Under the Influence with Terry O'Reilly - S1E01 - A New BRIC In The Wall

Episode Date: January 9, 2012

Welcome to the first episode of Under The Influence. In this show, we focus on the emergence of the BRIC nations as the new marketing force in the world. BRIC is an acronym for: Brazil, Russia, India and China. Hosted on Acast. See acast.com/privacy for more information.

Hi, it's Terry O'Reilly. As you may know, we've been producing a lot of bonus episodes while under the influences on hiatus. They're called the Beatleology Interviews, where I talk to people who knew the Beatles, work with them, love them, and the authors who write about them. Well, the Beatleology Interviews have become a hit, so we are spinning it out to be a standalone podcast series. You've already heard conversations with people like actors Mark Hamill, Malcolm McDowell, and Beatles confidant Astrid Kershaw. But coming up, I talk to May Pang, who dated John Lennon in the mid-70s. I talk to double fantasy guitarist Earl Slick, Apple Records creative director John Kosh. I'll be talking to Jan Hayworth,

who designed the Sgt. Pepper album cover. Very cool. And I'll talk to singer Dion, who is one of only five people still alive who were on the Sgt. Pepper cover. And two of those people were Beatles. The stories they tell are amazing. So thank you for making this series such a success. And please, do me a favor, follow the Beatleology interviews on your podcast app. You don't even have to be a huge Beatles fan, you just have to love storytelling. Subscribe now and don't miss a single beat. We'll see you next time. new locations. What matters is that you have something there to adapt with you, whether you need a challenge or rest. And Peloton has everything you need, whenever you need it. Find your push. Find your power. Peloton. Visit Peloton at onepeloton.ca. BetMGM, authorized gaming partner of the NBA, has your back all season long. From tip-off to

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You're in good hands with us. You're under the influence with Terry O'Reilly. One night in Sao Paulo, Brazil, a man named Washington Oliveira was driving home after work when he was stopped by a police roadblock. Except it was a fake roadblock, and the police were imposters. They ordered Oliveira out of the car and kidnapped him. They communicated to Oliveto's family through the classified ads and demanded a $10 million ransom.

The kidnappers chose Oliveto because he was one of the most celebrated people in Brazil. But here's the interesting thing. Even though he had rock star status, he wasn't a rock star. He was an ad man. Washington Oliveira was the most awarded copywriter in Brazil, putting his country on the map in the advertising world. He was named the Advertising Executive of the 20th Century

and the Advertising Executive of the 21st Century by the Latin American Association of advertising agencies he was chosen as the most trusted man in advertising by Reader's Digest magazine he is the seventh most mentioned Brazilian outside of Brazil he had a song written about him there is a dish named after him in a top San Paolo restaurant. And because of all this notoriety, Washington Oliveto was kidnapped. To pass the time, his kidnappers allowed him a pen and paper.

So he wrote long letters to his family, which were never mailed. He also wrote a letter to his kidnappers, calling them cowards. They actually wrote back asking him not to be so rude. Then, 53 days later, the police arrested the lead kidnapper and the other captors fled.

Washington Oliveiro was rescued. It's a remarkable story. The chance of an ad person being kidnapped here is, well, remote. But clearly, it's different in Brazil. A lot different in Brazil. There, advertising is widely admired. Advertising stars are celebrities.

It's a world that just doesn't exist in North America. Brazil is the B in the acronym BRIC, or B-R-I-C, which stands for Brazil, Russia, India, and China. Those four BRIC nations are rewriting the rules of marketing. While the rest of the world wobbles, their economies are growing at unprecedented rates, their populations are exploding, their consumers are consuming,

and as a result, they are creating a brand new marketing paradigm. They may be thousands of miles away, but one thing is for certain. The BRIC nations are going to completely change our world the tidal wave is coming from over 8,000 kilometers away. It's gaining speed and velocity, yet few see it coming. That marketing tidal wave is emanating from the BRIC nations,

Brazil, Russia, India, and China. You might be surprised to learn how much explosive growth is occurring in BRIC countries right now. So, first, a little math. In 2007, for the first time in history, China, India and Russia combined accounted for more than half of the world's economic growth. India's stock market grew 278% between 2002 and 2006 alone.

Forecasters believe India will be the world's third largest economy by 2050. Until this year, only the United States had ever produced over 100 billionaires. But in 2011, Brazil, Russia, India and China produced 108 of the newest 214 billionaires in the world. India is adding millionaires faster than any other country. The United States has 9 cities with a population of 1 million or more. Canada has 5. China has 90.

