REGIONAL FOCUS;PEACE PROCESS FORGES NEW MIDDLE EAST FUTURE;MULTINATIONALS GRAPPLE WITH COMPLEXITIES OF DIVERSE AREA AS REGION ENTERS GLOBAL MARKET

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There are two Middle Easts. One is the Middle East as seen on CNN, overwhelmed by conflict, violence and political uncertainty. The other is a ripe market of more than 250 million people being brought into global reality by the forces of the peace process. The latter has brought multinationals flooding into Middle East markets.

But while the region is slowly being embraced by the West as it changes its political agendas and alliances, it is still diverse in culture and ideology.

Marketers that can't identify the need to address this cultural kaleidoscope will find themselves alienated by consumers.

On the other hand, with this newfound assimilation into the global market, the Middle East is advancing technologically, making it easier for marketers to get their messages heard. More and more, target audiences have televisions, cable and satellite dishes, and advertising techniques are refined as local ad agencies embrace an influx of international agencies.

SAUDI ARABIA AND THE GULF

Since 1990, advertising in newspapers and on TV in the Gulf has doubled, reaching $593.1 million last year. Industry analysts predict it will exceed $1 billion by the year 2000. Even though Saudi ad spend dropped from $269 million in 1994 to $255 million last year, Saudi Arabia, with a population exceeding 16 million, is still the top ad spender in the region.

Multinationals are realizing the potential of the market, and many corporations, including General Motors, Unilever, Sony, Motorola and IBM, have opened marketing and distribution operations in the region. Following their clients are multinational advertising agencies like Leo Burnett, BBDO, and Saatchi & Saatchi.

International brands don't neccessarily alter their look for the market; rather, advertising is altered to create a brand image in keeping with the local culture.

Some marketers do go for localized product lines. Three years ago in Saudi Arabia, Unilever launched Lipton's Long Leaf Tea, specially formulated for the traditional Arabic long-brewing method of making tea.

Marketers also package according to local demands. Small packages are sought in Saudi Arabia where, for example, locals have several bathrooms and more than one maid, so small detergents packs are convenient for spreading round the house.

The Gulf and Mideast region is being flooded with new media opportunities, with satellites Nilesat, Arabsat and AsiaSat2 on the verge of being launched. And regional and international broadcasters like UAE TV and TV Dubai have announced plans to extend their channels, and offer a wider advertising platform.

Orbit TV, although primarily a subscription-funded service, is considering selling ads as a second source of revenue. As of this month, the company will have rate cards to target both regional and multinational advertisers.

"We've been thinking about ad sales for quite a while and it took off slowly. But we are now going to push it," said Adrian Newman, Orbit's new advertising sales manager. Interested marketers include car rental group Avis, carmakers Nissan and Volvo, cosmetic group Revlon and American Express. Also available to marketers is a print option in the network's glossy TV program listings called The Orbit Guide.

"TV is still a primary medium, but it's becoming harder to justify as more channels become available," said Edmond Moutran, chairman of the Bahrain-based Middle East Marketing and Communications. With the Gulf's small population, viewership gets more fragmented, he explains, and with budgets not increasing, advertisers are becoming more selective about media.

Advertisers believe direct marketing will work in the region. A concern, though, is the issue of privacy, "especially when dealing with local Arab ladies," said Akram Rafoul, director of Jacobson's Direct Mail Services in Dubai.

EGYPT

"Many people believe that all Arabs have the same habits and that one Arab market is the same as another. That's wrong," insisted Issa Abyad, general manager of the Middle East Marketing Reseach Bureau in Cairo. One U.S. auto company attempted to research the region with one questionnaire and found that each country has very different needs. Egyptians buy a car to get from point A to point B while Saudis purchase fifth or sixth cars for specific purposes such as for children or as family vehicles.

Relaxed import regulations are prompting more multinationals to set up shop in Egypt, and they are vying for shelf space in a market where brand awareness is low and the consumer buys according to product categories.

Purchasing power is for the large part low in Egypt, with no more than 5% of Egyptians in the middle- or upper-income brackets. As a result, marketers must package products in smaller, more affordable packs so more consumers can afford to buy them.

"We have to think locally. We aren't global in Egypt," said Sami Abdel Aziz, president of Cairo's Research and Advertising Consultants. There are about 700,000 satellite dishes in Egypt, but local TV stations are still the most effective way to reach Egypt's 60 million people. Newspapers are less effective as Egypt's illiteracy rate is about 50%. Yet 53% of Egypt's $180 million in ad spending went to newspapers, and 38% was spent on TV.

TV advertising, said Mr. Aziz, should be in colloquial Egyptian Arabic and reflect local culture. "Whoever is more `Egyptian' in their advertising will succeed." Egyptians are happier with local slang and colloquialism; Gulf consumers prefer classical Arabic.

"It's important to preserve that sense of local taste so viewers don't conclude from the ad that the product wasn't made for them," added Fathi Hadaya, managing director of IMPACT/BBDO, Cairo.

