Is Asia the next big thing

in advertising?

Bhavna Sharma

Is Asia the next big thing in advertising?A research paper on what characterizes the growth patterns

of advertising in developed and emerging markets.

By: Bhavna Sharma

Student no.20900587Faculty of Creativity & Culture

MA Advertising course 09Oct 2009

Tutor:Reg Win�eld

Word count:11,341

Course Leader:Bruce Sinclair

Course Administrator:Simon Forster

On the cover: Maneki NekoTheJapanese fortune cat

meant to bring good luck.Source: getty images

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1 INTRODUCTION 2

2 WHAT DO WE MEAN BY ‘DEVELOPED & EMERGING’ MARKET ECONOMIES? 4

2.1 Market Scenario 5

2.2 Developed Market Economies 5

2.3 Emerging Market Economies 7

2.4 Understanding these market economies from the advertising perspective: 8

3 UNDERSTANDING HOW ADVERTISING OPERATES IN DEVELOPED & EMERGING MARKETS? 9

3.1 Why is Asian advertising different from American advertising? 9

3.2 Brand Case Studies 11

3.2.1 Coca cola 11

3.2.2 Johnnie Walker 16

4 HOW HAS THE CURRENT RECESSION IMPACTED THE ADVERTISING INDUSTRY WORLDWIDE? 18

4.1 What do we mean by Recession? 18

4.2 How has Recession impacted advertising industry in the US: 20

4.2.1 Impact on the Automobile Industry 22

4.2.2 Impact on the branded Consumer Goods Industry 23

4.3 How has Recession impacted advertising industry in Asia: 24

4.3.1 Impact on Indian advertising sectors: 25

4.3.2 Impact on Chinese advertising sectors: 26

5 WHAT MAKES ASIA THE FUTURE HUB OF ADVERTISING? 28

5.1 Asia’s reaction to Recession 28

5.2 Adoption of New Age media in Asia 30

5.2.1 New Age media landscape: China, India, South Korea 31

5.3 Industry perspective on Asia: 33

6 CONCLUSION 36

7 ACCOUNT OF SOURCES 37

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Chapter:

1 Introduction

Is Asia the next big thing in advertising? : A research paper on what characterizes the growth

patterns of advertising in developed and emerging markets.

Under the current spell of global economic recession, many industry

pundits are engaged in speculative discussions about what lies in

the future for the world economy? Will the developed market

economy super powers be able to get back on their feet? And will

this be a fast recovery? If not, then which economy is showing

potential of a fast and healthy recovery? With all eyes set on the

steadfast performance of the emerging economies can we suggest

that, indeed, Asia is where the answers lie?

This thought, spurred my dissertation to discover the potential of an emerging force called Asia. But

for an advertising student like myself, it was important to research what the excitement about

emerging markets meant for the advertising industry as a whole along with the factors that affected

the advertising growth between the industries in developing and emerging regions.

My quest for answers, first led to the autopsy of the market economies. This is the essence of chapter

two. In order to understand what makes the advertising industry different in these markets, a study

of the market operatives was pertinent. So the first chapter discusses the meaning of emerging

market economies and developed market economies and what the prevalent economic trends

mean for advertisers there. For instance, research shows an emergence of an interesting trend in the

recession: Developed market economies began to register slower growth for advertising

consumption, because of market saturation. Perhaps this is why, advertisers increasingly prefer

broadcasting to the populous emerging economies with a high purchasing power.

Having understood the first line of influencers i.e the economic trends, I moved further to

understand what is the fundamental difference between the regions with reference to their cultures

and traditions. In chapter three, I set out to understand what sets Asian advertising apart from its

western counterpart in the developed economies. Reading Jim Aitchison’s book –‘How Asia

Figure 1-Emerging Asia. Source-Getty images

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Advertises’, highlighted the truism that most Asian cultures are ‘collective’ versus the ‘individualistic’

West. Indeed a fantastic insight, explaining the importance of cultural influences on everyday

business despite globalization and modernization of the Asian region. And this has been illustrated

through case studies of two global brands-Coca Cola and Johnnie Walker, who have had to adopt

culturally relevant communication strategies especially while marketing in the Asian markets.

Moving on to the fourth chapter, I researched how the recession impacted the advertising industries

of both the developed and emerging markets. This chapter discusses how certain key industries in

each market economy has been impacted, forcing marketers to revisit their existing marketing

strategies, eventually hurting the growth of the advertising industry. For instance, Asian industries

have been relatively cushioned from the current recession, compared to the western nations. As a

result, the advertising industry in emerging markets recorded a better growth than those in the

developed markets.

Lastly, all research thus far, suggests that the Asian markets have a better growth potential over the

developed markets post this recession. It’s fashionable now for global brands to talk about business

expansions in Asia. But could this imply Asia is indeed the future hub for advertising. This discussion

is the central theme of the last chapter, presenting reasons why Asia could clearly be the force to

reckon with for advertising. For instance, firstly by bouncing back from the recession, Asia has

reacted positively in a crisis. Indicating it can withstand any downturn because of it’s closed policies.

Secondly, it’s the largest combined region in the world, for new media consumption; and lastly

leaders from the media industry in the developed markets themselves, believe an emerging region

like Asia could very well likely be the future hub of advertising.

Thus, having discussed Asia’s potential compared to that of the west, in a streamlined logical series

of discussions and research, should help make a compelling argument in favour of Asia as a new

power house and hopefully this research paper proves to be very well substantiated, insightful read.

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Chapter:

2 What do we mean by ‘Developed & Emerging’ market economies?

Since my quest is to decipher what characterizes the growth patterns in advertising in the

‘developed and emerging’ economies, I began with studying the nature of each economy itself as an

influencer, propelling or retarding the growth of the advertising sector. With the help of existing

definitions and examples listed in financial reports and industry journals, I have attempted to explain

who the developed nations are and what makes them different from those catching up i.e. emerging

nations.

My last interaction with Economics had left a fairly simplified impression of world economies in my

mind. I remember the world market leaders from the followers. But that was then. Six years hence, I

found myself caught in animated discussions with finance professionals about what they think are

the characteristics of a Developed and an Emerging Economy.

The debate threw up one fact, which was the

presence of ambiguity regarding the true

meaning and characteristics of countries

classified as Developed, Mature or Emerging

markets. The traditional criterions for

differentiations have now fused into a very

fragile and complex matrix of numerical facts

and figures. Today the United Nations, the

World Bank and the International Monetary

Fund (IMF) each have differing terminologies

and parameters for classification of world

economies, making it complicated to follow.

For e.g. the World Bank’s parameters to classify economies are the GNI per capita of a nation,

whereas the IMF classifies economies using 3 factors such as (1) per capita income level, (2) export

diversification and (3) degree of integration into the global financial system.1 On the other hand, the

United Nations (UN) maintains a more neutral approach.

1 IMF Discussion Forums-World Economic Outlook (WEO) Data Forum on ‘Historical Classification of Different Economics

Figure 2-MSCI illustration of Emerging & Developed economies. Source-MSCI website.

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According to UN ‘Standard Country or Area Code’2 there is no established convention for the

designation of "developed" and "developing" countries or areas in the United Nations system.

The assignment of countries or areas to specific groupings is for statistical convenience and does not

necessarily express a judgment about the stage reached by a particular country or area in the

development process.

2.1 Market Scenario

In the 1980s, international business was essentially an exclusive club of the twenty odd richest

countries. This changed as dictatorships and command economies collapsed throughout the world.

Countries that once prohibited foreign investment from operating on their soil and were isolated

from international cooperation are now part of the global marketplace. For instance, in 1987, the

former Soviet Union received the first $80 million of foreign investment, but that was criticized as

equivalent to selling their motherland. But twenty years later, perception towards foreign

investment changed and it was looked upon as a much-needed impetus for growth of the receiving

nation. This led to Russia receiving about $43 billion of foreign direct investment in 2007, while the

emerging market countries received about 40% of the $1.5 trillion Foreign Direct Investment (FDI). 3

Since the eighties, development and innovation brought about by FDI has changed the dynamics of

many countries, offering equal opportunities to all.

2.2 Developed Market Economies

Developed Market Economies (DMEs) are those countries that are thought to be the most developed

and therefore less risky for investments. Developed economy refers to that economy where the level

of national income and the per capita income is very high as well as has high production,

consumption, savings and investment. As a result, people living in developed economies have a

higher standard of living, e.g. U.K, USA, Australia, Canada, etc. where people have a very high

standard of living. Today developed market economies are also referred to as ‘Mature markets’,

‘Advanced economies’ and ‘High Income countries’.

2 United Nations Statistics Division 3 Referenced from- ‘Define Emerging Markets Now’ by Vladimir Kvint, economist and strategist, President of the International Academy of Emerging Markets and a US Fulbright Scholar and a member of the Bretton Woods Committee (Washington, DC) and of the Russian Academy of Sciences (Lifetime Foreign Member) http://www.forbes.com/2008/01/28/kvint-developing-countries-oped-cx_kv_0129kvint.html)

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Figure 3: Classification of world economies.Source:wikipedia

‘Mature markets’ are defined as those markets, which have reached a state of equilibrium marked

by the absence of significant growth or innovation.4 It also means that mature economies are those

that are built largely on manufacturing and technology rather than agriculture. And who have the

available expertise and infrastructure to nurture a well-informed and healthy public.

