(Presentation made by Thayalan at the LBR-LBO Chief Marketing Officer (CMO) forum on the 13th December 2007)

Marketing in the age of turbulence sounds a very provoking thought….leave aside the realism of it as I attempt to deal with the subject. I would like to caution you not to expect startling discoveries at the conclusion of my presentation. But what I hope it will achieve is to shed light on obvious elements that miss our attention in turbulent times.

The very mention of turbulent times tricks us to believe that the magnitude of terrorism is wreaking havoc across our marketing plans. While terrorism is likely to be a cause in most countries, it is not the only formidable force that we are dealing with. The collapse of global debt markets, to the rising threat of climate change to the extreme sensitivities related to sweatshops and child abuse singularly and sometimes collectively unleash its force on marketing plans around the globe making the business environment hostile.

In a Sri Lankan context it is not wrong to assume that terrorism is the basis of the rough times we are facing as an economy. But this is only to be assumed if we define our business realm within the confines of Sri Lanka. But it has been years since we as a country acknowledged our presence within the realm of globalization and opened our economy to facilitate this transformation. So we need to think beyond terrorism as we deal with the term “Turbulent times”

My undertaking for this presentation is not to dwell on the causes of turbulence in markets but how brands need to communicate in times of turbulence. I was recently asked if the 100 year old marketing module was outdated to deal with turbulent times and my answer was NO! I think the marketing module is fundamentally robust to deal with it. Where it usually goes wrong is how we interpret and apply it when markets come under pressure.

Textbooks usually cover specific issues independent of one another. What it does not tell us is how to deal with the compounding effect of a series of events like the mass proliferation of brands within “new age” forces like terrorism, climate change, sub-prime mortgage crisis etc that interfere with business planning. It’s this chaos that creates turbulence and prevents us from making sense with consumers. I believe we unconsciously succumb to turbulence by not following three simple but fundamental practices in turbulent times.

1. The lack of vision in the quest for opportunities.
2. The disregard for continued brand development;
3. The struggle for consumer attention

I will be dealing with these 3 points which I hope will raise consciousness of our roles in marketing and advertising.

The lack of vision in the quest for opportunities: The vision for opportunities gets blurred by the troubles of turbulence. Turbulent times are like nowhere land. Nothing is clear, things deteriorate rapidly and the times are uncertain. We could all empathise with those symptoms.

Marian Salzmann JWT’s chief Marketing Officer and much revered global trend spotter says. “It takes patience, resilience and courage to operate during turbulent times. The landscape is mined with opportunities for those who see beyond the current downturn. She says the dance floor is less crowded, so you can get your groove on, without your competition”

Soon after 9/11 the Indian chapter of Wharton alumni organized a symposium moderated by Anil Ambani the MD of the multibillion dollar Reliance group. The subject was none other than managing in turbulent times. The speakers were Patrick Harker the Dean of Wharton, M.S Banga Chairman Unilever-India, Aroon Poorie- Head of living media group and Sabeer Bhatia –The founder of hotmail.

They summarized the symposium on 4 critical points:
1. You can’t tame turbulence and business leaders have to learn to take advantage of it”.
2. They agreed that companies must focus on their core competences and brand values.
3. “Turbulence is good since it separates the good from the bad,”
4. Innovation and entrepreneurship is critical in turbulence.

Turbulent times affect marketing plans because they affect consumers. But consumers don’t shift to commodities in sacrifice of brands. They still want to buy brands. Marketers must ensure that they deliver on value. It’s not enough to create value in a brand…. and the all important question is how to extract value. The consumer’s feelings during turbulent times can be very emotional. The worst thing a brand can do is to insensitively and irrelevantly communicate with them.

In 2002 Argentina went through a severe economic crisis with the devaluation of the currency. The symptoms of which are similar to what we are facing in Sri Lanka today. Here is an example of Unilever’s Knorr brand doing it right in Argentina.

