This action might not be possible to undo. Are you sure you want to continue?
The Asian Apocalypse: Crisis Marketing for Consumers and Businesses
Swee Hoon Ang, Siew Meng Leong and Philip Kotler
Analyses of consumers from various Asian countries indicate falling con®dence and a tightening of belts during the recession. Strategies employed by consumers to tide them over the economic crisis include: more comparative shopping; delaying purchases of expensive items; placing more emphasis on product durability and functionality; switching to lower end and local brands; developing a product life cycle±cost perspective; relying more on informative and less on imagery-based advertisements; and buying more often at discount stores. Businesses face cash ¯ow challenges as banks and suppliers are less willing to provide favourable ®nancial terms, whilst customers default more or buy less. Effective strategies that will help businesses during this period include expanding into crisis-resistant markets such as non-Asian and youth markets; introducing `®ghter' lines; maintaining prices while augmenting existing products; developing adaptive positioning; using informative advertisements; and pruning marginal channels. = 2000 Elsevier Science Ltd. All rights reserved.
Research on marketing during hard economic times suggests that consumers adapt their buying behaviour in view of expected lay-offs and rising interest rates.1,2 Fewer purchases are made; purchases of selected products, especially luxuries, are postponed; price becomes a more critical consideration in decision-making; and purchases are driven more by speci®c bene®ts sought. Psychologically and ®nancially, crisis-hit consumers behave differently from those enjoying economic prosperity. Likewise, business strategies appropriate during good times may become ineffective when there is a downturn. Strategies that promote more purchases, conspicuous consumption,
0024-6301/00/$ - see front matter # 2000 Elsevier Science Ltd. All rights reserved. PII: S 0 0 2 4 - 6 3 0 1 ( 9 9 ) 0 0 1 0 0 - 4
Swee Hoon Ang is an Associate Professor at the Faculty of Business Administration, National University of Singapore. Swee Hoon Ang, Siew Meng Leong and Philip Kotler are co-authors of Marketing Management: An Asian Perspective. Corresponding address: Department of Marketing, Faculty of Business
impulsive rather than deliberate decisions, and satisfying hedonism as opposed to necessities may not appeal to crisis-hit consumers. Instead, businesses need to reconsider their marketing strategies to capitalise on changes in consumer needs, values and consumption patterns. The market targeted may need to be changed and the market mix adjusted to re¯ect values that are consistent with those of crisis-hit consumers. To do so, businesses must ®rst understand how an economic crisis affects consumers. This article examines the impact of the economic crisis on Asian consumers and businesses, and discusses the adjustments they have made in addressing their new economic reality. After a decade of ¯ourishing economic activity, the Asian ¯u caught many, both businesses and consumers, off guard. Sceptics have raised concerns over whether Asia will be able to cope with this downturn. Therefore, it is managerially instructive to understand how Asian consumers and businesses have dealt with the crisis. In doing so, we can also assess how well businesses have adapted to the new values of the Asian consumer. Marketing strategies are suggested that provide lessons for businesses operating in periods of economic hardshipÐwhether in Asia or elsewhere. The background behind the genesis of the Asian crisis is described brie¯y. This is followed by the framework around which our discussion is organised. We then describe the effects of the crisis on consumer behaviour in the region, as well as the resulting adjustments that Asian consumers have made. Next, we describe the impact of the crisis on businesses in the region. Finally, we discuss the marketing strategies employed by businesses in response to the crisis, and consider the adjustments made by regional consumers.
Background to the Asian crisis
Administration, National University of Singapore, 10 Kent Ridge Crescent, Singapore 119260, Republic of Singapore. E-mail: firstname.lastname@example.org Siew Meng Leong is an Associate Professor at the National University of Singapore. Philip Kotler is S. C. Johnson & Son Distinguished Professor of International Marketing at the Kellogg Graduate School of Management, Northwestern University.
The Asian economic crisis began in July 1997 with the devaluation of the Thai baht, a day after Hong Kong became a special administration region in China. Since then, Asia's economies have undergone gut-wrenching changes which have left their mark on almost every commercial, industrial and even political activity in the region. Among the most affected are Asia's consumers and businesses. What Asian consumers eat, drink and buy, how they spend their leisure time, and what they dream of have all taken an entirely different track. Carefree consumption has been replaced by the tightening of belts. Businesses once devoted to satisfying the unceasing needs of the burgeoning Asian middle classes have become preoccupied with ®nding ways to stimulate ¯agging consumer demand. Several views have been advanced regarding what triggered the ®nancial problems in Asia. These include the over-reliance on short-term capital to fund long-term projects; inadequate supervision of the banking and ®nance sector; and investment in non-productive assets such as real estate. From a business
The Asian Apocalypse
Several reasons account for this de®ciency: . brie¯y a Minister of Trade and Industry towards the end of the former president's term of of®ce. Asian businesses . In terms of brand equity. the leadership of American brands mirrors the domination of the global marketplace by such US businesses as Microsoft. The core competence of Asian businesses appeared to be their ability to secure contracts via the guanxi mechanism. . only Japanese brands such as Sony. East Asian businesses ventured into any and all areas that they perceived to be pro®table. GE. CocaCola. such corporate diversi®cation may yield short-term bene®ts in a benign economic environment. In a macro sense. Such less-than-transparent transactions may have in¯ated the cost of doing business in Asia. and to a lesser extent the Koreans) have never been strong at marketing''. The headlong plunge into real estate by businesses that originally focused on such diverse areas as textiles and public transportation is a classic illustration of this syndrome. Whereas Western tenets were calling for corporate restructuring to focus on core competencies. Intel. nepotism and cronyism in countries such as Indonesia.perspective. the abuse of guanxi. By the same token. Toyota. Indonesia's state-owned oil company Pertamina recently called for a re-tendering of a lique®ed natural gas plant project in Irian Jaya. some of the causes of the crisis may have been selfin¯icted. systemic weaknesses are painfully exposed. Honda and National Panasonic appear atop global rankings. some 60 per cent of all public-listed companies on the Hong Kong stock market are involved in some property-related business. When times get tougher and leaner. The largest and most pro®table brands today are. The greasing of the political machinery may well have led to higher prices charged to taxpayers by winning bidders of government contracts trying to recover their `investments'. Indeed. particularly in brand management. Western (especially American). For example. that nebulous web of connections linking in¯uential political and commercial interests in the region. which precipitated an attitude of `it's who you know' rather than `it's what you know'. have never been strong at marketing the tendency of Asian businesses to serve as low-cost contract manufacturers and OEMs for Western MNCs. with few exceptions. vol 33 2000 . . A second business-related cause pertains to the unbridled and unsystematic expansion of Asian businesses into areas unrelated to their expertise. has led to charges of corruption. As Western businesses discovered during their recession. The estimated $500 million contract was `improperly awarded' during the Suharto era to a consortium that included a company owned by Muhammad `Bob' Hasan. Firstly. . the traditional emphasis on trading and distribution in the region. Gillette and IBM. 99 Long Range Planning. ``Asian businesses (other than the Japanese. the lack of wellknown and internationally accepted Asian brands accentuates the relative weakness of the region on the world economic stage. Thirdly.
