital. The whole conversation of addressability, the opportunity to buy inventory and sell audiences, will become more profound. And agencies, because they understand brands that much better, will have the ability to connect to audiences more efficiently.
The competition of tomorrow could well be the new age technology companies/media owners rather than media agencies. And we have to ensure we are geared to handle anything. But as we move forward, it would be difficult for any one player to enter the scene and give the client an integrated solution. You will see the interpretation of a brief as a 30-second ad, changing and if creative agencies don’t realise that, they are in peril. We have seen this happening earlier as well. There have been cases when media agencies took the central idea of a campaign and tailored it to a different media, and suddenly it would be activation, which would give it much more leg, and it was called engagement. Creative agencies missed the bus on that, but media agencies built great communication service on the back of that. Media agencies have been evolving and the attempt would continue to be in that direction, and of course our ability to leverage size, helps.
Q. Tell us how size can be leveraged to make a real difference.
Let’s take the example of cricket. We have very large clients who are interested in cricket. When deals are going to come out in the market, we connected with the broadcasters. Very quickly, whatever is discussed at the central level goes to the individual agency heads, and they in turn speak to their clients, and given the interest level, move forward on closing the deal -- all you are doing, like in social media, is just monitoring conversations. It requires one voice, real time action, getting basics in place, adding customisation for clients where required, and it is all set. But it requires clarity. A few years back, an India-England series had come up and the broadcaster was asking for an unjustified rate, given the metrics of the time, and we knew we could not agree to that – it would not bring any value to our clients. So the negotiations were prolonged, we told our clients, don’t blink and the series had begun. First two days of the series nothing happened, the third day, the broadcaster came back, had a conversation and we bought it. And it was a good deal.
Q. Most broadcasters complain that media agencies are spoiling the marketplace…
You should ask them how. It is a serious charge to say a company is damaging the industry. One reaction is to treat it as normal disdain, which you ascribe to anyone who speaks irresponsible. And this is what is happening now -- we are ignoring. What is the sense of a conversation that begins with ‘agencies are spoiling things’, ‘they are not taking rates up’? Some agencies reply with ‘you are spoiling the market’, ‘why are you launching so many channels and getting into senseless competition’. Discussions like these have become thoroughly boring!
Broadcasters need to understand that they are a medium. They should not look at their programmes as real estate or art pieces. Advertisers are utilising this medium to connect with consumers. Broadcasters have the reach and the wherewithal required, and they have to tell us the cost. I am the only one in the industry who is talking about CPT (cost per thousands) because that would make the conversations transparent, and more accountable. When you ask broadcasters, why they want to increase rates, they don’t talk value, they talk costs. And that is fine, but if that is the only reason for increasing rates, then it will be a mandi, then we will treat it such. We will find out how we get the cheapest. They have to speak the value language and I am giving them a hint in CPT.
Q. Clearly a lot going in that space, but we have seen GroupM and its agencies contribute significantly to the industry. What more can be expected this year?
GroupM with its agencies has, in fact, given this industry a lot that have become buzzwords today – the whole conversation of Interaction to Engagement began at Mindshare, or the Maxus standpoint, where we talk about deepening relationships. Then it is GroupM again that is speaking of engagement to advocacy viewpoint now. I would like to believe much of that has really come out of our stable. On the back of that, the true sense of communication planning has played out for our agencies, and you will see more of that as we move forward.