All premium priced brands were suffering losses and JWT convinced Unilever to go beyond the price war and exploit the emotional bond people have with food. It was a tough ask from the client at a time when Knorr was in deep trouble. I am sure the client had a discount plan and a few giveaways on his mind. But they went with the agency’s recommendation to evolve out of the brand’s equity and ride on people’s emotion. View the example below:

Knorr TV Commercial

The results were astounding.Knorr bullion penetration surged from 47% to 52%, packaged soups penetration grew from 10% to 11%,It secured a value share of 89.5%and a volume growth of 25%, gross margins increased by 5% and it neutralised the growth of competition that adopted a price-off strategy.

Budget airlines are a growing threat to established carriers. Unable to compete on low prices, easy bookings and check-in procedures some established carriers began mimicking budget airlines. Here’s another example from a troubled economy like ours where brand value took precedence over price in turbulent times and stayed clear from imitating the category.

Air Argentina simply brought the emotion back into flying. They did not try to cut price but they added value by differentiating their product from the beautiful airhostesses and appetizing food onboard. They created an earthly and emotionally captivating story for a product that needed to be constantly airborne- Also done in turbulent times.

Air Argentina TV Commercial

The moral of these examples - Consumers are looking for value in difficult times but this should not be decoded that he is looking for a cheaper price. Revisit your brand footprints and look within the brand’s proposition and consumer insights to extract that value like in the case of these two brands.

In turbulent times most MNCs continue to invest in brand communications. The common practice in Sri Lanka is to hold back and play cautiously.

In the case of GSK in Sri Lanka it reaped the rewards against a major competitor that was resting on its laurels. Viva chose to attack the market offering value with the credible proposition “energy on demand”. They differentiated wisely, invested positively and the result: - Viva gained over 25% in growth and is moving consumers from the competition as I speak. This brand is possibly one of the heroes of our turbulent times when most FMCGs are reporting a downturn.

MNC brands will survive and they will continue to grow as they are based on sound international business practices and are more resilient than local brands in such situations. Large local FMCG brands must watch-out as they are the most complacent. Relatively smaller brands are constantly searching for opportunities and are faster, sharper to innovate and differentiate in turbulent times.

A good example is the retail fashion business ODEL: ODEL has revolutionized the retail fashion business and moved shoppers out of traditional shopping places like Majestic city and Liberty plaza into their stores in turbulent times. In turbulent times people still want to look their best and are seeking brands that will complement or enhance their look and personality and are willing to pay a price for it.

At a different level “House of Fashion” has cleverly moved out shoppers from Pettah and the pavements into their stores- Also achieved in turbulent times.

The growth of “modern trade” spurred by Food City and Keells are moving consumers from the Pola to the environs of super marketing. Polas have been traditionally perceived as fresher and cheaper. I still believe that Polas are fresher and cheaper but these two institutions have managed to touch a “Value” cord to take a share off the Polas. Modern trade accounts for 12% -18% of all retail sales and is growing at 30% year- on-year. – All this is happening in turbulent times.

Take a look at what Abans has just done to the debt market to manage its own electronics business. They are well known to be an electrical super store to which banks brought customers and encouraged them to buy. Today they have cut –out the banks and finance companies and Abans is talking to customers directly about deposits and financial solutions. This example is not about the quality of advertising but their boldness to innovate and differentiate in turbulent times.

Abans examples

In reaction to deposits and cash certificates that are usually given during the festive season Vogue Jewelers got consumers to weigh their gift options between the depreciating rupee as a against the appreciating value of gold. The big boys in finance are certainly under pressure. The smaller enterprises are able to outthink and move faster than major players in turbulent times. This is not an example of a good ad but their boldness to innovate.

Vogue example:

Abans’s LG brand cleverly and consistently differentiated their brand through innovation; they came-up with deodorisers and door cooling for refrigerators and conquered the refrigeration market. When their competition was trying to open a debate on the most efficient air conditioning system they surprised them with art cool and introduced “style” to air-conditioning. I rarely hear of the onetime dominant brands like National, Sony and Sanyo in the same magnitude as LG- All done and achieved through innovation in turbulent times.

