How can marketers deal with the lofty loonie?

The jokes about the Canadian loonie stooping to the same level as the Mexican peso can stop now. They may have caused a chuckle about a year ago, when the dollar slumped to a shockingly low 65 cents against the U.S. greenback. But since then the dollar's miraculous 25% climb to about 76 cents (at press time) has become no laughing matter. In fact, it's been weighing heavily on the minds of those working in Canadian industries as varied as travel, automotive manufacturing and film production.

The jokes about the Canadian loonie stooping to the same level as the Mexican peso can stop now. They may have caused a chuckle about a year ago, when the dollar slumped to a shockingly low 65 cents against the U.S. greenback. But since then the dollar’s miraculous 25% climb to about 76 cents (at press time) has become no laughing matter. In fact, it’s been weighing heavily on the minds of those working in Canadian industries as varied as travel, automotive manufacturing and film production.

The Canadian Tourism Commission is feeling the impact in two ways, says Scott Meis, executive director of research for the Ottawa-based agency: There has been a 20% loss on its in-advertising buying power over the past 18 months and, in terms of consumer response, Canadians are now more likely to visit their American cousins.

‘History suggests that a 10% increase in the Canadian dollar vis-a-vis the U.S. dollar results in about a 15% to 16% increase in Canadian overnight travel to the U.S. That affects our travel deficit,’ explains Meis, who adds that Americans are less affected because – surprise, surprise – they tend to be ignorant about exchange rate differences.

In order to keep Canadians at home, the CTC will build on its image-based ‘I Can’ campaign from 2003, which wrapped in January and showcased domestic travel destinations. According to Scott Patterson, managing director for the Canada Marketing Program at CTC, ‘I Can’ performed well with awareness up 35% from a 9% benchmark following the first flight last summer.

But while the CTC had been allotted larger-than-usual advertising budgets to deal with crisis after crisis in recent years, namely 9/11 and SARS, going forward it will have to be more tactical to make marketing dollars stretch further. In March, a new campaign from its AOR, Toronto-based DDB Canada (formerly Palmer Jarvis DDB), will see targeted messages aimed at golfers or gardeners, for instance, running in niche magazines.

Says Patterson: ‘The genesis of our targeting is to go after the outbound conversion market – those Canadians most likely to go outside of the country.’

Unlike travellers, American consumers in the B2B world are quite aware of exchange rate differences. And that has left some sectors like automotive manufacturing and film production with the potential to lose out.

According to Dean Mullett, Canadian leader of the automotive industry services group at Toronto-based PricewaterhouseCoopers, auto parts manufacturers are grappling with this now. In a sector where 80% of product actually crosses the border, the issue is huge. ‘Because of cost pressures in the auto industry, manufacturers who sell vehicles in the U.S. market are looking at Canadian [auto parts] companies and saying, ‘can you keep on being competitive?’ With the 25% appreciation of the Canadian dollar that’s tough to do,’ he says. ‘Now the move is to build the vehicle where you sell it. Canada sells 1.5 million vehicles a year, but produces 2.5 million, which doesn’t make a lot of sense in the long term.’

Similarly, the Canadian film production industry, which has already been hit hard by the likes of SARS, is also in jeopardy. According to Strategy’s sister publication Playback, the category grew by a whopping 78% between 1995/96 and 2000/2001, but by a mere 3% in the two years following. Some markets, like Vancouver, are bracing for a 25% downturn in volumes specifically because of the lofty loonie: it’s getting a lot harder to sell Canada to U.S. producers when you can’t boast about how cheap it is.

But efforts have been made to counter that. Susan Croome, commissioner at the BC Film Commission, which aims to entice new production to the province, reports that a new campaign entitled ‘World of Looks’ is being introduced in mid-April. From now on the group’s Web site and collateral handed out at industry trade shows in the States and abroad will feature beauty shots of B.C.

Says Croome: ‘We’re focusing on what sets us apart from a lot of film centres. It describes how we have a wide diversity of locations, including bio-climatic zones, and that we’re only two-and-a-half hours from Los Angeles.’

