Bindu Balakrishnan, Country Head of DCMN India expressed her understanding on the issue of pitch discounting practices. In her following observation, she reiterates the need for mutual co-existence between the stake holders and thrive together with a holistic solution:
Back in August 2018, the Indian Broadcasting Foundation (IBF) sent an email to all agency heads requesting them to move away from the practice of price discounting to clients on behalf of broadcasters without prior approvals. Giving further wind to its sails, AAAI also recently came out with a written communication reiterating the same.
This move has brought out mixed reactions from the industry, with some hailing it as a much-needed move, and others opining that this should be an agency’s prerogative and they should have the right to decide. What we need to consider here is that in India, the media industry is a complex and intricately interlinked ecosystem. The broadcasters, publishers, agencies and advertisers, all have to co-exist and thrive together. One sided price-cutting and discounting might be beneficial to the agency and client in the short run but will only have negative repercussions in the long run for the entire ecosystem. With the distribution model not being profitable and the emergence of popular OTT platforms like Netflix, Amazon Prime etc., many broadcasters are already struggling. Heavy discounting leads to additional pressures on the entire industry. Heavily discounted media is also not in the best interest of the advertiser as it leads to quality issues like less than optimum placement of ads, high rate of spot drops etc. which compromises the impact of the campaign.
Having said that, the main crux of the discussion also lies in the fact that the agency business is also under a lot of pressure because of shrinking agency fees and undercutting. With more and more ecommerce and digital brands entering into offline advertising, agencies have also had to change their business model to bring quality service and support to this highly dynamic client group. They need their agency to be not just someone who executes their media plans, but also be a strategic partner with the same agility and speed as themselves. Delivering this high quality and agility also needs better resources in terms of team as well as the latest technology and tools on the agency side. Delivering this high quality becomes difficult when agencies have to operate on low margins and profits.
In a nutshell, the issue here cannot be solved unilaterally, but has to be approached holistically keeping in mind the best interests of all three parties: the advertiser, the broadcaster and the agency.