Publish in Perspectives - Wednesday, July 17, 2013
The recent Brazil protests present a risk for brand marketing, but also provide them with many opportunities. Here a protest in Rio de Janeiro on July 4, 2013. (Photo: Fernando Frazão/Agencia Brasil)
Companies may have to rethink marketing strategies tied to sporting events such as the World Cup and Rio Olympics.
As Brazil was defeating Spain 3-0 in the final game of the FIFA Confederations Cup in Rio de Janeiro's legendary Maracana Stadium, thousands of demonstrators were facing off with police at locations around the city. The protests, the latest in a series of demonstrations that began on June 10, brought thousands of people into the streets to demand better public services and to complain about the high public costs of mounting the various sports events being hosted by the country, including the FIFA Confederations Cup 2013, the FIFA World Cup in 2014, and the 2016 Olympics.
According to Anita Kon, a professor of economics at the Catholic Pontifical University of Sao Paulo (PUCSP), the demonstrations were initiated by a group of people in Sao Paulo who were unhappy about the hike in bus ticket prices from three reales to 3.20 reales. The incident spurred additional protests throughout the country, "despite the fact that the demands of the initial demonstrators were addressed, and the price of the tickets ultimately did not increase," she notes, adding that the demonstrations that followed are "the product of structural problems, not temporary ones, which are not being resolved by the government and by public institutions."
Kon says the state of discontent encompasses all of Brazil's social classes, "which have been unsatisfied for a long time with the behavior of politicians in all of the parties and all realms of the government: federal, provincial and municipal." This dissatisfaction reflects a wide range of problems that affect public services in the country in such areas as health care, education, security, transportation and, especially, the failure of the government to react strongly enough to cases of political corruption even when such cases have been widely broadcast in the media. In her view, the main problem has always been that "public sector spending contracts are awarded, above all, for electoral reasons. And since there are elections of this sort every two years, these [kinds of] investments are [continually] being postponed."
This sort of mismanagement and waste of resources on the wrong priorities has not merely failed to meet the demands of the population, "but has been directed toward satisfying the interests of the political class itself, and has wound up affecting the quality of public services in general," notes Kon. From that starting point, the public took to the streets to demonstrate, mostly in an orderly and peaceful way. However, there have also been "some violent groups that have provoked acts of vandalism and robbery, which resulted in a more energetic reaction on the part of the public security forces who have sought to disperse them." This series of demonstrations has led to several deaths and hundreds of arrests.
The protests caught Brazilian President Dilma Rousseff off guard. Rousseff, a former leftist guerrilla, is now president of the country with the world's sixth-largest economy, and a population that feels a special devotion for football, a sport in which Brazil has been the world champion on five separate occasions. However, for Felipe Monteiro, a professor of strategy at INSEAD in Paris, the Brazilian people's ability mobilize within a few days did not come as a surprise. "We all knew that the penetration of social networks in the country was impressive," says Monteiro. For example, Brazil ranks second (behind the United States) in terms of the penetration of Facebook.
In such a context, it was not surprising that a video titled, "I Will Not Go to the World Cup," shot by Brazilian Carla Toledo Dauden and posted to YouTube on June 17, recently attracted more than 3.38 million visits. In that video, Dauden, who was born in Florianopolis but now lives in the United States, noted that the World Cup is going to cost Brazil $30 billion. That money, she said, could be invested in areas that should be a higher priority for the country, such as public education and health care infrastructure. She added that most of the money generated by the sports event will go directly into the coffers of FIFA, and that the funds that come from tourists and investors will provide benefits mostly for those Brazilians who are already economically better off. That money will not change the life of the people at the bottom in any significant way, she pointed out.
