Braving the economic slump, Nepal's advertising industry has adopted a 'when the going gets tough, the tough get going' policy. And it's working.
After waiting and watching the steady economic downturn for three years, the industry has hunkered down and established itself as an effective market force even in these difficult times. Proof: the increasing number of media outlets fuelled by advertising. In just the past year, there have been four new tv channels, 10 new FM stations and three new magazines. "Despite everything, the advertising pie has grown bigger and this has helped the growth of the media," says Joydeb Chakravorty of Thomson Nepal. "Today, clients have realised that it pays to advertise even in times of recession."
In the short span of a decade, Nepal's advertising has gone through the boom of the late 90s followed by the bust in the early 2000s. But despite this cycle, advertising executives see the glimmer of an upturn.
Nepali professionalism is catching up with international trends and standards. Joint ventures with foreign partners have helped. There are about 20 active advertising agencies, although more than 60 agencies are registered with the government.
Unlike in the past, when clients dictated their positioning and content to ad agencies, the trend now is to leave it up to promotion professionals. All the producer has to do is brief the advertiser about the product and give general guidelines. As a result, a lot more creative commercials are cropping up on tv and the print ads are of higher standard. Even the radio jingles are getting catchier.
"Being creative is the main challenge," says Ranjit Acharya of Prisma Advertising. "That is why clients now come and ask us to design an entire multimedia campaign."
This is a far cry from the days when, not too long ago, placing an advertisement meant either bringing out notices through commission agents or giving donations to publishers. Officials in government agencies usually had relatives or friends seving as ad agents for placements in state-run newspapers, radio and tv. The limited private publishers used to queue up at business houses and politicians' residences to get donations in the name of advertisements on occasions like festivals or royal birthdays.
Nepal's consumer-led growth in urban areas has shown a massive impact in the industry, and manufacturers have seen sales soar as a result of a successful campaign. Sure, there are a lot of copycats who latch on to any approach that is a success, but the creative ones are always one step ahead and doing new things. Indications of the new trend are increasing numbers of humourous commercials on tv, the use of celebrity figures and the combination of mixed-media messages.
As more and more products in the same segment come out in the market, competition has got stiffer and this is reflected in the advertising. The instant noodle market is a prime example, as there are more than 50 brands, out of which 10 are heavy advertisers. Increasingly, they are relying on the expertise of the ad industry to make their noodles stand out from the rest.
Fast Moving Consumer Goods (FMCG), as they are known in advertising jargon, are the ones most frequently advertised in the media. They include day-to-day consumer items like soap, detergents, shampoo, food items and packaged snacks. A new entrant is the consumer electronic segment, Samsung's recent DigitAll Celebrations 2004 campaign being the latest example.
Advertisers say their Nepali clients are now much more demanding of quality and content in their ads, as they have seen what a successful advertising campaign can do. They cite the example of commercial banks which, till recent years, would only put out vacancy notices. "Times have changed," says Subu Shrestha of Business Advantage. "Banks are striving to get ahead of competition and creating their brands through aggressive ad campaigns."
Some 60 percent of the annual Rs 200 billion ad pie in Nepal goes to radio and tv, while the rest goes to newspapers and magazines. This share of the electronic media is growing and will dominate even more of the market, according to trade experts. The ban on cigarettes and liquor on radio and tv has been the saviour of the print media.
Another fast-growing segment of the ad market are billboards. Signage technology has advanced and new flex hoardings have nearly wiped out the unattractive, labour-intensive painted signs. Advertising agencies say 15 percent of the annual ad expenditure is now going to billboards. Some media houses see this as a threat, and have even formed a cartel to pressurise the government into restricting or banning billboards. But the Valley's municipalities derive so much revenue from them that a ban is unlikely.
Despite the urban middle class-led growth in consumer spending that is fuelling the advertising growth, industry analysts say this is not sustainable. Many manufacturers and service industries are deliberately keeping a low profile and waiting for better times.
Under normal circumstances, manufacturers allocate significant budgets for advertising purposes, but because of the current political disruptions there are often cash flow problems. "Now they pay us only after they have paid for everything else," says Madhav Timilsina of Crayons Electra Nepal. "That shows that advertisement is simply not the priority for now."
Then there are products, mainly of multinationals, that continue to advertise despite hard times. Nepal Lever, Coke, Pepsi, DHL and Kodak are some of the heavy advertisers. But even here, analysts say the advertising budget would grow several fold once stability returns to the country.
In fact, the insurgency and political uncertainty has capped the growth in the advertising industry. And in doing so, it has also held back growth of the media.