By ANDY FRY, campaignlive.co.uk, Friday, 03 April 1998 12:00AM
During the second half of last year, a widespread collapse in the
value of Asian currencies sent shock waves through the world
After years of seemingly unstoppable growth, the ferocity of the
region’s reverse took many observers by surprise.
Now there are clear signs that the devaluation is hitting consumers’
purchasing power. Hyperinflation, price hikes in staple goods and
large-scale job losses are just some of the factors playing on people’s
minds. These, in turn, are forcing clients to reassess their brand
strategies throughout the region.
The degree of concern varies by country. Ogilvy & Mather Asia Pacific
president, Miles Young, says China, India, Taiwan and Japan have emerged
more or less unscathed while Malaysia, Singapore and Hong Kong suffered
But the real problems are in South Korea, Thailand and Indonesia. Young
underlines the severity of the situation: ’It wouldn’t be over-egging it
to suggest that advertising will be down by as much as 50 per cent this
year in Indonesia and by 30 per cent in Thailand and Korea.’
Within the worst-hit markets, the impact of the recession is not
uniform, however. The downturn is particularly serious for local
companies which cannot cushion the collapse in their business with
revenues generated from other territories. However, for multinational
companies, the situation is more ambiguous. The position looks grim for
imported luxury goods as local consumers prioritise their spending
towards essentials. But for other multinationals the downturn is seen as
For companies which missed the first wave of entry into the Asian market
during the 80s, the recession is viewed as a ’great Asian sale’ that
will give them a second chance to break into the region. For those that
are already active, particularly in the fmcg market, there is a chance
to increase their share of voice.
In a recent paper presented to O&M’s clients, Young stressed the need
for advertisers to keep spending through the downturn and resist the
temptation to resort to price cuts. Drawing on data from previous world
recessions, he claimed that ’it is usually a mistake to cut advertising
budgets during a recession’.
The evidence suggests his warning is being heeded. At regional satellite
broadcaster, Star TV, the vice-president of regional advertising sales,
Susan McAteer, says: ’Hotel and travel are down but most of the bigger
clients are maintaining their spend. If there is a difference it is in a
renewed caution. Clients are planning their budgets quarterly rather
Asiaweek’s marketing director, Evan Blank, reports a similar
’It has been difficult for local businesses but pan-regional clients are
in Asia for the long term.’ At present, Blank says, clients such as
Rolex, Cathay Pacific and Marlboro are continuing to maintain a high
’European companies know the benefits of maintaining spend through a
This is where they gain share.’
O&M clients like Nestle and Unilever have also taken ’a very bullish
view’, says Young.’They’re not running shy of investment.’ Nestle has
the comfort of knowing that during the 1985-1989 recession in Malaysia,
it spent aggressively in support of its healthfood drink, Milo, and
watched as its market share rose from 60 per cent to 80 per cent.
Matthew Asinari, who heads Dentsu, Young & Rubicam’s operations in Asia,
is studying the results of a dollars 1.2 million research project which
analysed 6,000 brands across eight countries. He says the most
significant observation is that clients must find ’better long-term ways
to build their brands.
In times of recession, there is an opportunity to demonstrate
differentiation and relevance in their products’.
Asinari has witnessed a shift in Asia towards what he describes as
’internal values. Purchasing habits in Asia are now less about
impressing your neighbours - so clients have to reflect that. If they
are marketing a car, it has to be seen as a durable long-term investment
not as a status symbol. Ikea has been very successful in Asia because it
has managed to convey a message of affordable style.
It is also important to consider alternatives to mass exposure on
As Young puts it, the recession is the time to stop counting the
customers you reach and reach the customers who count.
Asinari adds: ’We’re investing aggressively in direct marketing through
Wunderman Cato Johnson. It’s a fast-growing means of communication for
clients like Citibank, IBM and Ericcson.’
Of the three worst hit markets, South Korea was the first to get back on
the road to recovery. One welcome spin-off, according to Young, has been
a deregulation of media buying which will make it easier for advertisers
to buy airtime.
Thailand’s problems remain - although there are signs of recovery.
Sunandha Tulayadhan, who heads O&M’s office in Thailand, confirms that
there has been a drop in the purchase of high-ticket items. However, she
points out that five of the top ten advertisers so far this year are
non-Thai companies: Toyota, Unilever’s Sunsilk, Procter & Gamble’s
Pantene, McDonald’s and Pampers. These companies have continued to
support their brands despite a high-profile government campaign to ’buy
Thai, live Thai and eat Thai’.
The biggest concern is Indonesia, where effective marketing is currently
next to impossible. Leo Burnett’s Jakarta-based managing director,
Berndt Soderbaum, says: ’It is impossible to plan. Local clients don’t
have access to money even if they want to spend it and multinationals
can’t plan because of the rollercoaster exchange rate.’
There has also been a collapse in the availability of media. The number
of radio stations has halved while TV stations have been broadcasting
shorter hours. Because of the inflated price of imported materials for
publishing, newspapers and magazines have either shut down or run hugely
According to Soderbaum, the key battle is now over price. ’The majority
of multinationals are trying not to raise prices too much. If they can
show loyalty by subsidising the market this year, they may be able to
come back next year.’
Given the situation, it is not clear why any Asian nation should show
loyalty to western companies that many feel are the root cause of their
However, Asinari sees no evidence of the sort of anti-Western brand
sentiments witnessed in Vietnam two years ago when the authorities
censored Western advertising. In fact, he believes there is cause for
optimism in Asia - with the short-term exception of Indonesia.
’After a period of reorganisation, these markets will be even stronger
and more dynamic. It’s a hard lesson but from it they will evolve to
combine local strengths with world-class standards.’
This article was first published on campaignlive.co.uk