09 Dec Marketing on a Global Scale

MARKETING ON A GLOBAL SCALE

December 2009

LEADERSHIP

SERIES

CONTENTS

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THE ISSUE Globalization: A Context for Canadian Marketing Capacity New economies are leading the world out of the Great Recession.

If Canadian businesses are to compete in the new world order, they must think bigger to take advantage of global opportunities.

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THE OPPORTUNITY Going Global: Canada’s Marketing Community Can Flourish by Exporting The idea of exporting services is not new. In a creative economy, marketing and advertising should be significant contributors -- and could be one of the highest earners of export revenues.

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ACTIONS FOR MARKETERS Digital, The Gateway to Global for Canadian Business The global internet audience is full of potential consumers for Canadian brands, products and services, yet Canadian companies lag when it comes to online marketing. Examples of companies leveraging digital successfully along with tips for marketers point business in the right direction.

December 2009 • 2

David Crane Writer and Consultant

David Crane is an award-winning journalist who writes extensively about both globalization and innovation, and the critical need for Canada to prepare for a much different world of both more intense competition and greater opportunity. He has two honorary doctorates from Canadian universities and was awarded the Queen’s Jubilee Medal for his contributions to Canadian life.

Globalization: A Context for Canadian Marketing Capacity As the first decade of the 21st century nears its end, a much different world is emerging. This is the world of China, India, Brazil, South Africa, Indonesia, Turkey, Mexico, a world so different from the world most Canadians have grown up with, a world which will bring changes to our own society that are so sweeping they are almost impossible to imagine.

In this future world, the new centres of gravity will be in Shanghai and Mumbai, in Rio de Janeiro and Cape Town, in Istanbul and Jakarta. Fashion and design, film and animation, not to mention automobiles, computers, pharmaceuticals and a vast array of consumer goods and services – as well as millions of new tourists – will come from these megalopolises. It will be a world with a new middle class of a billion or more people, the fastest-growing new market the world has ever seen. So it is not just about China – there will be modern societies around the world.

This is globalization, a world of growing interdependence as technology shrinks distance and ideas leap from one part of the world to another in nanoseconds. But the key questions are whether Canadians, and especially Canadian businesses, will see this as a threat, because competition will intensify, or an opportunity, because

new markets will grow by leaps and bounds.

China is already the world’s largest market for cellphones, with India not far behind, and is quickly becoming the largest market for automobiles.

Big brand name companies such as Procter & Gamble, Nestle, Unilever and L’Oreal have moved quickly to serve these markets, looking to them as the new sources of growth as the rich countries age.

Canada must move quickly – and smartly – to fit in this new world marketplace. The winning countries, and companies, will be those that adapt to this new global reality, responding to the new competition and profiting from the new opportunities. So far, while there are obvious exceptions, such as the BlackBerry, the omens are not good. Our companies – whether manufacturers of products or providers of services – are not showing the innovative and ambitious behaviour needed to win.

In what is the most detailed inquiry into innovation by Canadian businesses – Innovation and Business Strategy: Why Canada Falls Short – the Council of Canadian Academies is highly critical of Canadian business for failing to take advantage of globalization and global opportunities.

December 2009 • 3

Globalization: A Context for Canadian Marketing Capacity

“Canadian businesses, on the whole, have so far failed to aggressively grasp the opportunities created by globalization,” it says, noting, for example, that Canada has never had a single global brand in consumer products, though it acknowledges that the BlackBerry is now a contender.

This criticism is aimed as much at the Canadian business services sector as it is at Canadian manufacturers. How global is Canada’s marketing services industry, for example?

A key problem is what the Council report sees as a lack of “business ambition”, a mindset in which “too many successful Canadian businesses would rather behave like an income trust than like a venture capitalist.” In Olympic terms, this means settling for a bronze medal instead of aiming for a gold.

So the question the Council asks is, “are Canadian businesses good enough to compete in global markets, aggressive enough, willing to take risks, and sufficiently outward-looking beyond the huge and accessible U.S. market?”

Obviously some are, with examples such as Manulife Financial, Cirque du soleil, Research in Motion, Bombardier, CAE, Magna International, Sun Life, Air Canada, Four Seasons Hotels and SNC-Lavalin. But, as the Council argues, not enough Canadian companies have this global mindset or gold medal aspiration.

However, the growing pressure to adapt to the new reality, as the competitive circumstance and operating environment change, will force changes in the behaviour of Canadian business. As the Council underlines, these are about to change significantly. Canadian businesses will have to become more ambitious as the global economy changes, due to technology

and globalization, or it will fade away and die.

The reality is there for all to see.

