- Email: [email protected]
The future of brand marketing in Asia
M A R K E T P L A C E KRIS WADIA
The Future of Brand Marketing in Asia KRIS WADIA can be contacted at [email protected].
The battleground—brand marketing in Asia. The combatants—advertising versus direct marketing. The prize—billions of dollars in marketing budgets. ‘‘Brand Equity’’ is a term increasingly heard in the boardrooms of corporate Asia today. Hardly surprising, when you consider the ability of a high-value brand to enhance the fiscal appearance of a company’s balance sheet, particularly when normal trading returns are less than impressive. So what exactly is ‘‘brand equity’’? Looked at from a marketing point of view, the ‘‘equity’’ is actually the image in the minds of customers which an established brand builds up through years of promotion, distribution, and usage. Ask an accountant, however, and you could receive a multitude of explanations based around the word ‘‘goodwill.’’ The ‘‘equity’’ can be found in the difference between the value of the net tangible assets (such as fixtures and fittings) of a company, and the higher price a buyer would be prepared to pay to acquire the company. Part of this sum is the future revenue potential of the brand, which is quantified as its ‘‘equity.’’ But measurement is, in itself, fraught with difficulty because it requires a near impossible question to be answered: namely, how much is an intangible
asset worth? Should it be an accounting calculation? A percentage of annual marketing spending? Perhaps even a percentage of market share? Or should it just be ignored completely until a potential buyer’s purchase price offers one possible answer? Whatever the eventual outcome of the valuation battle as fought by opposing camps of accountants, one indisputable fact remains: A brand is a valuable asset for a company—not just for corporate fiscal cosmetics, but in the real world of marketing as well.
ADVERTISING’S ROLE IN BRAND BUILDING The value of a brand is based on the premise that consumers’ familiarity with an established brand is far more likely to allow the brand owner to maintain higher profit margins, particularly when faced with new or lower-priced competitors. Fair enough, but it is the issue of how the familiarity is to be maintained and built further that is now causing brand owners to reassess the allocation of their marketing budgets, and possibly reduce the influence of the very organizations that helped build those brands in the first place . . . the advertising agencies. From an agency perspective, a reduction in clients’ advertising budgets traditionally reserved for
q 1997 John Wiley & Sons, Inc. and Direct Marketing Educational Foundation, Inc. CCC 0892-0591/03058-06
58 JOURNAL OF DIRECT MARKETING
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VOLUME 11 NUMBER 3 SUMMER 1997
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brand building might appear to be more than just ill reward for a job well done. It would smack of short-sightedness, and a misguided attempt to try something new even though the old formula of ‘‘product / advertising Å brand’’ has proven successful over several years. After all, they would justifiably claim, haven’t some of their more creative efforts become catchphrases, heard everyday in the street? And do their catchy jingles not pop into consumers’ minds, apparently out of nowhere? And aren’t some of their inspired logos now recognised by two-year-olds from Alaska to Zambia? Therefore, the agencies suggest, brand equity can only be maintained by continuing the same strategy that built the brand to where it is today . . . repeated exposure of a promotional message using mass media channels. Persuasive as the argument may be, it fails to take fully into account some of the economic, technological and social developments in Asia today.
