Korea’s crisis is killing ad spend

Korea’s economic crisis has made branding a key issue in marketing to consumers facing the realities of unemployment, rising prices and falling incomes. A government-inspired “Buy-Korean” campaign designed to conserve scarce foreign exchange is hurting Korean as well as international companies. At the same time, a sharp drop in advertising spending by Korea’s major advertisers is ravaging the advertising and media industries.

Many Korean companies used to opt for foreign brand names to help sell their products domestically. An international ring to a name gave it cachet. But now that attitudes of the average consumer are strongly patriotic, the trend is quickly reversing itself. Foreign companies are also stressing the local content of their wares.

Italian sportswear maker Fila Korea now stresses all its fabrics and materials are from Korea. Pro-Specs, a Korean maker of athletic shoes, has scored a hit with ads asking consumers, “Are you wearing dollars?” in a direct appeal to nationalistic sentiments.

Korean companies making goods with foreign brand names are publicising themselves as purveyors of 100 per cent “domestic products,” but not always successfully. Morning Glory, a stationery company, went bankrupt in January when it failed to convince consu mers that its products were designed and made in Korea.

Ads for Dinno Galluci, a leather-goods subsidiary of Korean clothing company Sam Ai, display a special national flag. The flag has three Chinese characters in red ink that say: “We will soon gain our autonomy.” Alongside the copy reads: “Dinno Galluci is fighting its way out of these humiliating IMF times through exports.”

Imported cars are hard hit. Some of their drivers have been bumped off the road. On prime-time TV, Korean entertainers are trading in their Mercedes and BMWs for Daewoos and Hyundais. At Chrysler Korea, sales in December tumbled from a monthly average of nearly 200 cars to 34, and to 15 in January. Inchcape, once the leading importer of foreign cars in Korea, has shut down its operation.

Marlboros and Virginia Slims are no longer the badge to wear, Korean smokers are lighting up local brands like “This” and “Get II”. Sales of imported cigarettes, which were banned in Korea until a decade ago, have plummeted from 12 per cent to five per cent of the market in December and about two per cent in January.

Marks & Spencer’s department store in Seoul’s Myong-dong district now sees few customers.

“Consumers think buying foreign brands undermines Korea’s economy and threatens their own livelihoods. In such an atmosphere, there’s very little that can be done to builds sales,” says one Western marketing manager in Seoul.

The advertising industry in South Korea is in for a tough time. Kobaco estimates total ad spending will drop at least 40 per cent this year, and possibly by as much as 60 per cent. Agencies are planning to cut staff numbers by 20 to 40 per cent to cope with the slump in spending.