Indeed, it is these new economies that are leading the world out of the Great Recession.

The output of the emerging market economies now accounts for more than half of total global GDP in purchasing-

Russia, India, China, Mexico, Indonesia and Turkey – will be about 50 per cent larger than the current G7 (U.S., Japan, Germany, Britain, France, Italy and Canada) by 2050, measured at market exchange rates. The E7 countries are only 25 per cent of the G7 today.

It forecasts that China will likely

“Canadian businesses, on the whole, have so far failed to aggressively grasp the opportunities created by globalization,” for example, that Canada has never had a single global brand in consumer products, though it acknowledges that the BlackBerry is now a contender. power parity dollars (where currencies are adapted to take into account differences in living costs across countries), or about 30 per cent at market exchange rates, signifying their growing importance in the global economy.

More and more, these countries are shaping the overall pace of global growth, and also reshaping the activities and performance of the advanced economies, such as our own. Increasingly, our jobs and business activities will be influenced by what is happening in these countries.

Their dramatic entry into the global economy has been compared to the Industrial Revolution of the 19th century; indeed it has been argued this will have an even greater impact since it embraces the global economy whereas the Industrial Revolution was largely confined to Europe and North America.

PricewaterhouseCoopers, the global consulting firm, estimates that the E7 – the emerging economies of Brazil,

overtake the U.S. as the world’s largest economy by about 2025, while India will be close to the U.S. by 2050.

Closer to home, Mexico could be double the size of Canada by 2050; today it is about two-thirds the size of Canada’s economy.

When population is taken into account, GDP per capita is forecast to grow at a annual average rate of 1.9 per cent in the G7 countries, and at 4.0 per cent in the E7, measured in purchasing power parity, so that E7 countries will represent the fastestgrowing consumer market in the next several decades.

PwC identifies the potential business winners in the rich or advanced economies over the next decade, as the global transition continues. They include retailers who succeed in penetrating major emerging markets, leading global brand owners, business services, media companies, niche high-value-added manufacturers, health care and education provid-

December 2009 • 4

Globalization: A Context for Canadian Marketing Capacity

ers, financial service companies able to penetrate E7 markets, and energy and utility companies.

China, it says, could be the world’s second largest consumer market by 2020 “while cities across the leading emerging markets from Shanghai to Mexico City will have rapidly growing middle class populations with the spending power to afford Western consumer goods and services.”

Goldman Sachs, the global invest-

marketing support. Likewise, emerging multinationals from E7 countries will need marketing services and support as they invade rich-country markets such as Canada. And as the middle class expands in E7 countries, domestic companies in the E7 countries will need marketing support to compete against each other and foreign multinationals in their own markets.

We can certainly expect more foreign brands in our own market. Hyun-

Norman Hardie wines in Prince Edward County, Ontario won the prize for the best white wine label in Hong Kong a couple of years ago and is now shipping its wines into South Korea and Japan. ment banker, coined the term “BRICs” a number of years ago, referring to Brazil, Russia, India and China. Using its methodology, it projected that by 2025 the world’s top five economies would be the U.S., China, Japan, Germany and India, and that by 2050 the ranking would be China, U.S., India, Japan and Brazil. Canada would move from 8th place to 13th in 2025 and 15th in 2050. Mexico would overtake Canada by 2020, and by 2050 per capita GDP in Mexico would be 75 per cent of that in Canada.

Goldman Sachs also has what it calls the “Next 11” – the countries it sees as the next BRICs. These include South Korea, Mexico, Iran, Turkey, the Philippines, Indonesia, Nigeria, Egypt, Pakistan, Vietnam and Bangladesh.

Today, these countries account for 7 per cent of the world economy.

Globalization presents many opportunities for fast-moving Canadian companies. As they head into E7 and other emerging markets, they will need

dai and Kia automobiles, Samsung TVs and cellphones and LG household appliances were largely unknown in the Canadian market. Today they are well-established brands, all from South Korea.

Today, Chinese brands such as Lenovo laptop computers, Haier electrical appliances and Huwaei telecoms are new brands from China heading our way, as are Acer computers from Taiwan, Jaguar cars now owned by an Indian company as well as Indian pharmaceutical products.

We will see in the not-too-distant future automobiles from China, motorbikes from India and indeed a growing range of branded consumer products from the E7.

Canadian companies moving into major E7 markets also need major marketing support. Manulife Financial and Sun Life are both competing strongly in China and other parts of Asia, while Sun Life is also active in India. Research in Motion is selling its

BlackBerry around the world. Bombardier is building up its image as a leading global producers of fast trains, subway cars and other rail-based rolling stock, as well as executive jets and commuter aircraft.