Motor insurance was once just a pain-in-the-neck. But today consumers are highly involved in the category which has erupted with innovation particularly in the last 5 years-Times were turbulent then too.

Last year JWT created a campaign to woo Indian tourists. We never said there were cheap holidays in Sri Lanka. We played on the consumer insight that the Indian tourist wanted better value out of their holidays. He wanted many holidays in-one go. We met that need with a compelling proposition.

The brand insight: “that every four hours you experience a new Sri Lanka”. It gave birth to smallislandbigtrip. The campaign ran for only 3 months and recorded a 27% increase in tourist arrivals in turbulent times.

Small Island Big Trip TV Commercial

The environment has become the most important issue in the world’s agenda as it unleashes its force from gale winds, floods, forest fires and has now begun toppling governments.

Smirnoff has its own turbulence in the form of advertising and retailing restrictions but see how Smirnoff turned a topical environmental issue into an opportunity to take advantage of the sensitivity and leverage its brand proposition. This commercial is being discussed on blogs and viewed by millions on youtube. This is a direction that some of our local alcoholic beverages should explore in times of their turbulence and not cry before the law.

Smirnoff TV Commercial

The moral of this story: In bad times look for what the consumer is looking and invest your resources behind it.

I would also like to stress that brands like Abans, Cargills, ODEL are brands with no strings attached. The key thing is that the spirit of innovation and entrepreneurship takes over and they move-in faster for the kill. Decision making to action from the source to runner, is faster and less process oriented which is evident in these companies. FMCG companies must recognise this and try to cut themselves free from strings of bureaucracy and corporate obesity to add value and differentiate. Flatter structures, leaner and meaner teams are the steroids for turbulent times. The dividends from flat structures is that the intensity of the innovation is unadulterated helping in the germination of channels to roll it on to the market more efficiently.

The disregard for brand value: The Chernobyl disaster took place 8 months before I joined advertising. As I read articles of the catastrophe little did I realise that these events were teaching me my first and most important lessons in brand development. I am going to summarise a dramatic and complex 1 year story in 3 minutes.

My first month in advertising was directly linked to the turbulent events that took place 8 months before I joined JWT. I was an understudy handling a food brand. A brand which had a healthy market share, a wealth of reputation, solid values and excellent consumer acceptance. The brand was locally manufactured but required a small quantity of the imported variety from Europe to stabilize the fat content in the product.

We received a call from the newspapers informing us that a container, suspected of radioactive substance from Europe had been detected at the port and it belonged to the brand that I was working on. All hell broke loose and a senior colleague and I darted to the newspaper to stop it from hitting the headlines. We succeeded in getting it off the headlines by promising to secure an interview with the chairman of the company. But the company preferred not to comment and also postponed a press conference the agency had organised.

The next day’s headline slammed the company seriously affecting the brand and sales plummeted to an all time low. It was a turbulent time for the company and it responded immediately by launching a consumer promotion to arrest the decline and this took priority over clearing its name. The promotion momentarily controlled the decline and then plummeted further. And this went on for the next 3 years. The need of the hour was assurance to consumers. Offering a lollipop to buy their product just did not meet their needs.

Seeing the opportunity a competing brand took over to build its brand by placing specific emphasis on its country of origin and to out-position the troubled brand by distancing itself from Europe. All they simply harped was its country of origin and the clean pastures that were thousands of miles away from Europe. This worked.

It was mismanaged PR that derailed the brand. But the brand’s negative and insincere response to entice consumers by placing toys every quarter to prop sales systematically replaced the core values of the brand. The consumer over a period of time began to recognize the brand for little surprises that were in direct conflict with the brand’s RTB. 20 years later I believe the brand is still struggling from the consequences of wrong decision making in a turbulent time.

The moral of the story - in a turbulent environment one brand lost complete sight of its core values and obligations to the consumer and another saw an opportunity to emphasise on theirs and succeeded convincingly. Building on equity and differentiation are two elements that need attention in turbulence. The objective should not be to out-live turbulence but to conquer it and ride the winds positively.

