REPORT ON PROMOTION IN SAUDIA ARABIA

2014

Institute of Management

Sciences BZU Multan

Sumair ALI

MBE-11-38

Saudia Arabia

Institute of Management Sciences BZU Multan MBA(evening) 6th semester 2

Dedication

I dedicate this report to my parents who conveyed love and respect for education, to my teacher

who taught the skills and knowledge to accomplish all my educational tasks with confidence and

ease, and especially to people who believed in me when I did not; and for always being a support

and strength.

Institute of Management Sciences BZU Multan MBA(evening) 6th semester 3

Acknowledgement

We take courage for this operation from our teacher for the creation of this project. We

had short time because we did not work for our project during or before our paper but with the

contribution of group mates & teacher Ma’m Maria Yasin. It became so easy for us that it looks

well to work properly. We consider ourselves much fortune as we did work under the kind

supervision of Ma’m Maria Yasin. She solved our every problem when we faced any difficulty.

She also helps us in technical problems and also encouraged us in such a Tough task. We are

also thankful to all the teachers of the department because they raise our courage.

Sumair Ali

Institute of Management Sciences BZU Multan MBA(evening) 6th semester 4

Executive Summary

Background Information

Saudi Arabia is a significant regional economic player with a high GDP. It is the biggest oil

producer and exporter in the world. In addition, it has embarked during the past decade on a plan

to become a regional economic center and to diversify from almost exclusively petroleum based

output to other economic sectors and products. The Saudi economy has been opened up in the

previous years, Including the establishment of the capital market and investment sectors. Saudi

Arabia's legal system is a unique one, where the Holy Qur'an and Sunnah (Prophet Muhammad's

teachings and traditions) represent the core of the legal and ruling systems. Islamic Law (or

Shari'ah) and jurisprudence have a general lawStanding in many cases, where the statutory laws

are silent on some issues.

Saudi Arabia's anti-money laundering (AML) and counter terrorist financing (CFT) regime is in

creation since 2003. The anti-money laundering statute (AMLS) was issued in 2003, but money

laundering (ML) cases were prosecuted and brought to courts already before the law came into

effect. The said law and its Implementing Regulations (2005) provide basic requirements that are

complemented by rules,

Instructions and circulars issued by supervisory authorities. In its efforts to combat (ML) and

terrorist financing (TF), Saudi Arabia has established a number of permanent national

committees to coordinate policy efforts, though such committees' role should be maximized. The

CFT framework in Saudi Arabia

Suffers from shortcomings that need to be addressed and corrected explicitly and adequately,

even though terrorism (and therefore TF) is punishable in KSA under Shari'ah, which has

already led to convictions.

On the other hand, the implementation of the different aspects of the AML/CFT system in Saudi

Arabia is still gaining momentum, given the novelty of many sectors conducting business, such

as the insurance, securities and financing sectors, and the novelty of the AML/CFT instructions

for such sectors.

This overarching factor has a negative impact on the effectiveness of the whole regime. In

addition, some relevant supervisory authorities are young and are in the first stages of acquiring

Institute of Management Sciences BZU Multan MBA(evening) 6th semester 5

much needed knowledge and experience. The generally below-expectation level of compliance

and implementation varies between

financial institutions (especially banking financial institutions) and non-financial institutions and

among different sectors within each category. The level of awareness of AML/CFT risks and

vulnerabilities among the different sectors needs to be raised and better communicated.

Investigation and law enforcement

authorities, supervisory authorities and the private sectors should pay greater attention to training

and awareness-raising.

Institute of Management Sciences BZU Multan MBA(evening) 6th semester 6

Table of Contents

Introduction to Saudia Arabia

Articles Literature Review

Constitutional Law

Media Law

Trade regulations, Customs, & Standards

Membership in Free Trade Arrangements

Tariff and Non-Tariff Barriers/Tariff Rates

Marketing & Advertising

Top five advertising agencies in Saudia Arabia

Institute of Management Sciences BZU Multan MBA(evening) 6th semester 7

How Price Promotions Influence Post

purchase Consumption Experience over

Time

Author(s): Leonard Lee and Claire I. Tsai

Source: Journal of Consumer Research, Vol. 40, No. 5 (February 2014), pp. 943-959

Published by: The University of Chicago Press

Stable URL: http://www.jstor.org/stable/10.1086/673441 .

