ADVERTISING INDUSTRY IN INDIA

Definition of Advertising & Advertising Agencies

Advertising refers to the techniques and practices used to bring products, services, opinions,

or causes to public notice for the purpose of persuading the public to respond in a certain way

toward what is advertised.1 Most of the advertising activities are carried on with the aim of

promoting products but it can also be carried on with the aim of creating social awareness or

gather support for a political idea. Advertising agencies are an important part of the economic

fabric as they provide platform to the organisations to communicate with their audience.

According to the definition given by the Philip Kotler, advertising is any paid form of non-

personal presentation and promotion of products, services or ideas by an identified sponsor.2

Status of Advertising Industry in India

India is the world's second most populous nation. Over a billion people live within its

borders, making it second in size only to China. Hence making it one of the largest potential

market places for almost all multinationals for selling their products. In this background, the

role of the advertising agencies become crucial as post-liberalization, several companies

attempt to reach out to the masses.

Hence the advertising industry in India, has a tremendous growth potential catering to such

multinational organizations’ needs in understanding the diverse demographic distribution of

India helping them reaching out to the populace. According to the Pitch Maddison Report

2019, the advertising industry saw a tremendous growth rate of 14.6% in the Financial Year

2019 despite the crippling economic slowdown faced by the global economy in the aforesaid

Financial Year.3 However the future of the advertising agencies may face a paradigm change

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in its fate in the wake of the recent Covid crisis as several brands will seek to reduce their

advertising spending by whopping 69% due to lack of cash flow generation in the economy.4

PEST Analysis of the Advertising Agency

1. Political / Legal Factors

The Advertising Standards Council of India regulates the advertisement standards in India. In

regards to promote fair practices of advertisement in the Indian market and protect the right

of customers as guaranteed under the Consumer Protection Act, 1986, ASCI had come up

with the regulatory mechanism termed as "Code for Self-Regulation in Advertising"["Code"]

1. To ensure the truthfulness and honesty of representations and claims made by

advertisements and to safeguards against misleading advertisement.

2. To ensure that advertisements are not offensive to generally accepted standards of

public decency.

3. To safeguard against the indiscriminate use of advertising for the promotion of

products which are regarded as hazardous to society or to individuals to a degree or of

a type this is unacceptable to society at large.

The purpose of the Code is to control the content of advertisements and thereby issues

instructions in this respect along with complaint procedure in event of failure in compliance.

Though the ASCI is a non-governmental organisation and the code introduced by it is strictly

voluntary without any mandate but, the advertisers ought to give regard to such Code at the time of

publishing their advertisements since if any advertiser fails to comply with the CCC decision in

writing on a complaint upheld against a Press Ad, the ASCI has option to inform the Press Council of

India and Ministry of Information & Broadcasting about the print Ad contravening the ASCI Code

and such action may dent the reputation of the concerned advertiser.

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 1. The Press Council Act 1978

2. Cable Television Network Rules, 1994

3. Norms for Journalist Conduct issued by the Press Council of India

4. Code of Conduct of the News Broadcasters Association

Moreover, Consumer Protection Act will make new progress in the area of consumer rights pertaining

to advertisements by providing specific powers to the proposed Central Consumer Protection Agency

who would be able to issue directions and penalties against false or misleading advertisements. It is

noteworthy, that the CP Bill extends the liability of misleading advertisements on not just the

manufacturer of the product or service in question, but also holds their endorsers liable.

Economic Factors

 Rural markets face the critical issues of Distribution, Understanding the rural

consumer, Communication and Poor infrastructure. Media reach is a strong reason for

the penetration of goods like cosmetics, mobile phones, etc., into the rural market

which are mainly used by the urban people. Increasing awareness and knowledge on

different products and brands accelerate the demand. So advertising had shown

opportunities for income growth from the rural market.

 The turnover of Indian Advertising Industry is less than 1% of the national GDP of

India whereas the share of US ad industry in national GDP of USA is 2.3%. This

indicates a tremendous growth potential for the Indian Advertising Industry. In

contrast the growth in GDP is fuelling the advertisement spending.