The struggle for consumer attention: Companies slash budgets to ensure two things 1. Write back their saved advertising spends into the bottom-line.2. To fulfill belief that advertising is a waste in turbulent times.

Hilmy Carder of MTI say “In times of turbulence think business development first and fit advertising into it. If advertising is cut out during turbulent times then a good part of it was wasted during the good times”

There are two things companies must begin to adapt. Consider innovation the biggest motivator in turbulent times. Differentiate, differentiate and differentiate- Because the chance of propositioning your consumer is greater when your competition is cutting down budgets.

Contrary to global belief that ATL is not delivering impact, here in Sri Lanka, ATL still has an edge due to the lack of other choices. But there is a lot of wastage in ATL. Advertising in turbulent times requires precision targeting to manage wastage of media budgets. It will continue to be so, if we as an industry do not drive change. Activation is certainly being adopted but needs to be further exploited. Ambient media is only seen as an award opportunity and is not fully exploited by clients. Digital media is the most engaging with precision targeting capability but Sri Lanka likes to believe that we are not ready for it. Why? Because our industry likes to believe in figures. “I think we need to stop believing in figures and start making figures that we can believe in”

It’s true that the penetration of the internet is as low as 2.5%. Household computer ownership is still a dream in Sri Lanka. The web is largely seen as a one way information source and is not offering value and I am not surprised with these figures. What have we done as an industry to make the digital age a productive and engaging media vehicle? Today 99% of websites in Sri Lanka are information heavy seriously lacking interactive and engagement capability. If consumers want to know about you, they will call for an annual report or a product brochure. Look at the digital area taking shape and we are just not seeing the opportunity.

The Penetration of mobile phones in Sri Lanka is at 7 million and is growing by 100,000 connections a month. SMS is a big communication revolution but is not fully exploited as a media opportunity. Perhaps a quarter of the 7 million are carrying phones that will give them direct access to the internet and we are not seeing this opportunity. Nokia has just concluded a worldwide survey which says that 1/3rd of its users will generate and share their own content by 2011. As a brand communications person I shudder to think we are not ready to meet this.

Here is an example of Wilkinson hitting Gillette with an ATL and digital concoction. Wilkinson wanted to increase share against the market leader Gillette - It broke away from the cliché of the smooth shave and championed individuals with the right to shave exactly as they choose. This insight was also supported by the fact that 30% of men don’t shave every day, especially amongst the brand’s core target: 18-34 year-olds.

Wilkinson Fight For Kisses

Wilkinson Fight For Kisses website
www.fightforkisses.com,

The results:Market share rose to 23% - it’s highest ever, mentions in over 100 blogs, over 1.5 million website votes with multiple creative awards. From Sept 10th to Oct 16th-6 millions visits on the website, 300 000 downloads of the game,more than 2 millions views on Youtube and Dailymotion.

The point I am trying to make here is that –It’s immaterial if the time is right or not. It’s no consequence to anyone if the penetration of computers is going to improve or not….the point is that the web is going to take control of Sri Lanka very soon and the industry is going to be caught with its pants down. The onus is on us to hold consumer attention by driving new media opportunities. If the media is not there, we must create it. If we offer consumer’s value on the web they will log on. If every advertising company commits to making one good interactive site a year for brands we can create a new media choice. The penetration numbers will come. The ownership of computers will happen.

In summary, turbulent times are here to stay. It must be factored in your marketing plan. There is too much negativism in business and that is why we are feeling the times hard. Turbulent times are studded with opportunities and we must have the vision for it. The over dependence on ATL is restricting us from exploring and creating new media opportunities. The world does not need marketers and advertisers who defy change and continue to put brand margins under pressure .We need marketers driving change by creating value for the consumer and for businesses.

If you don’t know how to ride the winds of turbulence positively, you will surely be hit by it. So wake-up! Sri Lanka. Turbulence is a good thing! So long as you know how to deal with it and not allow it to deal with you.