Asian businesses had previously tended to reallocate human resources rather than remove them. which tend to be more traditionally run. More than 45 per cent of Japanese felt uneasy about their employment situation in late 1998. Losing one's job is painful anywhere. the role of Asian businesses as franchisees of Western franchisers. compared with 35 per cent 14 months earlier. In particular. Whereas Western enterprises regularly downsize and de-layer. especially those employed in smalland medium-sized indigenous businesses. This in turn adversely affects consumers' propensity to spend on products and services. . but especially so in a hierarchical and 100 The Asian Apocalypse Consumers and their reactions . . asset de¯ation and slower growth combine to erode consumer con®dence. there is the issue of mianzi or face. With lay-offs arising from business closures and cost-cutting measures. positioning and pricing. The idea of being made redundant from a job which has all along been assumed to be held until retirement is particularly dif®cult to accept. the perception of Asian names being a liability in certain product categories (such as fashion). and outright neglect and under-investment in maintaining and enhancing existing Asian brands. They respond by adjusting their targeting of markets. their product offering. people experience reduced job security. Asian consumers have been affected by the economic downturn both psychologically and ®nancially. Asians are used to the practice of lifetime employment. Marketing strategies that accommodate what consumers look for during such hard times are more likely to succeed than those that do not adequately address consumer concerns. the psychological An organisational framework impact on Asian people cannot be over-emphasised The Asian economic crisis has affected both consumers and businesses in the region. the psychological impact on Asian people cannot be over-emphasised. pressure from customers and competitors to reduce prices. the effects of a past socialist ideology which promoted equality rather than differentiation. and reduced credit from banks. Firstly. Secondly. Businesses are concerned with delays in collecting payments. and their promotion and distribution strategies. state-owned or sponsored monopolies in certain sectors (such as telecommunications) that saw little need for marketing and branding. for several reasons..3 Aside from the more obvious ®nancial challenge of making ends meet. . prospects of greater unemployment. . Changes in the economic environment are in general likely to impact both consumers and businesses.
In many Asian families.4 Consequently. Pessimism about Japan's future has also increased from 26 per cent to 51 per cent between 1989 and 1997. Indeed. consumer con®dence has been severely affected in the region (see Figure 1). His loss of employment brings shame to himself since he is unable to ful®l his role expectations. Thirdly. the good life abruptly ended for them. They had prospered under consecutive years of high economic growth and had begun to enjoy the fruits of their labours when. Many now believe that the only certainty is that they are on their own. Asian Consumer Confidence Index as of July 1998 (Source: MasterCard Consumer Confidence Survey) collectivistic culture. evidence exists that laid-off employees continued to socialise with their associates and friends in pubs to show that they are surviving the crisis. many Asians in developing countries such as Indonesia.3 We will now discuss the actual and potential reactions and adjustments of Asian consumers during the economic crisis. in a short and painful spell. In Indonesia. many husbands in Japan and Korea have kept news of their redundancy from their spouses and children for extended periods of time.1 Individuals during the early stages of an economic crisis will maintain their old spending patterns. Adjustments are all the more dif®cult under such circumstances than for those accustomed to a more basic lifestyle. refusing to take their loss of income seriously. middle-class Asians' faith in the future was severely shaken. by adhering to their daily routine following their lay-offs. Our discussion can be divided and summarised as follows: Long Range Planning. Malaysia and Thailand had only just joined the middle classes when the crisis struck. This phenomenon parallels that documented by Kotler. the average con®dence level is below the mid-point of 50. the husband is the sole (or main) breadwinner for the family. even though the amount spent on entertainment has been sharply curtailed. vol 33 2000 101 . As of mid-1998. Accordingly. while Hong Kong registered only 13.Figure 1.5 Con®dence in Japan was decimated with a score of 1 out of a maximum of 100.
leisure activities and buying clothing and accessories.2. opting for a simpler lifestyle. . Such voluntary simplicity mirrors the experience of American consumers during the 1970 recession in the USA. consumers embraced a `small is beautiful' attitude. As shown in Figure 2.5 per cent). large decreases in consumption were observed for electrical goods such as wash102 The Asian Apocalypse .6 Now.8 Indonesian consumers indicated that they had reduced consumption of fast food (90..10 These examples show that the economic slow-down has made consumers more frugal.8 per cent). Asian consumers have tended to be less wasteful. it has been reported that some 58 per cent of Thai consumers have stopped buying fashion clothing. General reactions: Reduce consumption and wastefulness More careful decision-making More search for information Product adjustments: Buy necessities rather than luxuries Switch to cheaper brands and generic products Buy local rather than foreign brands Buy products in smaller packages Price adjustments: Emphasise product life cycle costsÐdurability and value for money Emphasis on cheaper prices Promotion adjustments: More rational approach to promotions Reduced attraction to free gifts Preference for informative rather than imagery-based advertisements Shopping adjustments: Increased window shopping Preference for discount and neighbourhood stores Fewer end-of-aisle impulse purchases . in South Korea. respectively. 80 per cent of consumers have reduced their spending on dining out.7 Another 60 per cent have reduced expenditure on beauty products. Similarly. The consumption of most products has steadily declined as the crisis progressed. while 45 per cent and 46 per cent have stopped buying whisky and magazines.2 per cent) and beauty-care products (82. General reactions Reduced wastefulness With the onset of ®nancial hardship. . furniture and appliances.9 In Singapore. over 73 per cent of consumers indicated that they had become less wasteful in view of the economic downturn. Then. . imported fruits (85.