THE IMPACT OF ASIA’S DEVELOPMENT To begin with, traditional ‘‘mass media’’ are losing some of their reach, whether through increased competition or technological advances. Add in normal inflationary pressures, and you are left with higher rates and lower coverage. The resulting higher cost-per-thousand (CPM) invariably reduces the attractiveness of the mass media option. And then there’s the school of thought that suggests that there is already too much ‘‘noise’’ (the total quantity of promotional messages to which almost every consumer is exposed), so promotions will have to be better targeted in terms of message, tone and timing to make even a small impact on ‘‘share of mind.’’ Trend watchers within the marketing fraternity might disagree. They could provide statistics that prove Asia’s headlong march into economic liberalization and prosperity has increased the pool of targetable consumers by their millions. For example, consumers who, just a decade ago, were resigned to a few hours of government propaganda at prime
time on their black and white TVs, are now spoiled by choices among a dozen cable and satellite channels in full color. While it is fair to say that the media explosion has increased the number of fish in the marketers’ pond, it must be noted that the number of nets cast by media owners has also increased dramatically. This fragmentation, admittedly of a much larger universe, is also likely to result in higher costs for most media buyers. Moving on from the question of cost, factors other than the sheer volume of advertising exposure are increasingly being seen by brand owners as important to brand development. These include packaging and after-sales service, and are staking their own claims for funds previously earmarked for brand-related advertising. Agencies could also lose out in other ways. Having unequivocally demonstrated the value of brands, they could find themselves ill-equipped to service brand-related promotions for, say, an industrial air conditioning manufacturer, whose customer base can be clearly identified, but cannot be reached by traditional mass media advertising in a cost-effective manner. And clients are increasingly demanding cost-effectiveness from their advertising spend. It is conceivable that the issues of accountability and measurable results are where traditional advertising is likely to find the battle the hardest.
THE ASCENDANCY OF DIRECT MARKETING For in the opposite corner stands direct marketing. Loosely defined as the ‘‘use of any media to achieve a measurable response which is managed on a database,’’ it is still fighting hard to overcome its ‘‘junk mail’’ legacy. Despite this, direct marketing has already made a significant impact in the Western world, with some of the largest multinationals moving substantial percentages of their multimillion dollar budgets into this marketing discipline. The rationale for using direct marketing to maintain and build brands is equally persuasive. It invites
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direct customer interaction with the brand; it improves brand recall; and even if a campaign generates a response rate of 1%, the remaining 99% of carefully targeted prospects will have been exposed to the brand in a more direct manner than advertising could hope to achieve. So, it is fair to say that anything advertising can do, direct marketing can do better? Whether the objective is to generate a one-step sale or to drive traffic to retail outlets, direct marketing already has the skills, techniques, and power to achieve it . . . while measuring success in percentages or dollar values up to several decimal points.
TECHNOLOGICAL LEAPFROG Recent technological developments in Asia also tend to favor the ascendancy of direct marketing. Increasingly widespread usage of computers makes database-driven direct marketing possible; advances in telecommunications make the consumer’s physical presence during purchasing redundant; while credit cards cut through government restrictions and banking bureaucracy to allow instant settlements of long distance sales. Significantly, technology has leapfrogged one entire cycle and bypassed a couple of decades’ worth of equivalent development in the West. So, just as telecommunications have gone from copper-wire– based systems to the latest digital exchanges, some Asian brands could bypass advertising based strategies, particularly where the target audience is clearly identifiable and accessible via Direct Marketing. This technological leapfrog is already evident. Consider the database-driven Frequent Flyer Program launched within months of the maiden flight of a newly created airline, effectively consuming part of the marketing budget that would have been reserved for above-the-line advertising. Or the Direct Response TV commercial for automobile insurance, with sales processed directly by the insurance company rather than insurance agencies or an in-house sales force, both of which would have been supported by image advertising.
Improvements in infrastructure, especially telecommunications, will also make other direct marketing channels such as tele-marketing and fax marketing increasingly viable. Simply by virtue of their availability, they will attract a share of the brand building budget formerly assigned to mass media advertising. Direct marketing also appears to be capable of holding its own against advertising, irrespective of the stage of the customer relationship cycle. When initially building a brand, direct marketing can not only recognize the importance of trial by new customers, it can also identify the new customers themselves, and offer them highly targeted, short-term tactical promotions to introduce them to the brand. Recognising that existing customers often choose from a repertoire of brands, which they perceive as interchangeable rather than competitive, Direct Marketing strategies can systematically track and entice buyers from the Occasional Purchase into the Brand Loyal category. And it is in the area of influencing repeat purchases by existing customers over their lifetime that direct marketing is earning its stripes in Asia, mostly in the form of customer loyalty programs.
