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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.
Introduction
Research on marketing during hard economic times suggests Swee Hoon Ang is an Associate
that consumers adapt their buying behaviour in view of Professor at the Faculty of
Business Administration,
expected lay-offs and rising interest rates.1,2 Fewer purchases
National University of
are made; purchases of selected products, especially luxuries,
Singapore. Swee Hoon Ang,
are postponed; price becomes a more critical consideration in Siew Meng Leong and Philip
decision-making; and purchases are driven more by speci®c Kotler are co-authors of
bene®ts sought. Psychologically and ®nancially, crisis-hit consu- Marketing Management: An
mers behave differently from those enjoying economic prosper- Asian Perspective.
ity. Likewise, business strategies appropriate during good times Corresponding address:
may become ineffective when there is a downturn. Strategies Department of Marketing,
that promote more purchases, conspicuous consumption, Faculty of Business
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
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 market-
ing 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 under-
stand 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 oper-
ating 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 adjust-
ments made by regional consumers.
. 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
General reactions
Reduced wastefulness
With the onset of ®nancial hardship, Asian consumers have
tended to be less wasteful, opting for a simpler lifestyle. Such
voluntary simplicity mirrors the experience of American consu-
mers during the 1970 recession in the USA. Then, consumers
embraced a `small is beautiful' attitude.2,6 Now, in South
Korea, 80 per cent of consumers have reduced their spending
on dining out, leisure activities and buying clothing and acces-
sories.7 Another 60 per cent have reduced expenditure on
beauty products, furniture and appliances. Similarly, it has
been reported that some 58 per cent of Thai consumers have
stopped buying fashion clothing, while 45 per cent and 46 per
cent have stopped buying whisky and magazines, respectively.8
Indonesian consumers indicated that they had reduced con-
sumption of fast food (90.8 per cent), imported fruits (85.2 per
cent) and beauty-care products (82.5 per cent).9 In Singapore,
over 73 per cent of consumers indicated that they had become
less wasteful in view of the economic downturn.10 These
examples show that the economic slow-down has made consu-
mers more frugal.
The consumption of most products has steadily declined as
the crisis progressed. As shown in Figure 2, large decreases in
consumption were observed for electrical goods such as wash-
Product adjustments
Necessities versus luxuries
The trend towards voluntary simplicity suggests that adjust-
ments in product purchases by Asians will vary depending on
whether necessities or luxuries are involved. Essentials such as
cooking oil are less likely to see a drop in consumption. To
some extent, personal-care products have also held up relatively
well. By and large, people still have to eat, clean their teeth and
wash themselves. In contrast, ``consumption of luxuries such as
consumption of fashion clothing and cosmetics has been more adversely
affected by the crisis''.
luxuries . . . has been Given the close-knit family structure in the region, many
products and services aimed at maintaining the welfare of
more adversely Asian children are considered necessities. Some 83 per cent of
Indonesian parents would sacri®ce their personal consumption
affected by the crisis (of cigarettes and soft drinks, for instance) to ensure that pro-
ducts deemed necessary for their children (such as food) can
still be bought.7 Hence, products such as milk, 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. Another indication of the resilience of children's
food products is the extent of brand loyalty for them. In Thai-
land, brand loyalty was found to be strongest for nutrition sup-
plements (97 per cent) and milk (89 per cent)Ðboth of which
are child-related products.8
Aside from tangible products, leisure activities are also likely
to see a decline. This includes vacation travel to countries
whose currencies have appreciated relative to local currencies.
Instead, travel to countries whose currencies have depreciated
relatively, or vacationing within the home country, can be
expected to rise. Eating out will also be reduced, with more
consumers cooking at home.
As shown in Figure 2, the degree to which consumer expen-
diture is reduced varies by country, depending on the scale of
the economic crisis. Indonesians appeared to be the worst off,
while the Taiwanese were better insulated. Also, within each
country, purchases of essentials such as toiletries were the least
hit, although the effect on speci®c brands varies. Generally,
consumers tend to move from a better-known to a lesser-
known brand (for instance, from Colgate to Sparkleen). Thus,
while overall purchases are held constant in some product cat-
egories, people buy lesser-known brands. Likewise, consump-
tion of speciality products such as softeners may drop, but that
of basic detergent is less affected. Similarly, sales in Asia of lux-
ury cars such as Mercedes and BMW have been hit, while those
of lower-end, smaller cars such as Hyundai have seen increases.
However, some luxury products appear to be more reces-
Switching brands
The economic slow-down has seen consumer preferences shift-
ing towards locally made products. Between 40 and 65 per cent
of Indonesian consumers have experimented with local brands,
while over 80 per cent of Thais spend less on imported pro-
ducts.11 Figure 3 shows the percentages of various Asian consu-
mers buying local products during the economic crisis.
