Category: awareness

Organisational excellence required to build global Asian brands

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Not too long ago, the Michigan (U.S.) State Business School reported that every US$1 (RM3.36) invested in marketing earned US$5 (RM16.80). By contrast, for every US$1 (RM3.36) invested in operational excellence, returned revenue was US$60 (RM201.75).

Despite such data, the majority of Asian firms have been slow to grasp the importance of everyday operational excellence that requires a continuing commitment to quality service, as well as processes that are effective from the customer’s point of view and advanced supply chain skills.

Many Asian firms prefer to spend fortunes on tactics to acquire customers yet very little on the operational and other strategic requirements needed to keep them. Sales and marketing growth based on increased awareness are fine and important but they are activities to be embarked on only after the operational foundations are in place. This is because an acquisition only approach is generally unsustainable.

Therefore, once a customer is acquired, it is critical to develop relationships to retain them. Firms cannot simply ‘hope’ they will come back time and time again because, with so much competition, so many alternatives, if you are not communicating with them – and selling to them, someone else will.

Customers build brands
And because customers have the power to make or break our brands, Asian companies must learn to do business on their terms. At the same time, they must become focused on creating PROFITABLE customers (on average, 15% of customers are unprofitable), ensuring those customers become our brand ambassadors, and consistently increasing their share of wallet.

Coca-Cola, Marlboro, Pan-Am, Ford and so on, represent mass-economy brands. These Western brands were successful because they shrewdly used the tools of the mass economy. They positioned themselves by repeatedly advertising in the mass media of one, two or three TV stations, one or two newspapers and knew where consumers were most of the time as there were few leisure time activities to take them away from the home.

Global markets
They also used mass production to achieve economies of scale, and they used distribution to penetrate mass markets. Global markets were opening up, disposable income was increasing, competition was limited. Customer retention didn’t really matter. Markets were growing so fast, and the mass-economy tools were so powerful, that it is was fairly easy to acquire a new customer for everyone that was lost. They also had a large, essentially one segment, ready made affluent domestic market.

But today, the mass economy is dead. The mass economy was killed by the fragmentation of the media, new leisure time activities, the Internet, greater competition, globalization, immigration, increasing number of and power of retailers, marketing segmentation and other forces.

In its place, we now have the “Customer Economy.” Companies no longer have the exclusivity to make the rules and control information by “positioning” products or promoting “brand equity” through advertising and PR like they did in the mass economy. Moreover, where in the past, prospects were segmented by demographics and geography, now they are part of communities. In these circumstances, can advertising and PR be effective to build brands? As part of a comprehensive brand strategy, yes. On their own, no.

For example, in the 10 year period to 2006, the computer manufacturer Acer spent US$10 billion (RM33.6 billion) trying to build a global brand via advertising. The effort failed. Acer withdrew from the retail market and has only recently reentered it with a new strategy focusing on individual segments.

Sony mass market failure
In 2000 and 2001, Sony spent an incredible US$2.5 billion (RM8.4 billion) on advertising worldwide. The result? The first three months of 2003 saw stunning losses, a 25% slide in the company’s share price in just two days and layoffs of more than 20,000 workers worldwide.

Unperturbed, Sony again tried mass economy tactics in 2008, spending an astonishing US$4.9 billion (RM16.5 billion) to position its diverse range of products including televisions, Blu-Ray players, music players, Laptops, PlayStation games, movies from Sony Pictures and new music from Sony Music. The approach failed and Sony is now exploring a more specific product focused niche approach.

Asian companies
Asian companies obsess with using traditional marketing tools such as advertising and PR to acquire new customers. But what good does it do to acquire customers if you have no idea how long they are going to stay and how profitable they will be? Also required are investments in operational excellence and accountability.

There is also a belief by many firms that they just have to ‘participate’ in an activity to get business. One local firm we’re familiar with collected 200 qualified leads from a trade show, yet months later those leads were still collecting dust! They were waiting for the prospects to contact them!

Another Asian company invested over US$50,000 (RM175,000) on a trade show, instructed 3 ‘top’ sales people to represent the company at the trade show and then failed to train the staff on how to behave and sell at the trade show. Moreover, there was zero investment in a lead management programme for leads generated. This meant the company was unable to measure the effectiveness of the trade show.

Finally, within 3 weeks of the trade show ending, two of the sales people manning the booth left the company, taking all the leads generated with them.

