He has completed a decade at the helm in Ogilvy & Mather (O&M) and his agency has just been rated as India's most admired agency (Brand Equity's Ad Agency Reckoner 2003). O&M AsiaPac vice-chairman and O&M India executive chairman Ranjan Kapur has spent nearly 38 years in the advertising industry - which is roughly half of the number of years the Indian ad industry has been in existence.

He has been the potent force that has taken O&M from strength to strength. When questioned as to when O&M will become the biggest agency in terms of billings, he quips (switching on his 100 volt smile),"What makes you think we aren't already?" and refuses to comment further!

Kapur claims that his forte lies in telling stories and creating simple analogies to explain complex business strategies. However, don't be misled by the man's admissions as his steely grit, determination and confidence are evident in his agency's escalation up the ladders of success. Kapur, however, laments the "Bollywoodisation" of the ad industry which he says has become a victim of the "page three" syndrome rather than serious business preoccupations.

In a free-wheeling conversation with indiantelevision.com's Ashwin Kotian, the chain smoking head honcho tells stories (Manilal grocer); calls attention to the potential of "Foot on Street" business proposition; and elaborates on "Swings and Roundabout consumer Philosophy" and "combustion" theory for ad agencies. Bewildered! Read on:

How has the year 2002-3 been for the ad industry?
The year 2002 was an average year and it was business as usual. The stagnation of the industry started in the second half of 1999 and is still continuing. Post 11 September 2001, the industry braced itself for tough times. The industry is coping with the stress of managing bottomlines. Client-agency relationships have been affected; budgets are under pressure and remuneration models have changed drastically. Clients are getting attuned to the fee based systems. However, there has been slow and steady erosion in business. A lot of us had anticipated that we would have to tighten out belts - no splurging or excessively wanton expenditure.

In the last year and a half, the glamour side of the ad industry business - which was prevalent in the 1960s - resurfaced. People within and outside the business have started saying "Its Showbiz time!". Personally, I feel that this is unfortunate because the professional side of the business has been relegated to the background. I feel that media is responsible for glamourising the business - reducing it to the level of Bollywood!

The advertising business is serious business with huge stakes and not frivolous. The media has used its journalistic licence to play around, create 'stars' and 'iconise' them. It is unfortunate that we have got ourselves into this kind of a scenario - very crass. It doesn't make sense because business is still soft and it doesn't augur well for the future as people are grappling with hard targets.

However, I am not saying that we shouldn't have heroes and icons. But, we shouldn't lose sight of the business dimensions and people who perform must certainly be idolised with the requisite frivolity.

What, according to you, were the different phases in the Indian ad industry's long journey?
It is interesting to dissect the various phases of the Indian advertising industry. In the 1960s, the ad industry chugged along but no agency (Lintas, HTA, Bensons which eventually became O&M) was making money - or rather being profitable. The expats used to run Indian ad agencies in those days. In the 1960s, the ad agency industry had become associated with glamour. People joined the business because they wanted to be part of the glamour.

In the 1970s (1970-75), the expats disappeared and handed over the reins to Indians. Surprisingly, the bigger ad agencies started making money as soon as the Indians took over. The turnaround occurred because all the unnecessary costs were done away with and some kind of a sanity prevailed. The industry stopped being the 'glamour industry' and became more business oriented.

The period between 1976-1990 was a phase of consolidation. It was slow and steady progress as the economy was growing at one to three per cent per annum. The ad agencies growth can be attributed to inflation and a little bit of real growth. Some agencies grew faster than the rest while others grew steadily.

More importantly, the business got some amount of respectability. It didn't invite much fresh talent from the campuses - not to the extent as that of financial institutions or other organisations. Few people became well-known - Mani Aiyer, Subhash Ghosal, RK Swamy, Tara Sinha, Alyque Padamsee, Bal Mundkur, Nari Hira and Frank Simoes. Most of them had grown out of either O&M or HTA. However, a majority of people didn't treat the business as seriously as they should have - from the profitability point of view.

The 1990s was the era of acceleration and unprecedented growth due to liberalisation. The equities boom in the 1993-1996 saw agencies growing at 36 per cent, 42 per cent and 50 per cent - agencies grew four or five or even ten times. There was some kind of an explosion as MNCs came into India. The much touted figure of 200 million middle class Indian consumers drew foreign companies by the hordes. Overnight, people became heroes.

In 1993, I came back and took charge of the Indian operations - even for me it was a question of being at the right time and at the right place. The mandate was to manage the business and costs efficiently. The industry started getting recognised and started competing with talent with the other professions.

When the equities boom collapsed in 1996, reality dawned amongst many people in the ad business. Estimates indicate that nearly Rs 5 billion disappeared down the drain. Financial agencies, who had built their expansion plans around the money which they estimated would come from financial advertising, were at sea. Other bigger agencies who had limited exposure escaped.

At the same time, the world economy dipped and Asia had its financial crisis in the later half of 1990s. However, the dotcom hysteria soon followed and the industry benefited to a certain extent. Then 11 September 2001 happened and changed a lot of things.

How significant was the birth of MindShare in 2002? How have media independents altered the landscape of the industry?
The birth of MindShare was another milestone which happened at the right time and in the right place. However, I wouldn't call it a defining moment in 2002 because Carat and Sam's (Balsara) Madison had already been formed. In the case of MindShare, there were other issues such as accreditation which had to be tackled.

