The second quarter of this year (Q2 2019) saw the Malaysian economy expand by 4.9% to RM348.8 billion, after recording a growth of 4.5% during Q1 2019. According to the Ministry of Finance, the GDP growth during this period was supported by solid domestic demand growth of 4.6% year-on-year (yoy), which was faster than the 4.4% rate recorded in the first quarter of 2019. The domestic demand expansion was helped by low and stable inflation. In July 2019, the consumer price index rose 1.4% yoy, slightly lower than the 1.5% rise in June.
According to the Department of Statistics Malaysia, all sectors in the economy posted a positive growth primarily supported by the services (57.2%) and manufacturing services (22.7%) sectors. Meanwhile, other sectors that contributed to GDP growth were mining and quarrying (7.5%), agriculture (6.9%) and construction (4.6%).
This is contrary to the trend in countries across the region which have been impacted by the ongoing US-China trade war. This includes Singapore where its Ministry of Trade and Industry downgraded the GDP growth forecast to between 0% to 1%. While it is "excellent" to see a positive economic trajectory for the new government, especially amidst an uncertain global landscape and escalating trade tensions between the US and China, Campbell Cannon, co-CEO at Ogilvy Malaysia told A+M it "will likely take some time" for this growth to impact the marketing and communications industry.
"On the whole, the growth seems to be coming from a renewed focus on Malaysia as an attractive hub for business, with renewed investments in the East Coast Rail Link, and manufacturing, making it a more long-term impact," he said.
However, Cannon said this makes for an "exciting engine" to propel Malaysia forward in the areas of technology and innovation. Clients who are optimistic about this will understand the need to plan for the long-term potential of their business, ensuring their digital transformation, innovation, and modern marketing plans are in place to keep them ahead of the curve in their respective categories, he added.
According to Cannon, the country witnessed a large spike in the consumer confidence index (CCI) last year as a result of the optimism following the general elections. While the CCI still remains buoyant, Cannon said there is a tendency for Malaysian consumers to return to cautious behaviours and more prudent spending, even if GDP is showing growth. He explained, "In an environment where shoppers become more price-sensitive and seek out promotions, marketers obviously need to keep this in mind in order to win, but also need to ensure their brand equity and purpose isn't diluted for short-term gains."
Agreeing with Cannon on consumers being cautious and prudent in their spending is Kristian Lee, CEO of Naga DDB Tribal, who said:
Unless brands are able to bring novel experiences that justifies the spending, it will continue to be a challenging market place for brands.
"This presents us opportunities to work closely with advertisers to push for fresh new ideas that go beyond traditional advertising, i.e. collaboration of brands to create new product offerings that are innovative, and new ways to enjoy an existing product or service, among others," Lee said. He added, that on the other hand, brands and retailers will continue to put their money behind tactical promotions to create short-term interest and sales push.
As such, agencies will need to come up with new promotion tactics to help clients standout in the sea of price promotions. When asked if he foresees clients spending more with the GDP growth, Lee said that while that might not necessarily be the case, like consumers, clients will "definitely be more prudent and ROI-focused".
According to him, if agencies are able to demonstrate the value and potential ROI, backed with data, clients are likely to be more comfortable to relook at how they spend. "They may not be spending more in larger scheme of things, but they may choose to spend more on activity which traditionally isn't their priority," Lee added.
Aggressive spend on the cards?
On the other hand, there is still a possibility that clients might increase their spending as adex growth typically correlates with GDP growth. Bala Pomaleh, CEO of IPG Mediabrands Malaysia, told A+M that this news serves as "a great indicator for advertisers to get more aggressive with their spends".
"We see many mid-size advertisers spending very lightly, but consistently throughout the year. As a result, these campaigns might not prove effective unless they are highly targeted to a very specific audience. We believe advertisers need to have more impactful spikes in spends, at least on an intermittent basis," Pomaleh said.
He is of the view that it is "an advantageous time" for advertisers to gain market share by investing more to promote their products and services. Pomaleh explained that media partners are offering "unprecedented value" not just in terms of ROI but also greater amounts of flexibility on customised solutions to encourage spending.
"Another important step is to continuously track results through analytics so that advertisers can make informed decisions," he said, adding:
When advertisers have clarity on what is working and what is not, ineffective spends can be rechanneled towards harder working platforms.
In this regard, Pomaleh said that media agencies today have various tools to help advertisers target more precisely for better returns. It is no longer enough to merely look at broad target audiences and compare media coverage to decide selection.
According to Pomaleh, agencies can now craft "high value audiences" which are smaller in audience size but far more likely to buy a product or service. Couple that with the right platforms, geography, content and numerous other criteria, and clients will be able to see far greater results.
"In today’s world, we can even measure weather patterns to decide when to increase our media weights. The science is at our disposal, and with good strategists crafting the solutions artfully, we will surely deliver better outcomes," he said. Pomaleh added:
To the advertisers who have been playing safe, now is the time to ride the GDP wave.