Decision-making and information searching Asian consumers now weigh the pros and cons of buying a product more conscientiously. this leads Asians to minimise the possibility of making a poor purchasing decision by intensifying their search for inforLong Range Planning. clothing and cosmetics. Such involvement of important others in purchase decisions is not surprising given the collectivistic nature of Asians. This dilemma between the need to save face and the need for belt-tightening prompts Asian consumers to consult more with friends and spouses before making purchasing decisions. Asia Pacific (1998)] ing machines and refrigerators. Such deliberate decision-making leads to Asian consumers engaging in more comparative shopping. They will have more discussions with their friends or spouse before making a purchase. they also want to be more careful in how they spend their money. Together with the pressure for saving face. especially if it comes with a high price tag. While they desire to maintain their appearance and social solidarity. The drop in magnitude was generally less for essentials such as toiletries. In general. the views of important others in an Asian society are given considerably more weight than in non-Asian countries. this arises from Asians' aversion to risk and greater avoidance of uncertainty.Figure 2. content and product bene®ts across brands will be more intense during an economic crisis. Percentage of Asian consumers buying in different product categories [Source: Taylor Nelson Sofres. food and health-care products. travel. vol 33 2000 103 . Asians are particular about saving face. Furthermore. In part. Information searches involving comparing prices. The social in¯uence of others on decision-making has been enhanced during the economic crisis.
In Thailand. but that of basic detergent is less affected. can be expected to rise. Instead. some luxury products appear to be more recesThe Asian Apocalypse consumption of luxuries F F F has been more adversely affected by the crisis 104 . while those of lower-end.7 Hence. depending on the scale of the economic crisis. As shown in Figure 2. Similarly.mation. within each country. ``consumption of luxuries such as fashion clothing and cosmetics has been more adversely affected by the crisis''. personal-care products have also held up relatively well. In contrast. Eating out will also be reduced. sales in Asia of luxury cars such as Mercedes and BMW have been hit. with more consumers cooking at home. This means that consumers become more educated about various brands. for instance) to ensure that products deemed necessary for their children (such as food) can still be bought. purchases of essentials such as toiletries were the least hit. Indonesians appeared to be the worst off. they had become wiser in their shopping. Essentials such as cooking oil are less likely to see a drop in consumption. travel to countries whose currencies have depreciated relatively. leisure activities are also likely to see a decline. However. Indeed. the degree to which consumer expenditure is reduced varies by country. fruit juice and soap are less likely to experience large drops in sales as Asian parents tend to shelter their children from the harsh realities of the crisis.8 Aside from tangible products. By and large. people buy lesser-known brands. consumption of speciality products such as softeners may drop. while overall purchases are held constant in some product categories. clean their teeth and wash themselves. Likewise. consumers tend to move from a better-known to a lesserknown brand (for instance. from Colgate to Sparkleen). some 93 per cent of Indonesian consumers felt that with the economic crisis. Thus. To some extent. Some 83 per cent of Indonesian parents would sacri®ce their personal consumption (of cigarettes and soft drinks. while the Taiwanese were better insulated. Generally. people still have to eat. or vacationing within the home country. Another indication of the resilience of children's food products is the extent of brand loyalty for them. This includes vacation travel to countries whose currencies have appreciated relative to local currencies.7 Product adjustments Necessities versus luxuries The trend towards voluntary simplicity suggests that adjustments in product purchases by Asians will vary depending on whether necessities or luxuries are involved. brand loyalty was found to be strongest for nutrition supplements (97 per cent) and milk (89 per cent)Ðboth of which are child-related products. although the effect on speci®c brands varies. Given the close-knit family structure in the region. many products and services aimed at maintaining the welfare of Asian children are considered necessities. products such as milk. smaller cars such as Hyundai have seen increases. Also.
patriotic smokers are switching from imported cigarettes such as Marlboro and Virginia Slims to local brands such as This and Get II. While the increased demand for local brands is principally generated by their lower prices.Figure 3. gloom and doom has driven Asian consumers to seek solace in `vice' luxuries such as gambling. vol 33 2000 105 . 36 per cent of previously loyal consumers would shift to `genuine' Korean products. If a Korean company were to be acquired by a foreign company. Thailand's `Thai Buy Thai' programme has stirred locals to do more for their country by buying Thai-made products.12 The economic crisis also has also seen an increasing trend towards buying generic products. cigarettes and beerÐstress relievers with escapist features. Between 40 and 65 per cent of Indonesian consumers have experimented with local brands. In Malaysia. with another 31 per cent believing that local products are actually superior. Middle-income Filipino consumers were reported to be buying fewer branded household and grocery items. the transition from branded to generic products has Long Range Planning. Asia Pacific (1998)] sion-proof than others. a strong government campaign to buy local products has in¯uenced 54 per cent of Malaysian consumers who now believe that local products are of the same quality as foreign-made products. while over 80 per cent of Thais spend less on imported products. Percentage of consumers buying more locally made products [Source: Taylor Nelson Sofres. Switching brands The economic slow-down has seen consumer preferences shifting towards locally made products. Ironically. Some 69 per cent of Koreans were found to disfavour foreign products. However.11 Figure 3 shows the percentages of various Asian consumers buying local products during the economic crisis.12 In South Korea. a nationalistic sentiment is slowly growing in this region. preferring generic (own-brand) products.
