Marketing success: A highly competitive industry resumes rapid growth

Economic and media liberalisation has led to the emergence of a growing advertising industry in Ghana. Scores of radio, television and newspapers have materialised, giving advertisers a slew of new outlets with which to reach consumers. Meanwhile, economic growth has provided the necessary foundation to support industry expansion, as rising disposable income levels have generated significant growth in retail. This has attracted major international ad agencies to the market and lead to the emergence of many local players. The result has been an ever more competitive industry where price competition is playing an increasingly important role. According to a study conducted by the international retail research firm Ipsos, advertising expenditure in 2011 totalled GHS299.2m ($177.4m).

While the crowded field is encouraging consolidation and streamlining of operations, the biggest challenge for the advertising market is the opacity of ratings figures, audience numbers and ad spend levels. Numerical data on media outlets is lacking, and figures on ad spend often rely heavily on rate cards, despite the fact that discounts are common. As a result, it can be difficult to quantify the relationship between pricing and visibility.

SECTOR DEVELOPMENT: Though advertising has been prevalent in Ghana for some time, it was not until the 1990s when the effects of economic reform created an environment ripe for the industry’s maturation. The divestiture of state-owned media and the introduction of privately owned newspapers, radio and television broadcasters in the mid to late 1990s further deepened the market for small and medium-sized advertising companies.

The market grew substantially through the beginning of the 21st century, with new companies being formed and large international firms like McCann Erikson and Ogilvy entering the country, increasing competition and improving standards. This has been both a boon and a burden for local companies. Ghanaian-owned Media Majique and Research Systems entered a partnership with Kenyan giant Scangroup, providing the East African firm with clients in return for stakes in new local subsidiaries. However, other firms which had operated as local partners for the industry giants have lost out as companies such as Saatchi & Saatchi open offices. There are now more than 26 foreign agencies working either independently or in conjunction with a local agency in Ghana.

A number of local media organisations and companies also own or have controlling stakes in advertising agencies, which complicates access to both advertisers and outlets. OMP, for example, has built up a sizable profile in the advertising sector in part due to its status as a sister company to Metro TV, one of the largest private stations in the country.

After hitting a bump in 2008-09 with the onset of the global financial crisis, advertising slowly resumed its upward trajectory. “Companies here are very sensitive to economic downturns,” Joel E Nettey, the vice-president of the Advertising Association of Ghana, told OBG. “As is the case elsewhere, advertising is often the first expenditure to be cut.” However, Ghana’s economic woes were short-lived. Now, benefitting from broad-based economic growth, the industry continues to see the development of new agencies, with many attracted by the ease of starting a business and the industry’s low overhead costs.

A CROWDED FIELD: The increased competition has had a big impact on pricing. New agencies continue to emerge on a regular basis and many adopt a strategy of using price to sign new clients. The successful run the sector has seen over the past two decades has made it attractive for entrepreneurs. A two-person team, consisting of a graphic designer and a salesman, can set up shop with little financial risk, due to the limited barriers to entry. The competition has impacted larger firms, which find some clients are being attracted by the lower prices, though generally these are not the industry’s big spenders.

KEY INDUSTRIES: The highly competitive communications industry, specifically the telecoms segment, has led the pack in terms of annual spending, though this is a relatively recent development. According to Nettey, a decade ago it was the nation’s breweries that drove advertising growth. However the decreased popularity of alcohol consumption, combined with the rise of mobile penetration, has resulted in telecoms taking the top position.

According to a 2011 Ipsos study, communications accounted for 17% of total advertising expenditures, followed by corporate and multi-brand advertising with 12%, food and beverage (12%), tourism and entertainment (11%), pharmaceuticals (10%), household goods (9%), media (8%) and financial services (8%). The entrance of Nigeria’s Glo telecoms operator in 2012 was preceded by months of aggressive advertising, which the company does in-house, including sponsoring the Ghanaian Premier League and the men’s national side.

CONSUMER TRENDS: The advertising industry’s rise has coincided with progress in the retail sector. A rising middle class with increasing disposable incomes has begun to take shape in the country’s urban centres, with a notable number of new franchises and formal outlets in cities such as Accra, Kumasi and Sekondi-Takoradi. This has led to new demand for products ranging from fast-moving consumer goods (FMCG) to cars and high-tech hardware. Though brand recognition is increasing, brand loyalties are few and far between. This is primarily due to consumers being very conscious of cost, an aspect that still dominates the majority of retail activity. Despite recent increases in per capita income, much of the gains have been counter-balanced by inflation.

So, despite recent progress, the rise of the Ghanaian consumer faces obstacles. The vast majority of retail business is conducted by small and micro-enterprises. The lack of sophisticated physical infrastructure development in many areas of the country also drives costs and restricts distribution. Furthermore, the economic disparity between urban centres and rural towns has limited the scope of retail’s expansion.