‘Advanced economies’,5 similarly are those countries in the world, who have pumped significant

amounts of money into public education, infrastructure construction and hence have an absolute

advantage over most developing economies in the production of many types of consumer goods,

capital goods and commercial services.

‘High Income countries’,6 on the other hand is a classification used by the World Bank. It uses a

strictly numerical criterion for classifying economies by evaluating the gross national income (GNI)

per capita. Based on its GNI per capita, every economy is classified as low income, middle income

(subdivided into lower middle and upper middle) or high income. So according to the World Bank, a

country with a Gross National Income (GNI) per capita of US$11,456 or more would fall under the

High Income country classification. According to the April 2009 International Monetary Fund’s World

Economic and Financial Surveys on WEO Groups and Aggregates Information, the following 34

countries are classified as "advanced economies":

4 Investorwords.com & wikipedia 5 Encyclopedia of the Global Economy A Guide for Students and Researchers- By David E. O Connor 6 World Bank - Country Groups.- http://tinyurl.com/eqtld

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2.3 Emerging Market Economies

The phrase “emerging markets”, was coined by World Bank’s economist,

Antoine van Agtmael, to describe growing, but less-developed economies such

as China, India, Brazil, Argentina, Mexico, Thailand and other places. He coined

this phrase to replace and erase the disparaging description of ‘Third World’

used for these countries then. As per the World Bank, an Emerging Market

Economy (EME) is defined as an economy with low to middle per capita income.

Such countries constitute approximately 80% of the global population, and

represent about 20% of the world's economies.

In the ‘Emerging Economy Report 2008,’ by the Center for Knowledge Societies, India -Emerging

Economies as those "regions of the world that are experiencing rapid informationalization under

conditions of limited or partial industrialization." This means that there is a rapidly growing economy

present in those countries, and in turn in those markets. Emerging market economies are considered

to be fast growing, transitional economies. This means that they are in the process of moving from a

closed economy to an open market economy while building accountability within the system. Such

economies constantly work towards achieving economic development and reforms making them

open their markets and ‘emerge’ onto the global scene. One reason investors are interested in

emerging markets is due to the rapid economic growth in these countries. This implies that

companies in these markets are doing well with profitable revenues. Which means large gains in

stock prices, a lucrative opportunity for investors.

Emerging market economies provide an outlet for expansion for foreign investors or developed-

economy businesses by serving as a new place to set up a new factory or for diversifying business

and providing a new source of revenue. Such interactions usually help emerging markets in the long

run, as the emerging economy’s overall production levels rise, increasing its Gross Domestic Product

(GDP) and eventually reducing the gap between the emerged and emerging worlds.

As of April 2009, Morgan Stanley Capital International (MSCI - Barra)7 classified the following 22

countries as emerging markets:

7 MSCI Barra is a leading provider of investment decision support tools to investment institutions worldwide.

Figure 4-Antoine von Agtmael. Source-Google

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2.4 Understanding these market economies from the advertising perspective:

An advertiser presented with the above information about developing and emerging economies is

likely to draw the following conclusions: Firstly, they would realize that developed markets are

saturated with multiple product advertisements, as a result slowing down the ad-spend of

companies in that economy. For Instance advertising conglomerates like Omnicom Group (OMC)8,

WPP Group and Interpublic Group of Companies (IPG) 9 are shifting their focus to Brazil, Russia, India

and China (BRIC), and other emerging markets, where advertising spending is growing at much

higher rates.

Secondly, they would also realize that emerging economies are enjoying strong economic growth

implying a marked rise in GDP and disposable income. As a result, people in emerging countries are

often able to buy goods and services that they previously could not afford. This provides advertisers

with the opportunity to tap large, new consumer bases (80% of the world’s population comes from

the emerging market), potentially driving significant growth for their client company.

And thirdly, being an advertiser they would appreciate, the legacy-free emerging markets.

Advertisers would surely appreciate the fact that these economies (20% of the world’s economies)

are not tied up with history of marketing and branding standards and ideology, so advertising in

these markets could be absolutely different and fresh from what has been previously used.

Furthermore, American retail giants like Nike10 and Apple Inc.11 have already outsourced their

production to Asian countries like India, Thailand & Malaysia and China. Because, manufacturers in

developed economies have the unique opportunity to outsource their production units in these

emerging countries and leverage benefits from not just the low cost of overheads, but also the

improving economic situation. After all, of the 22 Emerging economies in the world, 9 fall under the

Asia region, making it the strongest region to look out for in the future.

8 Excessive Dependence on Developed Advertising Markets Leaves Little Room for Growth http://www.wikinvest.com/wiki/Omnicom_Group_(OMC) 9 Excessive Dependence on Developed Advertising Markets Leaves Little Room for Growth http://www.wikinvest.com/stock/Interpublic_Group_of_Companies_(IPG) 10 International outsourcing & Nike- http://legacy.lclark.edu/~soan221/96/nike.html 11 Apple To Shift Asian Manufacturing Outsourcing- http://www.macobserver.com/article/2002/05/28.8.shtml

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Chapter:

3 Understanding how advertising operates in developed and emerging markets?

All five fingers are not the same, so the adage goes. Perhaps this saying can explain why marketers

adopt different strategies to market their products in different markets around the world. This

chapter contains close analysis what these compelling differences are that have given the world

different versions of advertising for the same product. Is it out of the need to be innovative and

original? Or is it something more intrinsic to the social fabric of the country being marketed to,

which simply cannot be ignored or brushed aside by multinational advertising agencies handling

that brand account. Let’s investigate. For the purpose of this study, the broad markets we will

compare are the developed American market and the emerging Asian markets.

3.1 Why is Asian advertising different from American advertising?12

It’s anyone’s educated guess that the obvious difference between

American and Asian regions would be their cultures. But are these

stereotypical media-fed perceptions enough justification for

marketers to spend millions on re-designing communication that

fits in well with Asian audiences and hope to be successful? In this

chapter I have dissected the Asian and western cultures.

To being with it’s essential to understand the socio-cultural

characteristics of the region in order to appreciate their differences in advertising. Jim Aitchison’s

book “How Asia Advertises,” very clearly explains the distinctive features of advertising in Asia

compared to the West.

Asia and the Asia-Pacific region: from Australia to Malaysia, Japan, India and to China, is marked with

such diverse cultures and idiosyncrasies that the region’s advertising is bound to be very culturally

oriented. It’s reflective of the psyche of the people who live and work there, from religious beliefs 12 References drawn from1) “How Asia Advertises” by Jim Aitchison & 2) Advertising decision making in Asia: "Glocal" versus "Regcal" approach. By Susan H.C. Tai, Y.H. Wong/ http://www.questia.com

Figure 5-Cultural differences. Source-Getty images

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and traditions to everyday activities. And this diversity helps it to be inventive, reflective and

sometimes even whimsical, all of which baffle the western observer.

Asia as a region is so vibrant that it’s advertising is naturally very visual and aural. Asian advertising

adopts a holistic approach of connecting everything with each other. It’s about a community’s

feeling of belonging that is celebrated here in it’s advertising. The Asian culture is consumed with

fascination on how things and the world fit together, how they relate seamlessly and this is reflected

in the Asian approach to advertising and promotion.

But as a market, Asia has responded differently than predicted by the western world. Though an

emerging market, Asia has managed to blend foreign influences into their own cultural identity and

social fabric instead of adopting these influences wholesale. With access to higher education,

increased income, greater travel opportunities and exposure to different cultures, individual Asian

markets have become more similar in terms of personal aspirations and spending behavior.

Regionalism is becoming a significant trend and many multinational firms are applying regionally

integrated strategies across Asian markets. Their mantra seems to be "think globally, act locally and

manage regionally". As Asian markets grow, multinationals need to gain a better understanding of

these markets before formulating their advertising strategy.

Thus, from the above it’s clear that Asian Advertising is different but for a reason and therefore it

works differently no matter how many western products and brands are introduced into its many

markets and cultures.

The western world on the other hand, has a different way of going to market. Western advertising is

process-oriented and logical unlike the unconventional and vibrant Asian advertising. The west is

copy focused unlike Asia, which is visual and aural. Western Cultures are atomistic i.e. the tradition

has been to try to break down every activity or event into its smallest parts and then reassemble

them in an effort to explain and illustrate “how things work.” That’s why so much western

advertising is based on such things as Unique Selling Propositions (USP), positioning and step-by-

step, “how to” advertising copy. In other words, where the western world believes in contracts,

Asians believe in ‘Guanxi’ (Chinese for relationships).

There is little question that with the opening of China, the fantastic economic growth of India and

recovering economics of Malaysia, Singapore, South Korea, and Japan, Asia will be the central focus

of much economic growth and development in the next few decades. Advertising, marketing, and

promotion will be key elements in fuelling and driving the growth.

