It has been a roller coaster year for the Malaysian advertising industry. The year started optimistically; but soon sentiments were hit by the Iraq war and SARS outbreak.
Thankfully, the SARS outbreak was brief, and the second half of the year witnessed a strong rebound in the economy, and with that confidence is returning to the advertising industry.
So what are the prospects and challenges for the industry in the months and year ahead?
StarBiz invited a panel of leading personalities in the industry for a roundtable discussion on the subject.
Taking part were : RISHYA JOSEPH, president of the Malaysian chapter of the International Advertising Association (IAA), KHOO BOO BOON and JUNI EWE, president and vice-president of the Association of Accredited Advertising Agents Malaysia (4As), and SHAHAR NOOR and BHARAT AVALANI, president and vice-president of the Malaysian Advertisers Association (MAA). Representing The Star were DATIN LINDA NGIAM, general manager (advertising and business development), M. HAFIDZ MAHPAR, StarBiz deputy news editor and DATUK WONG SULONG, deputy group chief editor, who chaired the roundtable.
STAR: Is there anything in the recent Budget 2004 that excites you?
Rishya: The decision to reduce the threshold (of chargeable income subject to 20% corporate tax) for the small and medium-scale industries (SMIs) from RM100,000 to RM500,000 is significant. If you look at the situation and what’s happening internationally, I think Malaysia is in a very competitive position versus the US dollar. It’s in a very competitive position in terms of marketing its goods and services. This, I think, will spur growth and surely increase productivity. So increasing the threshold is significant.
What I found particularly interesting was in the cost of doing business. For years we had been trying to get entertainment allowance for four to five years now. With the government giving a 100% relief on expenses (wholly related to increasing sales) and a 50% deduction for business-related entertainment, it will spur some degree of support from this end, especially marketing consumer companies.
(Bank Negara governor) Tan Sri Dr Zeti Akhtar Aziz said the economy was scheduled to go from 4% to 8% growth in the next two to three years. What is exciting for our industry from this standpoint is that the communications sector must benefit from the reduction in Internet charges.
Look at what is happening in Japan. ITT, NTT DoCoMo, China Mobile – all these things are going to give the industry a larger scope for expansion. To me, the fact that Internet charges have gone down dramatically is going to open a whole new ballgame for our communications industry. My only thought is that we are the second cheapest country in terms of media rates in the region (next to the Philippines). Maybe there are some benefit to be had by re-looking at the media packages.
Khoo: I share very much similar thoughts with Rishya. I think the key thing that excites me has always been our home-grown industry, the SMIs. Even prior to the budget, they had already been given some excitement. I think this has to be looked at because at the end of the day, it is important to grow these young SMIs which will be Malaysia’s future.
I think a lot of SMIs, like our consumers, were quite restless after months of the so-called “non-confidence” situation – talking down the industry rather than anything else. I think all these Budget measures will help people who want to be successful, and if they are successful, then the country will be successful. The next step now is for the government to promote these incentives and facilities to the appropriate sectors for them to take advantage of for future growth.
Juni: If you look at the Malaysian economy, the SMEs (small and medium-scale enterprises) constitute 30% in terms of employment but 92% of the total companies registered in Malaysia. Within the manufacturing sector, SMEs are still heavily dependent on the resource based kind of industry supplying to the MNCs (multinational corporations) and others. The government is encouraging them to enhance their skills and competitiveness.
If we look at markets like Taiwan, Japan and South Korea, their SMEs contribute quite a lot to the industrial and manufacturing output. SMEs are actually the vehicle of growth for Malaysia. The micro credit scheme for SMEs (introduced in May) is quite a breakthrough, because after the last financial crisis and the merger of banks, it has become very difficult for SMEs to get funds and loans. Now there are fewer banks to borrow from, and they are very careful. The micro credit scheme is a good move. (The Budget calls for an additional RM1bil allocation under the scheme.)
