The changing face of advertising
Today no facet of our lives remain untouched by advertising
By Syed M. Aslam
Jun 12 - 18. 2000
There are some who call advertising the second oldest profession. The pun is intended to highlight the importance of advertising which has existed through the antiquity though the art has been honed into a science with the all-encompassing dawn of the communications era which leaves no life untouched today. The advent of PC, Internet, e-commerce, desk-top publishing, computer-assisted designing have changed the way of advertising today.
The primary objective of advertising is to make people buy goods or services. If the world is the market place where everyone is trying to sell a product, a service, or an idea and many say that it is the importance of advertising could hardly be over-emphasised. The post-PC era where information travels at the speed of light to struck all geographical barriers has helped turn the art of advertising into a precise science which can make or break a manufacturer to ensure maximum returns the ultimate barometer of which is the targeted increase in sales.
While advertising costs money, we are all aware of the multi-million dollars promotion blitzes by the two biggest global soft-drink manufacturers, the ultimate price of which is borne by the end-users as an inbuilt part of the retail price, even the better educated among us fail to take notice how it affects us. On the other hand, effective advertisement can help a manufacturer to multiply the turnovers to reduce retail prices. The advertisement industry never fail to miss an opportunity to stress that advertising lowers costs of products by creating a mass market for goods for the ultimate benefit of the consumers. Its proponents also say that advertising not only helps consumers to make better informed choices to choose a particular product according to their purchasing power and needs.
Today no facet of our lives remain untouched by advertising. An array of advertisements in the print media 'demand' us to buy a certain product or service while television viewers have to put up with lengthy commercial breaks depending on how popular a programme is. The length of commercial breaks has become the barometer for the popularity of a TV programme the more popular is sure to draw more advertisers than a less popular one. A popular sixty minute TV serial usually contains 15 minutes of advertisements. While this insistence on the part of the advertisers to book advertisements during airing of a popular programme is not hard to understand, it has also resulted in people jumping from channel to channel during commercial breaks, thanks mainly to the all mighty remote, as the airwaves of today are filled with satellite channels giving the viewers a much bigger choice to jump a channel than ever before.
Like the rest of the world the communications revolution has changed the face of the advertising industry in Pakistan. Gone are the days when consumers all commodities be it rice, milk, cloth, soap, tooth paste, soft drink, etc., from a local store the concept of brand loyalty was yet to shape. This of course does not mean that there was no advertising, only that it was merely used to publicise a much fewer number of products and services. The magnitude of advertising was much smaller and it was restricted to graffiti on the walls, printed messages in the newspapers, handbills. The vast majority of product and service oriented companies believed more in the word-of-the-mouth than anything else. The trend continued till some three decades ago.
Pakistani advertising industry has come a long in last 53 years when its annual expenditure added up to mere few hundred thousand rupees to touch the Rs 5 billion mark this year. The deeper penetration of the local market by the multinationals, the influence of the western style of consumerism associated with the feel of make-believe affluence by the locals, an increased purchasing power driven mainly by the flight of manpower to the Middle East in the 1970s, the spread of manufacturers and industries beyond their regional boundaries, the maturing of television as the most effective media with the ability to reach people in otherwise far-flung areas were some of the primary factors giving great push to the advertising industry.
The advent of PC, the beginning of satellite channels, the video cassette recorders in the early 1990s brought a new thrust and enthusiasm in the advertising. The industrialised world producing mass goods and services was forced to find greater markets to absorb these products necessitating the need to look for overseas markets. The overall fallout of this tendency on the part of the developed world ultimately spilled out to developing countries such as Pakistan where the multinational companies in particular, and local competitors in general, geared up their advertisement campaigns. Though objectives of the two were different the multinationals to capture a greater share of the market and the locals to keep retaining their share the ultimate beneficiary were the advertising agencies. This also resulted in improving the overall quality of the advertisements which required an unmatched investment in professional human resources and technology to meet the ever increasing demand for quality by the advertisers.
Today Pakistani advertising industry comprise over 200 agencies of all shapes and sizes. However, the term advertising industry is used for some six dozen members of Pakistan Advertising Association (PAA) which include the major media and research based agencies. State-owned Pakistan Television Corporation, which like all other countries provide the most effective advertising media, print media, and outdoor advertising are the major outlets of the local advertising scenario. Of course it is advertisers who are the source of all advertising revenues for the agencies and the media and are the inbuilt part of all publicity activities.
Talking to PAGE the president of Asiatic Advertising, Anwar H. Rammal, that despite making immense headways in terms of revenue generation and improved production the national advertising industry still suffers from wrong perception about the prospective market for a particular product. Blaming this lack of direction on the absence of qualified professionals, he said that despite the fact that the bulk of the advertising spendings, over 60 per cent, in Pakistan is spent on television, there is not a single institute in the country which imparts education in electronics advertising. The absence of institute for exclusive training in advertisements in tune with the latest technology is taking its toll on the overall creativity in the industry, he added.