The combined population of China and India is about 2.6 billion. Canada has 5. China has 90. The combined population of China and India is about 2.6 billion, or 36% of humanity. One in five people in the world are Indian. BRIC countries will contribute one-third of the world's advertising dollars next year. A single Chinese wireless company, China Mobile, has over 616 million customers. The total population of the United States and Canada combined

is only 346 million. With statistics like that, it's no wonder the BRIC nations are now beginning to take control of the steering wheel, and no more so than in the world of advertising and marketing when you look around many of the most interesting and influential trends are originating in BRIC countries and those cultural shifts tactics and ideas are reshaping the marketing world as we know it. The story begins with the middle class.

In the last 10 years, the North American middle class has taken a beating. From the economic reverberations from 9-11, to recessions, to fighting multiple wars, to shrinking job opportunities, the middle class itself is shrinking. In the last decade, that class has slashed spending between 10 and 13 percent. According to Advertising Age magazine, median family income in real dollars is now what it was in 1997. Today, half of all households have less than $10,000 in annual disposable income. And two family incomes, for the first time, aren't the majority anymore. Half of all households have less than $10,000 in annual disposable income,

and two family incomes, for the first time, aren't the majority anymore. Contrast that to the BRIC nations, where the middle class is showing explosive growth. By 2030, it is widely believed that the global middle class is projected to at least double in size to as many as 5 billion, a growth surge that dwarfs the middle class boom during the Industrial Revolution. And this surge is more global, more rapid, and is already having a massive impact in terms of international power. According to the Organization for Economic Cooperation and Development, for the first time in history, the world will move from being mostly poor to mostly middle class by 2022,

shifting the balance of economic power from West to East. It's no surprise then that Procter & Gamble CEO Bob McDonald mused recently about his company's shifting center of gravity. He's considering moving his company's main focus more towards international operations, including the BRIC countries. Analysts believe that P&G

is preparing to slim down their North American organization, which has grown too big relative to the size and importance of the North American consumer market. That's a shocking statement, coming from one of America's most influential marketers. But P&G's non-U.S. ad spending rocketed to 71% last year, and 63% of their revenue came from emerging nations.

CEO McDonald has said he wants to add 1 billion customers over the next five years. Those customers are coming from the same place Unilever's new customers are coming from. 55% of its business comes from developing markets. Unilever expects that number to rise as high as 75% by the end of the decade. The BRIC countries are becoming world power shapers

in population, in income, and in influence. And because of that, they are creating new ways to advertise and market. Take Russia, for example. In his fascinating book titled Brand New World, author Max Lenderman tells a remarkable story. Russia has quietly become the world's biggest energy producer, supplying Western Europe with more than one-third of its natural gas, and it pumps out more oil than Saudi Arabia. This has given Russia the third largest reserve of foreign currency in the world and the power that bestows. Twenty years ago, there were no ads in Russia. There were no products,

so who needed ads? But for the last eight years, the Russian ad market has had double-digit growth. One of the top products in Russia is vodka. As a matter of fact, vodka comes from the Russian word voda, meaning water. Over 90% of the alcohol consumed in Russia is vodka. So you could say it almost flows as freely as water. Because Russians consume

so much alcohol, the Putin government put big limitations on liquor advertising, banning it in prime time. One of the biggest vodka brands there is called Russian Standard Vodka. It was launched in 1998

by a Russian businessman named Rustam Tariqo. He marketed the vodka in 40 countries and promoted it with slick, cool TV ads. Nine years later, Forbes ranked Tariqo as one of the world's richest people with a net worth of $5.4 billion. Russian Standard commands 60% of the vodka market. But when Putin banned alcohol advertising, Tariqo had to think of another way to market his number one vodka. So, how could he continue to reach the Russian population without the benefit of television advertising?

He opened the Russian Standard Bank. That's right. He opened a bank with the same name as his vodka and advertised it. The people of Russia got the joke. Even though he was advertising a bank, he was really advertising his vodka. Same name, same logo, same branding. As a result, Tariqo kept his vodka number one. Oh, and something else happened.

Russians who loved Russian Standard Vodka rushed to the Russian Standard Bank in droves, making it that country's largest consumer finance bank. It now has 20 million customers and issues 77% of all credit cards in Russia at a rate of 100,000 a day. Tarikos strategy was strikingly original. He set up the bank to get around the vodka TV laws and became one of the most successful bankers in Europe along the way. This started a trend. Soon beer companies launched travel agencies, liquor companies launched high-end chocolates,

and whiskeys launched mineral waters. This concept is called surrogate branding. It's more than just a brand extension. It's a bold, brazen way to market one product by advertising a completely different one. It's a hot trend coming out of BrickNations, and I'm sure it's coming soon to a TV near you. And we'll be right back. If you're enjoying this episode, why not dip into our archives? Available wherever you download your pods.