As we work to move up the value chain, the goal of every Asian company that wants to build a brand must be profitability, backed by measurement and accountability. Reaching solely for sales or market growth is no longer enough.

Repeat business
Not so long ago, in the US, to reach its sales goals, Ford offered $3,000 in rebates and other special deals off the cost of the Taurus car. Ford maintained its market share – but at the cost of losing money on each vehicle sold. Interestingly, Ford learned from its mistakes. Its next TV ad campaign in the US was based on the following line: “The highest proportion of repeat buyers of any car in its class.” What better testimonial is there? Little wonder then that in a report released by LeaseTrader.com in August 2009, Ford had the highest brand loyalty of any American automotive brand.

Despite the obvious need to invest heavily in retention strategies, ask a typical advertising agency about the branding issues faced by Acer, Sony, Ford and other companies, and what do you think the most common response will be?

Exactly. Recommendations for more ads, in more media across more platforms! They’ll promise a better creative team to provide greater creativity, but what’s really required is accountability for results! The usual agency attitude of “spraying and praying!” may have been the best strategy during the mass economy when there were a limited number of media conduits. But in the customer economy, the proliferation of media outlets and competitive advertisers now makes it practically impossible to build a brand solely based on ‘spraying and praying’.

Strategic approach required
What Asian companies need more than anything else is a strategic approach to branding that is aligned with the new imperatives of the customer driven global economy. Branding in the customer economy requires a fresh look at how the organisation engages with customers, as well as market and profitability requirements.

Rather than a simplistic reliance on logos and creative driven, one-size-fits-all, repetitive advertising, branding today demands research, data, measurement, supply chain effectiveness, customer intelligence, service AND accountability to both customer requirements and resources spent. Only once the company has identified who it should talk to and how, can it start to talk to those prospects.

Because acquisition is so expensive, and existing customers make the best brand ambassadors, branding also requires an emphasis on the identification and retention of PROFITABLE customers. This is especially true as the balance of power shifts from sellers to buyers.

The payoffs from such customer-economy branding can be substantial. British Airways calculates that customer retention efforts return $2 for every dollar invested. The clothing label Zara has thrived against powerhouses like Gap by moving from four collections a year to releasing new styles every two weeks.

So, as Asian firms attempt to move up the value chain, it is imperative companies monitor their retention rates (which fewer than 20% of companies do), because it is the best indicator of future profitability and brand strength.

Track RFM (Recency, Frequency, Monetary Value) because it shows which customers may be prone to defection and which are candidates for up – or cross – selling. Since it is likely 20% of customers are generating 80% of profits, segment customers according to profitability, and develop unique value propositions for the top 1%, 4% and 15%.

Calculate the lifetime value of clients. For instance, Ford calculates that a customer who buys his first car at the age of eighteen, upgrades it every three years and services it at a Ford dealership is worth a six figure sum to Ford over a lifetime. Cadillac estimates the lifetime value to be $300,000.

Revisit dormant customers. And optimize spending by developing marketing ROI based on actual customer profitability.

Other areas of organisational excellence that are key to building global Asian brands include recruitment and training. The retail sector is only realizing a fraction of its potential. This is partly due to the lack of training of staff and subsequent indifference of frontline staff when interacting with customers. If there is no attempt to build rapport with a prospect, why should the prospect return?

This is also true of manufacturing. One company in Malaysia we contacted recently listed 2 markets it wanted to develop as the UK and France. Yet when we called the office, no one spoke English.

Building Asian brands will take much more than basic advertising and PR. Core requirements include research, accountability, operational excellence, data management and customer equity (lifetime value of customers).

In Malaysia, according to research carried out by PriceWaterhouse Coopers, 86% of Malaysian CEOs and their Board of Directors say that they believe in the economic potential of effective brand building. However, almost the same number of CEO respondents admitted that they do not have a brand unit to integrate brand practices within their organisation. Sentiments are similar in Thailand, Indonesia and Vietnam

Until those C level executives take the plunge and invest in their brands by building operational excellence into their brand strategy, the concept of building global Malaysian or other Asian brands will remain just that, a concept.

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In a social media world, are Billboards a necessity or expensive exercise in vanity?

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We all accept that the way consumers source and absorb data has changed dramatically in the last 10 years. Instead of listening to brands and what they have to say about themselves, consumers now listen to other consumers and buy brands based on data sourced from those other consumers.