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3.2 Brand case studies

So far, we have gained insights into what sets Asian advertising apart from American

(or the western) advertising. ‘Regionalism’ has been established as the key operative for

marketers to penetrate emerging markets and find brand success. This justifies investment

in locally integrated campaigns when marketing in emerging Asian markets. Presented in this sub-

section, are two brand case studies - Coca Cola and Johnnie Walker, used here to illustrate how

global brands that enjoy presence in many world markets have had to first understand the

importance of regional relevance in order to achieve such brand success globally.

3.2.1 Coca Cola

How Coke advertised the ‘Open Happiness’ campaign in Asia & the west?

About the ‘Open Happiness’ brand campaign: In January this year the Coca Cola Company in the

US, launched a new globally integrated marketing campaign from Wieden & Kennedy, titled "Open

Happiness,”- a sequel to its earlier award winning ‘Coke Side of Life’ campaign. The central message

for "Open Happiness,” was to simply enjoy an ice-cold Coca-Cola and take a small break from the day

to connect with others. In other words, ‘open a coke and share a little happiness." The company

proposed to use ‘Open Happiness’ as the creative spearhead of Coca-Cola's global advertising

campaign. In other words, a platform for all integrated marketing for brand Coca-Cola globally. This

included new point of sale promotions, outdoor and print advertising and digital and music

components among others.

Regional solutions: ‘Open Happiness’ launch ad in the US:13

Here the ‘Open Happiness’ campaign was

launched as a music track single titled ‘Open

Happiness’. This track was proposed to be sold

as a hit single both online and offline. What was

special about this track was that it was a joint

venture between America’s best music talents

like Gnarls Barkley's Cee-Lo, Patrick Stump from

13 Ad week article- Coke's 'Open Happiness’ With TV viewership down and music consumption up, Coke made a song the central piece of its campaign, by Jack Rutledge, June 5, 2009

Figure 6-Open Happiness music single by Coke USA. Source: YouTube

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Fall Out Boy, Brendon Urie from Panic at the Disco, Travis McCoy from Gym Class Heroes and

Grammy-nominated Janelle Monae and produced by Polow Da Don and Butch Walker. Additionally

this single was used in part, in the TV spot called ‘Happiness factory 3,’ (a sequel to the factory spots

for the previous ‘Coke Side of Life’ campaign.)

Figure 7: The Storyboard of Happiness Factory 3. Source: Coke website & YouTube

The story of Happiness factory 3 opens when a young man before inserting a coin in the wending

machine, draws a loud yawn. This contagious yawn casts its spell on all the factory workers, making

them sleepy. This causes complete mayhem in the factory until; a female character (posed as a

manager) claps as if to wake everyone up. Just then hands appear from the mountains in the factory

and hand out coke bottles to every worker, to recharge them and have a better day. The ‘Open

Happiness’ soundtrack is played when the hands pop out with the tiny bottles of coke.

Strategy Rationale: What drove the idea behind the campaign were market specific insights that TV

viewership was declining and people were spending more time online consuming music. So the

company looked to inspire people through music. It was decided to commission a song that would

have the best music names in the industry to up the attraction meter. Finally serving as the central

piece of an innovative global marketing strategy.

‘Open Happiness’ launch ad in the UK: 14

In UK, the ‘Open Happiness’ campaign

platform was launched with a summer

campaign called 'Yeah Yeah Yeah, La La

La'. The ad, created by Mother London,

featured an exclusive track commissioned

by Coca-Cola, written and produced by

electro superstar Calvin Harris.

14 Coca Cola Press Release/ http://tinyurl.com/yhqoxyr

Figure 8-Open Happiness UK Campaign. Source:Coke website

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This summer campaign was centred on inspiring people to say yes to the opportunities that summer

brings.

Figure 9- The Storyboard of 'Yeah yeah yeah la la la', UK.. Source: Brand Republic

The story unfolds on one summer morning, where a mysterious man is seen pushing a large box into

a park and up a hill. When the man opens the box, it turns into a magical organ with curious little

furry creatures inside. He fits a chilled bottle of Coke to a plug on the side of the musical machine

and when he hits a key on the keyboard a drop falls into the creature's mouth. With each drop, the

creatures are refreshed with ice cold Coca-Cola and begin to sing 'yeah yeah yeah' and 'la la la' as a

crowd of young people gathers in a surreal and summery scene.

Strategy Rationale: When Mother London, was commissioned for the task to create a summer

campaign for ‘Open Happiness’, the agency after studying market insights, picked to follow an

analogous route that evoked a feeling of optimism, positivity, refreshment and pleasure. The ‘Yeah,

Yeah, Yeah…La, La, la’ campaign was successful in recreating a mood that reminded young Britons

of a sunny summer and invited them to open a coke and spread some happiness with friends.

‘Open Happiness’ launch in Hong Kong, Singapore & China:15

When coke moved to the Asian markets like Hong Kong, Singapore and China, it chose to stick with

the brand’s original music initiative of recording a single first. In the Asian market the brand adopted

trans-media storytelling, which meant- extending the brand story to different platforms where it

didn’t previously exist like both on and offline promotions and activities. So the ‘Open Happiness’

campaign was launched in Hong Kong & Singapore with a hit single sung by a very popular

Cantonese pop star called Joey Young. And in China it was written and sung by Chinese singer and

songwriter named Wong Leehom. Both these singles are believed to have become very popular in

their respective markets and widened the market share for the brand. 15 MediaAsia articles- 1) http://www.media.asia/searcharticle/2009_06/MediaTV-Cokes-music-strategy/35851 2) http://www.media.asia/searcharticle/Coca-Cola-extends-Open-happiness-to-China/2008/36249

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Strategy Rationale: Coca cola’s ‘Open Happiness’ music single was different from it’s US version in

the use of an individual pop star as against a group of five. This was because Asian markets are very

receptive to celebrity endorsements of all kinds. People here have a much higher propensity to

interact with celebrities than in other parts of the world. This shows that the Asian market is open to

branded entertainment, compared to the youngsters in the west, who are cynical towards seeing

brands integrated into their music.

Figure 10- L- R: Joey Young(Hong Kong) & Wong Leeham(China). Source: Google & YouTube

‘Open Happiness’ launch in India:16

In India the brand’s new communication created by McCann Erickson, focused on building the

global ‘Open Happiness' platform- of inviting people to enjoy small moments of joy with their loved

ones and a Coca-Cola for company. In this region the campaign does not use any music track but

instead showcases a famous film star in an all-new and youthful animated avatar of him as a

videogame character- a first for the region.

Figure 11 –‘Open Happiness’ campaign in India, featuring Bollywood actor- Aamir Khan shown as a gaming character. Source: Coke website & YouTube

16 1) Coca cola Press release-http://www.cocacola.in/media/media_news_releases_detail.aspx?id=404 2) Campaign India article- http://www.campaignindia.in/news/2009/09/14/coca-cola-infuses-fun-through-animated-aamir-khan-in-latest-campaign

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The story showcases two young girls searching for their friend (a boy) who is so engaged in playing

video games that he has virtually become a part of the game as an animated character. However, as

the girls put ice in a glass, open a bottle and pour Coca-Cola into the glass, their friend starts to lose

his focus from his game and is tempted to come out in real life. The film ends when another

animated character (his rival in the game) also steps into the real world to enjoy Coca-Cola as the

girls open another bottle of Coca-Cola. The communication ends with the words - "Aap

Muskuraingey, Bul Bule Gun Gunayaingey" – Open Happiness" (You smile, so do the Bubbles in a

bottle of Coca-Cola)

Strategy Rationale: The creative idea behind this communication was to bring forward the thought

of enjoying a bottle of Coca-Cola while taking a pause. In a country like India, film stars can mobilize

masses better than pop stars so Bollywood’s famed actor and Coke brand ambassador- Aamir Khan

was roped in for the commercial. Moreover, the ad leverages the passion of video gaming amongst

the youth, by using the racing videogame as a device to connect with them in a warm and engaging

yet surreal way. The communication shows how a simple joy of sharing life's smallest pleasures with

a bottle of Coca-Cola lures one away from the virtual to the real world of love and friendship.

Now to summarize the ‘Open Happiness’ story so far, we have seen how the campaigns in the US

and the UK were alike, it was about communicating through music. In Asian countries of Hong Kong,

Singapore and China, however, contracting with local pop stars localized the campaign. Next, in

India, the campaign was a complete departure from the music initiative followed in the west.

Highlighting that market dynamics differ from region to region within Asia and all good marketers

are aware that for business success they must be regionally relevant in the markets they operate in.

According to Shay Drohan,17 VP-sparkling brands for Coca-Cola, the company spends about $3

billion on marketing in 200 different countries around the world and seeing Coke’s growth in

countries like China and India, proves that the company simply cannot afford to neglect any country

right now.”

17 `Open happiness' opens regional dialogue. (Shay Drohan vice president at Coca-Cola Co. speaks about marketing expenses and impacts)(Interview)." Advertising Age. Crain Communications, Inc. 2009. High Beam Research.http://www.highbeam.com

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3.2.2 Johnnie Walker18

How the global Johnnie Walker campaign "keep walking" was

adapted for the Chinese market.

