Whatever else affected marketing in 2013, the year will always be remembered as one dominated by deals. The announcement of the merger of Publicis Groupe and Omnicom Groupe stunned the industry in July, while Dentsu in March closed its acquisition of Aegis Group for nearly US$5 billion.
The impact of either move has yet to be truly felt, but one thing is clear: that scale, efficiency and consolidation—or at least collaboration—are likely to play an even bigger role as the industry enters a new phase. David Mayo, CEO of Bates CHI & Partners, says that where in 2013 clients began to “work out how agencies can collaborate behind specific briefs”, 2014 will be “the year that collaboration between agencies becomes more of a necessity than a positioning”.
“Marketers have had to deal with huge growth in social and changes to the agency model,” says Greg Paull, principal of R3. “While most are now looking at bespoke agencies by discipline, some, such as SingTel, are coming back full circle to the single appointment of one agency.”
Savings continued to drive a lot of marketing decisions, particularly in the FMCG sector. In early December, Unilever announced its intention to become a simpler, more “tailored” organisation. That in effect means a considerable reduction in agency fees and the redundancy of up to 800 marketers globally.
While it’s true that more global ideas are now coming from Asia, major advertisers such as Unilever are increasingly looking to centralise and deploy global work regionally as an alternative to localised development. Chris Thomas, chairman and CEO of BBDO AMEA, denies spending has slowed but says there has been a shift to “fewer, bigger, more impactful programmes, often run through lead offices rather than activated on the ground”.
On the other hand, Asian clients are exporting more global work from the region, two examples being Taiwan’s Eva and Asus, which work with Bates CHI & Partners. Thomas notes that winning local business is becoming more of a priority for large networks.
There have also been encouraging signs of stabilisation after the frantic pitching of 2012, when companies from P&G to HSBC held global reviews. Malcolm Hanlon, regional COO of ZenithOptimedia, points to a more “sensible” year that enabled more focus on existing business. “Clients are seeing the instability that constant pitching causes,” he says. “It’s as bad for them as it for us.”
Amid cost-cutting, there is also desire for growth—of which Asia remains the global driver. As certain sectors reduce investment, others, such as automotive, durables and finance, are stepping up their activities. ZenithOptimedia forecasts a rise in adspend of 4.5 per cent next year in ‘advanced’ Asian markets excluding Japan, and 11 to 12 per cent in what it terms ‘fast-track Asia—China, India, Indonesia, Malaysia, Pakistan, the Philippines, Taiwan, Thailand and Vietnam.
The mood is somewhat unsettled going into 2014. “While there are green shoots in the economy, the debate is whether they [stem from] financial fertiliser or returning confidence,” Thomas says.
But the much-discussed ‘cooling off’ in China has had minimal impact so far due to an abundance of categories, and MNCs continue to bet big on the market. Nielsen research finds consumer confidence unchanged, supported by the government’s economic reform plan. One notable change, spurred by the saturation of the top-tier and continued development of the lower tiers, has been a concerted effort by packaged goods brands to diversify and expand, according to Paull. ZenithOptimedia puts adspend growth for the year at just over 10 per cent, buoyed by online media as well as outdoor and radio.
While TV still accounts for the biggest share of spend—more than 40 per cent—growth is slowing, with inflation forcing advertisers to consider other options more seriously. Gowthaman Ragothaman, Mindshare’s regional chief client officer, expects a “sea change” in China’s channel mix in the near future. He notes that with online video having reached “critical mass”, it is eating into TV budgets by offering lower cost as well as aiding provincial planning through better targeting.
India’s slowdown has been more pronounced, with more questions asked of marketers around return on investment. A report released by an arm of Fitch Ratings in December says that India’s private consumption expenditure, in the two quarters ending September, grew at its slowest rate in 37 quarters. If there is any consolation, the September quarter saw it rise to 2.2 per cent from 1.6 per cent in the previous three months. With rural India relatively insulated and even expected to drive consumption with better agricultural yield in the coming months, it is not surprising that more than ever before, the focus for marketers has expanded to rural markets. But boosting urban consumption in discretionary categories remains a challenge.
In terms of channels, 2013 will be remembered as a year when e-commerce came into its own. This has been driven by several players aggressively growing the category with customisation for the Indian consumer, such as cash on delivery and try-and-buy. Newer categories like groceries are getting online, with localised players offering choice that retailers sometimes cannot. From jewellery to insurance, a segment of buyers is picking up things online not just for value, but for variety and convenience. The journey is still some time away from its destination given infrastructure issues, but Forrester predicts that online retail sales in India will grow from $2 billion in 2013 to $16 billion in 2018.
