How the US ban on Huawei will impact marketing and agency partnerships in SEA

In a latest blow to Huawei Technologies, Panasonic said today that it will cease business transactions with the company involving the supply of electronic parts, multiple media outlets reported.  This comes after the US banned Huawei and its 70 affiliates from acquiring US components and technology without government approval. Among the list of companies that have severed ties with Huawei include ARM, Qualcomm and Intel. Meanwhile, Google will temporarily continue to provide Huawei with software and security updates for the next 90 days after initially announcing it would cut ties.

On the consumer front, Huawei users globally are also deliberating on the purpose of their future phones and to continue being users of the phone. Statistics from YouGov showed that Huawei has been a popular brand among Singaporean and Malaysian consumers in particular. Also, 44% of Singaporeans and 43% of Hongkongers view it as an up and coming brand, indicating the company’s potential to win over more consumers from these countries.

The news breaks in Asia at a time where the cellphone manufacturer is holding a regional media pitch which is being led out of Malaysia and covers markets including Singapore, Indonesia, Thailand, Vietnam and the Philippines. A+M understands that the pitch process has concluded but results have yet to be announced. On the basis of anonymity, one industry player told A+M off the record that while the news might play out in the media for a while, there is no reason for agencies to feel compelled to pull out from the pitch. In fact, it would still be business as usual for now, unless the client is calling the pitch off.

“Instead, if given the chance, I’d use it to present our point of views on the issue, to position ourselves as a true business partner,” the industry player said. The individual added that whether or not the client would shift their marketing budgets is mainly dependent on consumer sentiments as well.

As the event has just unfolded, kneejerk reactions such as consumers offloading their devices are expected. However, it is too early to determine how this is going to affect Huawei’s sales in the long run, since Huawei has publicly assured consumers that it has developed its own OS and so forth, the industry player said.

“One potential concern for agencies is the likelihood that marketing budgets might be slashed as a direct result of possible cost cutting measures, if Huawei’s bottom line is significantly impacted from this episode. But in any case, PR and marketing efforts should go hand in hand to effectively recuperate market share,” the industry player added.

Another industry player also told A+M off the record and on the condition of anonymity that the recent news developments are “highly political” and global, and doesn’t foresee it impacting the brand or media agencies directly as of yet- apart from how it impacts Huawei’s business.

According to the industry player, Huawei is a “strong brand” and this news might only lead to it becoming stronger in certain parts of the world.

“If Huawei is seen as being bullied, you might actually see improved business if they are able to sort out the current issue. Nonetheless, service partners will have to evaluate the business viability. Huawei is far too big and it’s not going to fall like a deck of cards. It’s a long game of attrition. It’s not the end, just the beginning,” the industry player said. The industry player added that in the short term however, service partners might expect Huawei to shift its budget from paid media to other forms such as PR to lessen the impact.

Meanwhile, Entropia’s founder Prashant Kumar said while the full implications of the US-China trade war has yet to be fully clear for Southeast Asia, the recent developments would slow down Huawei’s plans for global dominance. In the consumer sector, the inability to have the likes of Google and Facebook onboard can be “a major disadvantage” outside China, at least in the short and medium terms, he said. According to him, clients would be expected to “totally reset” their long term R&D plans in such a context. He added that Huawei would have visualised such a shift in strategic scenario years back and have its plan B in the pipeline.

“Technology in many ways is an ecosystem war and US is flexing its tech ecosystem muscle to isolate Huawei. In the long run, it will allow Huawei to be more self-sufficient. But in a world where network effect rules, the war to build a full scale ecosystem outside China is not going to be an easy one,” Kumar added.

Marketers’ perspective: Will the pitch be in limbo? 

Also weighing in on the pitch proceedings was a former marketer, turn consultant, who said that when clients are in a controversial situation, it should not affect the pitch process or the partners that they are working with. “In fact, my belief is that as partners with clients, the agency should try to understand the situation from the leadership team and be as supportive as possible, bringing solutions to their clients where possible, through thick and thin. The effort will indeed be appreciated by the client,” the former marketer added.

Eugene Lee, who heads up marketing at McDonald’s Malaysia says that in such situations, business in regional markets should go on as usual. “Huawei won’t be shutting down its operations because it has lost the Android platform. The giant will continue to produce phones, and will figure out a way to make things work,” he said.

“At the end of the day, the brand will still need to promote their phones, and a pitch is to win the business for the long term, not just for now. If a media agency pulls out of the pitch because of what has happened, you wouldn’t want that company to support you as a partner moving forward either,” he added.

A partner supports its client through thick and thin, regardless of the company’s circumstance.

Agreeing with Lee is Jack Wong, Celcom Axiata’s head of digital and consumer brands, who said as of now, it is important to conclude the agency appointment so it can assist Huawei as a partner to win the hearts of consumers.
He is also of the view that the political controversy will merely slow down but not halt Huawei’s growth as the brand is increasingly gaining popularity among consumers in the Asia Pacific region, which is becoming key to its global strategy.

“While political impact on businesses is inevitable, this also depends on the organisation’s leadership, which can help steer the company towards the right course. In Huawei’s instance, it could be working with new partners for their own OS and chipsets,” Wong said.

Meanwhile, Huawei also sent out a statement saying that it has made “substantial contributions” to the development and growth of Android worldwide. According to multiple media reports, it said that it will continue to offer security updates and after-sales services to all existing Huawei and Honor products. It also aims to continue building a “safe and sustainable” software ecosystem.

Consultancies dish out advice for agencies

Chiming in on the matter from a consultancy perspective is Darren Woolley, founder and global CEO, TrinityP3 who said that in such a situation, pitch consultants would recommend the client to communicate any major strategic or marketing impacts to agencies immediately under a mutual confidentiality agreement.

“We had a pitch a few years ago where in the middle of a pitch the CEO contacted us as we were about to walk into the first of three agency presentations to recommend we consider calling off the pitch because they had just sold the company,” Woolley said. He added that this is an example of what the client should have informed them up front as it would have recommended not proceeding with the pitch process.

Woolley also predicts that it is highly likely that the budget for PR will increase as Huawei may invest more in this space to counter the negative media coverage. Nonetheless, Woolley said it is important for Huawei to continue to drive customer demand for the brand and the products, while implementing a strategy in marketing and corporate affairs. This is to reassure customers and investors that Huawei is either working on or has a solution for providing continuity.
He advises agencies who encounter similar situations in future to keep a low profile and make no public comment. They should also work on developing their own proactive brief to share with clients to show that they understand the business and have their best interests at hand.

“Also, let the client know that if there are any surprise or unexpected changes to the process, you would appreciate being confidentially informed as early as possible so you are able to assist and manage internal resources and expectations,” Woolley added.

Meanwhile, a former consultant told A+M that there will definitely be a shift in budgets but how big the amount is remains to be seen. Clearly, Huawei needs to focus on fighting the battle about its ability to function as a business and these actions could have a “significant impact” on its existence. Hence, influencing governments, regulatory bodies and lobbying, for example, is not a job for advertising.

“However, Huawei will need to keep customers updated and maybe use them in its battle (that is a strategy decision Huawei will need to make) but I see this more of a secondary priority,” the former consultant said.

Read also:
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Huawei found to be tweaking phones’ performances to ace benchmark scores

(Photo courtesy: 123RF)