Regional Marketing Budget Allocation for 2009

October 2008

Executive Summary

• Increasing Trend to Digital and Below the Line – More than 40% of marketers in this study now invest more in unpaid activities than in paid Above the Line Media

• 2008 Budgets have been cut – 54% of marketers here now have less budget than when they started the year. 15% have more than 20% less budget , making the annual planning and implementation process extremely challenging

• Initial forecasts for 2009 were positive – based on initial fieldwork conducted in September, most Asian marketers had allocated more funds for the coming year. 62% projected increases, and 14% projected more than 20% increase over this year’s budget

• Re-contacted fieldwork this week shows major reductions already for 2009 – 94% of this group have already re-projected a decline in their initial budgets for next year, the majority of this group seeing declines of more than 10%

• Outlook for 2009 is now gloomy – 94% of respondents are forecasting the same or less budget for their brands for 2009. 25% see a decline of 20% or more on their 2008 budgets

Overview of study

• Due to the credit crunch, increasing oil prices and the general pessimistic outlook globally, many companies are reviewing its expenses including advertising expenditure

• The purpose of this study: – to better understand marketing budget changes from 2008 – 2009 – How budgets change the preferred advertising mediums

• The study was conducted in September 2008, prior to the deterioration of the economy globally

• However, during Oct 8th and 9th, a re-contact was done was all participants and the 2009 budgets were re-calibrated. See Chart 9 for the breakdown

Methodology

• This study was conducted via face-to-face, phone and email covering over 50 senior marketing decision makers , based in Asia

• This group covers more than 100 of Asia’s top 500 brands and represents more than US$3b of media locally, regionally and globally

• While China was most heavily represented (41%) , results were quite consistent across all markets , despite the optimism and growth coming out of the Beijing Olympics

Methodology – Size of marketing Budget

3%

18%

12%

31%

6%

6%

3%

21%

What is your company's forecast marketing budget for next fiscal year (2009)?

Between US$1.1M - US$2m

Between US$2.1M - US$5m

Between US$5.1M - US$10m

Between US$10.1M - US$20m

Between US$20.1M - US$30m

Between US$30.1M - US$40m

Between US$40.1M - US$50m

Above US$50m

Selection of participating marketers

Marketers’ location and remit

41%

5%8%

8%

11%

5%

16%

3%

3%

Please indicate the market for your marketing budget

China

Hong Kong

India

Malaysia

Singapore

Thailand

Regional

Global

Taiwan

0%

6%

3%

3%

9%

9%

9%

3%

9%

3%

24%

3%

6%

0%

6%

3%

6%

0%

0% 5% 10% 15% 20% 25%

10%:90%

15%:85%

20%:80%

25%:75%

30%:70%

35%:65%

40%:60%

45%:55%

50%:50%

55%:45%

60%:40%

65%:35%

70%:30%

75%:25%

80%:20%

85%:15%

90%:10%

95%:5%What is your current split between above-the-line (paid media)and below-the-line(non-paid media)for 2009?

Current Ave. Split between Above the Line (paid media) and Below the Line (Digital, Activation and Events) is 51/49

Still more emphasis on ATL but the trend is moving towards BTL

41

%5

0%

No significant difference in ATL/BTL split between local and regional marketers

7%

4%

4%

11%

11%

7%

7%

11%

21%

4%

4%

4%

4%

4%

0% 5% 10% 15% 20% 25%

15%:85%

20%:80%

25%:75%

30%:70%

35%:65%

40%:60%

45%:55%

50%:50%

60%:40%

65%:35%

70%:30%

80%:20%

85%:15%

90%:10%

ATL : BTL Ratio - Local Markets

14%

14%

29%

14%

14%

14%

0% 5% 10% 15% 20% 25% 30%

40%:60%

55%:45%

60%:40%

70%:30%

80%:20%

90%:10%

ATL : BTL Ratio - Regional

3%

3%

6%

9%

26%

15%

15%

9%

15%

0% 5% 10% 15% 20% 25% 30%

More than 20% above original plan

15% - 20% above original plan

10% - 14% above original plan

Less than 10% above original plan

Unchanged

Less than 10% below original plan

10% - 14% below original plan

15% - 20% below original plan

More than 20% below original plan

Is your current marketing budget more or less than when you started the year (2008) ?

2008 Actual vs Plan54% of marketers have seen a budget reduction

Most marketers got a lower than forecasted budget eventually

14%

8%

17%

3%

17%

28%

6%

3%

6%

0% 5% 10% 15% 20% 25% 30%

Up more than 20%

Up 15% to 20%

Up 10% to 14%

Up 5% to 9%

Up 0% to 4%

Unchanged

Down 10% to 14%

Down 15% to 20%

Down more than 20%

Overall, how does your 2009 marketing budget compare to 2008?

Initial Response on 2009 Planning (Field work Sept 2008)

62%

15%

Before crisis

Revised response on 2009 planning(Fieldwork Oct 9th, 10th) shows major shifts

21%

73%

6%

Will the recent economic downturn of the last two weeks impact your marketing forecasts for next year?

Yes, it will significantly impact it (more than 20%)

Yes, it will have some impact on it (0-20%)

No, it will not impact our budget forecast

Revised response on 2009 planning (Fieldwork Oct 9th, 10th) shows 94% with same, less budget for 2009

0%

3%

0%

0%

3%

39%

19%

11%

25%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

Up more than 20%

Up 15% to 20%

Up 10% to 14%

Up 5% to 9%

Up 0% to 4%

Unchanged

Down 10% to 14%

Down 15% to 20%

Down more than 20%

Overall, how does your 2009 marketing budget compare to 2008? (Revised)

From 62% to 6%

From 15% to 55%

After crisis

About R3Our reason for being In a word, we are about performance. R3 (www.rthree.com) was set up in 2002 in response to an increasing need from Asian marketers to enhance their relationships and the return on investment with their agencies. We act as a coach to marketers wanting to play better Our background Since we started, we’ve worked with more than 50 companies on global, regional and local assignments to drive efficiency and effectivenessWe have talent based in Sydney, Beijing, Shanghai, Tokyo, Singapore, Delhi Where required, we have strong working partnerships and benchmarks in US, Europe and Latin America What we do Our core service offerings include proprietary processes and tools in the areas of Agency Relationships + Remuneration + Reviews (R3) Agency Compensation - we analyze agency process and compensation in detail and establish fee schemes, using benchmarks for 25 Asian cities Financial Audits – we audit creative and media costs, rebates and time in detail using professional in-house finance experts with real insightAgency Selection - We assist in identifying, reviewing and compensating the best agency be it a creative, media, CRM, BTL, PR or interactive agencyAgency Partnerships - We help in evaluating and improving agency relationships using an R3 proprietary online tool, process, and consulting skillsMarketing Training Workshops - We offer workshops on enhancing a marketing team’s performance and skills of communication and of mediaIndependent Media Analysis - We offer professional analysis of the media process, planning and buying with unique benchmarks and toolsProprietary Research – we invest in research on sports, engagement and pre and post campaign tracking to help independently validate performance How we do it In six years, we completed a research study of 2,000 marketers and their agency relations We have now analyzed over 500 marketers and their agency fees across the region Each month we exclusively track over 200 agency new business wins We recently co-authored a book “Sharpening the Saw” about our analysis of agency fees . We maintain an ongoing database of media costs for key Asia Pacific marketsWe have co-developed software to measure agency and media performance in Asia Who are our clients in Asia Pacific? There are client testimonials at www.rthree.com/clients adidas Coca-Cola Johnson & Johnson GSK Samsung Singapore Airlines VISA