奥美Taking The Road Less Traveled 037.ppt

Taking The Road Less Traveled ByHow to increase your profits in Asia,when times are tough,James Chadwick,Regional Account PlannerO&M Asia/Pacific,O&M Singapore,Contents,Is this a recession?How consumers behave in recessionsThe decision:fight or flightLearnings from historical studiesChoosing to fight5 strategic opportunities,Tough Times Headlines,Tough times in Asia-the debate,Is this a disastrous crashor a much-needed“reality check”?Will this make Asia more economically competitive again?or are we entering a downward spiral?,Spencer Stuart,Poll of over 400 Asian corporate leaders,May 1998,CEOs Predicting Recovery Rates,Tough times in Asia-the debate,Nobody knows for sure how tough it will get,or how long it will last.In the meantime,its time to develop a corporate stance towards the recession.,How the mighty respond.,Source:AWSJ Feb 5,98,Douglas Ivester,Chairman Coca-Cola Co.,and how the rest plan to cut back,Spencer Stuart survey,400 corporate leaders,May 1998,Avg planned%change,Is this a recession?,Textbook definitions,“A decline in GNP for two consecutive quarters.”The US has suffered 28 slumps since 1854,approximately one every four to five years.”“Short term growth lagging long-term growth in your market by at least 4 percentage points”,Definition:Strategic Planning Institute,US,Is this a recession?,Textbook definitions Our definition,“A decline in GNP for two consecutive quarters.”The US has suffered 28 slumps since 1854,approximately one every four to five years.”“Short term growth lagging long-term growth in your market by at least 4 percentage points”,If the consumer thinks she is in a recession,then she is.,Definition:Strategic Planning Institute,US,Consumer mood by country,China,Poland,UK,Mexico,US,Brazil,Japan,Germany,Italy,Thailand,S.Korea,Wirthlin Worldwide report,July-August 1997,7,833 interviewsQuestion asked:“Would you say things in this country are going in the right direction or the wrong direction?”,Wrong Direction Right Direction,Angus Reid/Economist World Poll,May/June fieldwork,1997/8,Satisfaction with Quality of Life Index,Angus Reid/Economist World Poll Hope Index,May/June fieldwork,1997/8,29 countries,Asians Are Still The Worlds Optimists,*Composite score across 3“future expectations”items,5 out of 10 of the worlds most optimistic*countries are Asian.But the Japanese are the worlds least hopeful about the future.,Consumer Confidence in Singapore,MasterIndex Survey Score,March 1998.,MasterIndex Score=42,Impact of Recession on Asian Consumer Confidence,MasterIndex Survey Score,March 1998.,Impact of Recession on Asian Consumer Confidence,MasterIndex Survey Score,March 1998.,Singaporean Consumer Confidence Trend,MasterIndex Survey Score,March 1998.,Changing Confidence of Singapore Consumer,MasterIndex Survey Score,March 1998.,How do consumers behaveduring a recession?,Consumer spending does not always drop,In previous US postwar recessions,real spending continued to rise except 73-74Consumers still need necessitiesMany consumers find they have more disposable income for everyday items than beforereduced high-ticket purchasingless wasteful behaviour,Recessionary behaviour is complex,Grand Met launched Haagen-Dazs when Europe was in recessiona super-premium(+40%)brand that created a new category of its ownUS$10m sales in 1990 to US$130m in 1994Perhaps consumers need“little luxury”feel-good brands more than ever during recession,+Adaptation,-Withdrawal,Relationship with category,Relationship with Brand,How behaviour may change during recession,Stop using category,Abstain from benefitsof category,+Adaptation,-Withdrawal,Relationship with category,Relationship with Brand,How behaviour may change during recession,Stop using category,Abstain from benefitsof category,Use on fewer occassions,Use less quantity,Substitute with different products,Cut down waste,+Adaptation,-Withdrawal,Relationship with category,Relationship with Brand,How behaviour may change during recession,Stop using category,Abstain from benefitsof category,Use on fewer occassions,Use less quantity,Substitute with different products,Cut down waste,More loyal to favourite Brands,Switch loyalty toeconomy/value Brands,Occassionaly trade up tolittle luxury Brands,+Adaptation,-Withdrawal,Relationship with category,Relationship with Brand,How behaviour may change during recession,Stop using category,Abstain from benefitsof category,Use only generic/commodityproducts,No loyalty:respondto price/promotions,Use on fewer occassions,Use less quantity,Substitute with different products,Cut down waste,More loyal to favourite Brands,Switch loyalty toeconomy/value Brands,Occassionaly trade up tolittle luxury Brands,+Adaptation,-Withdrawal,Relationship with category,Relationship with Brand,How behaviour may change during recession,Some international learnings*,Basic necessities hold up,or increasebread,soup,preparation ingredients,seasoningVices increasebeer,cigarettesHigh-ticket items postponedproperty,durables,holidaysSocial class differencesUpper-class luxuries hold upMiddle-class comforts suffer,*Sources:AC Nielsen,WSJ,Admap,Thai shoppers left category in past year,due to recession,O&M Thailand Listening Post study,April 1998.