Don’t Supply; Just Partner...

IIPM, GURGAON

...Says Jon Wilkins, Founder Partner, Naked Communications

Jon Wilkins
Founding Partner,Naked Communications

“Creative provision is more volatile as ideas are ephemeral and creative agencies have never been able to genuinely prove the pay back to their clients,” believes Wilkins, even as he outlines the shape of things to come in the global and Indian advertising industry

Naked refuses to be called either an advertising firm or a media planning agency. Started in 1999, the founders like to call themselves something between an ad-shop and a communication consultancy. Already delivering ground breaking strategies for some of the world’s biggest brands (Coca-Cola, Nestle & Nokia), Naked is now interested in the Indian market and is currently talking to clients here, as also scouting for partners and potential acquisitions. Founding partner, Jon Wilkins makes a case for the future of advertising...

4Ps B&M: According to AdWeek, $27.5b of advertising business went into review in 2007. How do you explain the bitterness in client-agency relationships?
JW: There is no right answer to this but clients have to find partners who can help them build value through communications, and as the landscape changes in India, more clients will need more partners or new partners to help them navigate this opportunity or threat. Clients should always strive to get the best services from their agency partners, so it’s not a surprise that business moves around. In the west this is more marked than in the east, where long term relationships are valued higher.

4Ps B&M: Which sectors are most volatile i.e. seeing maximum account movement and why?
JW: Service oriented businesses are perhaps the most obvious volatile category, in that they are highly competitive, highly. Segmented and under pressure to build maintain and grow long term customer relationships. They require the broadest communications expertise, and face the biggest challenges with digital disintermediation.

4Ps B&M: How does Naked’s model fit into the evolving scheme of things?
JW: We rarely pitch and are more often invited in by clients to help them realise value, unblock problems or create opportunities through our communications approach. We get business when clients want to accelerate growth beyond the norm, or have a problem that conventional TV led advertising can’t fix, or when to be honest they value the idea of experimenting with new channels and new opportunities and struggle to find strategic partners that are engaged enough with this new digitally framed fragmented communication landscape.

4Ps B&M: How do you see client-agency relationship evolving in the changing market dynamics?
JW: A true agency partner must help the client achieve his business and marketing goals. As such they must be entirely objective and align their goals with that of the client. This isn’t about ‘owning’ every conceivable executional delivery capability. It’s about being able to come up with big ideas not campaigns, understanding how to integrate an idea, a customer journey and multiple channels seamlessly to deliver against objectives set, and an ability to be able to genuinely measure your contribution to your clients success.

Many agencies and holding companies think the future is about owning more means of production, we believe in ‘open source’ collaboration and an ability to work with best of breed partners in every discipline. It’s an impossible and thankless task to try and own everything and everyone in a rapidly changing communications environment. You need to offer a one stop shop but it’s not what you own, it’s who you know!

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Domino effect...

IIPM, GURGAON

But isn’t Big Mac (McDonald’s) considered the most economical product in the QSR category? And if Domino’s is intending to compete with dosa and chole batore, then what about Mac Aloo Tikki Burger? Well, the competing products do remain, and some other competitor will surely launch a similar low-priced product soon, but Domino’s wants to do more... It plans to lure consumers with new launches through 360 degree ad-campaigns coupled with a new tagline ‘kushion ki delivery.’ Dev Amritesh, CMO, Domino’s Pizza India Ltd., while explaining the concepts behind the new TVC, points out that, “The new tagline & promotional acts would address the emotional proposition more, and that’s the reason we say kushio ki delivery...”

The strategy is clearly to cajole the consumers emotionally, but at the same time the company is not planning to do away with its on-time delivery anytime soon. After a clear dominance in the home-delivery segment, the real question that comes in mind is its future plans to improve its situation in the ‘sit & dine’ segment. “We are doing phenomenally well, in the sit & dine segment too, in which we grew by 55% over last year. Specially in tier-II cities like Nasik, Panipath et al, our restaurant segment is really doing well,” claims Ajay. Not a hollow boast, as Domino’s is aggressively mushrooming even in those places where others haven’t forayed-in yet. For numbers, Domino’s has rolled out as many as 210 stores across the country (Pizza Hut has 100 stores, McDonald’s 130) and in most of these towns & cities, where Domino’s is having a roll, Pizza Hut isn’t present yet!

Financially, launching a typical Domino’s outlet (being smaller than a Pizza Hut outlet), requires lesser capital. But that really doesn’t tantamount to an advantage as my Sunday dinner proved... Therefore, besides multi-locational expansions, Domino’s should immediately upgrade all its stores, as an industry analyst warns, “In the hospitality segment, a slight difference in service from a well-known brand can prove a disaster...” But then, it’s also true that in places like tier-I and tier-II, where Pizza Hut is absent, Domino’s is having a gala time. With the sit & dine segment contributing to 35% of its total turnover, Domino’s can’t let the ‘golden pizza-laying hen’ advantage fade away.

For more articles, Click on IIPM Article.

Source : IIPM Editorial, 2008

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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Watch out for plunging skylines!

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“The price correction expected in the sector is what is driving us to play safe and therefore you will see most of the investments by us in the commercial space,” said Dr. Anil Jindal, Chairman, SRS Group explaining the strategy of the group to bank on commercial land in order to stay away from the major correction seen in the sector. Tinku Sigh, Group President, SRS Group added further, “We will be focusing on Tier-II and Tier- III cities only as the prices of properties in metros are almost attaining saturation level.”

There are certain developers in the country that have raised debt at a very high rate of interest as there was a enormous scarcity of supply as compared to the demand in the sector (remember the boom in the sector), which made them believe on the formula of ‘Higher risk, higher return’ blindly. According to Unmesh Sharma, real estate analyst, Macquarie Research, the problems of the real estate players don’t seem to be ending with the festive season around the corner as he states, “Given the current interest rate scenario, I see a higher than 50% probability that recovery in sales volume will be weaker than expected.” This, if true, can surely raise some problems for the famed players in the industry.

Already, there seems to be a shift in strategy by mid and small players, signalling some consolidation. They are already facing a liquidity crunch and have seem to be sending an SOS message to big developers. Small and mid-sized players are more than willing to sell their land to biggies in order to arrange funds for the ongoing projects. “The real estate sector is facing a slowdown altogether and the players are facing a major liquidity crunch at this point of time” avers Susil Dungarwal, an independent realty & retail analyst.

Even Parsvnath Developers saw blood on its balance sheet as they announced a 17.8% dip in net profits for the quarter ending March 2008 standing at Rs.108.88 crores as compared to Rs.132.44 crores in the corresponding quarter last year. And their problems seem to be getting compounded with the rise in input prices; which could make it difficult for the company to script a comeback this year.

For DLF, the brand value continues to shield the group quite well from the sectoral upheaval. Recently, Symphony (a UK based PE fund) invested a hefty amount of $450 million in DAL (DLF Assets owned by the promoter of DLF, DE Shaw, Lehmann Brothers and Symphony Capital – with no cross holdings between DLF Ltd and DAL), which eased the risk of off-take for the commercial properties of the realty major. The problem of liquidity crunch is bothering Unitech the least as it is capable enough of raising the fresh venture capital and attracting new PE funds even after the debt the company has on the balance sheet.

For more articles, Click on IIPM Article.

Source : IIPM Editorial, 2008

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles.
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