This development comes even as brands in India expand their physical networks to deliver exclusive experiences, be it cafes by coffee brands or salons by personal care brands. The likes of Garnier is today talking of expanding its portfolio to reach lower down the pyramid. While a slowdown in high-visibility categories like cars has created an ambience of gloom, the pressures of delivering in this environment, perhaps, has resulted in some of the best advertising and marketing communication seen in India in recent times. Looking ahead, we can expect greater targeting and innovation for specific segments, whether on product, packaging and price, distribution or communication.
New (and old) markets in ascendance
The slowing of Asia’s growth powerhouses has allowed other markets into the frame. Japan is showing signs of a comeback thanks to ‘Abenomics’-induced optimism. Observers remain cautious nonetheless, particularly given the impending consumption tax hike to 8 per cent next April.
Asia’s developing markets remained of greater interest, and with good reason: Indonesia, the Philippines and Thailand still show among the highest levels of consumer confidence in the world, according to Nielsen. Vietnam also showed signs of movement, with Amobee, Burson-Marsteller, Cheil Worldwide, Dentsu Media, Edelman and Isobar all opening offices there in 2013. “In 10 years, this will be a Thailand,” says Prashant Kumar, president of world markets Asia-Pacific at IPG Mediabrands.
In Indonesia, ZenithOptimedia predicts media market growth of 20 per cent. Kumar suggests that the slowdown in bigger markets will see a rebalancing of resources to ASEAN nations.
Nonetheless, despite their potential, and heavy investment from the likes of China and Japan, markets such as Indonesia, Vietnam and Myanmar still account for a relatively small slice of the pie. Given their political and infrastructural instabilities, that is unlikely to change in the near future. Excitement around Myanmar is still there, but Tom Doctoroff, regional CEO of JWT, is realistic: “Vietnam was a boom market for 10 years but is still small. It’s important to view it as a long-term proposition.”
Marketing, not advertising
Another defining theme was the struggle by marketers to align with their technology counterparts. There were also signs that they are at last taking social and mobile channels more seriously: according to eMarketer, mobile spend in Asia rose from just over $2.6 billion last year to more than $4.1 billion.
“We’re moving from a time where people were also doing mobile to mobile being at the centre,” says Dick van Motman, chairman and CEO of Dentsu Asia. “Companies are waking up to the realisation that their brands can be mobile. I see it as a leveller for rural, urban, rich, poor, old and young.” Kumar also predicts that 2014 will herald “the advent of social economics”, with workable models at last coming into play to ‘monetise’ social platforms more effectively.
That is possible. But for mobile and social media to really come of age, marketers still need to move away from thinking of them as ad platforms and more in terms of new product development, CRM, customer service and sales, says Cheuk Chiang, CEO of OMG Asia-Pacific. “Marketers have to change their mindset from focusing on the thousand to focusing on the one and this means shifting investment in traditional channels to ones that allow us access to digital data,” Chiang says.
“Social is much more than advertising,” adds Ragothaman. “It involves insights, consumer understanding, engagement and activation. Money for this must come from marketing budgets, not advertising dollars. Mobile can be the fourth screen, but if [marketers operate purely with this mindset], they are failing to exploit this medium. There needs to be a surgical recasting of marketing expenditures to fully incorporate social and mobile platforms into marketing.”
All the same, too much emphasis on technology could also be counterproductive. “Something we forget is that tier 3 and 4 consumers need to be engaged in an analogue way,” Ragothaman says. “Understanding the consumers of the Mekong and how to reach them—that is Asia. People need to take low-income consumers into account.”
Marketing director, Asia
In 2013 the pessimism surrounding Europe became much stronger, and that meant more pressure on Asia to make sure that the numbers came through.
Asia has become a more fundamental part of core business growth. It was a focus, but not seen as the single biggest driver the way it is now. That puts a lot of pressure on the marketing community around efficiency.
But people are also worrying that Asia will slow down in 2014. There is volatility. You can’t change it, but you can work smarter around it and factor it into your plans with lots of risk management and flexibility. Now our budgets are coming under more scrutiny and will [continue to] going into 2014. People are realising that it’s going to get tougher. The numbers are not what they were a few years back.
CEO, OMG Asia-Pacific
There’s no doubt that the economic climate is cautious and many marketers are more mindful about where their ad dollars go. China continues to be a huge growth market. The surge in rising middle class consumers represents a huge opportunity.
To succeed, marketers must be able to not only manage change but also the pace of change. The speed of change for online, mobile and social platforms is unprecedented, especially when compared with that in other developing countries. This makes China a great crystal ball for predicting the nature of change elsewhere in the developing world.
Apart from China, emerging Asian economies like Indonesia and Vietnam, and more recently Myanmar, continue to be on the radar of global brands. Consumers there now have for the first time the opportunity to experience the best (and worst) consumerism and the opportunities of modern communications.