(206 Bangkok Shoppers),Thai shoppers remaining loyal to brands,past year,O&M Thailand Listening Post study,April 1998.(Shoppers still using each category),Two paths-fight or flight,Flight Recession as Threat,Advertising the easiest budget to slash Economic headlines are disastrous Competitors cutting back-so can I Consumers wont be buying anything,Two paths-fight or flight,Fight Recession as Opportunity,Flight Recession as Threat,Advertising the easiest budget to slash Economic headlines are disastrous Competitors cutting back-so can I!Consumers wont be buying anything,Dominate media Reframe brand valuesLaunch new products,packagingUse portfolio smartlyLeverage consumer insights,Studies suggest fight not flight,A number of academic and business organisations have studied this subject“Is it worth advertising during a recession?”All studies have reached similar conclusionsA strong correlation exists between investment during recession and subsequent sales/share growth A recession is a time of opportunity for growth for longterm players that can spend,The economists argument,UK economist C.OHerlihy,1980 articleAdvertising is a variable cost with direct impact on salesMeasured trade-off between the cost of advertising/contribution to sales&profits50 brands,20 categoriesCalculates 100 TVR points=1%sales growth in recessionHypothetical example:recession slashes sales volume 10%Profits fall faster than sales,due to fixed costsConclusion:Slashing ad investment puts profits in jeopardy,US$000SalesFixed CostsMarginal CostsAd ExpenditureProfitProfit Margin,Before Recession33,00010,00019,8007002,5007.6%,Danger of slashing:Hypothetical example,US$000SalesFixed CostsMarginal CostsAd ExpenditureProfitProfit Margin,Before Recession33,00010,00019,8007002,5007.6%,Fiance Dept.assumed impact of ad cut.(Only recession affects sales)30,00010,00018,00002,0006.7%,Danger of slashing:Hypothetical example,US$000SalesFixed CostsMarginal CostsAd ExpenditureProfitProfit Margin,Before Recession33,00010,00019,8007002,5007.6%,Fiance Dept.assumed impact of ad cut.(Only recession affects sales)30,00010,00018,00002,0006.7%,What actually occurs during Recession(Impact of loss from ad cut)27,00010,00016,20008003.0%,Danger of slashing:Hypothetical example,US$000SalesFixed CostsMarginal CostsAd ExpenditureProfitProfit Margin,Before Recession33,00010,00019,8007002,5007.6%,Fiance Dept.assumed impact of ad cut.(Only recession affects sales)30,00010,00018,00002,0006.7%,What actually occurs during Recession(Impact of loss from ad cut)27,00010,00016,20008003.0%,Impact during Recession if budget had been left intact30,00010,00018,0007001,3004.3%,Danger of slashing:Hypothetical example,Implication of economists argument,Advertising can be regarded as an investment,not just a cost.Due to fixed costs,profits slide faster than sales.How can you service your fixed costs better?If fixed costs are particularly high in your industry,can you afford not to fight?,Study 1:Harvard Business Review,1927,Study and MethodologyHBR article,1927,Author Roland VaileStudy of 200 companies and performance during and after 1923 recession,ConclusionsStrong positive correlation between adspend and sales growth,Study 2:Lab for Ad Performance,80-85,Study and MethodologyMcGraw-Hill subsidiary,Laboratory for Advertising PerformanceStudy of 600 companies advertising spend and sales performance,1980-85,ConclusionsStrong positive correlation between adspend and sales growth over 5 years.Average sales growth for those who increased adspend was 275%,against 19%for those who cut back,Adspend and sales,1981-2 recession,Sales Index(1980=100),Source:Laboratory for Advertising Performance,Study 3:SPI/CRD,1990 study,Study and MethodologyStrategic Planning Institute/Centre for Research and Development,using the PIMS(Profit Impact of Market Strategy)database,1990.PIMS database of 749 large European&US companies examined,allowing correlation of adpend with sales/ROI results339 database observations of companies during recessionsDivided into 3 groups,by reaction to recession:1.Cut adspend(average 11%cut)2.Increased spending upto 20%(average 10%inc.)3.Increased spending over 20%(average 49%inc),Study 3:SPI/CRD,1990 study,ConclusionsAlmost all businesses earn reduced profits during recessionBut businesses that cut ad expenditure(group 1)suffer ROI reduction equal to those that increase adspend upto 20%Companies increasing adspend during recession gain greater market shareOpportunity of gaining share through increased adspend is greater when total market is soft,Study 3:SPI/CRD,1990 study,Note:To put these figures into perspective,a single share point in the US car industry is worth over US$2 billion,Study 4:Dentsu Inc,Japan 1985-6,Study and MethodologyInvestigation of 874 listed companies,with