But this activity is not confined to big companies. Norman Hardie wines in Prince Edward County, Ontario won the prize for the best white wine label in Hong Kong a couple of years ago and is now shipping its wines into South Korea and Japan. A number of Canadian wineries from Ontario and British Columbia now have established shelf space in Hong Kong wine stores and are spreading across Asia as the demand for wine there escalates with rising incomes but where they must compete against U.S., Australian, Chilean and other new world wines.

The Internet is also a critical factor. It is a new medium that enables global reach or customization to local markets, as we see with Google advertising and media websites. It also enables partnerships and co-productions as E7 and other emerging markets refine and upgrade their creative skills. Production of TV commercials, marketing plans and marketing over YouTube or Facebook can easily originate in the E7.

We will also see growing influence from entertainment, product design and fashion originating in these countries, which will influence marketing in our own markets.

The world of marketing is also changing dramatically as a result of social networking and new ways of communicating, such as Twitter. Social networking has made marketing more democratic, extended dramatically the concept of “viral” or word-of-mouth advertising, and opened the door to highly creative marketing groups all over the world.

December 2009 • 5

Globalization: A Context for Canadian Marketing Capacity

The challenge for Canadian marketing services companies is to devise a joint strategy to pursue global markets and to woo the services of the Canadian government and foreign trade shows to boost Canadian service providers.

All of this means there is both threat and opportunity. The threat is that bright new marketing minds in the E7 will provide the future energy and creativity for marketing. But there is also opportunity as the E7 middle class expands and marketing expertise is needed in these dynamic new marketplaces.

But Canada has some distance to go. In its most recent Global Competitiveness Report, the World Economic Forum has moved Canada up from 10th to 9th position. Interestingly, one of its indicators is what it calls the “extent of marketing”. This ranking is

based on the extent to which “companies use sophisticated marketing tools and techniques.” Canada ranks 10th on this indicator. The five leading countries are the U.S., Switzerland, Britain, Sweden and France.

The challenge for Canadian marketing services companies is to devise a joint strategy to pursue global markets and to woo the services of the Canadian government and foreign trade shows to boost Canadian service providers.

This would entail, first, a readiness of Canadian marketing companies to

cooperate, and next, the identification of the skills and capabilities of Canadian companies that can be sold abroad. The industry also needs to identify export business opportunities and demonstrate they have the scale and scope to conduct a campaign or provide creative and technical services in much larger markets.

King Canute, the Danish King who ruled England in the early part of the 11th century, is famous for his futile attempt to hold back the waves of the sea by issuing an order. Likewise, efforts to halt the rising tide of globalization would be equally futile. Our challenge is to seize the opportunities of globalization, not to try to halt it.

David Crane can be reached at crane@interlog.com

December 2009 • 6

Laurence Bernstein Partner, Protean Strategies Recently, Laurence Bernstein has been involved in country and place branding projects with specific emphasis on trade and investment for the Ontario Government and the Toronto Region. This has provided a unique perspective on how various economic sectors are dealing with rapidly changing economic realities.

Going Global: Canada’s Marketing Community Can Flourish by Exporting It seems that “Globalization” is, for the most part, a dirty word in Canada’s marketing and communication world.

And this may be quite understandable.

In a recent CMA member survey1, more than one in every six respondents reported that their non-Canadian head office maintained total leadership in terms of strategy development; one in four reported that the non-Canadian head office retained total control of brand positioning; and one in three reported that off-shore head offices lead creative development either ‘very much’ or ‘completely’. The only areas where off-shore head offices are not steering the ship to a considerable degree are in executing the strategy and choosing the media mix. So it makes sense that Globalization, which is often blamed for the hollowing out of Canadian marketing departments, is viewed as something of an enemy.

It is almost impossible to get a handle on the amount of revenue that has been lost as a result of this claw back of marketing communication (marcom) responsibilities. Generally accepted measurements of industry size, such as media spending, would not reflect the professional services loss, and the picture is further clouded by the trans-

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fer of production and creative development dollars from traditional media to new media. In fact, in interviews with industry leaders conducted for this article, one might get the impression that any loss of revenue in mainstream advertising activities is being made up in digital and other non-traditional (below the line) creative and strategic development activities. While this may be the case, it is equally likely that it is not, and that the overall revenues in the sector are declining. Given the economic downturn it is not fair to draw any conclusions from current revenue figures or projections, so to some extent we are operating in the dark.

Either way, the industry needs to respond by developing new sources of revenue – if not to plug a leak (if there is one), then surely to grow the overall sector, and make room for new talent who are burning with enthusiasm to be part of this business.

