Will the conservative, Indian ad industry change at last?

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John Philip Jones

John Philip Jones, Emertius Professor, Syracuse University, New York

The way in which advertising is planned and operated changes very little over time. For instance, advertising budgets have always been determined by the clients who spend the money. They pay modest attention to outsiders but essentially budgets are governed by the clients’ sales volumes and earnings, and year-by-year changes in these are rarely radical. Any increase in advertising overall, is therefore determined by growth in the Gross Domestic Product (GDP), which in India will continue to grow organically although it will be unlikely to increase much faster than the current 6%. This is a good deal higher than the growth in most countries in the ‘developed’ world, although less than the 9% increases that India generated at the beginning of this century.

Within the total Indian advertising market, will there be any major internal shifts? The critical distinction that governs the style of advertising and the selection of media is that between advertised brands characterised as ‘low involvement’ or ‘high involvement.’

‘Low involvement’ describes the buying of low-price and high-volume goods and services that are purchased repeatedly, which means they need relatively continuous advertising and large advertising budgets. Advertising is generally not aggressive, but more concerned with reinforcing the preferences of buyers and defending the franchise.

It is easy to list major low-involvement campaigns. In India there is a host of them: advertising for international brands from international manufacturers, ‘India-only’ brands from international manufacturers, and the large and varied output of Indian marketing companies.

Communication with consumers of ‘low-involvement’ goods and services is sometimes described as advertising seeking buyers: a process in which waste is inevitable. This is because target groups are large and diffuse, although certain demographic groups are of special importance. For brands like those listed in the last paragraph, the numbers of targeted consumers are in the tens of millions. These are well covered by the main advertising media.But the selection of television day parts and magazine titles to get to particularly important demographic groups is at best approximate. The result is that the population is peppered with scattershot advertising.

‘High involvement’ describes the buying of infrequently purchased goods and services, whose prices are higher and target groups smaller than with ‘low-involvement’. The content of the advertising usually conveys information to help the consumer make rational choices: a process often described as buyers seeking   advertising. The advertising is fired at a bull’s eye representing the relatively small number of potential buyers who are in the market. A good deal is known about the users of digital media, and by clustering groups of this audience it is relatively easy to hit this bull’s eye.

Despite the fact that ‘high-involvement’ goods and services are more expensive than ‘low-involvement’ ones, there is more ‘low-involvement’ advertising because it has to be run at a heavy rate for long periods of time, to attract repeat buyers. As a general rule, ‘low-involvement’ brands devote about 6% of net sales value to media advertising. This percentage applied to the vast sales of a substantial brand produces a very large advertising budget. But because of the relatively inefficient targeting of such a brand – inevitable because the consumer group is so large and ill-defined – advertising media only make economic sense if the cost per contact is extremely low, often a tenth or less of a US cent. This is a level that only applies to the traditional main  advertising media. ‘Low-involvement’ advertisers do not make extensive use of digital because the cost per contact is much higher.

I believe that the style of advertising and media choices for ‘low-involvement’ campaigns will continue, with modest changes. Television and cinema will maintain their importance. However, the print media – newspapers and magazines – will be under pressure from the growth of digital media. (In the United States, newspapers are being devastated because readers have access to newspaper stories electronically, which means a reduction in newspapers’ income from their readers. They have also lost much classified advertising to the Internet.)

The advertising budget per unit of a ‘high-involvement’ product can be one hundred times as high as that for a ‘low-involvement’ one, because of its greatly higher consumer price and higher advertising ratio. A substantial advertising investment can be directed at each member of the target group, which aims for immediate sales generated directly by the advertising. The campaigns can afford the high cost per contact of digital media, which is rarely less than a US dollar (i.e. one thousand times as high as a contact on unselective network television), and can occasionally be very much higher. Although the advertising business has had twenty years’ experience of Internet advertising, this has grown at a surprisingly slow rate. The advertising business discovered rather late that digital is highly efficient for direct (rather than general) advertising.

What then is the future for the advertising of ‘high-involvement’ goods and services? The markets for such products, especially those based on the amazing advances in electronic technology, will continue to be buoyant. They are generally suitable for advertising in digital media, which can be a rich source of information. Digital media will continue their steady growth, and it is a reasonable certainty that their 2020 advertising volume will be well up. (In America, digital advertising will probably be 50% of the expenditure on television.) Digital is of course being used everywhere to advertise a host of new consumer electronics.

Whether or not my predictions will actually come to pass depends on the clients. If they learn to evaluate the effects of their campaigns more quickly and efficiently, desirable change would be hastened.

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