Meanwhile, last year, B.C. Film, which financially supports provincial filmmakers, introduced ‘Tools for the Trade,’ a campaign that brought in international distributors and sales agents to meet with feature film producers in Vancouver. Rob Egan, president and CEO of the organization, says the strategy is to bring people in to see what the West Coast has to offer firsthand.

The Toronto-based Ontario Media Development Corporation (OMDC) is also putting more cash into marketing, and it has recently opened an office in Los Angeles to boost its ability to conduct face-to-face meetings. ‘We’ve recognized the increasing competition for business in Ontario, due to the increase in the dollar and increased competition from other film jurisdictions both in Canada and around the world,’ says Donna Zuchlinski, acting manager of film in the OMDC’s industry development group. ‘A more intense effort is required to ensure that production levels remain constant in Ontario.’

Two full-time staff members will be making the rounds in L.A. to promote the province as a leader in film and TV production, as well as its ‘world-class infrastructure.’ Further, the OMDC will continue to showcase what the province has to offer through a biannual newsletter handed out at trade shows and mailed to 2,500 to 3,000 producers in L.A., New York and abroad. It describes the last six months of production activity in Toronto, with articles and interviews with key filmmakers.

Strategy asked three experts to advise marketers on how they can keep their bottom lines healthy while the loon continues to fly.

Dean Mullett, Canadian leader of the automotive industry services group, PricewaterhouseCoopers, Toronto

Say the dollar stays where it is – or a lot of economists talk about an 80-cent dollar – we need to find ways to be competitive at that level.

It’s about making sure we’re on the knowledge-added side of the equation when it comes to manufacturing. New good ideas, better ways of doing things are assets that, if you have them, no matter where you are people will want to deal with you. That’s an important feature.

If you can’t sell on price, you sell on product. You have to have something that people want. You have to create excitement. [Toronto-based auto parts manufacturer] Magna has done this well. It has focused on getting more of its content into the vehicle. It does that by giving complete assembly.

For example, if you look at a door, it has a door handle, the skin, and the armrest. Magna will focus on providing the whole system, which is obviously more complicated to do.

To a degree, it’s one-stop shopping. The car companies have thousands of suppliers, but manufacturers that bring it all together are offering a solution.

Jim Dollery, independent consultant, Toronto

Formerly the director of FutureBrand, Jim Dollery has worked in marketing for 19 years, including a stint at Procter & Gamble.

As far as the film production business goes, they have built their business solely on the dollar difference. That was to their advantage in the beginning, but over time they have proven that their technicians, their facilities and their service are as good as, or even superior to, what is offered in the U.S.

You don’t really want to use the Canadian dollar to your advantage, but it gets your foot in the door so you can prove that you are knowledgeable, that you can do everything that’s asked of you and more, and that you can offer a good product at a very good price.

You can see the impact of that in the growth of the film production industry – all the facilities that have sprung up in Toronto over the last five years. Initially, I think the issue was ‘take the money and run,’ but now it’s a mature industry that is well-entrenched, and it’s going to be difficult for U.S. producers to move business because the facilities are here, the technicians are here, and the dollar, even though it’s up, is still cheaper than the U.S. greenback.

I think the industry needs to use that as its argument – they can keep film production here because of all those things.

Shirley Roberts, president, Market-Driven Solutions, Toronto

Roberts is the author of Harness the Future: the nine keys to emerging consumer behaviour. She specializes in consumer trends, strategy and market research.

Price is the weakest competitive advantage. Someone else can always take over price leadership and everyone can become unprofitable. It’s important to find the other key drivers of purchase decisions. If you only have price you don’t have much, because it’s not sustainable.

For travel, you have to look at each city for its own unique features and advantages, and then look at the top five consumer targets to go after.

So you have to look at other drivers and be more specific about the targeting. Convenience is a key driver, as is delivering on your promises, and quality.

For instance, it can be about personal touch – treating people well and making them feel welcome so that then there’s word of mouth. The personal experience in Newfoundland, for example, is something you don’t get anywhere else in the world. People treat you like a guest in their home. That’s a unique advantage of Newfoundland and it should be expanded upon.

It’s a matter of finding the positioning – one sentence that sums up what the brand is in the consumer’s minds.