Most of the people already working in the advertising for decades have been able to gain the hands-on experience through their association while the absence of specialised institutes to impart professional training still restricts the agencies to fill the jobs in all departments with people who have no academic qualification. There are no institutes to create such academic qualified professionals as script writers, directors, modelling, editing, film making, production, etc. It is imperative that the government should establish, or encourage to establish, such institutions to impart basic electronics media advertising to improve the quality of advertising on the electronics media, the main beneficiary is the state-owned Pakistan Television.
This is all the important as irrespective of the business and size, advertising is basically a service industry the major cost of which is in the human resources. Internationally the accepted ratio of these personnel costs is 50 per cent of the expenditure of any advertisement agency. Compared to this the primary source of revenue of the agencies come from the 15 per cent commission they earn which includes the costs of production of advertisements at all stages from the initiation of an idea till the advertisement is released as a finished product. The creative strategy, market research, marketing strategy, the release of advertisements all requires competitive professional team which costs money at every stage of the work which places acute financial restrictions on the agencies to be creative and effective on the one hand and economic on the other. The imposition of 10 per cent presumptive tax on the earnings of the agencies, the primary source of which is the 15 per cent commission, from July 1 last year besides an already existing 5 per cent Central Excise Duty on billing. The imposition of the presumptive tax last year, Anwar said, has resulted in reduced earnings for the agencies so much so that almost all of them including the top agencies to lay off staff and workers.
Anwar said that while in a free economy advertising plays an important role to accelerate economy and is also seen by the economists as a barometer of the economy. However, he expressed concerns, that this globally accepted theory fails to work in Pakistan due mainly to the presence of a huge parallel economy. This also explains the small advertising expenditure of Rs 5 billion this year which translates into a per capita advertising revenue of a low Rs 36 per person in a population of some 140 million people.
India with seven-time the population of Pakistan spends twelve-fold more in advertising. Some 101 advertising agencies of India spent Rs 60 billion last year which translates into a per capita spending of Rs 60, almost double than that of Pakistan.
He also said that the bulk of the advertising revenue in the country comes from a handful of companies, almost all multinationals with few exception, which make advertising a fragile business in Pakistan. For instance, the annual advertising and sales marketing expenditure of just four companies Lever Brothers Pakistan, Pakistan Tobacco Company, Lakson Tobacco, and Nestle Milkpak- totalled half of the combined advertising bookings of the Rs 5 billion of the PAA members. Lever, the top advertiser in Pakistan, spent over Rs 1 billion in advertising in 1999; Lakson's 'marketing expenses' were Rs 532 million followed by Rs 498 million and Rs 469 million by the Nestle and Pakistan Tobacco.
H.N. Effendi, the managing director of Paragon Advertising, lamented about the flight of creativity from the Pakistan advertising scene for last 15 years. Putting the number of full service agencies those who have their own art, media, marketing, research and film-making departments between 30-35 in the country. He said that though rebating is not permitted as per the international rules all major agencies are doing it in Pakistan to eat into the revenues which primarily comes from the 15 per cent commission besides meeting all the personnel and other overheads. The rampant practice which goes un-noticed poses serious challenges for the agencies as companies seem inclined to pay certain rebates to the advertisers to retain the business. It's hard not to fall in the trap as refusal to pay a rebate means losing a client who can always find an eager agency ready to pay the rebate. While individual companies keep benefiting from the rampant rebating practices the phenomenon is hurting the growth of the industry as a whole, he added.
He said that the imposition of the 10 per cent presumptive tax last year has cut the 15 per cent commission by at least one per cent and is proving to be detrimental to the business of the advertising business. As is, the PC has cut the jobs in the artistic departments of most major agencies by one-tenth by replacing manual artists by computer-assisted designing, though at the same time it has also created increased number of jobs in the computer departments, and the imposition of presumptive tax is feared to result in more lay-offs as already done by many major agencies in last twelve months.
The creative director of Reach Advertising, Kamran R. Qureshi, said that upto 70 per cent of all advertising expenditure in Pakistan goes to the television, 15-25 per cent is spent on the print media and the rest goes towards outdoor advertising the main beneficiaries of which are the big advertisers. The popularity of television as the choice of advertisers, particularly those who can afford it, can be attributed primarily to its vast penetration PTV's national transmission covers 39 per cent of the land area and reaches 89 per cent of the country's population, PTV-2 signals covers 56 per cent of the population, and PTV World with its transmission beaming to over three dozen countries in the region reaches 70 per cent of the local population. The preference of television as a prime advertising choice is also attributed to the fact that it involve sight and sound in a country which has a low literacy rate where the majority of people can see and hear but few can read.