However, the consolidation of the media function and its transformation into an independent business entity is very significant. The responsibility no longer rests with the creative agencies. No longer is the creative agency carrying the liability of media - crores of rupees which are stuck in disputes. Why should the creative agency carry this burden of Rs 100 when it gets Rs 15 or even lesser.

Now, creative agencies have truly become partners of the clients not merely media agents. They can concentrate on maintaining standards, optimising resources, enhancing training, developing new techniques for delivery of quality services, build brands and conduct proper account management in the true sense of the term.

Industry associations used to spend a lot of time on sorting out issues related to billing disputes with the INS and the IBF. Now, it is time for them to get a holistic view of the business, full services and training related aspects. Within the next two or three years, these associations will change their focus.

Clients have complained that the different divisions floated by ad agencies are competing with one another?
If the various divisions within the same agency are fighting for the same share of the ad pie, it defeats the purpose of their creation. Sometimes, the individual divisions have misconceptions that they can achieve what mass advertising can. Even in this scenario of mistaken notions, there is friction.

However, in this age of specialisation, agencies have to create specialised units to provide a 360 degrees spin to clients. The importance of below-the-line activities has increased phenomenally and they have to complement traditional advertising. Both have to co-exist.

There are some agencies which are creating in-house dependent units for handling events. I feel that this model is inappropriate because the agency has to take the burden of all the hidden and often un-remunerative costs. Many a times, the margins from the advertising business get depressed due to these comparatively high investment low margin businesses. Every division has to be an independent profit centre; have a P/L (Profit and Loss) model - otherwise things can go berserk. The strategic differentiation of each division has to be clearly demarcated.

At O&M we follow this philosophy strictly. We decided to stop the consulting division because it wasn't profitable.

How have O&M's divisions performed?
The public relations wing and the direct marketing division had been created more than two decades ago. The rural marketing division, with its national level operations, is doing pretty well despite the fact that it is working within the parameters of a high volume low margin business. Also, there is no glamour involved at all! (with a mischievous glint in his eyes).

The outdoor unit (Landscape) has carved out a niche for itself. We had foreseen the potential in this business and had moved early on into this space. We shall reap the benefits in the years to come. Clients have responded well to the professionalism that we have brought to the "traditionally disorganised" business.

Ogilvy Live is facing a lot of competition from small, unorganised and big event managers. Also, clients see it as a separate activity - unconnected with brand building - and equate it with cheap expenses. Therefore, they bargain hard and this leads to lower margins. I feel that events must be given their due in the overall umbrella of brand building activities.

Another important high potential area could be the door to door - what I call "Foot on Street" - divisions.

The recently created Healthcare unit requires a lot of investments and trained resources. It is difficult and challenging task to train doctors or pharma graduates or other advertising professionals who have to moulded to become domain experts. However, the revenues from the Healthcare division is almost as large as that of the Interactive division which was started four years ago.

What about FMCGs?
Several FMCG companies are re-looking at their business models (distribution, quality) in the face of intense competition. The savvy consumers have demolished some of the earlier myths in the business.

For instance, today, "cheap" isn't necessarily perceived as having "poor quality" - manufacturers are getting better ingredients at cost effective prices. In the 1990s, there was a tendency to create premium versions of brands to cater to the customer's needs. Now, the premium versions are disappearing as the consumer has switched to "value for money" mode.

There is a clear trend visible in the marketplace is what I refer to as "Swings and Roundabout Philosophy". Let me explain - in this era of multiple options, consumers (Indian housewives) are tightening their purse strings and compromising on certain products/services in order to save for obtaining others.

Consumers save money on FMCGs and save to buy white goods - consider an amount of Rs 300 per month saved on FMCGs could result in savings of Rs 3,600 per annum; which could enable the consumer to buy an oven or a toaster mixer grinder or 200ml fridge! There is a plethora of options available in terms of upgrades, value for money offerings, cost effectively priced versions. The Indian housewife is a smart lady and very value conscious. We have to make a real effort to keep pace with her!

O&M has been traditionally perceived as a "creative strong" agency. How do you ensure that there is a balance between the creative, client servicing and account planning groups?
I have this great analogy about a combustion chamber.

I consider client servicing people to be domain experts - who are empowered by knowledge and understand the category. Account management teams or planners are those who "ring the consumer to the board room" or take the clients closer to the consumer.

Take the knowledge of these two and put it in a combustion chamber. Take the creative teams - the "spark plugs" - and put it into the chamber to ignite the mix. When everything is added in the right proportion, combustion takes place. The consumer insights, the category insights and the creative interpretation have to be perfectly balanced.

Earlier, the account planning group used to be part of the client servicing team. We have shifted some of them to the planning team so that they can manage their time better and focus on domain knowledge. Planners have to go to the consumer and marketplace every now and then. They need to spend time and effort on the activity.

Which clients and categories have been responsible for O&M's growth?
Nearly 80 per cent of O&M business now comes from local (non-global) clients. Our local clients have grown faster than the global clients. Global brands have been under pressure due to the state of world economy and those of the US and Europe. India has been insulated, relatively protected and Indian brands still have a large marketplace in which they operate.

Our largest clients are Hindustan Lever and Hutchison. Three years back, if I had told someone that a telecom client would be our largest client, the person would have laughed. In our top 10 list we have representative clients from white goods sectors (Onida), Insurance and Mutual Funds, services, Paints amongst others. We are gearing up for more.