More importantly, we are told that the Canadian economy must rapidly transform itself into a knowledge economy, and this is to be lead by members of the creative classes.

Practitioners of advertising and marketing are at the forefront of the creative class, and therefore have a

Marketing on a Global Scale: The Impact on Canada; CMA Survey, developed by its Integrated Marketing & Customer Experience Council, December 2008.

December 2009 • 7

Going Global: Canada’s Marketing Community Can Flourish by Exporting

vital role to play in the reforming of Canada’s economy. This can only be done by growing the industry and making room for more and more creative souls. In other words, even if it is not a matter of survival (which it probably is), it is nevertheless vital to expand the size and scope of the communication and marketing sector.

It is my contention that the most effective and potentially paradigm shifting approach to expanding the industry is not to charge fewer customers more (a strategy that is not working out all that well), but rather a concerted, strategic approach to opening up new markets around the world for our creative product and marketing expertise.

Exporting Services This is not a new idea. Canadian professional service industries have been exporting services for years, many of them building markets that today account for a significant percentage of the overall industry revenue. Canadian engineering firms, according to Foreign Affairs and International Trade Canada, rank third in the world in export revenue, providing services in more than 125 foreign markets – engineering services account for more than half the export revenue of the professional services sector; 15 per cent of the engineering industries overall revenue; and contributed nearly 0.6% of Canada’s Gross Domestic Product in 2005.2 International trade policy makers at the federal and provincial levels have not overlooked the potential of the management consulting and profes-

2 3 4

sional services sector. Canada is seeking greater market access and national treatment commitments in sectors and in countries of key interest to Canadian service providers, specifically [among others] management consulting services that include general management consulting, human resources management and marketing management consulting services.3 However, this references marketing consulting and not professional advertising and communication services. Advertising, creative and other professional activities under-

munication in the identified professions is the absence of a requirement for accreditation. Or it might also point toward a lack of awareness within the international trade development policy makers of the existence of professional designation programmes in the industry.4 Either way, the need for a concerted, focused and effective program to reframe advertising and communication practitioners as “professionals” is indisputable.

Furthermore, it is probable that these policy makers and export development professionals are not aware of the many small and large components

Practitioners of advertising and marketing are at the forefront of the creative class, and therefore have a vital role to play in the reforming of Canada’s economy. taken within the scope of our industry appear not to be thought of as having significant export potential.

Why is this the case?

Professional Services, as classified by the North American Industry Classification (NAICS, Code 54), includes a number of professions in the category (including legal services, accounting, auditing and bookkeeping services, taxation services, architectural services and urban planning and landscape architectural services), and suggests that “Many of these services require individual practitioners to be accredited, certified and/or licensed to hold a professional title and to exercise the right to practice.”

This might suggest that a barrier to the inclusion of advertising and com-

that constitute the industry, many of which lend themselves very strongly to exporting: creative development, art direction, copy writing, market research, data analytics, media production, digital programming, and the list goes on.

This is not necessarily the case in other industries or other jurisdictions.

Best Practices Two mini case studies indicate how industry sectors that are successfully developing export markets go about it:

Foreign Affairs and International Trade Canada, International Trade Consultations, Professional Service Background Information.

Foreign Affairs and International Trade Canada: Trade Negotiations and Agreements, WTO-Trade in Services.

CMA: “CMS” - Certified Marketing Specialist; ICA: “CAPP” - Communications and Advertising Accredited Professional.

December 2009 • 8

CASE STUDIES The RAIC works together with various arms of provincial and federal governments to inform their members on the potential of exporting and how to go about it. For instance, they combined with a variety of like-minded professional associations and government agencies to present a seminar on issues related to working in China. The Institute participates on behalf of their members in trade missions, and has a mapped-out international strategy as part of its mission: “The RAIC seeks to assist Canadian architects beyond our borders and inform them of international developments of importance to their professional lives.”

Royal Architectural Institute Of Canada

The RAIC’s international strategy is to: • Monitor and influence trade issues affecting the architectural profession; • Facilitate the negotiation of mutual recognition agreements; • Identify and disseminate international opportunities; • Market Canadian architectural expertise and services abroad.

