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Noorings: ZenithOptimedia may have won Reckitt, but the battle has just begun

10-January-2011
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Noorings: ZenithOptimedia may have won Reckitt, but the battle has just begun

The Reckitt Benckiser media pitch was one of the most talked about media pitches of 2010 and, as anyone aware of what was happening in the industry would know, not for the right reasons. The controversial pitch had a controversial culmination. There were many developments in the year that the exchange4media team was the first to break, but this one in particular – both the news of the pitch and of the decision to hand the business to ZenithOptimedia – literally had our phones ringing off the hook. First, it was about how did one even think of such terms, and second, how ZenithOptimedia would make anything from this business.

ZO officials were extremely tight-lipped when we were speaking to them end November – the report was broken on December 3, 2010, and Reckitt gave an official confirmation on January 4, 2011 (and people ask us why don’t we wait for official confirmations!) The incumbent MPG was clear that they would speak only when the client was saying anything, though MPG clarified to us that it did not participate in the pitch process. But this was one pitch that had the lowest possible attendance from media agencies. In time to come, whenever the Advertising Agencies Association of India (AAAI) would speak of instances where the industry got together for a cause, this would be one example where agencies stood united. And AAAI diktat to agencies to stay away from the pitch played its role in ZO’s favour. ZO participated citing the reason of global affiliation. And the agency ended the year on a high too – Reckitt Benckiser, a large client, especially on mediums like television, was in their pocket.

But the big question is – how will ZO make this business profitable given the terms of the pitch?

Even though there never were official confirmations, but discussions at AAAI put out three points – a) Any agency that wanted to participate in the pitch had to pay an amount of Rs 3 lakh; b) The deal had to be CPRP linked once again, which is to say, that the agency has to guarantee certain ratings for a certain cost; and c) The agency would give Reckitt 2.5 per cent commission from broadcasters till December 2011. Simply put, sharing the Agency Volume Business (AVB), as some people call it. The AAAI officials were against each of the three points. Reckitt itself has not commented or confirmed on these, and neither has ZO. But one cannot deny that this was a pitch with some very tough conditions, not only from an individual agency viewpoint, but also from an industry viewpoint.

A very senior person from the business explained to me that from a ZO standpoint, India operations may not make any money from the business, but it would help in other markets. I am not sure how true that is, but ZO hopefully has worked that out if, in fact, that is the scenario, the ‘other markets’ are ensuring ZO India operations don’t suffer.

Just a couple of months before ZO came in the picture as the winner, it pretty much looked like MPG would retain this business (not sure how good that would look on Reckitt after having raised hell over the pitch) and with the Havas-Percept buying JV in place, perhaps something would have worked out for Reckitt. But that clearly was now what Reckitt had in mind. ZO, and VivaKi for that matter, is sure to have an interesting 2011 – Reckitt is won, and it would add volume, but what else is the agency getting?

If Reckitt continues to move like it does, I guess one would know soon enough.

Also read:
ZenithOptimedia seen as the favourite to win Reckitt Benckiser media biz
 

 

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