The way consumers partition their worlds is also changing and nowadays, consumers segment themselves into communities. For companies, this should be seen as an exciting development because it gives them the opportunity to communicate directly with consumers in pre identified commuities using content that resonates with those communities in a more personalised and dynamic manner and using tools that are widely available and relatively inexpensive.

But when we meet with prospects, they only seem to be interested in traditional tools such as print ads, TV commercials and billboards. And they soon lapse back into semi indifference as we suggest the future is not about these expensive, outdated tools that are increasingly closed out by consumers.

All prospects seem to want is reach, awareness and creativity to build a brand. The high profile, mass economy tools and creative stuff that looks good, reaches the most consumers, irrespective of whether or not the product or service is relevant to those consumers and wins agencies awards.

Even if it means spending millions of Ringgit on immeasurable campaigns that are lost in the fog of messages consumers are bombarded with every day. Even if it means they cannot measure the effectiveness of the campaign with real, actionable data that they can use to save money and improve the effectiveness of future campaigns. Even if the messages within the campaign make claims the company simply cannot live up to, they still prefer this route to less expensive, targeted messages with relevant content to specific communities based on the requirements for value of that community.

It’s as if they are reassured that they are getting value for money because they can see the print ads, the billboards, the TV Commercials and therefore, so can lots of other people. Sure, billboards can be an inexpensive medium to pass on a message to a large audience. Indeed one company BPS states in their marketing collateral, …”Perhaps it’s because they (billboards) reach more people for cheaper prices than any other type of media.” But is reaching more people for cheaper prices a sound strategy for a social media world? From this we deduce that if lots of people see the product or service on TV or on a billboard, then many of them will seek out the product or remember it and buy it when they encounter it in the ‘flesh’. This may have been acceptable in a more sedate world, with limited competition etc. But we all know that in today’s marketplace, this approach is no longer effective.

Is this an Asian thing? Or is it universal? Here in Malaysia, one mass economy tool that is really popular is the billboard. Billboards, and in particular getting a company on one, is fast becoming a national obsession. One prospect recently interupted our strategic proposal and asked us to find a number of billboards at strategic locations across the capital to raise awareness of the company (The company is almost 100 years old).

The belief is that if enough consumers see the product on a billboard, preferably a really big billboard alongside a really busy highway, then the success of the brand is all but guaranteed. This obsession is growing fast. Currently, out of home accounts for only 2% of ad spend in Malaysia, but it is growing at over 35% per annum and is now worth in excess of RM100,000,000 (US$30million).

But I fail to understand the logic in this. Because think about your behaviour when you are driving. Unless you spend your days splitting molecules or working on a vaccine for AIDS, driving is probably the most complicated daily activity you will do. Not only is it a complicated activity that requires great skill, but according to research, it is a skill that consists of more than 1500 ”sub skills”.

When we’re driving, there is no opportunity to relax (This is where a wry grin appears on the faces of Malaysians). Throughout the journey, we are navigating badly signposted and unforgiving roads and terrain that changes on an almost daily basis. We’re constantly scanning the environment (well some of us are) for cars that don’t signal, pedestrians who take their time crossing the road, despite the obvious implications of being hit by a ton of steel at 50km, motor bikes driving the wrong way and debris from a recent lorry puncture. Plus, we’re constantly seeking information that can help us.

At the same time, we’re trying to maintain our position on the road. We’re also constantly checking our speed and mirrors (well some of us are), making decisions (apparently, about twenty per mile), evaluating risk and reward, looking at instruments and, despite the obvious futility, trying to anticipate the actions of the white wira with a black door and five girls in the back.

Whilst doing all this, many of us, and you know who you are, are sending an sms, talking on the phone, sipping from a water bottle or thinking about ___________________(insert name of premier league team). Others are trying to stop yet another fight between irritable kids or starting one with a spouse.

Research from the USA carried out a survey on one stretch of road in Maryland and, “found that a piece of information was presented every two feet, which at 30 miles per hour, the study reasoned, meant the driver was exposed to 1,320 “items of information”, or roughly 440 words, per minute. This is akin to reading three paragraphs like this one while also looking at lots of pretty pictures, not to mention doing all the other things mentioned above – and then repeating the cycle, every minute you drive.” (source Traffic: Why We Drive the Way We Do (and What it Says About Us) by Tom Vanderbilt). With all that going on, do billboards engage consumers effectively?