THE ROLE OF DIRECT MARKETING IN BUILDING BRAND LOYALTY Brand leaders, by their very definition, tend to command the largest market share in any given sector. But escalating competition and rising media costs are taking a sizable chunk out of the rewards earned for increasing that market share even by one extra percentage point when using traditional advertising strategies. Even if the market share of the brand is only to be maintained at its current level, the cost of replacing existing customers with new ones, who have to be influenced by mass media-based strategies, is becoming increasingly prohibitive. The rewards for concentrating on retaining existing customers look increasingly favorable by comparison. Depending on which marketing text book you read, it is anywhere between 5 and 50 times more expensive to acquire a new customer than it is to
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retain an existing one and with only a small increase in customer retention, a brand can enjoy a disproportionately large increase in profitability. That’s simply because existing customers’ familiarity with the brand requires a lower marketing expenditure to achieve a constant (or even increased) volume of sales. Ironically, therefore, it is the established brands, built by advertising, that could be the first to turn their backs on the very budgets that created them.
ADVERTISING’S COMPROMISE AND FAILURE And the first signs of grudging compromise from advertising agencies are beginning to surface in the Asian marketplace. Unfortunately for all concerned, these initial attempts to pacify clients’ demands for measurability of marketing spend will result in nothing more than mutual frustration at the lack of results. Attempts to modify existing materials—‘‘advertising in an envelope’’ pretending to be direct mail or a 2-second frame on a TV screen showing the telephone number in a traditional ‘‘image’’ commercial—will always end with the same disastrous results. Nowhere is this more noticeable than the recent wave of print advertisements which appear to be created using the formula ‘‘original image advertisement / odd shaped coupon hidden in some obscure corner Å direct response advertisement as demanded by client.’’ In terms of response rates, the result is a foregone conclusion . . . disastrous.
THE FATE OF LOCAL BRANDS So is the advertising versus direct marketing war for the marketing budgets for established multinational brands in Asia likely to spill over into local brands as well? In the immediate future, the question may be largely redundant. Neither advertising nor Direct Marketing is likely to be able to stave off the impending capture of large chunks of market share by
multinational brands, as soon as they are allowed entry into Asia’s newly liberalized economies. Hardly surprising, given the fact that Asians have long had to live with the shabby packaging, poor quality and limited durability of locally manufactured goods. Add to that a natural human desire to possess the unavailable and unaffordable, and one can appreciate why the lure of the long forbidden fruit, Western goods, is proving too great to resist at present. And how will local brands react? Will they raise their manufacturing quality thresholds and customer service standards to retain their market share, which currently owes more to protectionist legislation than to any preference by end users? They will have to, if they wish to survive over the longer term. But in the short term, local brands are far more likely to retaliate by playing the nationalist card. Already there are political calls for greater regulation of the multinationals, who are painted as ‘‘exploiting the people,’’ duly supported by brand marketing campaigns urging the populace to buy products manufactured within the nation, at the expense of their better-value, foreign-made counterparts. Some Asian governments also insist that only local language, talent, and production can be used in the creation and display of promotional messages. But the lure of Western consumerism even permeates these requirements, with the strap line on many billboards, after translation, proclaiming the brand to be ‘‘Number 1 in America!’’ Local brands would also do well to learn from recent marketing history, where the ‘‘Buy British’’ campaign in the United Kingdom served only to delay the inevitable victory of the Japanese motor industry over the inferior British incumbents at that time. In Asia, the initial victory of the multinationals is likely to be far swifter, as pent up demand exists, and Western products do not actively have to be demonstrated as being superior to their local equivalents.
DEALING WITH A BRAND ‘DISTRACTION’ A brand ‘‘distraction,’’ and one that is unlikely to disappear completely, is the piracy of Western
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goods, where the copycat packaging belies the inferior contents. Brand owners now universally acknowledge the fiscal value of their properties, and are painfully aware of the revenue lost to pirates. Their vociferous petitioning of Asian governments to curb infringements of patents and trade marks is resulting in the creation of legislation to protect intellectual property rights. With the necessary legal teeth and political will to enforce it, the penalties for piracy should outweigh the rewards, thereby reducing the scope of the problem. But it is market forces which will, as always, have the final say and effectively reduce the attractiveness of piracy and, ironically, the Western goods they so slavishly emulate.