 Foreign Direct Investment in India: The liberalized investment administration, rapidly

growing economy, good and strong macroeconomic policies, continuous de-licensing

of industry sectors and the easing in business transactions has attracted multinational

corporations to put investment in India.

  The Services of an Advertising agency other than media buying services is taxable at

the rate of 18% for Digital media and 5% for Print media.

 For media buying services the rates may vary from 5%to 18%. If the advertisement

agency works on principal-to-principal basis, that is, buys space from the newspaper

and sells such space for advertisement to clients on its own account, that is, as a

principal, it would be liable to pay GST at the rate of 5 per cent. However, if the

advertisement agency sells space for advertisement as an agent of the newspaper on

commission basis, it would be liable to pay GST at the rate of 18 per5

Social Factors

India is the land where the old and the new, the traditional and the modern, and the local and

the international coexist—sometimes comfortably, sometimes not. In managing brands and

targeting consumers, advertising must understand and contend with the social and cultural

diversity of India.

Today, many Indians remain suspicious of imported goods and the multinational corporations

that produce them. Others view such foreign influences, including the establishment of

foreign corporation branches, as a means of modernizing the country and bringing it into the

global economic community.

After years of controlling and closing the economy to foreign influence, the Indian

government liberalized the economy in 1991. The years since have witnessed rapid change at

virtually every level of the society and culture. Multinational corporations have moved in,

imported goods have become widely available, and consumption has become rampant. Today

it is possible to buy nearly anything in India—from inexpensive handcrafted bangles to

luxury watches, foreign cars, and designer clothing.

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Since the mid-1980s, Indian society has undergone a dramatic shift in social values. Getting

rich and enjoying a good life has become the new mantra of social existence for the Indian

middle class. With more income and more purchasing power, the status-conscious Indian

middle class now seek to buy good quality consumer products and spend more money on

food and entertainment. In metropolitan cities, extensive foreign media exposure and the

Internet revolution have contributed to the emergence of a new social attitude which accepts

Western values and culture. The contemporary Indian society can be understood on the basis

of a 70/30 dynamic. While 70% of Indians are still traditional, poor, and live in rural areas,

30% of Indians (more than 300 million people) have emerged as rich, modern, Western-

exposed, English-speaking, urban dwellers.6

For a long time advertisers have focused on the world’s largest population of the young

(51.8% of Indians are below 35 years of age), wooing them with youth-centric

advertisements.7 However lately, Indian advertising has become inclusive enough to

accommodate senior citizens promoting products beyond insurance and banking products for

the retired.. Lowe Lintas launched a campaign in Tamil for classifieds site OLX featuring two

grannies making fun of a young man using an outdated phone, guiding him to sell it on OLX.

Recently, advertisements are turning the spotlight on seniors who have more time for TV.

Advertisers believe they are the target consumers. As they have more money to spend, more

time, they want to do more things, eat out, shop and travel more, and they are willing to try

new experiences.

Technological Factors

Outdoor advertising is no more restricted to billboards. As the Indian consumer is bombarded

with 1, 00,000 advertisements a day on more than 250 channels, outdoor advertising has

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shown promise to break the clutter of advertising on traditional mediums. OOH is now into

digital and graphic innovations like Televisions advertising in Malls, Banners, hoardings and

on travel medium like planes.

The biggest consumer of computer animation is advertisement industry. From low end title

scrolls to high end visual effect for TV commercial, its animation all the way. This animation

industry has become the driving force for creativity in advertising.

Launch of INSAT satellite systems by ISRO enabled the rapid expansion of TV and modern

telecommunication facilities to even the remote areas and off-shore islands. Today, INSAT

has become the largest domestic communication satellite system in the Asia-Pacific region

with ten satellites in service

Online advertising is penetrating into a large market with different ways mainly through

social networking and over OTT platforms like