Brand’s China market position: The Johnnie Walker ‘Keep Walking’ campaign, showing a solo

‘striding man’, depicting personal progress, is a ten-year-old campaign, already used in more

than120 markets till date. But when it came to China, the brand was struggling on two counts. Firstly

trying to make the ‘Keep Walking’ message of the brand relevant with the Chinese whisky drinkers

and secondly- to bridge the competition from Chivas Regal, another whisky brand in the country. In

it’s three year presence in China, Johnnie Walker had created Johnnie Walker ads tailor made for the

market, complete with Chinese casting and Chinese cultural themes. But these had only been

moderately successful in the market.

Why China: The Chinese market was crucial for Johnnie Walker because China is the world’s most

populous nation and has a real appetite for whisky. Moreover it was also a very difficult market to

market in.

Market Problem: The core whisky target audience in China liked the ‘Keep Walking’ tagline, as an

idea but they couldn’t relate it to whisky and drinking. Additionally, the brand’s iconography of a

solo striding man came across as a little cold and distant-seen as ‘too serious’ or ‘a man struggling

alone’. Clearly indicating that the brand’s territory of ‘personal progress,’ didn’t resonate in a

collective Asian culture. By contrast, ‘The Chivas Life’ spoke about Chinese men’s desire for material

success and a luxurious lifestyle. So the task was to make the campaign relevant to the audience and

the product but without losing the brand’s key characteristics- sophistication and intelligence.

Solution: The contracting agency-BBH Asia, constructed a four-level model of cultural difference

and analysed the material, cultural, behavioural and ephemeral levels of Chinese culture as

pertaining to both the Whisky category and the concept of ‘personal progress’ which the ‘Keep

Walking’ campaign was based on.

Insights from this study showed that culturally whisky was consumed in the company of close

friends, out on a night in a noisy karaoke bar, much in sharp contrast to the quiet reflective whisky

mood in the west. Hence the ‘Keep Walking’ tagline was used as a toast, a substitute for ‘gan pei’

(Chinese for cheers or drink till the cup is empty) expressing a pact between men to help each 18 http://www.campaignlive.com/news/927734/APG-Creative-Strategy-Awards---Johnnie-Walker-keep-walking-BBH-Asia/

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other’s future progress. This idea made Keep Walking relevant to the Chinese drinking occasion and

the Chinese concept of progress.

This idea was expressed as a story about a group of successful architects who help their friend realise

his dream of becoming a film director. The story unfolds on a group of four partners running a

successful architect firm. But then three of them decide to fire the fourth partner. Not because of

incompetence, but because they knew his real dream was to be a film director and they had to

honour their promise to help him progress in life. In the last scene, the four friends raise a toast and

say’ Keep Walking’ signifying a pact between men to help each other progress through life.

The media strategy used was to tell a story in five episodes spread across both TV and web media.

The campaign drove 7 million unique visitors to the Johnnie Walker website and produced strong

tracking results across China (and also Taiwan) beating previous norms. This campaign had only

made the power of Keep Walking relevant to the Chinese, but it also won the APG creative strategy

award this year.

Figure 12-The Chinese Johnnie Walker ‘Keep Walking’ commercial. Source-YouTube

18

Chapter:

4 How has the current Recession impacted the advertising industry worldwide?

4.1 What is meant by Recession?

It has been more than a year now, but still barely a day

has passed without the mention of the notoriously

famous R word- ‘Recession’. It’s the subject of many

discussions from economists to ordinary people,

whose lives have been impacted in more than one

way. The Recession is blamed for declining industry

profits, widespread unemployment, collapse of the

housing sector and the financial markets. But the root

of the problem was the sub-prime loan crisis that gripped an advanced economy like the USA, who

in turn, through its strong trade and financial linkages with other economies caused a synchronised

recession worldwide.

Clearly recession means different things to different people. But before going ahead in this chapter,

it is important to establish what is meant by recession. Interestingly there isn’t any official definition

of recession instead there are two schools of thought regarding that.

Definitions:

Generally a recession is referred to a decline in a country's Gross Domestic Product (GDP) growth for

two or more consecutive quarters of a year. This definition however is unpopular with most

economists for two main reasons. Firstly, this definition does not take into consideration changes in

other variables in an economy. For example, this definition ignores any changes in the

unemployment rate or consumer confidence. Secondly, by using quarterly data this definition makes

it difficult to pinpoint when a recession begins or ends. This means that a recession that lasts ten

months or less may go undetected.

The other school of thought followed by Business Cycle Analysts is a reference to weak economic

phases, of which the three D’s of recession: duration, depth and diffusion, exceed their usual

Figure 13-Declining Economy. Source-Getty images

19

bounds.19 This means that in a recession economic activity decreases substantially, the decline

affects wide portions of the economy and it has some permanence. In the United States the Business

Cycle Dating Committee at the National Bureau of Economic Research (NBER) who is responsible for

dating of the US business cycle, provides a better way to find out if there is a recession taking place.

The NBER describes the concept as follows: “a recession is a significant decline in economic activity

spread across the economy, lasting more than a few months, normally visible in real GDP, real

income, employment, industrial production, and wholesale-retail sales”. 20

This means that this committee determines the amount of business activity in the economy by

looking at things like consumer spending, employment, industrial production, real income and

wholesale trade. They define a recession as the time when business activity has reached its peak and

starts to fall until the time when business activity bottoms out. An economy typically expands for 6-

10 years and tends to go into a recession for about 6 months to 2 years, untill business starts to rise

again. So on an average recession lasts about a year.

Causes:

After having established what is meant by recession, it would be worthwhile following what factors

triggered it in the first place. Research shows that there are complex reasons as well as simple

reasons why economic recessions happen. According to John Maynard Keynes, “animal spirits” 21 are

the driving elements for a recession. By animal spirits he refers to the spontaneous urge for action

rather than inaction, ignoring logically weighted average probabilities. Implying that aggregate

economic activity might be driven in part by waves of optimism or pessimism. An example of where

these “animal spirits” is taking over, is when consumers lose interest in products, services and

outputs, which is triggered by overproduction in a panicked industry. This leads to supply exceeding

demands for products and services, which pushes companies to increase prices and consumers

consequently lose confidence and retract their purchasing of non-essential products. Ultimately

resulting in an economic recession.

However other research22 suggests that some other economists do not completely believe such

basic simple animal spirits alone can cause a recession. There are other complex factors that can

trigger the same. Such as events that hurt industries like innovations and price hikes of a particular

component needed in a completion of a product. This could cause production cuts and subsequent

redundancies. Additionally, over-consumption by spending more than what is necessary can lead to

recession, along with formulating faulty economic policies by governments towards early market

19 Fiedler, E. R. (1990),The Future Lies Ahead, in: Klein, P. A. (ed.), Analyzing Modern Business Cycles, Essays Honoring Geoffrey H.Moore, Armonk, NY:M. E. Sharpe. 20 http://www.nber.org/cycles/recessions.html 21 John Maynard Keynes’s 1936 book: The General Theory of Employment Interest and Money.1. Animal Spirits and Economics 22 Economic-Collapse By KevinPH16/ http://hubpages.com/hub/Economic-Collapse

20

signs of inflation can prove recessionary. Moreover, this year’s global recession has been caused by

the sub-prime loan bubble burst in the United States housing market followed by a credit crisis in

other countries. To summarise, a break down of economic activity could be brought about by

external and/or internal economic shocks and widening imbalances in the economy. To emerge

from which, countries need strong, sound policies; departure from animal spirited behaviour and

focused administration.

4.2 How has Recession impacted advertising industry in the US:

According to Sir Martin Sorrell, Founder and CEO, WPP, the world’s second largest advertising group,

“things are still getting worse for the advertising industry.”23 Advertising budgets are often the first

to get axed during an economic downturn. Even though doing this often costs firms more in the

long run, to recover the lost ground. When Hyundai (in America), a South Korean carmaker,

considered pulling out this year’s Super Bowl ad plan, due to worry about the economy, advertisers

were clear that recession had begun to kick into advertising budgets.

WPP had expected a hard 2009, budgeting

for a 2% decline in revenues. But instead the

industry recorded a 5.8% year-on-year

decline in the first quarter. In America, total

ad spending fell by more than 10% in the

first quarter24. Spending on advertising in

America is expected to fall by 14.5% this

year.25 Radio & Newspaper advertising sales

declined to 25% and 24% respectively. And

magazines ad sales also fell by 21%.

Whereas Internet display advertising

recorded a 6.5% gain.26

23 "Hard sell; The advertising market- possible recession in advetisement spending." The Economist (US). Economist Newspaper L2008. HighBeam Research.http://www.highbeam.com 24, Magna Research forecast, a research arm of Interpublic Group/ http://www.interpublic.com/companyfinder/companydetail?company=163&cname=Magna) 26 Statistics from TNS Media Intelligence Reports U.S. Advertising Expenditures/ http://www.tns-mi.com/news/09162009.htm

21

The above figures help give us a macro understanding of the monetary impact of the recession on

the US advertising industry. But the ground impact would be better gauged by understanding how

marketers across the board are reacting.

