ASIA REPORT: HOW CLIENTS ARE COPING WITH ASIA’S CURRENCY CRISIS - The turmoil in the former ’tiger’ economies could give multinationals that can weather the storm a chance to improve the status of their brands, Andy Fry writes

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 economy.

During the second half of last year, a widespread collapse in the

value of Asian currencies sent shock waves through the world

economy.



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

slightly.



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

an opportunity.



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

than annually.’



Asiaweek’s marketing director, Evan Blank, reports a similar

experience.



’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

profile.



’European companies know the benefits of maintaining spend through a

recession.



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

television.



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

reduced editions.



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

problems.



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

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