Odigbo: Lots of Advertising Agencies Barely Surviving
The digital world is sure challenging the ways businesses are done in today’s world. It is a challenge facing many businesses presently. In this interview, the President, Association of Advertising Agencies of Nigeria, Mr. IkechiOdigbo, talks about challenges and opportunities in the industry. Kasie Abone presents the excerpts: Can you say the industry has recorded any significant growth over the past two years under your leadership and if that is the case, what is the size of your sector’s contribution to the national Gross Domestic Product?
There are different ways to measure growth. You can measure growth in terms of creative performance, you can measure growth in terms of financial performance, and you can also measure growth in terms of the creative performance of the member agencies, you can also measure growth in terms of the membership, that is, the number of agencies that are becoming members of the association. So, in that regard, you can actually say that there has been a significant upsurge in the past couple of years. I believe we have exceeded the target, we have 85 or probably close to 90 member agencies made up of full members and associate member agencies. So in that sense the association or the industry is growing because people are seeing a significant need to have themselves properly registered with the professional association. Now with regards to creative performance, we also have quite a lot of traction in the sense that you have most of our agencies winning awards and becoming more and more dominant in terms of award wins at the regional level. We have Nigerian agencies holding their own at the Lorries, Chrystals, at the Epical. So, that shows that the creative quality or the creative performance or the quality of creative works is on the upward trajectory and that is being recognized internationally. In terms of the actual financial performance, contribution to GDP, the share of the advertising pot or the brand building pot you would see that it is a bit cluttering, like I just discussed the advertising spend is fragmenting, the marketing spend is fragmenting, and what you find is that the biggest budget is into activations. In other words, the client wants to be able to convert to details because when you do activations you are meeting the consumers one on one and most of the time these activations happen in the sales field which is different from conventional advertising, which is largely media based and you don’t know how that has directly translated into sales. So, with more pressing demands to meet P & L targets what you find is that the client has to show preference to the sub sectors like activations and of course digital is the fastest growing in terms of budgets.
As a body what plans do you have to make your members relevant in this post digital age?
Yes, making the members relevant as an association is principally in the area of capacity building, we can only work hard towards equipping the members and the staff of the members to be up to the moment in terms of capacity and in terms of the competences which is required in a modern marketing age. We cannot pitch on behalf of our agencies. We cannot go and meet clients and say to them please let this our member agency work for you. But we can prepare them and that is our primary focus.
Some agencies are going into extinction and several others are ailing. What is responsible for this trend and are there plans by the association to help them survive these critical times?
Well, you see we must also appreciate that the dynamics of market economics means that there would always be some form of evolution. In every business sector you would have organisations that would need to reinvent themselves or to some extent become irrelevant. I also have new entries into advertising that would bring some level of valued creativity, innovations and dynamism. So it’s not easy to control that evolution. All you can do is to create knowledge interventions that enables the agencies manage that phase of growth. So, for an old agency the question is how do I stay relevant, how do I reinvent my offerings, how do I make sure I am able to attract quality talents, how do I keep my clients satisfied. Now the responsibility of the association is to as much as possible provide that capacity building and also strategic knowledge sharing platform, that raises the level of consciousness of different levels of member agencies regarding how they need to engage in this trending times. We cannot however take these critical decisions. Remember whatever needs to change requires critical decision making and an identification of what the real operational issues are. And these operational issues are unique to each company or to each agency, and that would need to be something that directly addressed by management of these agencies.
Under your leadership, what will you point as landmark achievement of your exco?
The image of the association. We have also been able to renovate the secretariat, which was in dire state, and it cost quite a lot for us to repaint, renovate and fully refurbish the secretariat as it is now. So, those are some of the key milestones that we have achieved. We have also been able to involve the industry leadership at the very highest level, regarding pertinent issues that had to do with APCON, which has to do with moving the association forward, from an institutional perspective.
Leading a group like the AAAN what are the challenges you encountered in these two years?