And billboards are not cheap. In Kuala Lumpur, the most expensive billboard in the country is on the federal highway, costs RM900,000 a year and reaches 252,000 cars daily. Less high profile billboards cost are around RM250,000 – RM500,000 per annum, depending on traffic. But branding requires so much more than reach today. Whilst reaching hundreds of thousands of consumers and creating awareness, especially for a new product may be an important step in the branding process of some products and services, it isn’t a goal, for any product of service.

Now I’m not suggesting for one minute that billboards are a waste of money. However, I am suggesting that you should get independent advice on whether or not it is the right tool for your brand. I’ve seen a number of billboards for B2B companies, one recently was selling shock absorbers. The major investment in that billboard and the production costs, would have been better spent on sales and marketing material to engage the automotive manufacturers and repair shops that purchase shock absorbers.

You also need to be careful how you chose the location. Just because 500,000 cars pass the billboard, doesn’t mean it is a good location. Equally important is the content of the billboard. Writing an essay will defeat the object of the billboard.

Some other questions you need to ask yourself include:

What role do billboards have to play in our brand strategy?
How can we measure the effectiveness of the campaign?
If we can’t measure it, should we do it?
What happens once we take the billboard down? How do we maintain momentum?
How can we leverage the impact of the billboard?
How can we make the billboard stand out?

It may be that a billboard will become a neccessary part of your brand strategy. But it is worth asking yourselves these questions first. Otherwise, your billboard will waste a lot of money that few companies can afford.

If having asked yourself these questions, you still believe billboards are part of your communications campaign, try to make them original. 3 dimensional billboards will definately get attention and so will digital boards. It amazes me when I see a photo of a watch on a billboard. We recently had a huge watch billboard outside our office. It was there for at least a month. No one in the office had ever heard of the brand so we decided to investigate it further to see what other communications were part of the campaign.

We couldn’t find anything so we can only assume that billboard was the extent of the communications campaign. As I write this, two months later, I have asked if anyone remembers the name. Nobody does. That’s probably RM200,000 wasted.

However, if that billboard had been digital and the watch actually worked, then we would probably remember the brand. Of course this doesn’t necessarily mean we would buy the product, but at least awareness levels would have increased.

This article has some great ideas for 3D billboards. A simple search of the Internet will uncover plenty more.

It failed once so let’s try it again

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According to a Ministry of Health (Malaysia) survey carried out in 1996, there were 2.4 million smokers in Malaysia. This was a rise of 41% over the number of smokers in 1986. Today the country has about 5 million smokers, about double the number in 1996. One can deduce therefore that the number is doubling every 10 years or so. As of 2003, approximately 49% of all adult males and 5% of all adult females are smokers.

Of most concern is the prevalence of smoking among young Malaysians. 30% of teenage boys aged 12–18 years smoke while smoking among girls doubled from 4.8% in 1996 to 8% in 1999. The prevalence of smokers aged 15 and above has increased from 21% in 1985 to 31% in 2000. This compares with about 21% of the population in the UK who smoke in 2009, down from 45% in 1974.

No data is available on what smoking costs the country but we do know it costs the Canadian government around RM10.5 billion in direct health care and another RM38 billion in lost productivity. Meanwhile revenue from taxes on cigarettes totaled around RM9 billion. Canada is a good benchmark for Malaysia because in 2001 approximately 5.7 million Canadians smoked, about the same as Malaysia.

To combat the rising number of smokers in the country, a number of initiatives have been put into place. These include a rapid rise in the price of cigarettes and a number of health ministry driven initiatives to alert smokers to the dangers of smoking.

The first of these initiatives was an anti smoking campaign launched in 1991, in conjunction with the National Healthy Life Style Campaign. This extensive campaign that ran for over 10 years raised the level of awareness of the hazards of smoking among the general public, both smokers and non-smokers.

The “Tak Nak” campaign was initially launched in 2003 and consisted of TVCs, Radio, print and Outdoor (including school notice boards). Costing almost RM18 million (US$5 million) for the first year, and rumoured to cost in total RM100 million for the 5 year campaign, it was widely lambasted in the media.

This is because although the campaign raised the awareness of the effects of smoking, it did little to reduce the number of smokers. Even the Health Minister Datuk Dr Chua Soi Lek said in 2005 that there was no indication that the number of smokers had gone down since the campaign began.