Kamran said that while print media is providing opportunity to comparatively small advertisers to publicise their products who otherwise could not afford to advertise on the PTV the print media's seemingly advantage is also its disadvantage as due to low literacy rate in the country. Kamran said that there seems to be a misconception about advertising and negated the common notion that advertisement is a return on sales added that it is actually a return on the investment. Advertisement, he said, is not a hit and run business at least that is not the case with the serious advertisers who are interested in long-term returns, a constant presence in the market, and constant sales.
This is all the more true, he said, in the case of electronics advertising which seems to work better over a longer period though it can also be used for quick target selling to keep reaping the dividends even after the advertisements cease to appear on the air waves. However, repeated reminders are necessary to keep on adding to the previous results as human psyche needs reminders. The prime example of this strategy is Coke and Pepsi.
The Pakistan market poses certain unique challenges for the advertisers in many respect, Kamran said. There are vast divisions in the economic, social, cultural, regional, language, religious, and traditions in the different segments of the society. The consumer profile is so diversified among the different segments of the society that a single marketing strategy is hardly effective compared to the developed countries which speak one common language and none of these traditional trappings. International accepted advertisement concepts remain hardly workable in Pakistan due to the psyche of the people.
Kamran also expressed concerns about the rampant rebate practices indulged in by all the agencies to appease the advertisers, he preferred to call it kickbacks, to hurt the advertising as a whole, particularly the smaller ones at the benefit of the bigger ones which can afford to absorb the financial drain that it causes. He also agreed that the imposition of the 10 per cent presumptive tax last year is destabilising the business in terms of lay-offs and predicted that it would result in the closures, takeovers and mergers. The practice is also resulting in the failure to improve the production, creativity and quality of the advertisements which can be improved if the advertisers choose not to demand for it, he added.
The changing scenario
The advertising industry of Pakistan is going through a number of radical changes at present. The induction of PC and its ever increasing use has made computer-assisted designing a reality to save substantial costs in terms of manpower, time, and effortless changes in pictorial and copy in the shortest possible time. It has reduced jobs for the manual artists without whose help the advertisements, particularly print, could not be possible to be released in the past. On the other hand it has created more jobs for the IT professionals, business managers and media experts in the industry.
Secondly, the state-owned Pakistan Television which previously used to market the advertisements and produce the programmes itself has now passed them to the private sector to cut the costs to increase its profitability. Passing on these responsibilities to the private sector not only helps the PTV to pay more attention to address the core administrative and management issues but also to earn better revenues without being directly involved. This shift in policy on the part of the PTV has also resulted in the mushroming of private production houses, many of them owned by individuals trained by the PTV itself, to produce all kinds of programmes. This in turn has introduced immense new acting, creative and technical talents in the country to create employment for many. The private marketing companies buy a specific day on contract from the PTV to substantially reduce the costs of maintaining a full-fledged marketing personnel at huge costs. This has been a win-win change for the PTV which has a cake and eat it too.
Thirdly, the local advertising scenario is changing with the coming up of the media buying houses. The idea is appreciated by the multinationals who spend huge monies on the advertisement the major portion of which goes to the PTV. For a certain percentage, which PAGE learnt runs anywhere from 1.5 per cent to 3.5 per cent, these companies provide exclusive expertise to their clients to ensure the best returns of the advertising money. The primary function of these companies is to serve as the advertisers media buying agent and planners. However, since the 1.5-3.5 commission of these media buying houses is deducted from the 15 per cent commission of the agencies the idea is sure to draw strong protest from the industry. This is particularly so as the agencies feel that the imposition of 10 per cent presumptive tax last year has already cut their profitability badly.
Effendi strongly protested the idea of media buying companies. There were others who said that these companies are aiming to take a cut of the hard earned commission from the agencies who have to spend immense amount of time, energy and money to create an advertisement from scratch to finish, pay salaries to their administrative and technical and creative staff without doing anything. These media buying companies are aiming to take away what rightly belong to the advertising agencies by barging in as brokers. That's what they are, nothing but a broker which is neither required nor needed.
Anwar Rammal listed a number of suggestions to expand the advertising business in the country. He said it is imperative that the industry be given the due importance which it remain deprived of till today. It should be given the status of the industry and accorded the relevant incentives which it deserves, he added.
He also advocated the establishment of institutions imparting professional training in advertising and all related fields for various media electronics and print in particular and all other in general.
He said that the 10 per cent presumptive tax imposed last year should be withdrawn by the government as it is based on inaccurate logic that advertising agencies enjoy high profitability margins.
He also advocated for reduction in duty on the import of machineries, electronics items, cameras, lightings, etc., used by the advertising industry to better the quality of commercials be it electronic, print or others.
The history of advertising can be traced back to the city of Babylon 5,000 years ago. The merchants of Babylon used symbols because only few people can read. For instance a shoemaker hung a sign shaped like a shoe at his door. The electrical signs and illuminations by the shops and markets today to attract the prospective buyers is the refinement of the same idea.