especially for products that are fragile or perishable. and then to generic products as the economic crisis has worsened. switching brands can be expected to be less prevalent for products with a high perceived risk. Indeed. Asian consumers have recognised that the limited government and international funds for recapitalising domestic banks would have to be prioritised. This tendency has also applied during the Asian crisis. Finally. a larger bag of rice stolen versus a smaller bag). it only holds true for those Asian consumers who are less adversely affected. such brands may provide a source of stability in an uncertain world. consumers have rushed to deposit their funds in betterknown and stronger foreign banks. there may be more wastage in larger packages if the product is damaged or lost (for instance. American consumers turned towards buying in bulk for cost savings. Package size During the US recession. For such consumers. in Malaysia and Indonesia banks such as Citibank and Standard Chartered Bank have seen their local deposit base grow as funds traditionally placed in local institutions have been redirected to them. sales of biscuits in smaller packages of 40 grams or less have increased. larger domestic banks have also bene®ted at the expense of smaller ®nancial institutions. Value for money considerations are also expressed in terms of varied product usage. Psychologically. although the unit cost may be higher. Price adjustments The economic crisis will see the evolution of a more rational and savvy Asian consumer. Products where the choice of the wrong brand can lead to disastrous outcomes are likely to be less affected. the outlay for each purchase is lower and thus more affordable. while Asian consumers appreciate low prices. Smaller packages are appealing to those whose discretionary income is low.Brands with strong equity are also likely to be more resistant to shifts in consumer behaviour occurred in two steps. larger packages may offer a false sense of abundance and therefore result in wastage. product life cycle costsÐhow long a product will last given the price paid and the maintenance costs incurred over its lifeÐare equally if not more important. Nonetheless. Multipur- 106 The Asian Apocalypse . with consumers switching from premium brands to challenger brands ®rst. with the larger and more important local banks being bailed out ®rst. However. For example.10 Yet. More aggressive price bargaining and more frequent pre-purchase price checking have already been seen. they will be more frugal in their consumption. To a lesser extent. Also. Danone has reported that in Indonesia. Consider personal ®nance: with many ®nancial institutions in the region on the brink of bankruptcy. Brands with strong equity are also likely to be more resistant to shifts in consumer behaviour. Asian consumers may feel that with smaller packages. smaller Asian homes may be less amenable to carrying large household inventories than US residences.
Long Range Planning.10 Promotion adjustments The types of promotion favoured by Asian consumers have also been affected by the crisis. The increased emphasis on durability and value for money suggests that the promotional message should include these qualities. By contrast. while 39 per cent stated that the crisis has forced them to switch to lower-priced brands. not only may such advertisements harm product sales. while over 83 per cent of Singaporeans have become more careful with their money. For example. vol 33 2000 imagery-based advertisements were relied upon less 107 .9 Likewise. consumers will tend to be more price-conscious. 23 per cent of Indonesians would choose brands based on price. Worse. Since social responsibility is a key contributor to perceptions of corporate excellence in Asia. while those in less severely hit countries (such as Singapore. over 68 per cent indicated that product durability was still more important to them than price considerations alone.7 In contrast. than pay a higher price and receive an accompanied free gift. one on each end of the stick. Some 59 per cent of Singaporeans found such advertisements frivolous and wasteful. over 76 per cent of Indonesian housewives indicated that they were switching to buying generic drugs because of the crisis. the IMF countries and Malaysia). For instance. The product sold well because it offers dual use compared to a normal one-colour lipstick. The extent to which consumers emphasise durability and price depends on the degree of ®nancial severity.13 this has potentially devastating long-term effects on identity management.pose products will be less resistant to sales decline than products with limited and in¯exible uses. imagery-based advertisements were relied upon less. Thus. but they may also lead to a company being perceived as socially inconsiderate. Taiwan and Hong Kong) can indulge their preferences for durability and value for money. An overwhelming 92 per cent of Indonesian consumers preferred to buy a product at a lower price without any free gift.9 The serious economic sentiment. Maintaining a higher price on products while including free gifts is not necessarily successful. the more intense information searches and the more deliberate purchase decisionmaking call for advertising to be more informative. Some 62 per cent of Singaporean consumers favoured advertisements that explained brand bene®ts and gave them reasons to select a product over competitive offerings. rather than quality. In countries where the crisis is more severe (for instance. brands using imagery-based advertisements were viewed as being unsympathetic towards the consumer's economic situation.10 The advertised products were perceived not to offer any real bene®ts. Crisis-hit consumers rationally evaluate the bene®ts to be gained from buying during a promotion. an Indonesian lipstick manufacturer came up with the ingenious idea of a crisis lipstickÐone that comes in two colours.
Besides the impact on sales and pro®ts. Consumers tend to be persuaded less by end-of-aisle displays meant for impulse purchases. Supermarkets have also bene®ted from the fact that Asian consumers are eating at home more. Given the consumer adjustments discussed above. discount retailers and neighbourhood stores. These include hypermarkets. . Businesses and their marketing strategies Like consumers. Families may thus engage in window shopping not only to keep up with market trends but also as a cheap form of leisure and recreation. downtown department stores have been hard hit by the crisis. Competition becomes more intense as businesses ®ght for a shrinking market.Asian consumers F F F continue to window shop Shopping adjustments While Asian consumers are spending less during the economic crisis. In contrast. they continue to window shop for at least two reasons. Asian consumers have also traded down in terms of their selection of stores. This translates into more active window shopping. their marketing strategies are also affected. 108 . they do continue paying attention to them while queuing to pay for their purchases. Stores that offer lower prices for the same product are becoming more popular. businesses are not insulated from the economic crisis. . However. Firstly. upgrade and expand during the economic crisis. Market mix strategies: Withdraw from weak markets Fortify in markets where brand is strong Acquire weak competitors Consider non-Asian and youth markets Consider resale market for durable products Product strategies: Prune weak products Avoid introducing new products to ®ll gaps Introduce ®ghter or second-line brands Adopt adaptive positioning Concentrate on simple and durable products Augment products with warranties Pricing strategies: The Asian Apocalypse . Secondly. what marketing strategies can businesses in Asia adopt to perform effectively under the poor economic conditions in the region? The following list summarises the marketing mix strategies that businesses in Asia can consider to survive. As with switching towards cheaper brands. window shopping is a relatively inexpensive pastime to indulge in during the crisis. their more deliberate decision-making patterns encourage greater information search behaviour.