Go to terryoreilly.ca for a master episode list. India is becoming a transformed country. An estimated 300 million Indians are now middle class, as one-third of them have escaped poverty in the last 10 years. At this rate, by adding 40 million people to the middle class each year the majority of Indians will be middle class by the year 2050 a statistic that would have seemed impossible just 20 years ago India currently has the 12th largest consumer market with consumerism set to quadruple by 2025 every year 2.7 million college students graduate in India versus 1.3 million in the United States India is

the second most populous country in the world with 1.8 billion people and 1.8 billion aspirations a pulsating dynamic new India is emerging. An India whose faith in success is far greater than its fear of failure. An India that no longer boycotts foreign-made goods, but buys out the companies that make them instead. India's entertainment industry is huge. In 2004, Bollywood surpassed Hollywood with double the number of movies released per year.

One large Indian entertainment company has underwritten a number of Hollywood production companies recently, including Steven Spielberg's, a factor that can't help but influence entertainment as we know it. While the average daily wage for an Indian is only $4.20, there are over 800 million mobile phone users in India. One of the reasons for this is that wireless companies adjusted to the market, and now India enjoys the lowest call rates in the world at one cent per minute. Nokia has the greatest market share there, and the way they achieved it is remarkable. Because India's huge population has very low internet penetration, and it's still difficult for advertising to reach the thousands of remote villages, Nokia did something completely

different. They sent vans out into the Indian countryside on six-month treks. But these weren't ordinary vans. They were customized mobile theaters. So when a van pulled into a small village, it would open up to become a colorful stage. Then Nokia's staff would jump onto that stage and perform a musical skit to

explain the power of mobile phones understand they weren't taking orders for Nokia phones they were explaining why anyone in a small farming community would want a mobile phone in the first place and a Nokia in particular the idea was to establish the concept of phones, the need for phones. Now, you may be thinking that tempting poor rural Indians with cell phones is wrong. But look at it

through another prism. Ten years ago in India, having a home phone line was as much of a status symbol as having a car. Many villages only had one single landline, so villagers, farmers and business people would have to wait up to a month to use it. Now, with mobile phones, the people of India are connected. And with that connectivity, wages are increasing. Business people can

now find markets for their products or find the lowest prices for raw materials. Farmers can now receive farming tips, news on the availability of microloans, and get twice daily weather reports, all delivered on their cell phones. A middle class is emerging. As one Indian writer said, that is the real digital revolution in India. And here's how that huge shift is affecting marketing. With 800 million users, India is becoming a hotbed of new digital and mobile ideas. Battery power had to be reinvented for rural India,

where recharging is still challenging. One company there called Spice has introduced a $20 cell phone. They're also experimenting with a plan for ad-sponsored free calls. And Spice invented the first phone able to play full-length movies

downloaded from DVDs. Sometimes friends or families share mobile phones in India. This trend led Nokia to create phones with multiple phone books for up to seven users. By sheer numbers, by sheer volume, by sheer creativity, this country is fast becoming the center of the mobile world. The next mobile trends to hit our shores will undoubtedly be influenced by India. defining weight loss for Canadians with a smarter, more personalized approach to help you crush your health goals is here. Losing weight is about more than diet and exercise. It can also be about our genetics, hormones, metabolism. Felix connects you with online licensed healthcare practitioners

who understand that everybody is different and can pair your healthy lifestyle with the right support to reach your goals. Start your visit today at felix.ca. That's F-E-L-I-X dot C-A. Time to cross the ocean to Brazil. Sao Paulo is the fourth largest city in the world, with a population of 20 million people. The traffic is so bad that it also boasts the world's second largest fleet of private helicopters. By 2014, Brazil will have more than 200 million mobile phone users. In the last 12 months, Brazilians had the highest rate of Twitter participation in the world. And, in the last decade, Brazil has surged in the advertising awards circuit. Last year at the Cannes Advertising Festival, Brazil won an astounding 124 trophies.

To give you a perspective, Canada won 18 and England won 95. But there is something else happening in Brazil. In 2007, the mayor of Sao Paulo banned outdoor billboards and posters. 15,000 were taken down. The mayor is not old school. In fact, he's young. But over 70% of Paulistanos agreed with his decision. Now other cities in Brazil are considering a similar ban.