While the increased demand for local brands is principally
generated by their lower prices, a nationalistic sentiment is
slowly growing in this region. Thailand's `Thai Buy Thai' pro-
gramme has stirred locals to do more for their country by buy-
ing Thai-made products. In Malaysia, 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, with another 31
per cent believing that local products are actually superior.12 In
South Korea, patriotic smokers are switching from imported
cigarettes such as Marlboro and Virginia Slims to local brands
such as This and Get II. Some 69 per cent of Koreans were
found to disfavour foreign products. If a Korean company were
to be acquired by a foreign company, 36 per cent of previously
loyal consumers would shift to `genuine' Korean products.12
The economic crisis also has also seen an increasing trend
towards buying generic products. Middle-income Filipino con-
sumers were reported to be buying fewer branded household
and grocery items, preferring generic (own-brand) products.
However, the transition from branded to generic products has
Price adjustments
The economic crisis will see the evolution of a more rational
and savvy Asian consumer. More aggressive price bargaining
and more frequent pre-purchase price checking have already
been seen.10 Yet, while Asian consumers appreciate low prices,
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. Value for money considerations
are also expressed in terms of varied product usage. Multipur-
Promotion adjustments
The types of promotion favoured by Asian consumers have
also been affected by the crisis. Crisis-hit consumers rationally
evaluate the bene®ts to be gained from buying during a pro-
motion. The increased emphasis on durability and value for
money suggests that the promotional message should include
these qualities. Maintaining a higher price on products while
including free gifts is not necessarily successful. An overwhelm-
ing 92 per cent of Indonesian consumers preferred to buy a
product at a lower price without any free gift, than pay a
higher price and receive an accompanied free gift.9
The serious economic sentiment, the more intense infor-
mation searches and the more deliberate purchase decision-
making 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. By contrast, imagery-based
advertisements were relied upon less. Some 59 per cent of Sin-
gaporeans found such advertisements frivolous and wasteful.10
The advertised products were perceived not to offer any real
bene®ts. Worse, brands using imagery-based advertisements
were viewed as being unsympathetic towards the consumer's
economic situation. Thus, not only may such advertisements
harm product sales, but they may also lead to a company being
perceived as socially inconsiderate. Since social responsibility is
a key contributor to perceptions of corporate excellence in
Asia,13 this has potentially devastating long-term effects on
identity management.
. 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:
. Promotion strategies:
Maintain advertising budget
Increase use of print media
Provide assurances through rational appeal
Use expert endorsements, traditionally respected ®gures
and satis®ed-customer testimonials
Avoid celebrity endorsements
Adopt an advisory tone
Capitalise on public relations
Use discounts and premiums, not contests and lucky
draws
Introduce customer loyalty programmes
Train salesforce to anticipate questions and handle objec-
tions
. Distribution strategies:
Location is still important
Sell in discount and wholesale centres
Prune marginal dealers
Consider alternative channels
Product strategies
Pruning existing products, developing new products
Businesses should prune weak product ranges and avoid un-
necessary line extensions. A shorter product line is more man-
ageable and allows for scarce resources to be suf®ciently and
effectively devoted to brands that yield higher returns.
During a downturn, businesses should not introduce new
products merely to ®ll gaps in their product line. Firstly, they
are already ®nancially stretched. Secondly, the crisis-hit consu-
mer is more savvy and less likely to be attracted to any new
product that comes by. Thirdly, competitors are also less likely
to attack any gap in the product line as they are similarly
strapped for cash. Instead, introductions of new products
Product augmentation
During such hard times, businesses should still keep their eyes
i
Source: J. Chadwick, Taking the Road Less Traveled: How to Increase Pro®ts in Asia When Times are Tough, Ogilvy & Mather,
Singapore (1998).
Price strategies
Raising quality, lowering prices
One strategy is to charge the same prices for higher quality
goods. Such a strategy of price maintenance induces consumers
to remain loyal to the ®rm by adding value to the product
offering. This assumes that the ®rm has high customer loyalty
and is willing to lose poorer customers to competitors.
Improvements in the product offering should be in terms of
durability and functionality as these are the features important
to consumers in a recession. In doing so, the ®rm's image of
providing a high quality product is maintained, if not
improved. Therefore, brand equity is not eroded. The ®rm,
however, must be prepared for a smaller market share and
lower pro®tability in the short term. But when the economy
recovers, it will be easier for the ®rm to extend its product line
to higher price brackets for higher pro®tability.
Another strategy is to charge a lower price for the same qual-
ity product. This strategy spells lower pro®t margins for the
®rm, but allows it to hold on to or expand its market share. It
is appropriate if winning market share is a dif®cult task. In
some industries, once market share is lost it is hard to recoup
because competitors work intensively to protect their own turf.
However, businesses should bear in mind that once a price cut
is implemented, it is very dif®cult to reverse it when times
improve. Therefore, instead of offering a permanent price cut,
businesses can offer promotional discounts. These are less likely
to dilute brand equity compared to a price cut as they are tem-
Promotional strategies
Advertising
When a recession occurs, advertising budgets are one of the
®rst things to be cut. Unfortunately, this has been shown by
US experience to be myopic.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, while those that cut their budgets enjoyed sales and
pro®ts increases of less than 44 per cent and 30 per cent, re-
spectively. Businesses in Asia should therefore view advertising
not as a cost but as an investment. The rewards of advertising
in a recession materialise when the economy improves.