Despite the ineffectiveness of this campaign, in August 2009, The Malaysia Ministry of Health launched the latest (and most harrowing) installment (see video) of its anti-smoking “Tak Nak” campaign via TVCs. The TVC’s feature gruesome images of mouth cancer and lost limbs due to gangrene caused by smoking.

This campaign follows the legislation, earlier this year that all cigarette packets sold in Malaysia must carry graphic images related to smoking. These include images of the results of neck cancer and a dead foetus. Displaying these graphic images on cigarette packets is a requirement of the World Health Organisation Framework Convention on Tobacco control of which Malaysia is a signatory.

It’s not clear if the latest series of graphic commercials that are obviously designed to shock, and the images on cigarette packets are part of a strategic plan or two independent tactical campaigns.

I’m not sure what the goals of the latest campaign are but I am sure they do not want to simply raise awareness of the dangerous side effects of smoking. I would imagine the goals include reducing the numbers of smokers in Malaysia and discouraging young adults of both sexes from taking up the habit.

If these are the goals then one has to question whether or not this is the best tactic. Certainly evidence from previous campaigns in Malaysia and other countries suggests that campaigns featuring shocking images and graphic descriptions of the consequences of smoking using old economy tools such as TVCs, print ads and outdoor are ineffective.

Malaysia spent RM100 million over 5 years on such a campaign that was inneffective in bringing down the number of smokers in Malaysia. In the UK, after extensive research of more than 8,500 smokers over a ten-year period, the Institute for Social and Economic research found that the warnings on cigarette packets that smoking kills or maims are ineffective in reducing the number of smokers.

Likewise, chilling commercials or emotionally disturbing programs are also ineffective. The study also discovered that when a close family member become ill from the effects of smoking, the smoker takes no notice. In fact, according to the study, smokers only reduce the number of cigarettes or sometimes quit when their own personal health is at stake.

And even failing health may not persuade a smoker to reduce or even stop smoking because smoking is linked to a lack of psychological wellbeing and often failing health results in psychological decline.

I have a hunch that this campaign will not reduce the number of smokers in Malaysia. Data shows that traditional marketing tools are even less effective today than they were 10 years ago.

What is required is a data driven approach to the issue. Specific and comprehensive qualitative research with relevant targeted questions related to each segment (and each segment will be specific and targetted) that are designed to deliver actionable data. It is imperative that the audience is identified and then communicated with using content that resonates with them. It will be a long term effort. That doesn’t mean repeating the same one size fits all commercials or messages, this means developing a relationship with these partners through engagement.

Also critical to the development of the strategy will be the buy in from stakeholders such as doctors, educators, retailers and others. Discussions must be held with these key elements to determine strategies. Once research is completed and analysed, a comprehensive strategy must be developed featuring a fully integrated program to communicate with all stakeholders with specific emphasis on education at kampung level and dynamic, preventative programmes for schools. Existing smokers will be targetted individually through interviews with doctors, rather than one-size-fits all shock and awe campaigns.

Only once the strategic blueprint is ready can the implementation begin. There is no easy way to reduce the number of smokers in Malaysia. It’s going to take a long term investment in time, effort and money. Wasting money on creative driven campaigns that have not worked in the past is not the way forward.

Warning: Viewer discretion advised.

Pitching for a bank name change in Malaysia

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Last Friday we were pitching against 4 advertising agencies to a Malaysian bank. Essentially, the brief was for a name change and to create awareness of the name change in Malaysia. We were invited to pitch despite being a data driven brand consultancy. In fact I had personally discussed this fact with one of the corporate communications representatives at the bank.

He told me that if we went into the traditional FusionBrand pitch (We had presented to them 12 months ago) we would not get very far however, if we presented a ‘traditional re-brand’ pitch and suggest the FusionBrand approach for after the name change then we might generate some interest.

So, much to my chagrin, we pitched in the traditional way and suggested that this was only half the battle and what the bank also needed once the population was aware of the new name was a strategy to get prospects and customers into the branches and to buy product(s) and so on.

As my colleagues presented, I was imagining how the other agencies would make promises based on their new “positioning” of the bank.

I found myself thinking that what sort of a position could an agency offer the bank that would make them stand out from all the other banks? What position would make consumers cast aside their ingrained perceptions (not very good) of the bank? How would a new positioning strategy encourage prospects to walk into branches? And once they had walked into those branches, how well preparred would the staff be to sell to them?