market leaders should select the markets with the most potential and channel resources into expanding these markets. Those brands that can maintain or increase their sales volume are either likely to be the top brands (because of their strong equity) or cheaper generic brands. Promotion strategies: Maintain advertising budget Increase use of print media Provide assurances through rational appeal Use expert endorsements. during such times. Long Range Planning. Brands with middling market share are the worst hit. in Hong Kong's Tsuen Wan district. Carrefour has expanded its operations. Further. Businesses should withdraw from markets in which they are weak in order to fortify markets in which they are a leader or strong challenger. vol 33 2000 109 . Markets that are not growing and in which the business is weak should be divested. not contests and lucky draws Introduce customer loyalty programmes Train salesforce to anticipate questions and handle objections Distribution strategies: Location is still important Sell in discount and wholesale centres Prune marginal dealers Consider alternative channels . Maintaining commitment in markets where the business is the leader or a close challenger is essential during a crisis. With scant resources. traditionally respected ®gures and satis®ed-customer testimonials Avoid celebrity endorsements Adopt an advisory tone Capitalise on public relations Use discounts and premiums. Strong market challengers should enhance their competitive advantage. Market mix strategies During a downturn. Devalued regional currencies make Asian businesses cheaper to acquire for foreign businesses. while two local supermarkets (Nam Luen and Kwai Shing) have been forced to close. An economic crisis also offers opportunities for acquisition. Resources from the divestment can be channelled to protect existing strong markets and to groom others into stronger positions. For example. Therefore. businesses must take stock and consolidate their activities. a leaner and more ef®cient organisational mindset is needed.Improve quality while maintaining price Reduce price while maintaining quality Avoid reducing quality and price Consider product life cycle pricing .
has opened new stores in South Africa. Evidence of this is suggested by the double-digit growth achieved by Pepsi in 1997 and 1998. Thus they are relatively resilient to the crisis. but managed to do so following the outbreak of the crisis. Aside from cash injections. For example. others that had entered the European and US real estate and hotel markets. their purchasing power is not so badly affected by the crisis. China and India have remained generally attractive markets during the crisis. These include non-traditional markets where minimal business linkages had been established in the past. However. Although they do not earn much. mainly in Japan. South America and Australia. which may lead to a nationalistic backlash when Asian economies eventually recover. Mergers and acquisitions can enhance a business's market position and drive out marginal competitors. buying market share does carry an added risk in Asia. many Asian youths live at home with their parents. However. Hence. Singapore property developers such as Wing Tai.buying market share does carry an added risk in Asia businesses that have yet to enter Asia or which have entered Asia only lately can catch up with market pioneers through an acquisitions strategy. For example. Geographically. Those which relied on local and even regional markets found to their dismay that these were insuf®cient for long-term growth. In particular. like City Developments. Asian businesses which had ventured into Europe and North America were better insulated from the crisis. foreign businesses may also provide much-needed human resource and technological capital for Asian companies. cultural norms to do with saving face may be violated with aggressive bidding. In contrast. They are also less likely to have large bank loans. reported huge losses as their real estate holdings were written down to re¯ect their lowered market values. In spite of the recession. Morgan Stanley Asia estimates that there were $75 billion and $60 billion worth of such regional deals done in 1997 and 1998. New market opportunities The economic crisis has brought home the importance of a broader market base amongst Asian businesses. given their positive economic growth. respectively. which focused solely on domestic and regional markets. the economic crisis has spurred Asian businesses to examine new markets worldwide. Demographically. A host of acquisitions has taken place all over Asia. fared much better as their earnings stream and asset appreciation in the West offset the poorer contributions from local and regional operations. Korea and Thailand. the Hong Kong casual clothing chain. Societe Generale had failed to buy Asia Credit in Thailand. Hence. there still exist new market opportunities within the region. Thus Giordano. the youth segment may also be targeted.14 Designer coffee chains such as Starbucks and Cof- 110 The Asian Apocalypse . Once-reluctant Asian businesses are now more enthusiastic about being courted by foreign companies. particularly in the real estate and telecommunications sectors.
Instead. they return to their rural home towns and bring along with them brands not available in the rural areas. Product strategies Pruning existing products. even within one country. they have more brand loyalty than their urban cousins who are more exposed to competitive advertising and promotion. As city workers are made redundant. Thirdly. developing new products Businesses should prune weak product ranges and avoid unnecessary line extensions. These unemployed workers become mouthpieces for these brands and introduce them to the rural folk. Expensive items have a high depreciation charge during their early years. Lever Brothers in Malaysia feels that there are some bene®ts to the economic crisis. Purchasing a used Mercedes enables the buyer to preserve face while saving money! At the same time. The cash they get in the resale helps to offset the cost of buying another new product. Secondly. who otherwise would not be exposed to them. while Indonesian farmers have been reported killing their livestock as they could not afford feed or fertiliser. low-quality products. In fact. Nevertheless. consumers who have bought new durable goods and want a change (for instance. the rural market is a heterogeneous one. Firstly. Another market opportunity is the rural population. For example. A shorter product line is more manageable and allows for scarce resources to be suf®ciently and effectively devoted to brands that yield higher returns. Several Singaporean jewellery retailers are expanding by selling gold and diamond pieces priced below $300 targeted at the young. Thus. businesses should not introduce new products merely to ®ll gaps in their product line.15 The recession will also see a strong resale market for durables. Asians have never been keen on buying second-hand products. Although this market tends to buy cheaper.fee Bean & Tea LeafÐalso targeted at the youngÐare ¯ourishing in recession-hit Asia. upgrading from a 486 to a Pentium PC) seek a resale market to dispose of their products. the nation's nutmeg growers are prospering given the escalation of prices due to the rupiah devaluation and the increase in global demand for the spice. competitors are also less likely to attack any gap in the product line as they are similarly strapped for cash. However. The resale durable market has both a demand and a supply pool of customers. they are already ®nancially stretched. Buying such items new may be considered wasteful by many consumers. During a downturn. chains of second-hand shops selling computers have sprung up in the region. vol 33 2000 The recession will also see a strong resale market 111 . pickup trucks and motor boats. the crisis-hit consumer is more savvy and less likely to be attracted to any new product that comes by. introductions of new products Long Range Planning. Such consumers are more likely to buy expensive items from the resale market. Banda Island has been a lucrative niche for such products as satellite dishes.