The economic crisis provides a rare opportunity for
businesses to leapfrog their competitors. When times are good,
all businesses advertise intensively. Thus, advertising expendi-
ture in the region grew in the years before the crisis. To rise
above the advertising `clutter' and be noticed by consumers is
extremely challenging during an economic boom. In contrast,
competitors advertise less during a recession, leading to less
clutter. Coupled with lower costs and better servicing from
hard-pressed media owners and advertising agencies, it is easier
and cheaper to gain a larger share of the advertising voice, and
hence of consumer attention, during a recession.
More involving media such as print become more relevant
during an economic crunch. 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 infor-
mation communicated. The appropriateness of using such
media during a recession rests on consumers being more delib-
erate in their decision-making. Print advertisements offer con-
Promotion
A larger proportion of the budget will be spent on promotion
and public relations. Amway, for instance, introduced more
promotions and offered better cash incentives to its distributors
during the Asian crisis. Given the increased price consciousness,
selected promotions such as coupons, premiums and sales dis-
counts are likely to ®nd favour with Asian consumers. Such
promotions offer immediate and concrete gains. These pro-
motions therefore speak directly to the consumers' pocket.
Amway . . . introduced Such promotional tools may not only persuade customers to
switch to buying your brand, but may also expand the market
more promotions and by encouraging those who would otherwise not be purchasers
of the product. An example of the sort of discounts given is
offered better cash the 5 per cent waiver, equivalent to the nationwide sales tax,
offered by major Japanese retail chains such as Ito-Yokado and
incentives . . . during Daiei. Many Japanese retailers feel that cutting the sales tax is
the quickest way to boost consumption.
the Asian crisis In contrast, promotions such as lucky draws and contests are
unlikely to attract new buyers. They will generate purchases
from consumers who have already decided to buy the product
but who are not quite sure which brand to buy, but they do
not encourage purchases from those who do not intend to buy
the product. Lucky draws and contests also fail to offer guaran-
teed returns, as not all consumers are winners. Therefore, if
purchases are necessary to enter the contest or lucky draw,
tight consumer budgets are unlikely to encourage more con-
sumption.
Customer loyalty programmes will see more usage during an
economic crisis. Airlines such as Singapore Airlines, which used
to reward only ®rst class and business class passengers, have
moved towards offering frequent ¯yer programmes to economy
class passengers as well. These loyalty programmes help tie con-
sumers to the brand. This is important, especially since brand
switching tends to be heightened when pockets are tight.
Personal selling
As consumers are likely to ask salespeople for more infor-
mation before they make a purchase, salespeople have to be
trained to handle consumer questions and objections. In par-
ticular, training should focus on anticipating the types of ques-
tions consumers will ask, handling objections and comparative
product analyses. There may also be a need to empower sales-
people to make some independent decisions to help close a
sale. In such cases, clear guidelines of empowerment have to be
drawn up. Avon's strategy during the Asian recession has been
to increase customer sales representatives. Similarly, Amway
plans to increase its number of representatives in Malaysia and
Distribution strategies
Location is still the key to ensuring store patronage. Retailers
may spruce up their store and window displays to attract the
crisis-hit Asian consumer. Manufacturers may market their
®ghter lines to discount and wholesale stores favoured by con-
sumers during the recession. They may drop dealers who are
unpro®table, and reallocate their scarce resources to those who
show better promise and performance. Moreover, they may
consider using alternative channels to reach their customers.
Direct selling and marketing may be contemplated to reduce
intermediary expenses.
Conclusion
It is not dif®cult for businesses to turn a pro®t when economic
conditions are favourable. Corporate growth is more easily
achieved when the entire market is growing. However, in a lea-
ner environment, effective market planning and implemen-
tation become vital. There is simply much less margin for
error. Certain marketing strategies applicable across various
recession contexts prevail in Asia. These include the need to be
more focused; to identify target segments more precisely; to cut
non-essential costs via pruning marginal product lines and
channels; to enhance productivity by leveraging on resource-
saving tools such as public relations and publicity; and to
understand and cater to a more value-conscious consumer by
offering ®ghter lines, lower product life cycle costs, and greater
information to reduce perceived social and ®nancial risks.
However, there are several aspects that are more important
or peculiar to businesses operating under the economic crisis
in Asia. Firstly, Asian businesses must venture beyond the
region to tap non-traditional markets. They cannot afford to be
satis®ed with doing business in their own backyard in the same
old way. Secondly, they must become more professional and
disciplined in their approach to business and marketing. No
longer is it appropriate for them to simply go where the pro®ts
are, no matter that the business may not ®t their resources and
competencies. Thirdly, they should exploit consumers' tendency
to purchase more local offerings by developing and strengthen-
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