Censorship must also be taken into account: Regulations prohibit advertisers from attacking competitors and require modestly dressed models to behave appropriately in commercials.

Egyptian marketing is branching out, with direct marketing being used for a personalized approach. One problem: Egypt's postal service isn't reliable, so marketers use faxes and hand distributed material. Another problem: a lack of companies renting consumer lists. Telemarketing, however, is perceived as an invasion of privacy. Outdoor advertising is becoming more sophisticated with technologically advanced outdoor boards replacing traditional, hand-painted ones.

ISRAEL

Israel has undergone a marketing revolution in the past few years as a result of the peace process-which brought Israel to the attention of multinationals-and the 1993 introduction of commercial TV-which changed the face of advertising.

If spreading the multinational message anywhere in the Middle East is easy, then Israel's the place. More than 40% of the adult Israeli population went abroad in 1995 for longer than a week. As a result, said Moshe Theumim, chairman and president of Gitam/BBDO, "Israelis are open to the world, and the Israeli consumer is becoming more cosmopolitan."

In fact, Israelis are so enamored with things foreign, Mr. Theumim's agency has just launched a campaign promoting locally produced goods to Israelis, who generally prefer imports.

However, warns Yair Feldmann, chairman of the Israel Advertisers Association, multinationals must realize that their Israel is still a different culture. A classic example is the Pepsi campaign that launched the soft drink's re-entry into Israel in 1992. It offended the religious community with posters of the evolution of man, a concept rejected by Orthodox Judaism. The product was boycotted by the 450,000-strong ultra-Orthodox community, and Pepsi took an early market bashing.

Some cultural norms in Israel would be shunned by the rest of the world. The Israeli army experience conjours up sentimental memories for most Israeli men, and as a result, noted Mr. Theumim, the image of men hugging and touching is considered very macho, while it may be rejected as carrying homosexual overtones in other markets. A Gitam/BBDO commercial for Maccabi Beer, one of Israel's top selling beers, has young men, in and out the army, hugging and touching, and showering together.

With Israel being a very computer oriented society, new forms of marketing, such as the Internet, are taking off. Yet direct mail doesn't work well in a 5.6 million population. "Israel's really small, and it's easy to reach people through one TV channel and daily newspapers," said Mr. Feldmann.

In spite of its size, though, Israel's ad spend was approximately $780 million last year, about 1.5% of the gross national product and by far the highest in the Middle East.

One third of media spending was spent on TV, with newspapers still a significant force with 44%. A recent survey shows 84.2% of Israeli adults read daily newspapers.

PALESTINE

The Palestinian advertising industry, like the Palestinian state itself, is still in its infancy. The advertising field is wide open, said Fayeq Hourani, general manager of Ramallah-based El Arabi advertising agency, but account sizes are still very low. Palestinian ad spending doesn't exceed $250,000 yet, even though the past year was a good year leading up to the Palestinian elections in January.

One problem with the industry is that regular employment isn't guaranteed for the 2.5 million Palestinians in the autonomous areas of the West Bank and Gaza, due to closures imposed after recent terrorist attacks in Israel that prevent workers from entering Israel to work. Even when there is steady employment, the average per capita annual income is $4,000. "But when the situation stabilizes," anticipates Mr. Hourani, "we intend to have a lot of work."

Research is needed to crack the Palestinian market because of its peculiar circumstances. Much depends on whether Palestinians and Israelis go for full separation, and Palestinians gain direct access to foreign markets and vice versa, said Said Aub Gosh, director of Palestinian Group of Industrialists, Bethelehem. Currently, Palestinian imports and exports go through Israel.

Most advertising in the Palestinian Autonomy areas is done in newspapers, followed by radio, flyers and stickers. Outdoor is rarely used because of their high costs, and the fact that they're vulnerable to "political vandalism."

Multinationals advertising in the Autonomy include Cadbury's, General Motors and Timex.

JORDAN

In neighboring Jordan, where 1995 ad spending reached only $23.4 million, advertisers and marketers are limited by a 4.13 million population whose per capita annual income is about $2,000, and a 25% unemployment rate.

Phillip Akruk, director of the Intermarket Advertising Agency, Amman, notes that much thought goes into the types of products advertised. "We have to consider the kind of product we're dealing with, and the budget of the potential purchasers."

Aiman Kherfan, advertising manager of Coca-Cola in Jordan, explains freebies are a good way of reaching people. "We offer give-aways with other purchases, and that's very successful here where people have to watch their spending very closely." Coca-Cola reaches more than 90% of the population through radio, then TV, print and outdoor advertising.

And even though consumers are literate, said Yazid Betar, manager of Amman's Promo 7 Advertising Co., visuals are important. For example, people buying cooking oil seem more attracted to a label depicting an ear of corn than the words on the label.

Contributing: Mary Kelly, Cairo; Juliana Koranteng, London; Maureen Meehan, Bethlehem; Lekha Rai, Dubai.

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