There is an on-going debate in the advertising industry about whether or not consumers will regain

their old spending habits once the economy revives. Some like Sir Martin Sorrell, believes that the

American and European consumers have been "scarred", and will take a long time to rediscover the

joy of spending.27 So marketers have had to emphasise on accountable budgets and innovative ways

to entice consumers in these recessionary times.

For example,1) In April 2009 Coca-Cola28 said it was adopting a system of "value-based

compensation" for the advertisers that work on its 400 or so brands, rather than paying them for

time spent. This would cover the ad agencies' costs, with a performance bonus of up to 30%. Procter

& Gamble had earlier announced a similar scheme for 12 of its brands. 2) Barack Obama’s election

campaign, showed marketers the effectiveness of replacing of established forms of advertising with

cheaper new age media.

And talking about how marketers are pressing for innovative ways to woo consumers, a look at the

high street retail market, which is flooded with two-for-one offers, showcases their apparent

desperation. Retail electronics stores are making extended warranties free, while airlines are offering

deep fare discounts. But the auto industry faced the biggest challenge and has had to be particularly

creative. Buying a big-ticket item like a car is a major commitment, and in difficult economic times

consumers are more likely to avoid or delay such a purchase, unless they can be convinced that they

are getting a good deal. For instance, the fall of automobile giants like Chrysler and General Motors,

27 Nothing to shout about; The recession in advertising.(businesses limit advertising expenditures)." The Economist (US). Economist Newspaper Ltd. 2009. HighBeam Research.http://www.highbeam.com 28 "Nothing to shout about; The recession in advertising.(businesses limit advertising expenditures). The Economist (US). Economist Newspaper Ltd. 2009. HighBeam Research. http://www.highbeam.com>.

Figure 14-Ford’s highly productive pickup truck assembly plant in Detroitl, above, will close this year. Source-NY times

22

has significantly impacted American television advertising because car dealerships make for

America’s big advertisers. Similarly, the banking sector, hit hard by losses, has already cut back on

their spending. Further, makers of luxury goods and other dispensable items will be more exposed

to a recession than companies that sell necessities. Below are case studies of how the recession has

changed the communication fabric of America’s two most affected industries.

4.2.1 Impact on the Automobile Industry29

In the fall of 2008, as economic difficulties quickly deepened and credit dried up, the automobile

industry’s sales plunged from what experts consider a healthy level of about 17 million units a year

to about 9.2 million a year.

Hyundai’s sales fell 41 % in the fourth quarter. A

focus group study commissioned to understand

why people were not buying cars, pointed out

that they were hesitant to buy new cars out of

concern for their own job security. With this

insight, Hyundai America, advertised a

programme in the U.S., called ‘Hyundai

Assurance’, promising buyers that if they lose

their jobs within a year, they could return their

vehicles with no negative impact on their credit

ratings. Their programme partner- Walkaway,

would administer the programme, which entails

documenting that a customer has really lost his

or her job. The programme was launched in

January 2009 via television commercials that

featured an announcer soothing viewers saying-

“These are tough times. We’re all going to get

through it together.” It seems to have worked. Hyundai’s sales in North America were up 4.9 % in the

first two months of 2009, when the overall market declined 39.4 % from the comparable period in

2008.

29 Convincing Consumers to Spend Again by William J. Holstein, author of Why GM Matters: Inside the Race to Transform an American Icon (Walker,2009) http://www.strategy-business.com/article/li00119?pg=1/ RESOURCES: Pete Batten, “Key Innovations from the World of Auto Marketing,” iMediaConnection.com, May 30, 2008: How dealers are enhancing their dialogue with customers./Patrick Forsyth and Frances Kay, Tough Tactics for Tough Times: How to Maintain Business Success in Difficult Economic Conditions (Kogan Page, 2009): Fifty practical ways to increase sales effectiveness and maintain marketing initiatives in today’s environment./Stephan Schiffman, Selling When No One Is Buying: Growing Prospects, Clients, and Sales in Tough Economic Times (Adams Media, forthcoming): Suggestions for how to sell in hard times from an author of multiple books on sales techniques and online marketing.

Figure 15- The Hyundai Assurance plan advert. Source- Hyundai

23

Following this trend, in March 2009, Ford Motor Company launched a two-month incentive

programme, the ‘Ford Advantage Plan’, that covers auto loan payments for up to a year if a customer

loses his or her job. On the same day, the General Motors Corporation announced its ‘Total

Confidence Plan’, which picked up the tab on auto loans for laid-off customers for up to nine

months. Of all the new marketing efforts, the ‘Hyundai Assurance Program’ has attracted the most

attention. In fact, the trend is already expanding beyond autos — Jet Blue Airways Corporation and

home builders Toll Brothers Inc. and Lennar Corporation are offering similar programmes.

So in this recession, offering special marketing

programmes and incentives seems to have been the

way out for many industries in the US, but for how long

will this last? “We hope we don’t need this forever,” says

Joel Ewanick, Marketing VP, Hyundai Motor America. “I look forward to the day I can take it off.” Yet industry-

wide annual car sales would have to reach the 12

million or 13 million unit-a-year level before marketers

could even begin to ease back.

4.2.2 Impact on the branded Consumer Goods Industry 30

The current economic crisis is creating a “new normal” in consumer buying habits. Before the recent

downturn, when consumers tried to save money, they traded down from branded products to

private-label or so-called value brands. But they tended to keep buying some form of the product;

they continued to pay for the convenience of, say, antibacterial throwaway wipes or gourmet frozen

foods. In the current economy, they are not just trading down within a category, but switching to

“inferior” products and services i.e paper towels instead of wipes, washcloths instead of paper

towels. In the process, they are raising the value of the type of products and services economists call

“inferior goods”: those that attract consumers more when purchasing power declines.

30 A Breakaway Opportunity for “Inferior” Products by Leslie Moeller, James Ryan, and Juan Carlos Webster/ http://www.strategy-business.com/article/li00093?pg=1/ Resources-Nikhil Bahadur and John Jullens, “New Life for Tired Brands,” s+b, Spring 2008: Offers a step-by-step guide to determining whether a brand has enough equity to make it worth revitalizing/ Robert L. Heilbroner, The Worldly Philosophers: The Lives, Times, and Ideas of the Great Economic Thinkers, revised 7th ed. (Touchstone, 1999): A classic that provides easily digestible insights into major economists and their theories/ Christine Kinealy, This Great Calamity: The Irish Famine 1845–52 (Gill & Macmillan, 1994): Our source on the famine’s population impact/ Leslie H. Moeller, Nick Hodson, and Brad Wolfsen, “The Superpremium Premium,” s+b, Winter 2004: A look at the opportunities inherent in the premiumization trend. /Paul A. Samuelson and William D. Nordhaus, Economics, 18th ed. (Tata McGraw-Hill, 2006): A staple of economics education that has greatly influenced thinking on the subject

Figure 16-Joel Ewanick-VP Marketing, Hyundai Source-Google

24

Procter & Gamble (P&G) this year reported

profits down 18% in the most recent quarter

from a year earlier. Sales of its products, which

include such brands as Bounty paper towels and

Tide detergent, were down 11%. Analysts worry

that it might take years for the company to

restore its profits to their former levels.31

Unilever, P&G and others have begun cutting

their prices and increasing sizes and adopting

targeted advertising (which directly compares

the quality of a branded product with a private-label rival) to compete with private labels as a short-

term solution for consumer-goods companies like themselves, which are keen to remind their

customers why paying more is a good idea.

Hopefully when the recession ends, the pressure on consumer-goods firms would dissipate.

Provided a good number of Western consumers do not stick to the frugal habits they have learned in

recent months. Alternately marketers could place a greater emphasis on emerging markets in Asia

and Latin America, where private labels are unlikely to produce their own brands. For e.g. Unilever,

already gets over half its revenue from emerging markets, while P&G is toying with the idea to

sidestep retailers completely and sell directly to consumers through the internet.

4.3 How has Recession impacted the advertising industry in Asia:

It is said that-“When the US sneezes, the world catches a cold.” This saying could prove particularly

true for the impact the American financial crisis has had on economies of the world. However, what

remains to be seen is whether the Asian advertising industry is reacting in the same way, as its

American counterpart. Sir Martin Sorrell, CEO, WPP (the advertising and marketing communications

conglomerate), at a recent press conference in Bangalore, India, commented on how positively the

Asian advertising industry was dealing with the recession. He said, “The growth for the advertising

industry will come from the new markets in Asia and Latin America.” He added that new media such

as the Internet, mobile phones and video would power this growth.32

31 Consumer goods in the recession.The game has changed, Aug 20th 2009 | NEW YORK From The Economist print edition /http://www.economist.com/businessfinance/displayStory.cfm?story_id=14259150 32 http://www.thehindubusinessline.com/2009/09/04/stories/2009090450830500.htm

Figure 17-The down trading between brands. Source-P&G website

25

4.3.1 Impact on Indian advertising sectors:

The private sector ad spending is down by 35 % this fiscal year due to the global financial meltdown.