Canadian Marketing Association December 2009 • 9

CASE STUDIES In response to a Federal Government (Australian) report highlighting the underperformance of Australian exports and probably as a means of raising the profile of its members’ industry, NIA prepared and submitted a paper examining the potential for Financial Services (specifically accounting services) as an export sector. The comprehensive analysis of potential in specific countries resulted in a set of recommendations, not surprisingly including:

National Institute of Accountants (NIA) - Australia

• Export Market Development Grants (EMDG); • EMDG should provide further financial support to the promotion of Australian professional services overseas; • Encourage accounting firms to expand their operations overseas by offering more favourable tax concessions (or deductions) for exporting of financial services; • Involve representatives of professional services providers or accounting professional organisations: the NIA, CPA Australia and the Institute of Chartered Accountants in Australia (ICAA) in trade promotion delegations, events and negotiations organized by Government agencies; • Provide more consultation on policies and regulations of target destinations; • Government should devote more resources and increase its focus on promoting professional services in export markets, including financial services, legal services, architecture and engineering etc. Such promotion builds on the good reputation and high regard of Australia’s professional services.

Canadian Marketing Association December 2009 • 10

Going Global: Canada’s Marketing Community Can Flourish by Exporting

We’re doing it already?

On the bright side, this process is already happening in Canada, although by no means with the momentum and focus that is called for.

Most notably, The Association of Quebec Advertisers has identified a market niche that they believe their members can uniquely fulfil based on specific, non-pre-emptable attributes of the province. They see the potential for Montreal to be a global advertising test lab. To activate this position they have embarked on a campaign to sell the city as “the perfect human laboratory” for the testing of marketing strategies. The association has co-opted the help of the city and a who’s who list of well known Montreal entertainers and celebrities. “Yul-LAB” is the result of a broader Montreal initiative, Montreal.ad (http://www.montreal.ad/en), that defines itself as a “Vision for Quebec Creativity.” 5 Montreal.ad is in many ways a blueprint for the development of a creative and advertising product export strategy.

There are other high profile ways in which the Canadian industry is building a global presence – such as offshore offices opened by Canadian Agencies (Cossette and Taxi among others). However, these represent an example of foreign investment rather than export development (but are no less important to the overall Canadian economy).

Most significantly, however, are the low-profile examples of marketing and communication product export that are taking place almost on a daily basis: Canadian agencies are vying for and winning U.S. accounts,

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European accounts and business from other countries. Other marcom players such as digital agencies, online selling strategy consultants and marketing research companies have been developing and executing offshore business for some time, and with admirable results.

But, none of this is happening on a scale that will have the impact on growth of the industry that is needed. Nor, unlike in Quebec, are these the result of a unified strategy supported and promoted not only by industry, but empathically embraced and promoted (i.e. funded in part) by various levels of government. And while government funding is probably not the answer to every business issue, there is no doubt that the export development support funds other industries re-

ceive goes a long way to help grow the categories.

Moving forward, or not A big part of the problem seems to be that there is no real sense that the platform is burning in the advertising and communication industries – growth in revenues are slower, but margins are higher, so there may a false sense of comfort. According to Statistics Canada industry figures, the increase in margin outpaces the increase in revenue (Figure 1 below).

This is clearly due to great management and great cost control. However, in a service industry where talent is the primary expense, cost containment is not necessarily a good thing. Where are the savings? In the

Figure 1 • Increase in Revenues vs. Operating Profit 2005-2007 % Increase in Revenue % Increase in Operating Profit % 14

12.50

12 10 8 6

6.67 5.48 3.85

4 2 0

2005 - 2006

2006 - 2007

Source: Statistics Canada, 2007 Advertising & Related Services Service Bulletin (Catalogue #: 63-257-X)

http://montreal.ad/Blog/post/2009/03/27/Montrealad-a-vision-for-Quebec-creativity.aspx

December 2009 • 11

Going Global: Canada’s Marketing Community Can Flourish by Exporting

salaries – which will lead inexorably to an increase in brain drain and a concurrent decrease in creative and strategic competence? In training – which will lead to shortages of talent and, again, decrease in the quality of communication product delivered

by Canadian agencies?

The anecdotal stories of marketing activities being consolidated in nonCanadian head offices are common refrains. CMA has attempted to understand the nature of this beast and verify the problem exists. The Institute of Communication Agencies acknowledges the existence of the problem, and recognizes that exporting might be a potential solution.6 Much more needs to be done – and sooner rather than later. Economic development in general in Canada over the past ten years can be characterized as too little, too late. Other industry sectors have realized how far behind the eight ball they are and are actively working to make up for lost time: Industry Associations and ad hoc market development initiatives are working together with economic development agencies in multiple jurisdictions (all

6 7

the way from municipal to federal) to bring attention to the potential of their industry and take advantage of available economic development funding and activities. 7 Their eyes are on the world and their goal is to find and nurture new markets.

Steps we can take: • Focus the attention of industry and government on the challenges the industry faces – primarily with a study highlighting the economic impact of globalization on the creative services, marketing and advertising industries.