THE TIDE TURNS The winners are likely to be hybrid products— goods manufactured locally using superior Western technology—who can claim to have the best of both worlds. Their pricing will, undoubtedly, be more competitive as they will avoid the punitive customs and import tariffs imposed on Western goods which, while dropping, are unlikely to be completely eliminated. When these hybrid products are supported by other brand-building elements such as attractive packaging and effective after sales service, they will begin to claim their rightful share of the home market. This will, however, take considerable time, as the hybrids will have to engineer a sea-change in the public perception of today’s local brands. This change will have to be as significant as the West’s perception of goods ‘‘Made in Japan’’ in the mid1990s, compared to their cheap and shoddy postWar predecessors. The passage of time will also work in the hybrids’ favor as Asia’s regional psyche changes from its current aping of the West to a form of national pride and purchasing preference for locally manufactured products at the expense of their Western equivalents. The reasons this time around will be the right ones—self-confidence derived from increasing affluence, rather than the manipulative
protestations of politicians and businessmen with vested interests to protect.
SUPPORT FROM AN UNEXPECTED SOURCE Hybrid brands are also likely to find support from an unexpected source. The rapid pace of economic liberalization in most Asian countries has also unleashed the moribund pool of local creative talent, long suppressed by unimaginative clients, made complacent as part of former government supported cartels. Paradoxically, Western brands seem intent on resuppressing this creative expression, but for entirely different reasons. Years of bitter experience when entering newly emerging markets to the cacophony of local criticism have made them painfully aware of the need to respect local sensitivities. This results in Western brands generally erring on the side of caution in the creative execution of new local campaigns, or using sanitised versions of original campaigns, with the obligatory replacements of Caucasian models and English language scripts or soundtracks with their local equivalents. Hybrids, on the other hand, appear intent on testing the boundaries of current societal norms. This may, in part, be based on the principle that ‘‘any publicity is good publicity,’’ especially in the face of the multinational brand onslaught, but probably owes more to the resulting jingling of cash registers that invariably accompanies the howls of protest by more conservative citizens.
THE FINAL BATTLE The rise of the hybrids will also see the final battle for supremacy in the advertising versus Direct Marketing brand building war. Initial victory is likely to go to the advertising agencies whose brand-building skills, honed to perfection in the West, would be invaluable during the launch phase, when substantial market penetration is essential to a brand’s long
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term survival and success. They could also justify their role in terms of altering public opinion, even if this involves using increasingly expensive mass media channels. Postlaunch, however, would be an entirely different proposition. Direct marketing’s demonstrated effectiveness in cost-effectively acquiring new customers, aided by Asia’s rapidly developing infrastructure, while retaining their dollars using loyalty programs, should make it the marketing discipline of choice for most hybrid brands.
THE INTERIM CHALLENGE The interim challenge for all marketing disciplines in Asia, prior to the final battle, would be to keep pace with the rapid sophistication of Asian consumers as they enjoy the luxury of choice, and tailor their marketing messages accordingly. This sophistication is likely to be expressed in a more cynical approach towards claims made in promotional material, a preference for informed edi-
torial over blatant sales pitches, and an increasing move away from the hierarchy of basic needs such as food, clothing and shelter.
LIFE AND DEATH OF ADVERTISING A WESTERN BRAND Given the above analysis, how is the future of brand marketing, currently driven by traditional advertising, likely to unfold over the next decade? For example, is it wise to predict the eventual demise of the legendary cowboy, cigarette in hand, from a lack of funds allocated for advertising? No. From legislative attempts to restrict the marketing exposure of a legally saleable product? Perhaps. From a diversion of funds into direct marketing to try and slow the rate of loss of overall market size by incentivising repeat purchases of a distasteful product? Possibly. From sophisticated Asian consumers no longer prepared to be the dumping ground for products increasingly rejected in the West? Definitely! j
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The Future of Brand Marketing in Asia KRIS WADIA can be contacted at [email protected].