Ancient Egyptians used to carved messages on stone tablets and placed them along the main thoroughfares. They were the earliest forms of hoardings and posters which we see today.
In ancient Greece criers walked the streets shouting messages similar to television and radio advertisements aimed at selling a particular product or services.
The invention of printing in the 1400s resulted in the appearance of handbills. In 1480, William Caxton, prepared the first known advertisement in English to announce a text book and where it could be bought. This was the birth of the concept of advertisement in print media; newspapers, magazines, periodicals, etc.
Advertising agencies were first formed in Britain in the early 1800s. They bought large blocks of advertising space from the newspapers at a discount less than full price and sold space to advertisers at the full rate. While many agencies throughout the world still act only as 'space brokers' most of them today work provides a full service to the advertisers to plan, prepare, and place advertisements for their clients. The primary source of income of the advertisement agencies still remains the traditional 'discount', the 'commission in today's advertising jargon'.
Today all of the above methods of advertising are still in use, though television the worldover has emerged as the most effective media as it reaches not only due to its immense penetration across the greatest number of people but also as it appeals to two of the most vital human senses sight and hearing. Television today has become the choice for advertisers, at least for those who could afford to launch a new product, initiate a promotion to boost up stagnant or decreasing sales. The ultimate dream of every small entrepreneur is to advertise his/her product on the television which offer the best returns on the advertising costs the end result of which is a substantial increase in sales.
Planning an advertisement campaign begins with an idea, primarily when an advertiser approaches an agency. The representatives of the two sides discuss suggestions for an advertisement. The advertiser briefed the agency about the product and the agency try to find a Unique Selling Point (USP) of the product.
The agency develops a consumer profile to understand what segment of the market is the product aimed at, the psychology and social pattern of their particular segment, and whether the product is aimed at an exclusive segment only for women or men, or both. For instance, a lawn fabric in case of women and shaving cream in the case of men. A further bifurcation of the product is based on the price if it is aimed at the high-end, low-end of middle income market.
Once these decisions are made, a creative strategy is developed to pitch an appeal to the targeted group including the main message which the product wants to convey. A media strategy is also developed to decide the most effective media what portion of the advertisement will go to the electronic media (television or radio) and in today's world the internet print, billboards, or a mix of all of these.
Next comes the budgeting will the campaign be run over a selective period of time and how the seasonal realities affects it. Naturally ice cream advertisements could not deliver in winter and advertisements of winter jackets could hardly make an impact in summer. After all these issues are settled, the campaign is finally launched.
The post-launch impact and result of the campaign are analysed and the creative strategy is once again studied. Sometimes agencies also carry out a survey about the reaction of the targeted consumer group. All this is aimed at removing any discrepancies in the promotional campaign to improve the advertisement.
The budgeting of an advertisement campaign vary from product to product but depends on a number of factors. It primarily depends on what the objective of the advertiser is the more ambitious the objective is the more is the advertising costs. For instance, a company aiming to capture the bulk of the national market for its particular product has to spend more than a company which is only looking to get a small share in regional market. Launching an advertisement campaign for a new product involves much bigger funds compared to a product which has already been introduced in the market. This is so primarily as launching a new product requires substantial investment in the introductory stage, follow-up stage and analysis stage over a specific time frame. Maintaining an advertisement presence during the maturation stage which is usually followed by stagnation stage, heard the saw 'what goes up must come down', is seen as a must to help keep an edge, even a narrow one.
The five main stages in planning and advertising campaigns are: selecting the market for the goods; examining the product to see how best to promote it; estimating the cost of the campaign; choosing the most effective media; and developing the advertisement.
There are three main players in the advertising the clients who advertise their goods or products; the advertising agencies who plan, prepare and place the advertisements; and the media.
Any advertising campaign begins with an idea. The advertiser approaches an advertising agency either to introduce a new product or to better sell an already marketed product to enhance its share of the market or to maintain the share once the sales the post-maturing state. The role of the advertising agency is to achieve the desired results set by an advertiser. Advertising is a team effort it requires executives with wide knowledge of the advertising and ability to sell; it involves research to understand the potential market, distribution, media, buying habits of the targeted consumers, and the strengths and weaknesses of the competition; and it includes media experts specialising in buying and selling space in various types of media and to advice the advertiser which would be the best media for his product. It also includes creative people to write the words and the theme, design the artistic work, and visualisers who design the advertisement.
Often all of these team members discuss and workout ideas for hours before they hit upon a suitable idea. The artwork is the pictorial part of an advertisement while copy is its written part. The developed countries spend huge amounts of money in advertising and the concept has also taken root in the developing countries where multinational companies enjoy a massive share of the respective markets. The scene of advertising in Pakistan is no different.