• Change the focus of companies in the industry from cost control to revenue building by encouraging investment in talent and training.

• Create a higher profile for marketing and advertising at all levels of government, pointing out the reality that, in a “creative economy,” our industry is one of the most significant contributors and could become one of the highest earners of export revenues.

• Identify a compelling point of difference on which to base a meaningful marketing campaign. As with the example of Montreal, this must transcend the traditional “value proposition” boundaries. Yes, we can, when the U.S. dollar is strong, produce more for less, and maybe even faster, although probably not. And, yes, we can do many functional things, very well. But in order to do what needs to be done, we need to identify a powerful added value that only Canada can deliver.

• Collectively, take action through our industry and professional associations to become world leaders in creative and strategic marketing product before the opportunity is lost.

Laurence Bernstein can be reached at bernstein@proteanstrategies.com

ICA is in the process of undertaking a ‘transferability’ study to understand the effectiveness of picking up U.S. creative.

Examples include: Toronto Region Research Alliance (an ad hoc, but well funded and highly credible alliance of participants in all areas of scientific, medical and industrial research and innovation); the Toronto Financial Services Alliance, a high profile ad hoc association committed to “enhance and promote the competitiveness of Toronto as a premier North American financial services centre”; [previously mentioned] Montreal.ad is undertaking in Montreal what I suggest might be undertaken for Canada on a national level.

December 2009 • 12

Sabrina Geremia Head of Agency Relations, Google Canada Sabrina is an international marketer, sales leader and integrated communications specialist. She spent 14 years based in Europe leading teams and global projects for the likes of P&G, Ask Jeeves, Reckitt Benckiser & Google. Sabrina returned to Toronto in 2007 and is the Canadian lead for Google’s Global Agency Team.

Digital, The Gateway to Global for Canadian Business “Anything travels globally and the question is how to use technology and the Internet to make that happen.” Patrick Pichette, CFO, Google Inc. A quintessentially global medium In September 2009, 1.7 billion people worldwide (25% of the global population8) were connected via the worldwide web. They are going online to access content, share information and communicate with one another. But it’s not just about information. The web has also become a global platform for marketing and commerce. Products are being bought and sold and advertising is being delivered across languages and borders.

Internet users are a marketer’s dream. They are generally wealthier, more educated and urban than the average population and, if they have a credit card, are a few clicks away from transacting. Smart businesses all over the world, large and small, are using the Internet as a gateway to the global marketplace.

From a Canadian business perspective, the global digital opportunity speaks for itself. The Canadian online audience represents less than

2% of the global online community.9 Looking at it the other way, 98% of the audience is beyond our border.

For example, there are 10 million 18+ women online in Canada and 465 million globally.10 The opportunity to digitally connect with audiences beyond our border will become even more pronounced as developing markets come online.

In 2007, the global Internet audience grew by 73 million people from China11 alone. That’s over three times the size of our entire online community (22.8 million). (See Figure 2 on next page.)

The Canadian digital disconnect Within this global ecosystem, Canadian businesses have an enormous opportunity to use digital to reach their audiences, regardless of location. As a country, we are global leaders in accessing and using the internet but are laggards in leveraging digital for marketing and commerce.

8

Internet World Stats, www.internetworldstats.com/stats.htm comScore Inc., 2009.

Ibid.

11 Morgan Stanley, 2008.

9

10

December 2009 • 13

Digital, The Gateway to Global for Canadian Business

Canadians hold the gold trophy with respect to Internet usage. We are in the global top ten for Internet penetration and broadband access. Nobody beats us in the areas of watching videos online and searching (88% of Internet users watched 3.1 billion videos in Feb ’09 and 3.5 billion searches were conducted in Jun ‘09) and we are avid social networkers (59% have at least one social network).11 It’s no surprise that Canadians are using the Internet almost 27 days per month; spending 45 hours and viewing almost 4000 pages per visitor.12 Our Internet infrastructure is world class and we have an emerging pool of digitally savvy talent and strong academic institutions that are investing in and growing their digital curriculum.

Yet, despite all these advantages, we lag when it comes to using the web for e-commerce and digital marketing. eMarketer now estimates Canadian e-commerce at $10 billion (September 2009) which pales compared to the $132 billion in retail e-commerce sales in the United States. (See Figure 3.) According to James Connell, Senior Director E-Commerce, Digital Marketing, New Media at Roots, Canadian companies like Roots, Lululemon and Harry Rosen now have global e-commerce presence but the journey began with getting it right locally first: “As Canadian companies grow our e-commerce capabilities domestically, we will improve the feature set and can then use this platform to grow internationally.”