The battleground—brand marketing in Asia. The combatants—advertising versus direct marketing. The prize—billions of dollars in marketing budgets. ‘‘Brand Equity’’ is a term increasingly heard in the boardrooms of corporate Asia today. Hardly surprising, when you consider the ability of a high-value brand to enhance the fiscal appearance of a company’s balance sheet, particularly when normal trading returns are less than impressive. So what exactly is ‘‘brand equity’’? Looked at from a marketing point of view, the ‘‘equity’’ is actually the image in the minds of customers which an established brand builds up through years of promotion, distribution, and usage. Ask an accountant, however, and you could receive a multitude of explanations based around the word ‘‘goodwill.’’ The ‘‘equity’’ can be found in the difference between the value of the net tangible assets (such as fixtures and fittings) of a company, and the higher price a buyer would be prepared to pay to acquire the company. Part of this sum is the future revenue potential of the brand, which is quantified as its ‘‘equity.’’ But measurement is, in itself, fraught with difficulty because it requires a near impossible question to be answered: namely, how much is an intangible
asset worth? Should it be an accounting calculation? A percentage of annual marketing spending? Perhaps even a percentage of market share? Or should it just be ignored completely until a potential buyer’s purchase price offers one possible answer? Whatever the eventual outcome of the valuation battle as fought by opposing camps of accountants, one indisputable fact remains: A brand is a valuable asset for a company—not just for corporate fiscal cosmetics, but in the real world of marketing as well.
ADVERTISING’S ROLE IN BRAND BUILDING The value of a brand is based on the premise that consumers’ familiarity with an established brand is far more likely to allow the brand owner to maintain higher profit margins, particularly when faced with new or lower-priced competitors. Fair enough, but it is the issue of how the familiarity is to be maintained and built further that is now causing brand owners to reassess the allocation of their marketing budgets, and possibly reduce the influence of the very organizations that helped build those brands in the first place . . . the advertising agencies. From an agency perspective, a reduction in clients’ advertising budgets traditionally reserved for
q 1997 John Wiley & Sons, Inc. and Direct Marketing Educational Foundation, Inc. CCC 0892-0591/03058-06
58 JOURNAL OF DIRECT MARKETING
/ 8s08$$0248
VOLUME 11 NUMBER 3 SUMMER 1997
05-07-97 17:34:45
dmhas
W: Dir Mktg 248
M A R K E T P L A C E
brand building might appear to be more than just ill reward for a job well done. It would smack of short-sightedness, and a misguided attempt to try something new even though the old formula of ‘‘product / advertising Å brand’’ has proven successful over several years. After all, they would justifiably claim, haven’t some of their more creative efforts become catchphrases, heard everyday in the street? And do their catchy jingles not pop into consumers’ minds, apparently out of nowhere? And aren’t some of their inspired logos now recognised by two-year-olds from Alaska to Zambia? Therefore, the agencies suggest, brand equity can only be maintained by continuing the same strategy that built the brand to where it is today . . . repeated exposure of a promotional message using mass media channels. Persuasive as the argument may be, it fails to take fully into account some of the economic, technological and social developments in Asia today.
THE IMPACT OF ASIA’S DEVELOPMENT To begin with, traditional ‘‘mass media’’ are losing some of their reach, whether through increased competition or technological advances. Add in normal inflationary pressures, and you are left with higher rates and lower coverage. The resulting higher cost-per-thousand (CPM) invariably reduces the attractiveness of the mass media option. And then there’s the school of thought that suggests that there is already too much ‘‘noise’’ (the total quantity of promotional messages to which almost every consumer is exposed), so promotions will have to be better targeted in terms of message, tone and timing to make even a small impact on ‘‘share of mind.’’ Trend watchers within the marketing fraternity might disagree. They could provide statistics that prove Asia’s headlong march into economic liberalization and prosperity has increased the pool of targetable consumers by their millions. For example, consumers who, just a decade ago, were resigned to a few hours of government propaganda at prime
time on their black and white TVs, are now spoiled by choices among a dozen cable and satellite channels in full color. While it is fair to say that the media explosion has increased the number of fish in the marketers’ pond, it must be noted that the number of nets cast by media owners has also increased dramatically. This fragmentation, admittedly of a much larger universe, is also likely to result in higher costs for most media buyers. Moving on from the question of cost, factors other than the sheer volume of advertising exposure are increasingly being seen by brand owners as important to brand development. These include packaging and after-sales service, and are staking their own claims for funds previously earmarked for brand-related advertising. Agencies could also lose out in other ways. Having unequivocally demonstrated the value of brands, they could find themselves ill-equipped to service brand-related promotions for, say, an industrial air conditioning manufacturer, whose customer base can be clearly identified, but cannot be reached by traditional mass media advertising in a cost-effective manner. And clients are increasingly demanding cost-effectiveness from their advertising spend. It is conceivable that the issues of accountability and measurable results are where traditional advertising is likely to find the battle the hardest.