Accessed: 07/05/2014 07:23

Summary:

The current research examines how price promotions influence post purchase consumption

experience. On the one hand, getting a good deal can elevate moods and dampen the “pain of

payment,” thus enhancing consumption enjoyment. On the other hand, discounts also reduce

sunk-cost. Four experiments involving real spending and consumption demonstrate that when

consumption occurs immediately after payment, discounts make consumption more enjoyable;

however, this pattern reverses when consumption is delayed.

While price promotions can affect consumption experience, how this influence manifests

depends on when products are consumed after payment. Across four experiments involving real

payment and consumption as well as distinct product categories—chocolate truffles (experiment

1), music (experiment 2), and orange juice (experiments 3 and 4)— we found that when product

consumption occurs immediately after purchase, price discounts enhance consumers’ enjoyment

of the product. In contrast, when consumption is decoupled from the transaction by a time delay,

price discounts reduce consumption enjoyment. The studies also provide process evidence for

the dominant role of mood for immediate consumption (experiments 2 and 4) and the role

Institute of Management Sciences BZU Multan MBA(evening) 6th semester 8

of consumption attention for delayed consumption (experiments 3 and 4). We also ruled out

alternative accounts including absolute price differences (experiment 2), pure sunk-cost

considerations (experiment 3), and perceived quality (experiments 2 and 3).

Our findings complement prior work that examines the difference between prepayment and post

payment consumption experience (Patrick and Park 2006; Prelec and Loewenstein

1998) by investigating the effect of price promotions on consumption experience at different

points in time after payment. Our findings also complement prior work on the placebo effect in

which price discounts have been found to have a deleterious effect on consumers’ perceived

efficacy of utilitarian products (Shiv et al. 2005)

Institute of Management Sciences BZU Multan MBA(evening) 6th semester 9

How to Evaluate Field Sales Promotion

Author(s): Milton J. Margolis

Source: Journal of Marketing, Vol. 27, No. 3 (Jul., 1963), pp. 42-46

Published by: American Marketing AssociationStable

URL: http://www.jstor.org/stable/1249434

.Accessed: 07/05/2014 07:19Your

Summary:

SALES promotion covers many separate activities, the more significant of which are showing

gains in usage. Some indi-cation of the increase in use of those major devices can be seen by the

following facts. Premiums, as traffic-building and purchase inducements, in-creased 80% from

1957 to 1962.

1.As one example, 82% of super-markets were using some form of continuous premiums during

1962.

2. Couponing rose 43% in the 1957-1960 period, with 10 billion coupons distributed in 1960.

3. Contests are increasing in popularity, with 366 recorded in 1961, rising 41% over 1960.

4. Sales incentive programs, for salesmen and the trade, reached a new high in 1961, and Sales

Management referred to the sales incentive plan as "one of the most widely used devices in

marketing.

5. Deals, in six highly promoted product groups offered to consumers, were 3'/2 times higher in

1962 than in 1955.

Institute of Management Sciences BZU Multan MBA(evening) 6th semester 10

6. National sales promotion expenditures are approximately $6 billion annually and still

increasing.

7. To gain some perspective, this figure should be compared with the $12 billion annual

expenditures for advertising.

Sales Promotion Evaluation

If management really agrees with the principle of evaluation, two different reactions must be

considered. The first point of view is expressed by purists who argue, "A little evaluation is a

dangerous thing." This implies that if you cannot do it exactly right, do not do it at all!

Furthermore, you cannot afford to do it right because of the undue drain on time and money. The

second point of view is expressed by those who say, "A little evaluation is better than no

evaluation." This implies that resources may not be sufficient to do the perfect job, but that

enough can be done to make the effort worthwhile.

Institute of Management Sciences BZU Multan MBA(evening) 6th semester 11

Brand Promotions as a Lottery

Author(s): Sanjay K. Dhar, Claudia González-Vallejo and Dilip Soman

Source: Marketing Letters, Vol. 6, No. 3 (Jul., 1995), pp. 221-233

Published by: SpringerStable

URL: http://www.jstor.org/stable/40216376 .

Accessed: 07/05/2014 07:23Your

Summary:

The key contributions of this paper are as follows:

1 . This paper provides empirical support for the use of discount in brand promotions. We show

that higher sales and hence profits result when brands are offered on discounts instead of

conventional across-the-board promotions. The result reverses when the probability level is high

for the lottery promotion.