Star: Shahar and Bharat, both of you represent very well known and huge multinationals (Panasonic Malaysia and Unilever, respectively). We have covered a lot on the SMEs. What’s your perspective on the Budget?
Shahar: We think the Budget must be really important as the PM extended his presentation time. It was the longest Budget tabling and I think if he had the time he would’ve talked more. I think he had a lot to say, not because it was his last one but he was making a summary of things in going forward. So listening to it and reading about it, one thing’s for sure: he was trying to spur consumer spending which is the key to economic growth, for example, the government wants to take over the unfinished housing projects. Basically, all these things are to stimulate consumer spending, of which we are looking forward, because if consumers don’t spend, nothing will move. And if they do, everything will move positively. There will be a chain reaction.
Bharat: I tend to look at adex (advertising expenditure) as a barometer of the economy. While some measures have been made to boost consumer spending, I feel we could do more to boost the adex. The Singapore adex is slightly higher than ours, but if we look at per capita adex, Singapore is US$240 per person and Malaysia is US$36. So there is still room to grow the advertising industry in this country and some measures need to be undertaken to encourage businesses to advertise more, which will induce domestic consumption.
Rishya: One of the points highlighted by the prime minister is for Malaysians to be world marketers and the need for Malaysia to develop its own international brands. Building Malaysian brands to become international enterprises is a big challenge.
Star: The Budget allocated RM100mil to promote Malaysian brands with the promise of another RM100mil to come. During the 1950s, if a product carried the “Made in USA or UK,” half the battle is won. Now a “Made in Japan” is regarded as a symbol of quality. I agree with Rishya that we have reached a stage where “Made in Malaysia” products do carry some recognition and premium in many countries.
Rishya: We are the world’s largest producer of air-conditioners.
Shahar: Now we have a more advantageous position in point of entry. In the past, it took a while before people respected Japanese-made products. Now if anybody wants to go in with this kind of branding, no problem. The point of entry has gone to a different level and accepted by many.
Bharat: I think our PM is the best marketeer and I say that very confidently. He has changed the image of Malaysia in the world and today Malaysia is a country to be counted on. It is time for us to reap the benefits because Malaysia, as a country, is being noticed and has a good reputation. We need to brand our products correctly and market it properly.
Khoo: It is true. In all our travels in the last 10 years, when we mentioned Malaysia, they would say Mahathir and when we said Mahathir, they would say Malaysia. It is synonymous. We are in a very good position to be another Japan Inc, UK Inc. I think our competition is not only among Asians but also Australians. We ourselves must believe in being a winner. The trouble is that sometimes we don’t believe in it because of the way we are brought up.
Star: From your viewpoint, how valuable is a brand to the business?
Shahar: Our chairman, in any speech that he makes, would always say, “Remember this: our brands are our most important assets.” We have to really nourish it and cherish it properly. Nothing can happen without any brand. Just like a person will not be recognised without a name. Therefore, a brand plays a very important role. The brand will tell the character of the company – where you position yourself, whether, in our case, our products are acceptable for quality and durability, good before and after sales service, etc. In any event, the brand tells a lot of things to the end users.
Bharat: It is difficult to put tangible values to brands but let me try to put it in perspective. At Unilever, our brands are the core of our business and existence. Sales of Lipton, Sunsilk and Lux worldwide in 2002 exceeded 1 billion euros. Sales of Dove exceeded 2 billion euros and Knorr exceeded 3 billion euros.
Rishya: In a world of parity products, brand is the only differentiator. It is such a powerful tool which I think Malaysian advertisers tend to disregard. Parity is to gain sales at the expense of brand building. A classic case in point is Unilever. I’ll also quote Citibank. Citibank has only three branches in Malaysia but it has top-of-mind awareness. Look at its competitors. Ask any consumer and their perception is that it is the largest bank, but it is not so in reality. The only differentiator is branding.