THE ASCENDANCY OF DIRECT MARKETING For in the opposite corner stands direct marketing. Loosely defined as the ‘‘use of any media to achieve a measurable response which is managed on a database,’’ it is still fighting hard to overcome its ‘‘junk mail’’ legacy. Despite this, direct marketing has already made a significant impact in the Western world, with some of the largest multinationals moving substantial percentages of their multimillion dollar budgets into this marketing discipline. The rationale for using direct marketing to maintain and build brands is equally persuasive. It invites
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direct customer interaction with the brand; it improves brand recall; and even if a campaign generates a response rate of 1%, the remaining 99% of carefully targeted prospects will have been exposed to the brand in a more direct manner than advertising could hope to achieve. So, it is fair to say that anything advertising can do, direct marketing can do better? Whether the objective is to generate a one-step sale or to drive traffic to retail outlets, direct marketing already has the skills, techniques, and power to achieve it . . . while measuring success in percentages or dollar values up to several decimal points.
TECHNOLOGICAL LEAPFROG Recent technological developments in Asia also tend to favor the ascendancy of direct marketing. Increasingly widespread usage of computers makes database-driven direct marketing possible; advances in telecommunications make the consumer’s physical presence during purchasing redundant; while credit cards cut through government restrictions and banking bureaucracy to allow instant settlements of long distance sales. Significantly, technology has leapfrogged one entire cycle and bypassed a couple of decades’ worth of equivalent development in the West. So, just as telecommunications have gone from copper-wire– based systems to the latest digital exchanges, some Asian brands could bypass advertising based strategies, particularly where the target audience is clearly identifiable and accessible via Direct Marketing. This technological leapfrog is already evident. Consider the database-driven Frequent Flyer Program launched within months of the maiden flight of a newly created airline, effectively consuming part of the marketing budget that would have been reserved for above-the-line advertising. Or the Direct Response TV commercial for automobile insurance, with sales processed directly by the insurance company rather than insurance agencies or an in-house sales force, both of which would have been supported by image advertising.
Improvements in infrastructure, especially telecommunications, will also make other direct marketing channels such as tele-marketing and fax marketing increasingly viable. Simply by virtue of their availability, they will attract a share of the brand building budget formerly assigned to mass media advertising. Direct marketing also appears to be capable of holding its own against advertising, irrespective of the stage of the customer relationship cycle. When initially building a brand, direct marketing can not only recognize the importance of trial by new customers, it can also identify the new customers themselves, and offer them highly targeted, short-term tactical promotions to introduce them to the brand. Recognising that existing customers often choose from a repertoire of brands, which they perceive as interchangeable rather than competitive, Direct Marketing strategies can systematically track and entice buyers from the Occasional Purchase into the Brand Loyal category. And it is in the area of influencing repeat purchases by existing customers over their lifetime that direct marketing is earning its stripes in Asia, mostly in the form of customer loyalty programs.