ALL POLITICS: Every four years elections have a tangible effect on advertising. Political parties and their candidates dominate the airwaves, newspaper columns and roadside billboards. Being an election year, 2012 is no different. However, Nettey believes this does not necessarily mean that every four years overall spending on advertising automatically jumps significantly. “Generally, the increases we see in political advertising during election seasons are, for the most part, balanced by decreases from traditional sources of ad revenues,” he told OBG. With political discourse so dominant in national media many companies simply eliminate, or at least cut back on, marketing expenditures – ads are considered less effective during political campaigns. Of course this does not mean spending from the private sector comes to a complete halt. As such, small increases in overall spending are generally anticipated among ad agencies during an election.

MEDIA: Traditional above-the-line (ABL) advertising media are television, radio, print and billboard. Nettey ranks revenue generated by ABL media as television, followed by radio, print and outdoor/billboards. In terms of volume the order is radio, television, print and outdoor/billboards.

Radio is the dominant media outlet, primarily due to its ability to reach all corners of the country and its modest overhead costs. A primetime 30-second ad on Peace FM, a popular station, is GHS151 ($90), while a live presenter mention goes for GHS520 ($308). Television comes in second in terms of volume, but is first in revenue terms, due to its higher costs. A 30-second primetime spot on TV3 costs GHS976 ($579), while the price of a 60-second spot jumps to GHS2000 ($1186).

Meanwhile, a full page in colour in one of the country’s more popular daily newspapers, the circulation figures in the country are decidedly low. Finally, outdoor billboards cost an average of $600 per month for a 5x10 metre board, $1200 per month for 9x6 and $1400 per month for 12x9.

ABL expenditures are complicated in part by uncertainty over audience figures. Ratings data is not readily available or comprehensive, and in some cases self-published figures of newspaper circulations are estimated to consist of at least 50% unsold copies. The Advertising Association of Ghana does compile audience research for select purposes, but overall advertisers face a challenging time ensuring prices match the proclaimed reach of an outlet.

Media outlets across the spectrum are heavily dependent on advertising revenues, a situation exacerbated by the lack of state support for the sector. Broadcast stations, for example, are almost wholly reliant on advertising revenues, which makes the market extremely competitive. Advertising and sponsorship revenues tend to grow most dramatically among broadcast stations than for radio or print, and urban stations (as well as the state-owned Daily Graphic, which has one of the larger coverage areas among the daily newspapers).

Though ABL advertising costs have not risen dramatically in recent years, partially due to currency appreciation, many advertisers are beginning to experiment away from traditional techniques by embracing below-the-line (BTL) advertising. A number of broadcasters, including state-owned radio outlet GBC, and a few daily papers have been prominent in pursuing BTL activities – such as promotional events, sponsorships and special kit sales – to boost their bottom line, but increasingly advertisers in urban areas are moving towards digital media.

UNCONVENTIONAL TECHNIQUES: In general, the digital age has brought with it a shift among advertisers towards implementing BTL techniques. BTL advertising refers to any method outside traditional mass media and has been embraced for three main reasons. First, there are often significant cost advantages to, say, creating a Facebook page as opposed to launching a television marketing campaign. Additionally, the highly coveted youth segment is at times more effectively reached via BTL, due to their adoption of digital technology.

That is not to say that BTL techniques are exclusive to the digital world. Methods such as mailing campaigns (both digital and physical) and in-store trials have the ability to reach a more specific audience by targeting clients already identified as prospective customers. In Ghana internet penetration has yet to reach a level where ABL advertising might experience any significant decrease due to BTL techniques. Firms are beginning to use BTL advertising, but not at the expense of traditional methods. BTL ad campaigns are gaining traction as companies see the value they have, especially when targeting the youth population, but the growth of social networking and other digital media, though significant, comes from a small base. In the absence of large-scale internet usage some firms have taken to advertising on mobile phones, which have an estimated penetration of 87.1%. BTL methods certainly do not automatically remove ad agencies from the equation, as customised campaigns must still be produced. A shift to in-house marketing production by companies has, however, begun to take place and could affect private advertising agencies.

OUTLOOK: Competition will remain fierce in the private sector and should keep pricing at local ad agencies to a minimum in the short term. Consolidation, along with increased regulation, could help to further raise industry standards, as well as helping address current price competition. In terms of spending, the telecoms sector is expected to drive growth, followed closely by FMCG, corporate and entertainment advertising. More expensive items, such as cars and technology-related products, should begin to play a larger role as the country’s middle class continues to expand. Meanwhile, the spread of the internet should help fuel the growth of BTL advertising, especially among firms targeting a young audience.