Apart from the viewpoints expressed in the video, the latest demonstrations of public discontent may be an indication that something is changing in the behavioral style of Brazilians, who have long had a tendency to look for a personal workaround for their problems rather than calling for broad overall reforms, notes Monteiro. He is referring to the theory of economist Albert Hirschman regarding the attitudes adopted by individuals and members of organizations when they face situations involving a decline in quality and benefits. According to Monteiro, when Brazilians have a problem -- especially among the elite -- they often choose to look for a way to solve it at the individual level. "If public security is not good, I hire a private security guard; if the level of public education is not adequate, I send my kids to a private school; if there are lots of traffic jams in Sao Paulo, I hire a helicopter as my means of transportation," he says. "When there is a disappointment, people often choose to get out, rather than change things."
Rousseff appears to have listened to the protestors. She proposed a popular plebiscite on a broad national pact with implications for the political system, health care, education and transportation. This plebiscite must take place as part of "a specific constitutional process for political reform," the president said at a meeting with other authorities. Despite her efforts, however, Rousseff's public approval level has declined by 27 percentage points, from 57 percent to 30 percent, during the wave of social protests. As a result, it has dropped to its lowest level since she took power in 2011, according to a survey by the Instituto Datafolha.
Kon is skeptical about the immediate results of these moves. The problem, she says, is that in Brazil the structural issues cannot be resolved in the short term. In addition, "certain legal issues have to be resolved so that it becomes possible to enact constitutional reform. Moreover, a broad debate cannot take place over the short term."
WINNERS AND LOSERS
The question is how all of these protests will affect the country's economic situation, which has become a source of concern for investors. Since the end of last year, the macroeconomic situation has deteriorated, and the country's growth rate has slowed from 2.7 percent in 2011 to 0.9 percent during 2012. This compares with 7.5 percent in 2010, according to data from the Brazilian central bank. Economists are forecasting growth of 2.4 percent this year, and have raised their forecasts for inflation for 2013 from 5.82 percent to 5.86 percent. Monteiro notes that investors had already taken their foot off of the accelerator pedal while waiting to see how the country's economy evolved. He says that they will likely continue to have the same "wait and see" attitude with regards to the demonstrations.
According to Monteiro, the wave of protests will have one of two possible long-term outcomes. The first, and less probable, outcome is that the situation continues to deteriorate, and that there are more protests. "The most serious result in this scenario would be a return to the old days of 'boom and bust' in Brazil. Latin America and Brazil have frequently passed through such cycles: a great deal of growth and then years of stagnation, inflation, and a redesign of the economic model, and so forth. It is possible that this situation will take place, but I would say that this is the less likely scenario."
More likely, the system could look for solutions on its own, which would be a good demonstration of the current state of the Brazilian economy. "This is already happening: Instead of responding with confrontation, the government has begun to deal with these topics within the system itself through political reform," he says. "If this occurs, and if they manage to find solutions without provoking a crisis, the public, along with the investors who have been standing by, is going to be confident in the country once more. The long-term intention is for investment to continue." Monteiro adds that Brazil was one of the countries that took in the greatest inflows of foreign direct investment in 2012, going from fifth place in the world in 2011 to fourth place in 2012, with a total volume of $65 billion, according to the recently published World Investment Report 2013.
Moving forward, Kon predicts that projects and investments in public services, instead of being damaged, will be accelerated in accordance with the complaints of the population. Monteiro agrees with this view, adding that those companies that are involved in lower priority projects, such as the high-speed train linking Rio de Janeiro and Sao Paulo, will find it harder to win approval for such costly investments when there are so many basic things that have yet to be undertaken. "Facing a greater amount of popular pressure, it will be harder to win approval for any project with such characteristics; something that is important but, at best, is not the most important thing to do at the time. Such projects are going to move down to the second level [of priorities]. Generally speaking, those projects that are not a top priority will be postponed," Monteiro notes.
On the other hand, the people are likely to demand more and more transparency from companies so they can figure out what those at the bottom of the social pyramid are getting out of such investments. If Monteiro was a foreign investor, "I would be very focused on finding ways to show how the local people are going to benefit from the projects that I have invested in."