THE ROLE OF DIRECT MARKETING IN BUILDING BRAND LOYALTY Brand leaders, by their very definition, tend to command the largest market share in any given sector. But escalating competition and rising media costs are taking a sizable chunk out of the rewards earned for increasing that market share even by one extra percentage point when using traditional advertising strategies. Even if the market share of the brand is only to be maintained at its current level, the cost of replacing existing customers with new ones, who have to be influenced by mass media-based strategies, is becoming increasingly prohibitive. The rewards for concentrating on retaining existing customers look increasingly favorable by comparison. Depending on which marketing text book you read, it is anywhere between 5 and 50 times more expensive to acquire a new customer than it is to
60 JOURNAL OF DIRECT MARKETING
/ 8s08$$0248
VOLUME 11 NUMBER 3 SUMMER 1997
05-07-97 17:34:45
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W: Dir Mktg 248
M A R K E T P L A C E
retain an existing one and with only a small increase in customer retention, a brand can enjoy a disproportionately large increase in profitability. That’s simply because existing customers’ familiarity with the brand requires a lower marketing expenditure to achieve a constant (or even increased) volume of sales. Ironically, therefore, it is the established brands, built by advertising, that could be the first to turn their backs on the very budgets that created them.
ADVERTISING’S COMPROMISE AND FAILURE And the first signs of grudging compromise from advertising agencies are beginning to surface in the Asian marketplace. Unfortunately for all concerned, these initial attempts to pacify clients’ demands for measurability of marketing spend will result in nothing more than mutual frustration at the lack of results. Attempts to modify existing materials—‘‘advertising in an envelope’’ pretending to be direct mail or a 2-second frame on a TV screen showing the telephone number in a traditional ‘‘image’’ commercial—will always end with the same disastrous results. Nowhere is this more noticeable than the recent wave of print advertisements which appear to be created using the formula ‘‘original image advertisement / odd shaped coupon hidden in some obscure corner Å direct response advertisement as demanded by client.’’ In terms of response rates, the result is a foregone conclusion . . . disastrous.
THE FATE OF LOCAL BRANDS So is the advertising versus direct marketing war for the marketing budgets for established multinational brands in Asia likely to spill over into local brands as well? In the immediate future, the question may be largely redundant. Neither advertising nor Direct Marketing is likely to be able to stave off the impending capture of large chunks of market share by
multinational brands, as soon as they are allowed entry into Asia’s newly liberalized economies. Hardly surprising, given the fact that Asians have long had to live with the shabby packaging, poor quality and limited durability of locally manufactured goods. Add to that a natural human desire to possess the unavailable and unaffordable, and one can appreciate why the lure of the long forbidden fruit, Western goods, is proving too great to resist at present. And how will local brands react? Will they raise their manufacturing quality thresholds and customer service standards to retain their market share, which currently owes more to protectionist legislation than to any preference by end users? They will have to, if they wish to survive over the longer term. But in the short term, local brands are far more likely to retaliate by playing the nationalist card. Already there are political calls for greater regulation of the multinationals, who are painted as ‘‘exploiting the people,’’ duly supported by brand marketing campaigns urging the populace to buy products manufactured within the nation, at the expense of their better-value, foreign-made counterparts. Some Asian governments also insist that only local language, talent, and production can be used in the creation and display of promotional messages. But the lure of Western consumerism even permeates these requirements, with the strap line on many billboards, after translation, proclaiming the brand to be ‘‘Number 1 in America!’’ Local brands would also do well to learn from recent marketing history, where the ‘‘Buy British’’ campaign in the United Kingdom served only to delay the inevitable victory of the Japanese motor industry over the inferior British incumbents at that time. In Asia, the initial victory of the multinationals is likely to be far swifter, as pent up demand exists, and Western products do not actively have to be demonstrated as being superior to their local equivalents.
DEALING WITH A BRAND ‘DISTRACTION’ A brand ‘‘distraction,’’ and one that is unlikely to disappear completely, is the piracy of Western
JOURNAL OF DIRECT MARKETING
/ 8s08$$0248
VOLUME 11 NUMBER 3 SUMMER 1997 61
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M A R K E T P L A C E
goods, where the copycat packaging belies the inferior contents. Brand owners now universally acknowledge the fiscal value of their properties, and are painfully aware of the revenue lost to pirates. Their vociferous petitioning of Asian governments to curb infringements of patents and trade marks is resulting in the creation of legislation to protect intellectual property rights. With the necessary legal teeth and political will to enforce it, the penalties for piracy should outweigh the rewards, thereby reducing the scope of the problem. But it is market forces which will, as always, have the final say and effectively reduce the attractiveness of piracy and, ironically, the Western goods they so slavishly emulate.
