Customer satisfaction is more important than ever these days.
Anticipating higher cost of living ahead, Malaysian consumers are becoming increasingly cautious in their spending, and have developed more rigorous and aggressive coping mechanisms. While this may present challenges to brand owners and marketers, it also presents them opportunities aplenty.
Jimmy Lim, General Manager of media agency PHD Malaysia (pix), tells Business Circle: “The key going into 2015 is in really understanding how consumers react to rising costs – across different product categories – and in driving relevancy in communications.”
“From our study we found that when it comes to product categories which are necessities, consumers will gravitate towards cheaper brands and ‘downtrade’. When it comes to FMCG [fast moving consumer goods] non-necessities such as skincare or snacks, consumers gravitate towards reducing the frequency of consumption. Hence, the message that we use to drive communications will be crucial,” he says.
The study Lim refers to is the one PHD Malaysia had undertaken in partnership with Epinion and Media Prima Group to understand the impact of the rising cost of living in Malaysia. Epinion had collected responses from 500 Malay and Chinese online consumers aged 15 and above in October 2014. PHD explained that only Malay and Chinese consumers were polled because they represent the bulk of the population and most marketers tend to look at these two groups.
The study found that while Malaysian consumers have no clear understanding about the impending goods and services tax (GST), 71% expect prices to soar once GST sets in. Some 89% of them were convinced that costs will just get higher and higher. There believe there is nothing they could do but to tighten the belt and live with it.
On top of the constricted “refrain and avoid” approach, consumers are also turning to a more aggressive “deduct and reduce” strategy by cutting down even the necessities. They have been trying to maximize their money with value-buy, discounts and sales in the past one year. Many are looking at new sources of income via extra job or stretching their money with other financial means like credit cards.
Lim urges local brands and small and medium sized enterprises (SMEs) to see this period of anxiety as an opportunity to gain market share as multinational brands may take more time to settle on their strategic plans to combat the anxiety of GST. “They should pounce hard as such opportunities don’t come too often,” he exclaims.
Among others, the study shows that in the past year, consumers have been spending more time at home and participating in “cocooning” behaviour. Given the consumers’ propensity to save money, Lim expects the cocooning trend to continue. “Opportunities here are for brands to be the catalyst for fun in-home entertainment. We also see a further uplift in digital time spent, likely because consumers see the internet as a necessary alternative to out-of-home entertainment. As such, we expect digital spend to further grow in 2015,” says Lim.
Lim reckons adjusting to the GST will take time, as will truly understanding the impact of GST on businesses and consumer behaviour.
“The most important thing is to be prepared! The consumers will be more discerning and selective when purchasing a product or service. They will be time poor as a result, so attention span will be even shorter. Hence, the key to winning the game is not about increasing ad spend, but where and how you spend to create more meaningful exchanges with consumers to build resonance for your brands,” maintains Lim.
Adex to grow this year
PHD expects positive growth in Malaysian advertising expenditure (Adex) in 2015. “Regardless of whether it is due to inflation, GST or even real increases in ad spend, brands need to be mindful that consumers are going to throw more challenges at them given their cautious outlook in 2015,” he says.
Lim believes advertisers will be promoting aggressively in the first half of the year, before GST kicks in. “Anxiety over the GST implementation will most likely subside by the second half. That’s when both advertisers and consumers alike will come around and accept GST as the new normal.”
“Property developers had a very subdue 2014 and I expect them to continue holding back [advertising] till after April 2015. I believe they will come back and add to the Adex significantly in the second half of 2015. That will be followed by the banks which will seize the opportunity to market their property loans once the consumers come back into the property market.
“I also expect the hospitality sector to promote aggressively to encourage locals to spend their holidays in Malaysia given the cautious outlook and the weakened ringgit. Budget airlines will then follow suit. Once these take place, the retailers and shopping malls will start to leverage on the uplift in domestic travels. After all, local holiday makers will still have to shop and eat once they arrive at any local destination,” Lim forecasts.