What I see is something that is generic, and its endemic and that is the fact that just like the member agencies, spent a lot of their time, they slave for the clients so much about the strategic issues, problems, the operational issues that their agencies have, they mind only in as much as it impacts the relationship with clients. You find that same pattern in terms of the association. So, you find that the minds are so busy trying to survive, trying to keep their operation going, that it is difficult to draw any level of input, any level of investment in terms of time, within the committees, to drive the initiative of the association.
Among the sectorial groups what kind of engagements did you have and what issues were you able to address head on?
I believe that one of the primary things we have done was to provide very strong strategic partnership to APCON. We realised that APCON is not properly constituted, and they have been going through several issues with regards to constitution of APCON Board and the proposed APCON law which is supposed to be reviewed, and it has been introduced in the senate. One of the things we have done was to work closely to address that and provide top strategic leadership behind the scene to make sure that while it is not properly constituted, we are not just allowing it to be vulnerable to the circumstances of these times but that we are putting in everything necessary to ensure that the association moves forward.
What is AAAN’s position on the 120day credit policy by the multinationals? Was it an agreement with the agencies and how are you moving to resolve this issue with the advertisers’ body, ADVAN?
No, I believe it is more of a situation where the various sectors within the media and the marketing communications sector have to work together because it doesn’t just affect advertising, it affects the other sectors, and because there is a lack of leverage, what you find is that the clients have almost all the leverage to set the terms and its now left for you to determine whether you want to work based on those terms with them or not. So, they have been able to capitalize on the weak leverage the agencies have, and it’s something that needs to be addressed at the sectoral group level.
On the issue of debts in the industry how much of outstanding debts are we looking at and what are you doing as an association and an industry to address it?
I would say that the inter-sectorial debts is a vicious cycle. You just mentioned the 120 days to the agencies. If an agency is working under those terms, what kind of terms would you work with the vendors and media partners? So, it’s a vicious cycle. Because cash flow has become king, so every client, every agency hoping to hold on for as long as possible, because it’s actually your cash flow that determines your sustainability, your ability to stay in business, to pay your bills. So, you have a lot of agencies who in the books, they are looking profitable, but in terms of cash flow, they are barely surviving. So, that’s the paradox.
Concerning the pitch fee issue, are you trying to push for compliance? And if so, how do you hope to enforce compliance to payments?
Yes, we can only lead from a statutory side. What we do is that we tell our clients, we tell our members that if you have been invited for a pitch, because the association is not in a position to know, that a pitch is going on, so it takes a kind of organic or collective ownership, of a position that pitch fees must be paid, and pitch rejection fees must be paid, before it becomes effective. So, what we have told our member agencies is if you are invited for a pitch and we realized that it would undermine your opportunity to directly engage the client, to say I want pitch fees before I pitch, you will inform us and once you inform us we as an association will now communicate the prospective client. And without mentioning that agency’s name we would say it has come to our notice that you are conducting a pitch, please note that based on our regulatory framework association, our member agencies are supposed to be paid so and so amount for pitch fees for strategy and for creative purposes. But what happens is most of the time this is subverted because the client knowing this now goes ahead to engage the member agencies and say look I want to conduct a pitch, I am not paying any pitch fees. Our company policy does not allow paying pitch fees. Are you ready to pitch? So, the response of the member agency now becomes very important.
How are you adapting to the incursion of traditional consultants into areas of the advertising business? Is the industry not threatened by this and how do you see the future of the creative industry?
It is only to be expected because if you have a global perspective of the share of revenue, you would find that the consultants earn much less than advertising and media. They earn less than the pie of the client. The percentage on consulting is less. Advertising, media and production are about five times the size of consulting. And if you were in their shoes and you are able to get to the board room, you would say why am I not making more money by adding the advertising offering into my portfolio of services. But having said that, it’s not as clear cut as we think. For instance, DDB Worldwide also owns a consulting company. So, we tend to see these things in shades of white and black but for over five years, DDB worldwide as a network which I belong to also owns a very strong and robust consulting company, management consulting company. So, you see a lot of cross fertilization of offerings and I believe at the end of the day that is where this session becomes most relevant. It’s not so much what you offer as much as the level of innovation, but the level of strategic input and value you bring to the table.