And the Indian advertising industry is forecasted to record a 5% dip for year ending 2009. 33 However

India, among other emerging economies seems likely to bounce back quicker and stronger.

In the words of Sir Martin Sorrell, “In India, China and Latin America, things are less severe.”…”The

recession has just emphasised that new media and new markets are important, and that India scores

high on new media and consumer insights, which are the emerging trends in the media and

communications industry”.34

The Indian advertising industry is directly affected by

the Telecom and Auto industries since being affected by

the financial crisis; they decreased their ad-spend for

the current year. However, despite the reductions in

advertising, they have recorded profitable net sales. For

instance, Telecom operator ‘Reliance Communications’,

reduced its promotion expenditure by 26% in ‘08-09,

and still gained 21% in net sales. And TVS Motor (two-

wheeler company) cut advertising expenditure by

12.02% in ‘08-09 and yet registered a growth rate of

14.02%.35

FMCG, Telecom, Education and Entertainment, four of the largest categories which together

contributed to 50% of the total Ad-market in 2008, are less impacted by the recession in 2009 and

will see a 12% growth in Ad spending. The AEP36, analysis showed key FMCG companies like

‘Hindustan Unilever Limited’ increase advertising costs by 48% and saw net sales rise by 47.12%.

As per the Mid-term Review of the Pitch Madison Media Advertising Outlook 200937, the Print media

was worst affected with a 32% decline in its revenue; Television saw a 19% drop; Cinema and

outdoor revenues fell by 37% and 30% respectively; Radio recorded a moderate 5% decline, where

as the Internet media was the only media that recorded a growth of 16% .

33 Study by Assocham- The Associated Chambers of Commerce & Industry of India, http://www.assocham.org/prels/shownews.php?id=2176 34 http://www.thehindubusinessline.com/2009/09/04/stories/2009090450830500.htm 35 Study titled “Cost-Benefit Analysis of Advertisement Campaigns”, Assocham 36 AEP-Assocham(The Associated Chambers of Commerce and Industry of India) Economic Pulse Study,India 37 http://www.medianewsline.com/news/117/ARTICLE/5024/2009-09-04.html

Figure 18- Advert by Reliance Mobile, India, featuring Bollywood film stars. Source- Reliance website

26

Though the impact of a looming drought remains very alive, on the macro front there are many

positive signs like- better-than-expected profits reported by Indian industries, indicating a possibility

of India pulling itself out of the global economic crisis.

4.3.2 Impact on Chinese advertising sectors:

In the first three quarters of 2008, the growth rate of China’s Gross Domestic Product (GDP) fell by

2.3% over the same period last year. And China’s advertising spend declined by 13% in the fourth

quarter of 2009, compared to that of 2008. China’s mainstream media comprises 85% television, 13%

newspaper and 2% magazine media.38

Those Chinese Industries relatively unaffected by the recession, i.e. they continued to grow and

enjoy strong advertising budgets, were the FMCG (specially beverage market), registering a 35%

growth; health industry with a 22% growth and necessities market like food stuff was up by 21%

from the previous year. But those industries mostly affected in China were the automobile and

telecommunications industry recording an approximate 16% and 9% decline respectively.39

Since the Chinese automobile industry was the

worst affected, let us consider what went

wrong and how. China’s automobile industry

has shown year-on-year declines for the last

five months in a row. First quarter results show

this declining trend with 19%, 11% and 16% fall

in the first three months compared to the

single digit figures of November and

December, 2008.40

In 2008, the yields of Chinese automobile

increased by 5.2% of last year. But the growth speed decreased by 16.8% of last year.41 There was a

sharp reduction in the profits of Chinese automobile manufacturers. In order to promote the

development of the Chinese automobile industry suppressed under the current crisis, the Chinese

38 Statistics take from Neilson report on ‘China Advertising Market, Q1,2009 Review’ 39 Statistics take from Neilson report on ‘China Advertising Market, Q1,2009 Review’ 40 Excerpt and statistics take from Neilson report on ‘China Advertising Market, Q1,2009 Review’ 41 Report of Chinese Automobile Industry under International Financial Crisis, 2009/ http://www.prlog.org/10199939-report-of-

chinese-automobile-industry-under-international-financial-crisis-2009.html

Figure 19- General Motors Corp. accounts for a large share of total production in China. Source-sae.org

27

government approved the ‘Revitalization Plans of Automobile Industry’ in January of 2009. The

major contents concluded: reducing the purchase tax of passenger automobiles with low emissions;

offering purchase subsidy policy to specific targets so as to promote automobile consumption;

advancing mergers and acquisitions among automobile industry; supporting Chinese automobile

manufacturers to develop independent innovation and technical reform; driving the development

of electric powered automobiles and its crucial accessories; supporting Chinese automobile

manufacturers to develop independent brands; speeding up the export base construction of

automobile and accessories.

Interestingly enough, right after the Chinese government announced its stimulus package for the

automobile industry, the auto sales started to recover. The industry saw a number of new car

launches, which propelled increased ad-spending. These launches were of the BMW-7series model,

AudiA4L from FAW Volkswagen and lastly the Buick Regal from Shanghai GM. Thanks to the stimulus

package, Shanghai GM now reported a 16% sales increase in the first quarter 2009 where as

Volkswagen showed a 6% growth.42

Perhaps, in summary it would not be wrong to say that the international financial crisis, proved to

have hidden opportunities for the Chinese automobile industry, in the form of the much needed

government impetus for future growth and development.

42 Excerpt and statistics take from Neilson report on ‘China Advertising Market, Q1,2009 Review’

28

Chapter:

5 What makes Asia the future hub of advertising?

5.1 Asia’s reaction to Recession 43

Asia’s emerging economies are recovering much more quickly than economies in other parts of the

world. Asian economies probably grew at an average annualised rate of over 10% in the second

quarter, while America’s GDP fell by 1%. 44

Recent forecasts suggest that in 2009 as a whole, emerging Asia could grow by at least 5%, while the

G7 economies contract by 3.5%. 45The growth gap between the two markets has never been wider.

Perhaps it is time for western politicians to brace themselves for more talk of economic power

drifting inexorably to the East.

According to Barclays Capital,46 emerging Asia is the only region in the world where output has

regained its industrial production level before the crisis. This is largely due to China, where industrial

production rose by 11% in the 12 months to July. In contrast, up to June, America’s production

continued to fall. So how has Asia made such an astonishing rebound?

To begin with, despite the numbers, forecasters always seem to underestimate the ability of Asia to

rebound from recessions. During East Asia’s financial crisis in 1997-98, for example, countries across

the region were forced to devalue as a result of large current-account deficits and speculative

attacks on their currencies. This caused firms’ foreign-currency debts to swell in local terms, resulting

in widespread bankruptcies and bank failures. In 1998 the real GDP of Thailand, Indonesia and South

Korea fell by an average of 10%. But Asia did bounce back, despite being written off as tepid

economies with weak exports.

43 An astonishing rebound, Aug 13th 2009 From The Economist print edition/ http://www.economist.com/opinion/displaystory.cfm?story_id=14214001 44 On The Rebound Aug 13th 2009 | HONG KONG From The Economist print edition http://www.economist.com/opinion/displaystory.cfm?story_id=14209825) 45 On The Rebound Aug 13th 2009 | HONG Kong From The Economist print edition http://www.economist.com/opinion/displaystory.cfm?story_id=14209825) 46 On The Rebound Aug 13th 2009 | HONG Kong From The Economist print edition http://www.economist.com/opinion/displaystory.cfm?story_id=14209825)

29

Many western skeptics then, concluded that Asia’s economic success had been a complete pretense,

based on governments pouring cheap money into favoured firms. And over-borrowing and over-

investment had artificially boosted growth. Although it was true that Asia’s strong growth had

concealed wasteful investment, inadequate bank regulation and corruption, but the key ingredients

of growth i.e. rapid productivity growth, relatively open markets and a high saving rate to finance

investment, remained in place. That helps explain why the East Asian economies recovered more

quickly than many expected.

Another factor that enabled Asian emerging economies recover well before the developed

economies was the basic reason that their downturn was caused only partly by the slump in

America. In 2008 domestic spending was squeezed by higher prices for oil and food (which account

for a much higher share of household budgets than in other countries) and by tighter monetary

policies, aimed at curbing inflation. China’s growth, for instance, began to slow well before global

demand stumbled, as tight credit policies to prevent the economy overheating caused the property

market and construction industry to collapse. Moreover, pump priming has been more effective in

Asia than in America or Europe, because Asian households are not burdened with huge debts, so tax

cuts or cash handouts are more likely to be spent than saved. It is also easier in a poorer country to

find worthwhile infrastructure projects, from railways to power grids, to spend money on.

Across the region, aggressive fiscal and monetary stimulus has helped revive domestic demand. Asia

has had the biggest fiscal stimulus than any other region of the world. China’s package grabbed the

headlines, but South Korea, Singapore, Malaysia, Taiwan and Thailand have all had a government

boost this year of at least 4% of GDP. Most Asian countries, with the notable exception of India,

entered this downturn with sounder budget finances than their Western counterparts, so they had

more room to spend. Bank of America Merrill Lynch forecasts that the region’s public debt will rise to

a modest 45% of GDP at the end of 2009, only half of the average in OECD countries.

