The Dilemma
This case is referring to the dilemma confronted by Mr Rajesh who is running an advertising agency called “Creed” in the Southern State of Kerala, India. This is a small advertising agency which is trying to compete with a large advertising agency named “Vista “and focusing on price discounts to penetrate in the market and compete with them. He is also worried about losing his projects and clients because its competitor is also offering higher discount prices. In the highly competitive market, their agency is on stake so, they should focus on new strategies to penetrate in the market. Now they have some choices first is that either they compete on the basis of creativity and quality or to penetrate in the market they have to more discount offers than their competitors. Rajesh is also thinking to move away from its core values from ‘advertising’ to designing posters and brochures.
Key learnings for advertising students
- First of all, it will help students to understand about the structure of advertising market in India. How Indian advertising agencies penetrate and compete in market.
- The other learning objective is to train students that which and methods can be implemented for small advertising agencies to maintain and grow against their competitors.
- Another learning objective is that it will help us to understand strategies used by larger agencies and how a market follower will adopt it to survive in the market.
Discussion Questions
Should Rejesh offer more discounts to its clients?
No, he should think of some alternative strategies rather than entering the price war, like focus on creativity and quality of services as low prices is the USP of “Vista” and should not offer more discounts to its clients because of the following reasons.
- As company could not effort to lower their prices as it will increase their costs and reduce profitability.
- Lowering their prices or discounting more will not be a good strategy because of the huge competitive market.
- Most people value something based on its price. So, discounting the prices will change the consumer’s perception about “creed”.
- As soon as you lower your price, your customer will expect to see the same thing next time.
- It will lead to untrustworthiness about the brand.
- There will be a negative effect of lower prices on perceived brand quality.
what should be the strategy for smaller agencies to survive in the market?
With the help of SWOT analysis, we can detect Crees’s strengths and weakness against Vista. Then compare the strengths of competitors with agency’s strengths with the help of House of Quality. Find our unique selling point (USP) and try to penetrate in the market by focusing on these strengths.
By targeting a specific niche and implementing the following methods they can create a reason for people to pay more for them. Comparing the client’s profile, we can figure out that Creed’s main clients are;
- Ayurveda 45%
- Education 35%
- Hardware 10%
- Others 10%
So, they should focus specially on these industry clients.
- Target jewelers and textile industry as they are the major advertisers there.
- Vista’s main focus is on increasing advertising volume and creativity not he quality. So, there’s a market gap for Creed as they can improve their quality of services to compete in the market.
- Creed’s strength is that they have a very good number of clients who are with the agency all these years, may be because of their client serving skills. So, they just have to make their quality better which will help to gain their loyalty and at the end they will be addicted to Creed.
- They should concentrate more on cost reduction variables like low wages and salary employees, hiring part time workers, hiring internees and electricity saving strategies to reduce cost rather than discounting the prices. It will help agency to gain more profit.
- On the basis of its new recruited two client serving executives who maintain the standards of client serving quality and brand identity, Vista will find it difficult to match Creed standards.
- Rajesh should not go to the other category of advertising as he was thinking about focusing on designing posters and packaging using the outsourcing model. Because he will lose all of his permanent clients and brand identity.
- Bringing new change in form of designing posters and banners will be highly cost effective and it will impact all of the agency’s performance.
- Repositioning the brand can be a good strategy to gain more clients.
- Advertising; further extending the value systems
- Integrating promotions; organizing new events
- Social media promotions; building a one-on-one dialogue
