This is my first guest post on this blog. I often have trouble coming up with content and I thought these were great insights from my guest blogger Dr. Matt McDougall, Group CEO & Executive Chairman of SinoTech Group. Matt is an active member of the SEMPO Asia Working Group and speaks at industry conferences around the APAC region.

Defining Value in an Global Economic Downturn

Any meeting I have (either formally or informally) with marketing folks in Beijing and Shanghai these days includes time speculating on the effects the global economic downturn is going to have on our regional ad business. Depending on whom I talk to, predictions range from a “small dip in first quarter revenues” to “it’s the apocalypse! The world is ending!”

Whatever the actual impact of the downturn, it is clear that this is accelerating a move by advertisers to ‘focus on value’. Advertisers are looking for ways to get much more for their RMB in 2009 than they got in 2008. Many commentators in the trade magazines have speculated that we will see a shift away from TV, outdoor, radio and print and a move toward digital to give advertisers more value.

I concur that this is a likely trend, however this is an oversimplification of the dynamics at play in China. To understand why this will happen, you first have to recognize that when it comes to how Chinese advertisers define value, there are essentially four types of advertisers in China:

1. The “value” Advertiser
This profile is underpinned on the notion of ROI. The better the measurable results for the company, its business, and its brand for a given level of spend, the greater the value. This is the kind of advertiser who is going to experiment with new media, who is going to be the most skeptical about traditional media, and whom we all usually think about when we talk about rational marketers.

2. The “relationship” Advertiser
This advertiser places a high degree of trust and value on their relationships with people. They have developed this relationship based on either past results or through their ‘Guanxi‘ network. Relationship Advertisers tend to be more local (Chinese companies) and deal with local Chinese Agencies. Although, I am seeing a number of ‘Foreign Agencies’ starting to identify and leverage this advertiser type.

3. The “price” Advertiser
This kind of advertiser has one focus; “How much does it cost?” “The less money I pay per unit of media, the higher the value I get”. As long as real rates fall or at least remain stable, value improves.

4. The ‘transient’ Advertiser
This kind of Advertisers will churn frequently. Irrespective of how good the campaign or strategy was they tend to want to try a new Agency or even account team within the same Agency. A frustrating client that tends to also change their campaign goals as often as their marketing team.

In the Chinese market, there are examples of all these types but it is the ‘price’ and the ‘relationship’ advertiser that dominate our client rostrum at SinoTech Group and our partner Agencies. Sadly, the recognition from advertisers on using and adopting performance and ROI centric approaches to media strategy, planning and execution is a small group.

So what does that mean for us in marketing this year? This, a year with economic uncertainty and more clients wanting ‘value‘. It means, we will see some of our advertising clients face tough economic times and this means a tendency for them to scale back their marketing spending. It also means your account teams need clear understand their advertiser ‘profile’ so they can align the marketing goals and working style too their clients psyche to ensure that the definition of ‘value’ is a shared notion. Value as defined by us may not actually be the same understanding of value they have.

Regards
Dr Mathew McDougall
Group CEO & Executive Chairman
SinoTech Group