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Figure 2 • Internet Use (August 2009) Persons 15+

Total Unique Visitors (000)

Average Usage Days per Visitor

Average Minutes per Visitor

Average Pages per Visitor

World-Wide

1,165,194

15.7

1,345.9

2,135

United States

168,264

20.8

1,928.1

2,701

Japan

67,586

16.0

1,151.4

2,031

Germany

43,268

17.8

1,225.9

2,467

France

38,746

17.0

1,454.8

2,569

United Kingdom

36,938

18.3

1,688.1

2,483

Canada

22,785

24.0

2,525.1

3,786

Source: comScore Inc., August 2009

The global Internet audience is full of potential consumers for Canadian brands, products and services, yet Canadian companies lag when it comes to online marketing. Domestically, Canada’s $1.6 billion online advertising industry represents 11% of total media spend in Can-

ada. (See Figure 4 on next page.)

This puts us behind countries like Denmark (24%), the U.K. (23%) and even France (16%). If we don’t fully leverage the digital opportunity domestically we will struggle to leverage it globally.

Figure 3 • Retail E-Commerce Sales In North America, by Country, 2008-2011 (millions and % change) 2008

2009

2010

2011

2008-2011 CAGR

U.S.

$132,416

$135,726

$147,263

$164,935

7.6%

Canada

$10,491

$10,753

$11,667

$13,067

7.6%

North America

$142,907

$146,479

$158,930

$178,002

7.6%

Source: eMarketer, September 2009, 2009-2011 estimates are from the September 2009 Collins Stewart LLC report titled “Internet & Software” (Collins Stewart LLC based its calculations on data from the U.S. Department of Commerce and eMarketer) Note: Excludes travel, financial services and event ticket sales

comScore Inc., eMarketer, 2009.

Ibid.

December 2009 • 14

Digital, The Gateway to Global for Canadian Business

Leveraging the web to go global - 5 tips for marketers 1. Go back to fundamentals.

Every business and marketing plan starts with strategy, and thinking broader is crucial to understanding your global potential. If you are starting a new business, think of problems that can be solved on a global basis and how to use the digital economy to build your business model. If you are running an existing business, re-assess whether global fits your strategy. What is your value proposition and brand equity and do they translate beyond Canadian borders? Do you want to reach teenage Canadian boys or young male urbanite hipsters in metropolitan cities over 2 million people? Can your business model scale to fulfill global demand?

2. Use online metrics to understand your brand’s global potential.

Analytics sites like Omniture, Web Trends or the free Google Analytics can tell you what countries visitors to your site are coming from, how they got there (i.e., typing the url direct or via a search engine) and what they do once they arrive on your site. You can also set up tracking to help you understand specific behaviours; for example, visits to a page on your site or people who visit and then abandon. To help determine which countries have the highest demand for their products, the team at Roots looks at the number of international visitors who visit their Canadian site but, abandon at checkout because they cannot buy.

3. Make your digital presence welcoming to global visitors.

If you know from your site metrics that you are getting global visitors, let them contact you. It can be as simple as a phone number or email address. Once you are committed to a global strategy, having a best-in-class localized website is fundamental. The Roots team has discovered that different products sell differently in different countries. For example, in Australia merchandise featuring the Roots logo outsells 3:1 while in Switzerland they over index in sales of leather products. Multivariate

testing using products like Google Website Optimizer is a quick and inexpensive way to serve up different landing pages with different offerings to see which ones get the best response from visitors.

4. If you are selling online, find smart scalable distribution solutions.

Roots Canada began distributing abroad with a U.S.-based third party called “International Checkout”. Today, Roots distributes direct to consumers using DHL Global and Canada Post aided by an additional warehouse in Tennessee. (continues on page 18)

Figure 4 • Online as a Percentage of All Media Spend - 2008 Denmark UK Norway Sweden Netherlands France Germany United States Finland Canada Belgium Spain Italy Austria Greece

24.4% 23.1% 21.1% 19.5% 18.0% 16.1% 15.2% 12.5% 11.5% 11.0% 10.5% 8.9% 8.7% 6.8% 2.1%

Source: IAB 2008 + 2009 estimate Canadian Online Advertising Revenue Survey

December 2009 • 15

COMPANIES DOING IT RIGHT DRIVING GLOBAL EXPANSION WITH E-COMMERCE

Roots Canada www.roots.ca

The Roots team determines which international markets are ripe for expansion by looking at website analytics, consumer emails and social media. When they build a business case for expansion, they lead with an e-commerce enabled site that is promoted strictly with online advertising and social media. Online Roots stores can now be found in 45 countries and generate 10% of Roots revenue with a goal of 30% post-2010.