THE TIDE TURNS The winners are likely to be hybrid products— goods manufactured locally using superior Western technology—who can claim to have the best of both worlds. Their pricing will, undoubtedly, be more competitive as they will avoid the punitive customs and import tariffs imposed on Western goods which, while dropping, are unlikely to be completely eliminated. When these hybrid products are supported by other brand-building elements such as attractive packaging and effective after sales service, they will begin to claim their rightful share of the home market. This will, however, take considerable time, as the hybrids will have to engineer a sea-change in the public perception of today’s local brands. This change will have to be as significant as the West’s perception of goods ‘‘Made in Japan’’ in the mid1990s, compared to their cheap and shoddy postWar predecessors. The passage of time will also work in the hybrids’ favor as Asia’s regional psyche changes from its current aping of the West to a form of national pride and purchasing preference for locally manufactured products at the expense of their Western equivalents. The reasons this time around will be the right ones—self-confidence derived from increasing affluence, rather than the manipulative
protestations of politicians and businessmen with vested interests to protect.
SUPPORT FROM AN UNEXPECTED SOURCE Hybrid brands are also likely to find support from an unexpected source. The rapid pace of economic liberalization in most Asian countries has also unleashed the moribund pool of local creative talent, long suppressed by unimaginative clients, made complacent as part of former government supported cartels. Paradoxically, Western brands seem intent on resuppressing this creative expression, but for entirely different reasons. Years of bitter experience when entering newly emerging markets to the cacophony of local criticism have made them painfully aware of the need to respect local sensitivities. This results in Western brands generally erring on the side of caution in the creative execution of new local campaigns, or using sanitised versions of original campaigns, with the obligatory replacements of Caucasian models and English language scripts or soundtracks with their local equivalents. Hybrids, on the other hand, appear intent on testing the boundaries of current societal norms. This may, in part, be based on the principle that ‘‘any publicity is good publicity,’’ especially in the face of the multinational brand onslaught, but probably owes more to the resulting jingling of cash registers that invariably accompanies the howls of protest by more conservative citizens.
THE FINAL BATTLE The rise of the hybrids will also see the final battle for supremacy in the advertising versus Direct Marketing brand building war. Initial victory is likely to go to the advertising agencies whose brand-building skills, honed to perfection in the West, would be invaluable during the launch phase, when substantial market penetration is essential to a brand’s long
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term survival and success. They could also justify their role in terms of altering public opinion, even if this involves using increasingly expensive mass media channels. Postlaunch, however, would be an entirely different proposition. Direct marketing’s demonstrated effectiveness in cost-effectively acquiring new customers, aided by Asia’s rapidly developing infrastructure, while retaining their dollars using loyalty programs, should make it the marketing discipline of choice for most hybrid brands.
THE INTERIM CHALLENGE The interim challenge for all marketing disciplines in Asia, prior to the final battle, would be to keep pace with the rapid sophistication of Asian consumers as they enjoy the luxury of choice, and tailor their marketing messages accordingly. This sophistication is likely to be expressed in a more cynical approach towards claims made in promotional material, a preference for informed edi-
torial over blatant sales pitches, and an increasing move away from the hierarchy of basic needs such as food, clothing and shelter.
LIFE AND DEATH OF ADVERTISING A WESTERN BRAND Given the above analysis, how is the future of brand marketing, currently driven by traditional advertising, likely to unfold over the next decade? For example, is it wise to predict the eventual demise of the legendary cowboy, cigarette in hand, from a lack of funds allocated for advertising? No. From legislative attempts to restrict the marketing exposure of a legally saleable product? Perhaps. From a diversion of funds into direct marketing to try and slow the rate of loss of overall market size by incentivising repeat purchases of a distasteful product? Possibly. From sophisticated Asian consumers no longer prepared to be the dumping ground for products increasingly rejected in the West? Definitely! j
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