Hence. Table 1 provides some classic illustrations of adaptive positioning by well-known businesses that Asian companies could perhaps emulate. durability and functionality. economic wisdom (Volvo's ®nancial safe haven). and the ordinary (for instance. Brand's core bene®t of mental±physical stimulation is maintained but adapted to suit the crisis. affordability (Michelin). Managing existing brands The economic crisis presents an opportunity for Asian businesses to strengthen existing brands (and perhaps develop new ones as well). Fighter brands are appealing because they assure consumers of quality at a lower price. existing Asian brands will need to adjust to the new mood and habits of the consumer through adaptive positioningÐretaining the core bene®ts of their products while adapting them to suit the revised consumption environment. the survival of the ®ttest Asian brands during this recession may signal an enduring strength suf®cient to penetrate global markets in the future. However. These tend to be products that are consistent with consumer values of frugality. Product augmentation During such hard times. Asian businesses should position their brands to appeal to Asian consumers who are now more favourably predisposed towards domestic offerings. A-1 sauce for hamburgers). businesses should still keep their eyes 112 The Asian Apocalypse . leftover foods in Ziploc). the economic crisis offers businesses. Such ®ghter brands may also capitalise on existing brand equity if their product quality does not damage the core brand. it has enlarged its market to include all adults. Brand's Essence of Chicken is an Asian health tonic known for providing mental and physical stimulation to children and expectant mothers. Further. Adaptive positioning signals that businesses are cognisant of the budget-conscious consumer and realise that ostentation and the ¯aunting of wealth is taboo during an economic crisis. it positioned itself as the tonic that helps employees tide over the crisis as they work harder to keep their jobs. However. Interestingly. Brand's in Thailand adapted its positioning while maintaining its core bene®t. instead of retaining the original positioning of luxury. When the Asian crisis started. Adaptive positioning requires recasting or re-framing to suit consumer sentiments. which are ®nancially strong. they focus on austerity (for instance. protecting the ¯anks of the core brand from competition. the opportunity to plug holes in their product lines in order to block future competition. These new products would serve as ®ghter or second-line brands. With adaptive positioning. be it for ®nancial or emotional reasons. they provide the added bene®t of good names at a lower price. given Asians' tendency for face-saving behaviour. as opposed to changing what the product stands for. In doing so.The economic crisis presents an opportunity for Asian businesses to strengthen existing brands should focus on those that add signi®cantly to the ®rm's bottom line.
This assumes that the ®rm has high customer loyalty and is willing to lose poorer customers to competitors. businesses can offer promotional discounts. Another strategy is to charge a lower price for the same quality product.Table 1. Improvements in the product offering should be in terms of durability and functionality as these are the features important to consumers in a recession. buyers were deterred from committing to property purchases. Price strategies Raising quality. In some industries. These are less likely to dilute brand equity compared to a price cut as they are temLong Range Planning. Such a strategy of price maintenance induces consumers to remain loyal to the ®rm by adding value to the product offering. keep your valuables in a safe place' Source: J. This strategy spells lower pro®t margins for the ®rm. However. if not improved. must be prepared for a smaller market share and lower pro®tability in the short term. businesses should bear in mind that once a price cut is implemented. The ®rm. but allows it to hold on to or expand its market share. lowering prices One strategy is to charge the same prices for higher quality goods. it will be easier for the ®rm to extend its product line to higher price brackets for higher pro®tability. Taking the Road Less Traveled: How to Increase Pro®ts in Asia When Times are Tough. on the future and invest in developing their long-term positioning. But when the economy recovers. once market share is lost it is hard to recoup because competitors work intensively to protect their own turf. Li augmented his real estate product by offering a guarantee of a 10 per cent capital appreciation over ®ve years. however. it is very dif®cult to reverse it when times improve. instead of offering a permanent price cut. Therefore. Chadwick. the ®rm's image of providing a high quality product is maintained. One such example is Hong Kong property developer Li Ka-shing in Singapore. It is appropriate if winning market share is a dif®cult task. Therefore. brand equity is not eroded. The recession brought about pessimism that the property market would fall further. Ogilvy & Mather. Adaptive positioning during an economic crisisi Brand Michelin Ziploc A-1 Volvo i Product Tyres Food bags Steak sauce Car Original positioning `Expensive. vol 33 2000 113 . Hence. Businesses may also augment their product offerings with extended warranties or guarantees aimed at providing consumers with peace of mind and thus persuading them that the product is worth purchasing. In doing so. but worth it' Airtight bags For sirloin steaks Safety Adaptive positioning `Surprisingly affordable' Airtight food bags for leftovers Also for hamburgers `In a ®nancial crash. Singapore (1998). To overcome such fears.