CAPITALIZING ON GLOBAL TRENDS, AUDIENCES & PARTNERSHIPS

Trendhunter.com

In the short span of 3 years, Jeremy Gutsche, Editori-in-Chief of Trendhunter.com and author of Explaining Chaos, has built the world’s biggest trend site with over 25,000 global contributors and 1.5M monthly viewers (50% from the US, 10% from Canada and the balance outside of North America). According to Jeremy, “acting global allows you to tap into a bigger market. At Trendhunter we’re looking for the next big thing that pops up. It could be an idea in Columbia that interests people in New York or vice versa”.

This Toronto-based company works with a mix of local and global agencies and partners. This works for Jeremy because “most of communication is via email and skype so it’s easy to collaborate globally. It doesn’t really matter if our partners are in the U.K. or down the street, we probably communicate with them just as often.” Jeremy is also quick to point out that Toronto’s lower capital and labour costs combined with a good talent pool has provided Trendhunter competitive advantages on a global scale.

Canadian Marketing Association December 2009 • 16

COMPANIES DOING IT RIGHT A GLOBAL DIGITAL APPROACH WITH A LOCAL FLAVOUR

Scotiabank www.scotiabank.com

As Canada’s most international bank, Scotiabank has a digital presence in 28 countries (Canada plus 27 others in Latin America and the Caribbean). As noted by Ian Deverteuil from BMO Capital Markets in his 2007 Analyst report, Scotiabank’s international websites look “eerily similar.” This is no coincidence. Scotiabank manages the majority of its global sites through a centrally hosted content management system that preserves brand equity across markets by strictly enforcing brand guidelines such as colour, fonts & logos.

While some elements of the sites are centrally deployed, the system encourages localization at a country level. According to Chris MacDonald, Scotiabank’s Director & Head of Digital Marketing: “Each website is run as an entity onto itself so there’s no cookie cutter content. Every country has content customized for the local market. For example, Jamaica imagery is different to Dominican Republic which is different to Canada.”

The Scotiabank global digital approach doesn’t stop at websites.

They run a complex digital marketing strategy that leverages learnings from North America across developing markets. A large focus for international markets is on Google’s search and content network and is centrally managed out of Canada. Larysa Rodriguez, Director of Digital Marketing for Scotiabank’s International Banking division notes that “Digital used to be a luxury but now it’s a requirement. Our customers are online so we need to be there.”

She also advises other Canadian businesses looking to use digital to go global to focus on metrics and results. “There has to be a strategy behind digital and a measurable approach. A plan needs to line up to the wider marketing objective, be integrated across channels and demonstrate results.”

Canadian Marketing Association December 2009 • 17

Digital, The Gateway to Global for Canadian Business

5. Invest in digital media to reach your target audience with minimum waste.

Digital media is a scalable and efficient way to reach your target audience, regardless of where they reside. Campaigns can be set up directly online or with the help and expertise of a media agency. Most online advertising solutions deploy geo targeting which allows the advertiser to select the appropriate destination for an ad to be shown, whether it is a country, city or even tighter criteria. They also come laden with a series of free tools to help build, monitor, optimize and

measure performance. Display and online video advertising allows consumers to engage with text or multimedia ads when they are pursuing their interests on websites. Search engine marketing connects advertisers to consumers when they are actively searching. Social media marketing taps into people’s online networks and communities to share advertising messages. Online campaigns are generally charged on a CPM (cost per thousand), CPC (cost per click), CPA (cost per acquisition) or fixed cost basis. Online media companies are among the

most global in the world with offerings in hundreds of countries. Some examples include: AOL (advertising. com), Microsoft (msn.com, bing.ca), Google (google.com/adwords, youtube.com/advertise), Facebook (facebook.com), Yahoo (yahoo.com) not to mention the many local players present in all markets.

Sabrina Geremia can be reached at sgeremia@google.com

December 2009 • 18

Canadian Marketing Association With more than 800 corporate members, the Canadian Marketing Association (CMA) is the largest marketing association embracing Canada’s major business sectors and all marketing disciplines, channels and technologies. CMA is the marketing community’s leading advocate on the key public policy issues affecting both consumer and business-to-business marketers. As well, the Association is the principal provider of knowledge, marketing intelligence and professional development opportunities for marketers; and catalyst for networking and business opportunities within the marketing community.

Disclaimer: The opinions and information provided in this publication are those of the contributors and do not represent official positions of the Canadian Marketing Association. Leadership Series papers are intended to share knowledge and foster debate about important marketing issues, as such they may be used for information and guidance but are not intended to substitute for legal or other professional advice.

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