Juni: There have been attempts to put a value to a brand, essentially brand equity. What’s the value of it? The value of the brand is the difference between it and a parity product, which could be a sum total of all the spending over the years and the relationship between the brand and its customers including the people in the distribution channel. It is a lot of things, so how do you value it? Basically it commands a premium.
Bharat: Studies have been made, but I think in Malaysia we haven’t done that. I read that when Levi’s went to the bank for a loan, all the bank asked for was: “Just mortgage the brand to us.” They just wanted the rights to the brand, they didn’t want any of the buildings.
Star: Shahar, recently your company, National Panasonic, decided to drop the “National” name and use only “Panasonic” worldwide. Was the decision a difficult one?
Shahar: It was indeed for us! However, we have taken a very strong initiative to unify our brand. We’ve spoken about it for 10 years. To drop National is very emotional – National brand is well known in Malaysia, Thailand, Singapore, Indonesia, and the Philippines, so it was a very difficult move. But we have to change. Basically, this is a global exercise. And this is affecting us in Asia and the Middle East. Therefore we have to address this carefully to the various groups. The young people will not be affected so much. We especially have to take care of the loyal, so one of the initiatives was we came up with a “Thank You” ad, to thank all our loyal National customers before we launched the Panasonic campaign in October this year. We have to touch and win their hearts and confidence.
Bharat: If it’s of any comfort to my emotional friend (laughter all round) we at Unilever have actually gone through this with our Brand Focus exercise. But if we believe in the brand that we want to focus on, we will put all our passion, resource and money behind it. It will be just a matter of time before consumers start bonding with the brand. But it is a process which takes time. We need to believe and be patient.
Shahar: The problem is our people in this region. They are not like the US and Europe where they all have the same level of education. We have different levels and perceive different things.
Star: I perceive National Panasonic as two things. One, National has more to do with home appliances and Panasonic with audio-visual products. By advertising only Panasonic you do have a problem you have to overcome, but I presume over time, people will accept.
Shahar: A question came out as to whether it will affect our sales. Probably not but many will be taken aback. But the point is that the Panasonic brand is more associated with high technology. When we say National, people will always think of rice cooker first. Therefore, we have to be sensitive in that sense. That shows how powerful a brand is, how to release slowly without affecting the sales and confidence of our customers. Will people question us? For example, when we changed the brand for audio-visual products from National to Panasonic five, six years ago, a customer in Felda land scheme ordered a National television but my dealer sent a Panasonic television, and he refused to accept. This was the problem that we had. But now, things are different as our Malaysian level of education is higher, it is easier to approach.
Rishya: A classic case is taking place and this will affect Shahar’s perspective of things. National Panasonic has been in the market for 30-35 years; it literally owns the market. But look at the word “brand intrusion” with the word “Samsung.” Look at what Samsung is doing to Sony. Basically annihilating them. Samsung products are not superior – at best they are parity. But look at the brand intrusion and how this is affecting the competitors.
One of the addressable issues in terms of Malaysian brands: MAS and Petronas are very well differentiated. They have a world platform – world’s best cabin crew, Petronas by virtue of its F1 affiliation. The brand that I think is in dire need of reinvention to stand up against Afta (Asean Free Trade Area) rules and I don’t think it’s done a good job of, is Proton. It is not sufficiently differentiated in terms of its branding. It is very fragile.
Bharat: It is bigger than branding. It is how Malaysians relate to a brand. How many people buy a car for the pride and nation building reason than for the cost reason? I think most consumers now will buy a brand out of choice and price could be one of the things, but there could be emotional benefits as well. But I would tend to think that with Proton, consumers are buying it because of the price factor, and that is not a way to build a brand.
Sometimes it’s sad when you look at key policy makers who don’t value branding, like politicians. When you look at a country like Burma; they call it Myanmar. And almost every Indian city today is called by a different name; Chennai (for Madras) and Mumbai (for Bombay), etc. They are big brands and they have lost a big value there. They have killed the history with the change.
Transcribed by ELAINE ANG
TOMORROW: Part 2
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