In addition, Kon says that foreign firms will have to show the Brazilian public that they understand -- and are in solidarity with -- the popular demonstrations that are taking place in the country. The firms will also have to show "that they are interested in bringing the country the necessary assistance [including human resources] that compensates for the lack of savings and enables the country to accelerate the improvement in its public services, while contributing with new types of management technologies that make results more efficient and faster to achieve."
She notes that these steps must be taken with great care and tact, so that the population does not feel that it is not respected. "The Brazilian people are very cordial and hospitable, and they really like to play host to tourists and foreign investors. But nowadays they are very unsatisfied with the way the government has accepted certain impositions made by FIFA."
REFOCUSING MARKETING STRATEGIES
In that sense, Monteiro says that the moment may have arrived when the companies that are sponsors of, or are otherwise involved in, future sports events, especially in football, think about what the game means for this country, which knows, loves and values the sport like few others. "It is the national passion," Monteiro points out. "For the companies involved in the World Cup, Brazil would be the ideal situation: almost 200 million people who are crazy about football and, in addition, who have a local team that is first rate; unlike, for example, the situation in South Africa, where the previous World Cup was held." All of the elements are in place for the upcoming event to be a complete success, he adds, but the protests could create a very different result.
"The people [of Brazil], who have all this love and interest in football, are starting to feel that the party is not for them; that they are not totally involved in it, and that the event is made for people who are on the outside, so that they can benefit from it elsewhere in the world," Monteiro says, noting that a nationwide feeling is beginning to grow to the effect that "we don't need FIFA to come here and tell us how to experience football. We have always gotten into [matches in] our stadiums, and we have experienced things in our own special way; eating our local foods, and so forth. And now they come here and they tell us, for example, that we have to drink Coca-Cola and eat hamburgers."
Moreover, the protests have made it clear that there is a growing desire among Brazilians to stop being mere spectators of events, meaning that "companies have to find ways to rethink their marketing strategies because people want to participate," Monteiro states. He says that if businesses don't find ways to directly engage the Brazilian people, and allow them to be active and present during the World Cup, they could be creating a feeling of "rejection" that would spill over into future events. "People might say,' 'I always used to go to Maracana [stadium], but now that it costs $200 for a ticket, I can't afford it.' That can generate a distancing, a very serious detachment," he notes.
The key is for the brands and companies to become more inclusive, according to Julian Villanueva, marketing professor at the IESE Business School. He says that firms must change their priorities and communications goals, with the intention of becoming more transparent and social. He warns that if it is true that these protests are rooted in a significant segment of Brazilian society, that segment must be listened to. "Nowadays, the brands must learn to adapt their marketing strategies to the voice of the marketplace, and they must do it more rapidly. They must begin by re-thinking the story that they want to tell in each event; by being bolder and more committed to society. And it is important that these are real actions and real stories, and that the managers create them and commit to them; rather than cosmetic tactics for trying to take advantage of the situation in an opportunistic way."
The protests present a risk for the brands, but also provide them with many opportunities. Villanueva thinks that it is unlikely that every brand will have to reformulate its strategies. "However, many can indeed take advantage of this new situation." Monteiro agrees with that view, noting that there is an authentic symbiosis between Brazilian culture and football, which presents an opportunity for companies that are aware of the great power that this can provide for their marketing strategies. "They are not directing themselves at people who are not interested in these events," Monteiro notes. If he were Coca-Cola or another FIFA sponsor, Monteiro adds, "I would think about how I might channel all of that energy from the people to my favor."
Villanueva says that future sports events could generate a significant reputational crisis for some specific brands. However, he considers it more likely that, "when the time comes, any possible reputational crisis will spill over more directly to the [sports] event in its entirety and to the people who manage it."
Republished with permission from http://www.knowledge.wharton.upenn.edu -- the online research and business analysis journal of the Wharton School of the University of Pennsylvania.