The mayor of Buenos Aires has already removed 60% of their outdoor ads. The mayor of Moscow is considering similar legislation. This is important for two reasons. First, the Wall Street Journal calls Brazil a leading indicator of future trends. Second, the Brazilian mayor banned outdoor advertisements as part of his Clean City Act. He's the first mayor to equate mental pollution with air pollution. Brazil banned outdoor ads because that advertising didn't give anything back to the people of Brazil. This echoes a concept I've talked about often on past shows,

which I call the contract. Essentially, advertising has to give something back to the public in return for the public being exposed to the advertising. In radio and television, for example, ads underwrite the programs. In newspapers, ads pay for the reporting. Bus shelters give you protection from the elements, and so on. The advertising of today has to offer something to hold up its end of the bargain. Therefore, the trend coming out of Sao Paulo is a warning bell. Before that outdoor ban extends to

other cities and countries, the advertising industry needs to heed this wake-up call and give back. Like France-based JC Decaux, the world's third-largest outdoor billboard company. They provided Paris with 20,000 bicycles in exchange for the exclusive rights to the city's 1,600 billboards. Or like Tide. After Hurricane Katrina, Tide sent in mobile laundromats on trucks. Each one did 600 loads a day, then gave people their laundry back neatly bundled and wrapped,

and gave them some dignity in the middle of a horrific situation. When marketers give back, people reciprocate. A recent global survey found that 33% of consumers are willing to pay a 5 to 10% premium to companies they know are doing good. It's something the advertising industry has to embrace. The alternative is frustration, anger, and ad bans. Sao Paulo is the choking canary in the ad mine. One last brick stop. It is estimated that over 600 million people in China

will enter the middle class by the year 2015. China is the most populous country in the world and 1 billion of its inhabitants will be living in urban centers by 2030. It's a consumer marketplace that accepts and even craves mass media advertising. Another thing China craves are knockoffs. China is the leading source of pirated film, video games, and just about anything else you can name in the world. The International Federation of the Phonographic Industry estimates that 99% of all music files in China are downloaded illegally. The Motion Picture Association of America believes that over 90% of all DVDs sold in China are pirated. If you want to buy a smartphone in China, you might consider a Redberry.

Or you might want to shop at Walmart. China has a completely different view of brands. For decades, the people of China could not afford name products because of grinding poverty, but wanted the status of brand names. So they reacted by creating cheap fake brands. And over the years, a billion consumers have enjoyed those counterfeit brands, creating a tolerance of piracy that will eventually make its way to North America. As a matter of fact, a professor at the Wharton School of Business

and a former chief economist for the Federal Communications Commission bluntly stated that, If you have a business model based on copyright, forget it. It's a dead issue. That is very scary stuff for marketers. It means that soon they may no longer be able to depend on a logo, a slogan, or even the law to protect their brand.

That means real brands have to be marketed in completely new, unprecedented ways. More than anything, brands will have to create intense relationships with customers. And you can't do that with traditional advertising campaigns. You have to create experiences.

Look at Apple. Those aren't just retail stores. They are full-on experiences. And have you ever seen an empty Apple store? Anybody can serve coffee, but Starbucks doesn't have 26 million Facebook fans for nothing. It's coffee theater. And there's a reason why Harley-Davidson owners get tattoos of the company's logo on their arms.

The good news is that the assault on brands emanating from China will force companies to innovate or die. Personal interaction between brands and their customers will never be more important. While technology and design can be copied, culture, experience, and relationships can't. But it's going to take brave new thinking and a lot of coloring outside the lines. The nicely decorated window of marketing as we know it is about to be broken. And all it's going to take is a break. Brazil, Russia, India and China are sending us big signals.

Their increasing wealth, their exploding middle classes and their resulting power are all on the rise. And consider this. Total ad spending in emerging markets will pass that in the U.S. by 2014 for the first time ever. The BRIC nations won a total of 184 trophies at the Cannes Advertising Festival last year. That's over 16% of the total awards given out. And this year, the festival announced

their first ever Chinese jury president. Change is afoot. To disregard the tremors is foolish, and to ignore the innovative campaigns, trends, and tactics

coming from the BRIC nations is sheer folly. Some of those trends are warning signs that advertising has to give back to be tolerated, and that brands aren't as sacred as they have been for over 100 years. My friend Max Lenderman also points out a fascinating flip side to the emergence and aggressive nature of the BRIC nations. As the North American and European economies reel, multinational companies must chase the

BRIC nations for business. In other words, established nations need the BRIC nations to survive. Their emergence might just be our saving grace. It's a whole new world when you're under the influence. I'm Terry O'Reilly. Yes, I'd like to file a complaint about the radio program Under the Influence. Yes, well, the host was talking about a Russian vodka bank, and that's just wrong. It is so wrong.

A vodka bank. Honestly. But I'm intrigued and I'm just wondering, can you make vodka withdrawals? What about vodka loans? You know, I'm just thinking out loud.