Indian giants cut back

22 September 2009

NEW DELHI: Some of India's biggest telecoms and automotive companies have made substantial reductions to their adspend, but are continuing to enjoy improving sales levels in spite of this strategy, a study has found.

According to estimates from the Associated Chambers of Commerce and Industry of India, some of the largest firms in the Indian telecoms sector trimmed their marketing budgets by 3% in 2008–09 compared with the previous year.

Despite this, the number of mobile subscribers in the Asian nation has increased by more than 50% during this period, with net sales also recording an uptick of 26.9% in the same timeframe.

Airtel, one of the country's largest telecommunications operators, actually heightened its adspend by 10%, with its mobile user base expanding by 30%, and net sales by 32.5%.

Reliance Communications slashed its spending by 26%, but sales improved by 21%, while Tata Telecoms diverted 63% more funding to advertising, with net sales rising by 14.2%.

Among the automakers in the two-wheeler category, the resources allocated by the main manufacturers to commercial communications fell by 5.87% on an annual basis, while net category sales rose by 2.5%.

However, expenditure levels among some of the premier brands in this segment have continued to grow, partially offsetting the overall slowdown.

Honda Hero's outlay was up 12.5%, with sales also increasing by 19.2%, while Bajaj spent 32.9% more, with shipments falling 6.6%, and TVS boosted its adspend by 12%, while sales grew by 14%.

In the FMCG sector, the resources dedicated by Hindustan Unilever to marketing its stable of brands rose by 48%, while sales climbed by 47.1%.

ITC, one of its major rivals, invested 33% more on advertising, with sales totals up 8.4%, while Britannia spent 17.5% more, with sales up 20.5%.

Overall, ASSOCHAM's Eco Pulse study reported that the elasticity of advertising to net sales was –9.31% for telecoms, and –1.32% for automakers.

By contrast, this figure was 0.8% for the FMCG market, indicating that for every rupee a company generated in extra sales, it spent 80 paise (eight tenths of a rupee) on advertising.
"With services becoming driver of the Indian economy, advertising which spreads awareness to consumers has made an important contribution to the growth in some of the dynamic sectors like telecommunications, auto and FMCG," Sajjan Jindal, president of ASSOCHAM, said.

Data sourced from ASSOCHAM; additional content by WARC staff