Emerging Asia’s average growth rate of almost 8% over the past two decades (three times the rate in

the developed world) has brought huge benefits to the rest of the world. Its rebound now is all the

more useful when growth in the West is likely to be slow. Asia cannot replace the American

consumer: emerging Asia’s total consumption amounts to only two-fifths of America’s. But it is the

growth in spending that really matters. In dollar terms, the increase in emerging Asia’s consumer-

spending this year will more than offset the drop in spending in America and the euro region. This

shift in spending from the West to the East will help rebalance the world economy.

Further, it’s expected that growth rates will almost certainly moderate after the second quarter’s

astonishing bounce. Even so, Mike Buchanan, an economist at Goldman Sachs, has raised his

forecast for GDP growth in emerging Asia to 5.6% for 2009 as a whole and 8.6% in 2010. He expects

China to grow by a breathtaking 9.4% this year and 11.9% in the next. India’s GDP is forecast to grow

30

by a more modest 5.8% in this fiscal year (ending March 2010). Exports accounted for only 15% of

India’s GDP in 2008, compared with 33% in China, so India should have been much less affected by

the global downturn. But because of its dire fiscal finances (a budget deficit of 10% of GDP last year),

the government has had much less room to spur growth. The poor monsoon rains have also reduced

farm output this year but still its growth is expected to increase to 7.8% next year. In a nutshell, it

never pays to underestimate the resilience of Asia’s emerging economies.

5.2 Adoption of New Age media in Asia

Communication technologies create a structure within which human cultures are expressed. What

this implies is that the dominant medium of communication, influences the type of expression

taking place in society in that space and time. For instance, if we look back in history, during the

print revolution, we can clearly see that print (a technological advancement in communication) gave

people a medium through which they could communicate and express themselves. Similarly, today

New Age Media like Internet and Mobile Phones have became the platform to project what people

felt, behaved and their influences. Not surprisingly William McGaughey in his book “Five Epochs of

Civilization” stated, “Currently, our society is living in a computer communication age.” The reason

lies not just in the advent of the Internet but how deeply it and other New Age Media have impacted

us and how heavily we rely on them to function on a daily basis. Therefore, it’s not surprising to see

our conventional modes of communications taking a back seat while digital technology, is the new

blue-eyed boy for advertisers across the globe.

The last decade has been characterised by enormous changes in technology, demography and

geopolitics as well. The increasing technological penetration had begun to dictate the way people

communicated and interacted with each other. Increased access to media and technology,

combined with the above mentioned external shifts changed consumers’ brand perception and

buying behaviour. Consumers globally, are increasingly incorporating digital into their daily lives.

Statistics reveal that consumers spend 9 hours per day with media (internet, television, radio and

print), and an additional 7 hours with other technologies (gadgets) like mobile phones, mp3 players

and handheld gaming devices.47 Marketers, in order to communicate effectively with such evolving,

pro-active and market savvy consumers, realized the importance of merging conventional media

with the new age technology. And interestingly it’s not the west but the east that has adopted this

New Age Media wave with open arms.48

47 OMD & Yahoo report on Media Evolution of a global family in a digital age 48 http://www.universalmccann.com/Assets/wave_3_20080403093750.pdf

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Asia as we know is the world's largest and most populous continent, covering 8.6% of the earth's

total surface area (or 29.9% of its land area) and, is home to approximately 4 billion people, i. e. 60%

of the world's current population.49 Here you will find more than 2000 spoken languages, political

models ranging from monarchies to democracies to authoritarian governments, incredible wealth

and unforgiving poverty, and numerous religious traditions. In this unique and diverse socio-cultural

atmosphere, the advent of New Age Media and its phenomenal growth makes it a truly fascinating

combination.

Countries such as South Korea and Japan rank amongst the world's leaders in terms of Internet

penetration and technological innovation. In 2008 China became the world's largest Internet market

with more than 300 million netizens. Also in 2008 we observed how digital technology, specifically,

social networking in Malaysia and mobile technology in South Korea, could dramatically change the

fortunes of elected political parties. 50

And a look at the regional digital landscape, shows how it differs from country to country in the

region. According to Ben Joffe, Founder & CEO of China-based telecom consultancy +8* (Plus 8 Star),

“Japan is a mobile market, South Korea an Internet market, and China a giant technology

incubator.”51 Today the west, especially the advertisers, cannot ignore Jakarta's love of Wordpress,

Singapore's rank as a top-thirty Twitter location, Hong Kong's preference for YouTube, and India’s

fascination for mobile phones. It’s the humongous digital topography of Asia that makes it the

favourite hotspot for advertisers.

5.2.1 New Age media landscape: China, India, South Korea

China:

According to CNNIC, China's Internet users reached 298 million by

December 31, 2008, surpassing the United States in the number of

Internet users per country. This represents a staggering growth of 88

million users since December 2007. Internet penetration is at 22.6%,

which is already above the world average. Broadband access became the

predominating Internet access method in China with 90.6% of overall

netizens share. The number of broadband and mobile phone users has

49 http://en.wikipedia.org/wiki/Asia 50 Welcome to Asia's Most Comprehensive Social Media-http://comm215.wetpaint.com/ 51 Asia’s Digital Topography- http://www.thomascrampton.com/china/benjamin-joffe-asias-digital-topography/

Figure 20-Chinese Internet boom. Source- Google

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been increasing rapidly in 2008. 117.6 million people are now accessing the Internet through mobile

phones making Internet on Mobile the chosen access point over desktops, laptops and PDAs.

Growth in the mobile phone segment has been accelerated by the introduction of 3G-technology in

China and the penetration of mobile Internet is projected to greatly increase in the near future. 52

India:

Despite being the outsourcing capital of the world, India’s abysmal PC

and internet penetration stand in the way of its becoming an information

technology powerhouse. According to the World Economic Forum’s

(WEF) Global Technology Report, India has slipped by four positions to

the 54th rank in the list of the most networked economy. “India ranks low

(114th) in individual usage because of spotty ICT penetration. There are

fewer than three PCs and only seven Internet users for every 100

inhabitants…” said the report.53 However contrary to the Internet

penetration, India’s mobile market has seen extraordinary levels of

growth in recent quarters. The Indian mobile industry has set a new world record for organic

monthly net additions in September with an uplift of 9.99m, beating its own previous best of 9.90m.

This is equivalent to 3.9 new connections every second in September 2008. The total market reached

310.62m with a penetration rate of 27.5%. The number of connections in India stood at 346.77m at

the end of 2008 with annual growth of 48.5%, compared to 60.8% in 2007.54

South Korea:

Social Media is a global phenomenon operating in all markets

regardless of wider economic, social and cultural development. If you

are online, you are using social media. And out of all the Social Media

platforms, blogging is the most important one because blogs are a

mainstream media worldwide and a rival to any traditional media.

Politicians, celebrities, brands and family members all seem to have

one. Traditional media outlets use them to supplement their normal

output. At the same time thousands of micropublishers have utilised blogs to start mini media

empires, from Perez Hilton to Treehugger in every niche imaginable. The result is a massive wealth of

new sources of information that we continue to digest. Universal McCann’s annual study on

worldwide use of social media, clearly shows that South Korea is leading in terms of participation,

creating more content than any other region. The 2008 ‘Wave 3’ report by Universal McCann

52 http://www.cnnic.net.cn/en/index/0O/ index.htm 53 http:// www.financialexpress.com/news/abysmal-pc-net-penetration-put-india-at-54th-place-in-networked-economies-list/439558/1 54 http://www.cellular-news.com/story/34239.php

Figure 21- Indian markets ahead with mobile growth. Source-Google images

Figure 22- South Koreans lead social networking. Source-Google.

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illustrates that South Korea has reached saturation point with a staggering 92.1% blog readership,

which is much higher compare to the global blog readership which is 77%. Daily readership

frequency is 45% in South Korea whereas 31% globally.55 Not surprisingly, companies like DHL, KIA

Motors, LG are using corporate blogs to promote new brands or product launches.

5.3 Industry perspective on Asia:

After a careful analysis of all the research data available, complete with facts and figures, the future

does look very promising for the Asian region. But the question remains: whether Asia’s advertising

industry growth is a reality or hype? A Nielson study highlights that advertising growth stimulates

economic growth in any economy; and that more Asians find advertising entertaining and are

persuaded in their purchasing decisions by it than people living in developed advertising markets.

All of this in my opinion is proof of the potential of Asia to indeed become the next big thing in

Advertising (vis-à-vis economy).

Excerpts from Neilson report shows: 70% of consumers surveyed, a total of 25,420 across 50

countries between March and April 2009, were shown to agree that advertising stimulates economic

growth; 68% indicated that advertising helps raise the quality of products and drive down prices,

while 80% saw it as a factor in job creation. A higher proportion of consumers in Asia-Pacific found

advertising entertaining than in North America: 76 % as opposed to 59%. Asia-Pacific respondents

were also less skeptical than their European counterparts regarding advertising’s influence on

purchase decisions, with 75% agreeing that advertising helps simplify and improve decision-making,

compared with just 50% of Europeans.56

But is Asia the favourite hunting ground for the Western Advertisers and Agencies? I’ve tried to get

the real on-ground perspective in the form of personal opinions expressed by a couple of media

moguls and corporate honchos.

