Cutting ad costs 'incorrect for Asian firms'

Cutting ad costs 'incorrect for Asian firms'

By Jim Della-Giacoma

JAKARTA (Reuters): Asian brands are under threat from international counterparts because domestic companies are cutting advertising costs to try to survive the region's economic crisis, a top advertising agency executive says.

But Miles Young, Ogilvy & Mather Worldwide Asia-Pacific president, said Asian firms were shooting themselves in the foot by trimming costs in this area.

He said depreciated currencies and cut-price rates meant the advertising budgets of international firms were going further, giving them greater exposure at the expense of local names.

He said nationalistic campaigns urging locals in the worst hit countries of Indonesia, South Korea and Thailand to buy domestic products were misplaced.

The best way to boost sales of local brands was to advertise the brands themselves, Young said in a recent interview in Jakarta.

"If you believe in your brand, then a recession is an opportunity," Young said.

But if local firms opted out of advertising, the market might skew too much towards multi-nationals, he said.

"The most effective way of supporting local brands is for local brands to be attractive to consumers and if they go quiet for two years multinational brands will take all the (market) share. No amount of government campaigns to 'buy Indonesian' can get over that problem," he said.

Indonesia has its "I love rupiah" and "I love Indonesia" movements complete with pictures of President Soeharto saying "I choose Indonesian products".

"Thais help Thais, eat Thai food, use Thai products, visit Thailand, let's save together," the slogans out of Bangkok say.

Young said the strength of a brand depended on what he called the "share of voice" that was not the amount of money spent but the share of exposure an advertiser had compared to his competitors.

"At a time when media rates are plunging for a client that is prepared to be aggressive, you can quite cheaply buy share of voice," Young said in a recent interview in Jakarta.

"Global clients such as Unilever and Nestle are very conscious of this as an opportunity and this is one of the things sustaining our business," he said.

But he said 50 percent of the company's business in the region still came from local brands.

He believed Indonesian firms should look beyond the present financial crisis.

"Indonesia is going to be one of the critical consumer markets of the next century regardless of the current situation and the fact that this next year is going to be extremely difficult."

"The great danger in a recession like this is that Indonesian brands will neglect themselves and therefore disadvantage themselves against foreign brands," he added.

Ogilvy & Mather's local affiliate Indo-Ad has estimated Indonesia will see a 50 percent decline this year in billings from the 1997 estimate of Rp 4.96 trillion (US$496 million).

The fall, combined with the soaring cost of U.S. dollar dominated newsprint and paper, is expected to cause Indonesia's media industry to shrink.

Indo-Ad expects the number of newspaper and magazine titles to decrease about 20 percent and the number of radio stations to fall to 550 from about 900.