Businesses resorting to aggressive price tactics should resist lowering their list price because consumers may view them as permanent. and hence of consumer attention. leading to less clutter. Instead. while those that cut their budgets enjoyed sales and pro®ts increases of less than 44 per cent and 30 per cent. respectively. long-term pro®tability is likely to be compromised. Therefore. Thus. free maintenance. In contrast. lower quality A ®nal option is to charge lower prices for a lower quality product. such a strategy may dilute brand equity in the long run. advertising budgets are one of the ®rst things to be cut. it is easier and cheaper to gain a larger share of the advertising voice. Lower prices. Promotional strategies Advertising When a recession occurs. especially when the upturn occurs. When times are good. The appropriateness of using such media during a recession rests on consumers being more deliberate in their decision-making. Unfortunately. Print advertisements offer con114 The Asian Apocalypse rewards of advertising in a recession materialise when the economy improves . all businesses advertise intensively. lower-interest ®nancing. The rewards of advertising in a recession materialise when the economy improves. This may prove disastrous. as consumers may continue to perceive the product as being of inferior quality even when subsequent product improvements are made by the business. rebates. although market share and pro®t margin are maintained in the short run.16 Businesses that did not cut their advertising budgets during a recession doubled their sales and increased their pro®ts by 75 per cent when the economy improved. Businesses in Asia should therefore view advertising not as a cost but as an investment. loyalty programmes and longer product warranties can be offered as alternatives to a reduction in list price. More involving media such as print become more relevant during an economic crunch. The economic crisis provides a rare opportunity for businesses to leapfrog their competitors. As the mass market is likely to grow if economic conditions worsen. Consumers are likely to spend more of their time on and to pay more attention to these more involving media. and so are more likely to digest the information communicated. This is somewhat similar to a market penetration strategy where a business targets the mass market. this has been shown by US experience to be myopic. advertising expenditure in the region grew in the years before the crisis.porary and meant only to thwart competition in the short term. competitors advertise less during a recession. However. there is market potential here. To rise above the advertising `clutter' and be noticed by consumers is extremely challenging during an economic boom. during a recession. Coupled with lower costs and better servicing from hard-pressed media owners and advertising agencies.
Mediagraphics involves knowing what television programmes consumers watch. During an economic crisis. when consumers are more sceptical of advertising. The extensive information searching conducted by Asian consumers also suggests that advertisers should ®nd ways to make product information more accessible to consumers. Besides costing less. as the risk of making a poor purchasing decision leads to greater discussions with the spouse and close friends prior to purchase. The content of advertisements changes somewhat during an economic crisis. the use of traditionally respected ®gures such grandmothers (for cooking products) and mothers (for children's products) assures consumers that there will be social approval when buying the product. consumers identify more with ordinary people during a crisis as they are similarly hit by the recession. so that the relevant media are chosen to maximise the accessibility of product information. Product bene®ts are better communicated in the form of advice or product experience as they lend credence to the advertised claims. while the satis®ed customer recounts his favourable product experience. they value advertisements with quality assurances and clear communication of bene®ts. Television and radio commercials. Since consumers cannot afford to experiment. The endorsement of independent expert sources also reassures consumers. reliance on nonLong Range Planning. because of their ¯eeting nature and reliance on other sensory cues besides words. In Asia. Public relations and publicity Business should try to get publicity in the press. Furthermore. Newspaper articles are perceived to be credible because journalists are considered to be independent. and what radio programmes they listen to. vol 33 2000 the use of traditionally respected ®gures F F F assures consumers 115 . advertisements demonstrating the opinions of others are likely to strike a chord with crisis-hit Asian consumers. Advertisements that rely on testimonials of satis®ed Á ordinary customers will gain popularity vis-a-vis celebrity endorsements. For advertising. The respected authoritative ®gure gives advice to consumers. This lecture format differs from the psychological appeal and symbolic association formats more commonly observed in Asian advertisements. The tone of advertisements during a recession will tend to assume an advisory stance. what newspapers and magazines they read. this means that understanding the media demographics or `mediagraphics' of the target audience is essential.sumers the opportunity to read about the product at their own pace and to deliberate on the bene®ts of the product offer.17 suggesting that a recession may bring about more reliance on rational appeal and the use of expert endorsements. Similarly. where there are strong hierarchical delineations. Advertisements that discuss product bene®ts in a rational manner will be more attractive than those that rely on imagery. expert sources are greatly respected for their opinions. tend not to satisfy the informative needs of crisis-hit consumers.
Given the increased price consciousness. these sources are perceived to be honest and objective. Amway. especially since brand switching tends to be heightened when pockets are tight. Personal selling As consumers are likely to ask salespeople for more information before they make a purchase. tight consumer budgets are unlikely to encourage more consumption. Amway plans to increase its number of representatives in Malaysia and 116 The Asian Apocalypse Amway F F F introduced more promotions and offered better cash incentives F F F during the Asian crisis . Such promotional tools may not only persuade customers to switch to buying your brand. These loyalty programmes help tie consumers to the brand. have moved towards offering frequent ¯yer programmes to economy class passengers as well. introduced more promotions and offered better cash incentives to its distributors during the Asian crisis. Such promotions offer immediate and concrete gains. This is important. as not all consumers are winners. In contrast. selected promotions such as coupons. Promotion A larger proportion of the budget will be spent on promotion and public relations. An example of the sort of discounts given is the 5 per cent waiver. but they do not encourage purchases from those who do not intend to buy the product. They will generate purchases from consumers who have already decided to buy the product but who are not quite sure which brand to buy. In particular. Besides being free. Many Japanese retailers feel that cutting the sales tax is the quickest way to boost consumption. training should focus on anticipating the types of questions consumers will ask. handling objections and comparative product analyses. which used to reward only ®rst class and business class passengers. Moreover. Avon's strategy during the Asian recession has been to increase customer sales representatives. equivalent to the nationwide sales tax. for instance. Lucky draws and contests also fail to offer guaranteed returns. These promotions therefore speak directly to the consumers' pocket. if purchases are necessary to enter the contest or lucky draw. offered by major Japanese retail chains such as Ito-Yokado and Daiei.commercial sources such as newspaper and magazine write-ups increases. their newsworthy characteristic enhances the perception that these sources are important. Similarly. premiums and sales discounts are likely to ®nd favour with Asian consumers. Airlines such as Singapore Airlines. Therefore. clear guidelines of empowerment have to be drawn up. Customer loyalty programmes will see more usage during an economic crisis. salespeople have to be trained to handle consumer questions and objections. In such cases. There may also be a need to empower salespeople to make some independent decisions to help close a sale. promotions such as lucky draws and contests are unlikely to attract new buyers. but may also expand the market by encouraging those who would otherwise not be purchasers of the product.