Sir Martin Sorrell: Founder & CEO, WPP

Speaking at the annual lecture of the Stationers' and Newspaper Makers'

Company (March 2009), Sir Sorrell said that WPP was adopting a three-pronged

strategy for weathering the recession: growing in the emerging markets, driving

revenue using new media and the adoption of digital technology, and building

its consumer insight division. In five years' time WPP will be "more Asian, more

55 http://www. universalmccann.com/Assets/wave_3_20080403093750.pdf 56 http://www.media.asia/newsarticle/2009_07/Advertising-seen-as-spur-to-economic-growth-Nielsen/36291

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Latin American, less focused on TV and radio and more on new media” he said.

“The people who are going to suffer most are the spending nations. We've lent our way into this

situation and paradoxically were being asked to lend and spend our way out of it. We'll go back to

where we were 200 years ago. Two hundred years ago China, India and the BRIC countries [Brazil,

Russia, India and China] were 50% of the worldwide GNP. By 2040 or 2050, in my view, they will be

there again. The future of western Europe, unless it changes significantly, is under extreme

pressure."57

Rose Tsou, Sr. VP, Yahoo! Asia

Rose Tsou had turned the U.S. Web portal as Taiwan’s top site. Now she has

similar aims for the rest of Asia. "We're striving to become the center of Internet

life for the millions of people who come to Yahoo every single day." The idea is

to get Yahoo, already Nielsen-ranked as the eleventh most recognized brand in

Asia, onto as many screens as possible, big and little. Because 60% of Asian

Internet users are already visiting Yahoo, the way to get more traffic, it figures,

is to get more people online more often. They'll see more ads. "We try to be the best partner that

advertisers can find," Tsou remarked in an interview. 58

She also said: Yahoo Inc expects its business in Asia to grow in the coming year and to increase its

market share if the overall economy continues to recover. (The Microsoft deal) will free up lot of

resources for Yahoo to invest in areas from Web services to mobile experiences to display

advertising. There is a fair chance that we will grow in the coming year or so if the economy doesn't

get worse," she said. "Given our strength, we really think Yahoo is well poised to take more share

when the economy comes back." 59

Vittorio Colao: CEO, Vodafone

Vodafone's expansion into emerging economies to offset dwindling growth in

mature European markets is paying off for the world’s biggest mobile phone

operator. 60 Over the past two years, the UK-based operator has pushed

further into growth markets with the acquisition of operators in India, Ghana

and Turkey.

57 http://www.guardian.co.uk/media/2009/mar/17/martin-sorrell-recession-l-shaped 58 http://www.forbes.com/global/2009/0907/power-women-09-tsou-yahoo-yodeling-in-asia.html 59http://in.reuters.com/article/businessNews/idIIndia-42638220090923?pageNumber=1&virtualBrandChannel=0 60 http://www.heraldscotland.com/expansion-strategy-pays-for-vodafone-1.910501

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Chief executive officer Vittorio Colao praised the performance of some of the firm’s recent

acquisitions, and said: “Whilst emerging markets are of interest to us, we remain cautious and

selective on future expansion.” Expanding into emerging markets is a tactic that has helped

Vodafone to become the world’s leading operator by revenue. The operator’s latest set of results,

released on 19 May 2009, show that while its European operations are suffering from slower growth,

those in the emerging markets are performing well. In contrast to Europe, results in Africa and India

were “robust”, thanks to continued but lower GDP growth and increasing penetration. Revenue from

the Asia Pacific and Middle East region grew by 32%, compared to 14% in Europe and 11% in Africa

and Central Europe. Mainly the fast growing market of India, where Vodafone added 24.6 million

subscribers during the 2009 UK financial year, drove the growth in Asia Pacific and the Middle East.61

Simon Sherwood: CEO, BBH

An agency is known by the brands that it has helped build and if one looks

at brands like Axe, Levi’s, Johnny Walker, to name just a few, one knows why

BBH is one of the most admired agencies in the world.

After setting up an office in Mumbai in 2008, Simon Sherwood, chief

executive of BBH said: "Our view is that we ought to go where our

multinational clients are.62 It’s a great time to start laying the foundation in

markets such as India. What’s exciting in the emerging markets is the speed at which they grow. "63

And now after getting Unilever’s Surf account, he again said in a statement: "This is a very important

global consolidation for us. Much of the brands future growth will come from the developing

markets in Asia and AMET, so to partner Unilever in pursuit of this is a challenge that we relish." 64

Not surprisingly, Nigel Bogle, Co-Founder and Chairman of BBH, once commented: “50% of our six

agencies are in Asia. Certainly, we are looking to those markets and also to preserve future growth.”65

On that note, this chapter on what the industry feels about Asia as a business market of the future,

comes to an end. And if the opinions of the above reputed personalities are anything to go by, from

both the client an agency side, then certainly, this reinstates the fact that Asia is emerging as a

business powerhouse and a superpower in Advertising.

61 http://www.arabianbusiness.com/556139-vodafone-cautious-about-emerging-markets-expansion 62 http://www.futurelab.net/blogs/marketing-strategy-innovation/2008/08/for_ad_agencies_the_asian_priz.html 63 http://www.thehindubusinessline.com/catalyst/2008/11/27/stories/2008112750020100.htm 64 http://www.media.asia/searcharticle/2009_05/Unilever-hands-Surf-account-to-BBH/3547 65 http://www.moneycontrol.com/news/advertisingmarketing/see-great-opportunityrecession-times-bbh_368034.html

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Chapter:

6 Conclusion

Considering the impressive growth figures recorded by the various economic research studies

undertaken worldwide, along with encouraging opinions expressed by business leaders of the

media world, we are presented with a compelling case to recognize and appreciate the untapped

potential of Asia-the emerging region in the world. The research undertaken in this paper, bares

evidence that Asia is already well ahead on its recovery from the global financial crisis compared to

many adversely affected developed economies. In my opinion this clearly illustrates that indeed this

region has the resilience and capability to battle out any crisis affecting its people. May be this could

be attributed to its cultural DNA which thrives on collective wellbeing rather than individualistic

growth and development or it could be the result of it’s conservative economic policies that helps

the region resurface during crisis.

Which ever way one chooses to look at it, it cannot be deny that Asia has indeed come a long way

from being a ‘Third World’ economy to an ‘emerged’ one. And standing witness to this are it’s shores,

which are subjected to massive influx of trade and economic activity from other countries. Thus it is

my opinion that perhaps Asia is indeed, in the process of taking over the reigns of economic growth

from its developed counterparts, and the say is not far that it will become the future hub of exciting

and diverse advertising activity.

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Chapter:

7 Account of Sources

BIBLIOGRAPHY:

1. How Asia Advertises – Jim Aitchison 2. The Emerging markets century – Antoine Von Agtmael 3. Convergence Culture – Jenkins 4. Five Epochs of Civilization – William McGaughey 5. Encyclopedia of the Global Economy A Guide for Students and Researchers – David E. O Connor

WEBOGRAPHY:

1. United Nations (un.org) 2. International Monetary Fund (imf.org) 3. OECD.com 4. World bank.com 5. NBER.org 6. Forbes.com 7. Economist.com 8. Reuters.com 9. Account Planners Group (APG.com) 10. Coca Cola.com 11. Campaign Live.com 12. Brand republic.com 13. Media.Asia 14. Adweek.com 15. Procter & Gamble (pg.com) 16. Guardian.co.uk 17. The Hindu business line.com 18. Questia.com 19. High beam (research).com 20. Strategy+Business(research).com 21. Moneycontrol.com 22. Cellular news.com 23. CNNIC (China Internet Network Information Center) 24. Plus8star.com 25. YouTube videos

REPORTS:

1. United Nations ‘World Economic Situation and Prospects 2009’ 2. Centre for Knowledge Societies’ ‘Emerging Economy Report 2009’ 3. MSCI-Barra-‘Update on Emerging markets, Sept 2009’ 4. Neilson’s ‘China Advertising Market 2009 Review’ 5. Magna Global(research wing of Interpublic group)- ‘Advertising Economy 2008’ 6. OECD.org’s ‘Economic outlook no.85’ 2009 report 7. Pitch Madison Media Advertising Outlook 2009 8. Rubicom Project ‘Online advertising market 2008’ 9. The Associated Chambers of Commerce and Industry of India (Assocham) India study 10. KPMG FICCI report on ‘Indian Advertising 2009-2013’ 11. Universal Mccann ‘Social Media Report 2009’ 12. TNS Media Intelligence Report 2009 13. (WEF) World Economic Forum- Global tech report 14. OMD & Yahoo report on media evolution of a global family in a digital age. 15. Bank of America and Merrill Lynch forecast on GDP 16. Barclays capital

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