adspend over US$800,000Companies divided into 3 groups:1.Cut adspend(320 companies)2.Unchanged/moderate increase(265 companies)3.Increased adspend(289 companies),ConclusionsPositive correlation beteween adspend and growth in sales,market share and profitsLong-term leadership sustained after recession by those that spent,Affects of adspend during recession,Recession RecoveryExpansion,Market Share Growth%,Source:Dentsu Inc,Long-term advantages,Study results suggest long-term advantages for those who support brandsWhy?brand considered more permanentconsumers trust themvirtuous circle of spending createdmore sales,bigger budget,etc.new habits formed during recessionsconsumers stick with habit during recovery,Our Recommendation:Choose to Fight,Fight Recession as Opportunity,Flight Recession as Threat,Advertising the easiest budget to slash Economic headlines are disastrous Competitors cutting back-so can I!Consumers wont be buying anything,Dominate media Reframe brand valuesLaunch new products,packagingUse portfolio smartlyLeverage consumer insights,Choosing to fight-5 opportunities,1.Managing a budget positively,Tough Times Communications,2.Reframing brand values to new context,3.Fast Marketing,4.Using brand portfolio strategically,5.Leveraging consumer insights better to save communication costs,1.Managing a budget positively,Spend upfront at start of year to stimulate a virtuous circle of salesavoid a vicious circle,always chasing money,1.Managing a budget positively,Spend upfront at start of year to stimulate a virtuous circle of salesavoid a vicious circle,always chasing moneyIncrease share of voiceMedia inflation tends to slowTimid competitors cut backCompanies with strong resources can dominate share of voice,often for less,What happens when competitors stop spending?,1958 in the UK,consumers chose betweensoft toilet paperAndrexDelseyOtherhard toilet paper and flatpackBy 1963,most consumers had turned to soft toilet paperincreasing retail pressure,more competitorspressure to cut adspend,shift to promotions,UK toilet paper,adspend analysis,343,410,516,476,465,454,596,362,295,205,160,146,UK Sterling,000,Delsey reduced,then stopped advertising,1963-66Andrex dominated SOV,UK toilet paper,volume shares,%,Andrex volume share steadily grew through period,What happens when competitors stop spending?,Andrex continued to speak directly to consumers when key competitor stoppedrewarded with 30%volume share by 1969stronger loyalty,able to charge a premiumAndrexs attribute ratings for“soft”and“strong”rose steadily,as Delseys declinedAndrex leads UK market today,Milo in Malaysian recession,1985-89,During 85-88,Nestle increased Milos adspend from RM2m to RM3m,while competitors cut back or fluctuated,Milo increased adspend through recession,RM 000,Milo in Malaysian recession,1985-89,During 85-88,Nestle increased Milos adspend from RM2m to RM3m,while competitors cut back or fluctuatedSOV increased from 55%to 70%Past 3 month usage share increased from 65%to 70%and now stands at 80%Nestle now maintain 80%share usage with only 55%SOV,1.Managing a budget positively,Spend upfront at start of year to stimulate a virtuous circle of salesavoid a vicious circle,always chasing moneyIncrease share of voiceMedia inflation tends to slowTimid competitors cut backCompanies with strong resources can dominate share of voice,often for lessEvaluate new vehicles-cinema&print,Evaluate new vehicles,During recent Australian recessionprint readership increasedcinema attendance increased“Consumers needed a bit of escapism during the tough times,and we had to reflect that in our creative work as well as our media buying”Philip Beck,MD of The Network(Now Mindshare),Aus/NZ,Choosing to fight-5 opportunities,1.Managing a budget positively,Tough Times Communications,2.Reframing brand values to new context,2.Reframing brand values to new context,Fit new mood&new habitsHow can I reframe my brand to exploit this?not“How must I change direction?”,Brand Recession reframingMichelin Changed from“Expensive,but worth it”to“Surprisingly Affordable”Ziploc Emphasized Airtight foodbags for leftoversA-1 Steak For hamburgers,not just sirloin steakSauceVolvo“In a financial crash,keep your valuables in a safe place”,2.Reframing brand values to new context,New ContextReduced outings,Reframing opportunity“Home is where the heart is”,2.Reframing brand values to new context,New ContextReduced outingsTightening belts,Reframing opportunity“Home is where the heart is”“Treat yourself a little”,2.Reframing brand values to new context,New ContextReduced outingsTightening beltsSelfish climate,Reframing opportunity“Home is where the heart is”“Treat yourself a little”“A brand that cares”,2.Reframing brand values to new context,New ContextReduced outingsTightening beltsSelfish climateNational crisis,Reframing opportunity“Home is where the heart is”“Treat yourself a little”“A brand that cares”“Lets all pull together”,Choosing to fight-5 opportunities,1.Managing a budget positively,Tough Times Communi