I already knew that one of our competitors was a global agency but because they are very busy they were outsourcing the creative element so it was unlikely (though not impossible) that they would have the best talent in the market working on the creative.

And then I thought how could the bank make inroads into existing markets using the same type of ‘positioning strategy’ that all the other banks are using? Sure, the tactics might be different, then again perhaps not, but the positioning strategy, of finding a space in the consumers mind would be the same.

I also thought of how tumultuous the world is at the moment and how any positioning ‘strategy’ that had been implemented before the global economic crisis would be a worthless (and expensive) waste of money now because the world is a different place compared to even a year ago. What if something similar were to happen in the next 6 months, as this bank’s positioning ‘strategy’ was implemented? Would they too waste their valuable resources?

I also thought about my own issues with my bank and how, despite numerous negative experiences over the last 10 years, I was still with them. And yet during that time, I’ve seen so many ‘re-brands’ of banks or financial institutions, RHB, CIMB, Bank Islam, etc, all of them used positioning to influence me and hope that I would become a client (I didn’t and I wonder how many did. I certainly don’t know anyone who has changed their bank in the last 5 years).

It made me realize that the FusionBrand approach, where we use customised research to deliver actionable data, operational excellence as the foundations for the brand strategy, brand planning to eradicate the hope mentality, and segment specific communications that resonate with those segments alone and meet the economic, experiential and emotional needs of customers and prospects in those segments. Metrics and measurement that ensures valuable marketing resources are not wasted are what is required to build a brand in the customer economy of today.

The issue of course, is whether the bank knows this! I will let you know how we get on!

Luxury branding in Malaysia & Asia

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Despite the global economic meltdown, the development of the retail sector in Malaysia continues at a phenomenal pace with over 1,000,000 square foot of additional mall space becoming ready this year. Passing almost unnoticed however is the proliferation of international luxury brands in many of those malls. Familiar international names such as Asprey, Giorgio Armani, Prada, TOD’s, Van Cleef and Arpels and so on, have all entered the local market in recent years, encouraged by the success of exclusive names such as Bulgari, Cartier, Hermes, Louis Vuitton, Rolex and other famous names already familiar to KL shoppers.

Unusually in Malaysia, The Pavilion has clustered its luxury boutiques into a high profile area facing Bukit Bintang. Globally, this clustering of stores is nothing new. For centuries stores have organized themselves into districts based on what they sell – think Saville Row in London (tailors), Faubourg Saint-Honore in Paris (designer boutiques), Deira in Dubai (jewelry), and so on. The cluster approach allows the rich and famous to be dropped off in front of the store, rush in and make a purchase that would make a small African country drool and then rush out into the safety of the limousine without having to rub shoulders with the rakyat.

With its double story street facing façade the luxury section or ‘couture precinct’ of the Pavilion is an exciting development in the evolution of the retail sector in Malaysia. But there is one thing missing from this development. That is a luxury Malaysian brand.

And as Malaysia moves from an Original equipment manufacturer (OEM) economy to an Original brand manufacturer (OBM) economy, and the government rams home the need to move up the value chain, the retail sector, where so many Malaysian OEM cut their teeth, should be at the forefront of this step up the value chain. Especially as according to the MasterCard Worldwide Insight report, the value of the market for luxury products and services in the Asia-Pacific region will jump from US$83.3 billion in 2007 to US$258.7 billion in 2016. Not a bad segment.

What’s more, there’s already a ready made market because the largest number of tourist arrivals to Malaysia is from ASEAN countries, followed by Japan and China with India and the Middle East not far behind. And the burgeoning middle classes from these countries are notoriously brand conscious.

This interest almost obsession with brands is likely to continue according to Radha Chadha, author of “The cult of the luxury brand”. She believes that the Asian interest in luxury products is because of the massive changes – social, cultural, economic and political that have been affected by the traditional attitudes to who you are and where you are in the societal food chain.

She believes that over the past 50 or so years, many of the traditional cultural indicators of social standing in Asia – profession, family, clan, caste have been eroded by the onset of globalization, migration and education. Free of rigid social hierarchies, mass migration and the development of urban areas, more people are making money and making it faster. The way to differentiate oneself is by purchasing a luxury product that shouted, “I’ve got money, respect me.”