Asian businesses must venture beyond the region to tap non-traditional markets. there are several aspects that are more important or peculiar to businesses operating under the economic crisis in Asia. Asians by far tend to shy away from a heavy reliance on commission. lower product life cycle costs. Corporate growth is more easily achieved when the entire market is growing. They cannot afford to be satis®ed with doing business in their own backyard in the same old way. These include the need to be more focused. preferring instead to have a substantial ®xed salary base. In terms of compensation. to enhance productivity by leveraging on resourcesaving tools such as public relations and publicity. Moreover. the recession has forced them to consider such lines as insurance selling. Secondly. effective market planning and implementation become vital. they may consider using alternative channels to reach their customers. They may drop dealers who are unpro®table. and reallocate their scarce resources to those who show better promise and performance. This stems in part from Asians' low tolerance for uncertainty. Retailers may spruce up their store and window displays to attract the crisis-hit Asian consumer. Therefore. and greater information to reduce perceived social and ®nancial risks. Distribution strategies Location is still the key to ensuring store patronage. No longer is it appropriate for them to simply go where the pro®ts are. there is increasing pressure to peg compensation to performance. no matter that the business may not ®t their resources and competencies. vol 33 2000 117 . However. However.Thailand. in a leaner environment. businesses are more cognisant of costs. Thirdly. to identify target segments more precisely. Conclusion It is not dif®cult for businesses to turn a pro®t when economic conditions are favourable. Direct selling and marketing may be contemplated to reduce intermediary expenses. they must become more professional and disciplined in their approach to business and marketing. to cut non-essential costs via pruning marginal product lines and channels. they should exploit consumers' tendency to purchase more local offerings by developing and strengthenLong Range Planning. Manufacturers may market their ®ghter lines to discount and wholesale stores favoured by consumers during the recession. with a larger percentage based on commission. however. Firstly. There is simply much less margin for error. Certain marketing strategies applicable across various recession contexts prevail in Asia. With the recession. and to understand and cater to a more value-conscious consumer by offering ®ghter lines. While many Asian graduates have generally not considered sales a worthwhile career. Hiring better quali®ed salespeople (such as graduates) is more likely during such conditions.
Kelola 18(VII). Leong and C. Roundtable on the Asian Consumer: New Strategies for New Realities. Smurthwaite. J. The crisis affords the opportunity to place under severe scrutiny the branding expertise of Asian marketers as well as the brands they manage. 27 August (1998). Research International Asia. When integrated. The Asian Apocalypse 118 . December. Prentice Hall. Thailand and Indonesia (1997). Thus. ACNielsen. Shapiro. 26 October (1998). S. 4. The Big Squeeze. H. pp. Korea (1998). Business Horisons. References 1. H. Tan. Clearly. 7. S11. Hirose. Coping with stag¯ation: voluntary simplicity. T. Asia Economic Survey. Ogilvy and Mather. Ogilvy and Mather. Marketing Management: An Asian Perspective. they refer to there being opportunity in danger. 28±30 September (1998). Lee. A. Thailand/Indonesia. Thailand Listening Post Study. p. T. 3. 120±134 (1981). Journal of Marketing 45(Summer). Marketing Institute of Singapore. Ang. L. businesses in Asia should adopt a longer-term view when making strategic marketing decisions. P. Ang. 10. Marketing Under Challenging Economic Conditions: Consumer & Business Perspectives. 36±40. Brands that survive this examination should prove ®tter for the test of the global market. M. The Asian Wall Street Journal. 12. S. Changes in Japanese consumer attitudes according to Dentsu consumer con®dence survey. 8. P. 9. How Consumers Cope with Economic Crisis: Learning from Korea. Singapore (1999). The Asian recession will eventually end. Sharma. Roundtable on the Asian Consumer: New Strategies for New Realities. Kotler. Wong. The economic crisis: the impact on consumer demand in Asia. Kotler. S. H. 17±20. I. Consumer behavior in the economic crisis and its implications for marketing strategy. P. Venkataraman. S. Singapore (1998). Kartajaya. 2nd edn. Indeed. 11. the two Chinese words for `crisis' (wei qi ) mean `opportunity' and `danger'. ACNielsen. 3±13 April (1978). M. those businesses in Asia which can seek and exploit market opportunities during these turbulent times will bene®t greatly when Asia recovers. 1998± 1999 The Asian Wall Street Journal. 6. S. Prentice Hall. Marketing Management. Englewood Cliffs. NJ (1980).ing indigenous brands. Most Consumers Throughout Asia Lose Con®dence. pp. 104±136 (1998). Thailand (1998). 5. p. Wijayanto and Yusohady. 2. 13. 4. 28±30 September (1998). J. Marketing in a conserver society. respectively.
Rosberg. J. 35±63 (1994). Chang. Ko. J. Osborn. 68±70 (1979). R. Indonesia's poverty: how bad is it? Asia Economic Survey 1998±1999. Global reach and local touch: achieving cultural ®tness in TV advertising. Cho. D. V. p. Hoobyar.14. 28±30 September (1998). Catalano. Y. Madrid. M. W. 17. Journal of Advertising Research September±October. 16. market priorities: Asia's biggest challenge? Roundtable on the Asian Consumer: New Strategies for New Realities. 26 October (1998). C. Scheideler and S. M. Is a recession on the way? It's no time to cut ad budgets. Zandpour. S. Market segmentation. The Asian Wall Street Journal. Jiang. Wagstaff. Long Range Planning. Industrial Marketing 64. S13. J. S. p. vol 33 2000 119 . Lin. Campos. 59. F. H. T. 15.
This action might not be possible to undo. Are you sure you want to continue?
We've moved you to where you read on your other device.
Get the full title to continue reading from where you left off, or restart the preview.