Displaying one’s status through outward appearances of rank and wealth is nothing new but Asians seem to have taken to it like the proverbial duck to water. And those LV bags, Chanel suits, Jimmy Choo shoes aren’t simple female indulgences, they are part of a new world order that identifies the wearers position in society. Indeed, these luxury brands are a modern set of symbols that Asian consumers are using to redefine their identity and social position.

The Japanese have been devouring brands for years. 94% of Japanese women in their twenties own a Louis Vuitton bag. In fact, the Japanese as a whole are the most brand conscious and a staggering 92 per cent of Japanese women own a Gucci bag, 57 per cent own a Prada one, and 51 per cent own a Chanel bag.

In fact, Japanese passion for luxury brands is so huge that they account for over 40 per cent of worldwide sales for most major luxury brands. Meanwhile, Asia accounts for a third of Louis Vuitton sales worldwide whilst Cartier depends on the region for half of its worldwide sales.

And what of China? According to the China Brand Strategy Association, 175 million Chinese people can now afford to buy luxury products. By 2010 their number is projected to reach 250 million. Already, Chinese consumers are responsible for about US$10 billion of global luxury sales. Following the announcement of the US$586 billion stimulus that is expected to encourage increased spending, 70% of consumers confirmed that they will spend more in the next 6 months than they did in the previous 6 months.

Rolls Royce, the iconic British luxury brand owned by BMW, expects to double annual sales volume from 1,000 to 2,000 when the new, smaller ‘Ghost’ is launched in 2010, many of the early enquiries for the yet to be launched model are from Asia. Not bad considering each car will cost over US$200,000.

So, with all this new found wealth in Asia, the time is ripe for the development of Malaysian luxury brands. And the good news is, Malaysian firms know how to manufacture quality products. They’ve been doing it for years for iconic brands such as Apple, GAP, Guess, Ralph Lauren and other well known global brands.

But developing a luxury brand is also like raising a family – it requires a long-term commitment and investment, attributes that don’t sit well with corporate Malaysia. It also requires limited production, value over volume, even with a successful line. It also requires quality, not only in production but also in marketing and service, especially service. Training of staff is key. Walk into the Cartier store in Kuala Lumpur and the staff will assess you based on a number of pre-determined factors. Pass the test and they’ll offer you a bottle of champagne to anesthetize the pain of the purchase!

Ongoing research is also critical to the long-term success of the luxury brand. Back in 1837, when Hermes was building its brand, the founders lent new products to customers to get feedback on how the products could be improved. Zara applies the same tactics today. If a new line doesn’t sell, it is pulled off the shelves immediately and replaced with a new range based on customer feedback on styles.

One mistake many brands make is that they ignore existing customers, preferring to always acquire new customers. The successful luxury brands have an ongoing relationship with their best customers who become brand ambassadors and grow the family.

And for those cynics who don’t think Malaysians can build luxury brands or that there is any money in luxury brands, think of Jimmy Choo, the closest Malaysia has come to a luxury brand. Six years after Jimmy Choo sold his 51% stake in his own company for US$25 million, TowerBrook Capital Partners recently paid more than US370 million for ownership of the iconic brand named after the charming cobbler born in Penang in 1961. And with annual sales that have grown since 2001 at a compounded rate of over 45% to more than US130 million today, the purchase looks like good value.

Another British based private equity group, Permira, paid US$3.5 billion a couple of years ago for the Valentino Fashion Group. This was one of the most talked about acquisitions of the year because although Valentino is a well respected brand in Europe, it does not have the penetration in Asia of say Giorgio Armani. This is reflected in the global sales of US$340 million for Valentino compared with US$3.1 billion for Giorgio Armani.

There is also a strong argument to suggest that luxury brands are recession proof. At the end of last year, when the American economy was in free fall, Saks Fifth Avenue had a massive sale, offering huge 70% discounts on iconic brands such as Manolo Blahnik and even Prada. However, at the Louis Vuitton shop inside the luxury department store, nothing was reduced. Recently, Moët Hennessy Louis Vuitton announced that sales in its fashion and leather goods division, which includes Louis Vuitton, increased by 11% to $2.1 billion in the first quarter of 2009.

So, as the average tourist spends only 22% of his budget on shopping in Malaysia compared with 50% in Hong Kong and Singapore, the time is ripe for Malaysian firms to start building brands that can take pride of place alongside Canali, Ermenegildo Zegna, Jean-Paul Gaultier and Versace in places like the Pavilion, Star Hill and other prominent malls in KL.