2. Our studies extend promotions usually observed in the department store retail arena to

consumer packaged goods.

Results provide strong support for an interesting empirical observation that low-probability

lottery-like brand promotions with imprecisely stated discounts can do better than equally costly

conventional promotions offering a precise discount on the entire stock. Using such promotions

could increase a brand's sales (market share) and hence profit performance over that resulting

from conventional promotions. This holds for both high-share and low-share brands. The results

were supported by both survey-based measures of attractiveness and purchase intention as well

as actual purchase behavior of consumers shop- ping in an on-campus store with their own

Institute of Management Sciences BZU Multan MBA(evening) 6th semester 12

money. Lottery promotions can be implemented using scratch panels on packages or peel-off

coupons (which cannot be restickered once peeled off). Treating brand promotions as a lottery

significantly extends prior research on tensile price claims by identifying that the probability of

getting the tensile discount is a key variable. While our study accounts for brand factors like

prior share and familiarity, future research should examine the effect of other brand (such as

national brand versus store brand), store and category factors (such as purchase frequency,

involvement, competitive structure, and promotions) on this result.

Institute of Management Sciences BZU Multan MBA(evening) 6th semester 13

Introduction to Saudia Arabia

Saudi Arabia, officially known as the Kingdom of Saudi Arabia, is the largest Arab state in

Western Asia by land area and the second-largest in the Arab world after Algeria.

Capital: Riyadh

Dialing code: +966

Currency: Saudi riyal

King: Abdullah of Saudi Arabia

Population: 28.29 million (2012) World Bank

Colleges and Universities: King Faisal University etc.

The Kingdom of Saudi Arabia features one of the most restrictive media landscapes in the world.

In its 2011 report, Reporters without Borders ranked Saudi Arabia at 158 out of 179 countries.

The press in Saudi Arabia receives little protection to practice critical journalism. In general, the

government sees the news media as a tool to help promote government interests and a

harmonious society.

Saudi Arabia was founded by Abdul-Aziz bin Saud in 1932 after he conquered various lands on

the peninsula that would later bear his name. The kingdom has never adopted an official

Constitution, but in 1992 it adopted the Basic Law of Saudi Arabia by royal decree. The basic

law insists that the king must comply with Sharia (Islamic) law and the Quran. Officially, the

country’s constitution are said to be the Koran and the Sunnah (the traditions of Muhammad),

but no written modern constitution has ever been adopted.73 The king rules the country and

Institute of Management Sciences BZU Multan MBA(evening) 6th semester 14

about 2,000 members of the royal family, descendants of Abdul-Aziz bin Saud, hold most of the

nation’s wealth and power.

Institute of Management Sciences BZU Multan MBA(evening) 6th semester 15

Constitution (basic law)

Unlike the other countries in the GCC, Saudi Arabia’s “basic law” does not protect freedom of

expression. Article 39 covers expression by stating that “information, publication, and all other

media shall employ courteous language and the state’s regulations, and they shall contribute to

the education of the nation and the bolstering of its unity.” The article goes on to expressly

prohibit any communications that “foster sedition or division or harm the state’s security and its

public relations or detract from man’s dignity and rights.”74 The basic law explains that statutes

determine the proper boundaries of acceptable speech. Another article shows the importance

placed upon collective harmony in the Saudi system. Article 12 of the basic law declares that the

“state will prevent anything that may lead to disunity, sedition and separation.”75 The absence of

any

protection for free expression and a focus on social harmony creates a

highly restrictive space for the news media to operate. The kingdom doesn’t have a written penal

code. Instead “the security forces and courts rely on vague and somewhat elastic concepts of

criminal legislation” leading to a nebulous playing field in which journalists and others

operate.’’76

Media law

Saudi Arabia amended its 1963 press law with the 2003 Press and

Publications Act, which led to a more liberal press environment. The move was seen as the royal

family’s view that a more liberal press was in their best interest “in light of expanding global

information from satellite television and the Internet.”77 The press takes some liberties,

reporting on “bad news” such as fires and occasionally criticizing some policies. Still, red lines

Institute of Management Sciences BZU Multan MBA(evening) 6th semester 16

are never crossed: Criticism of the country’s rulers or its foreign policies, such as its stance

toward the Arab-Israeli conflict.78 The government doesn’t exercise prior restraint in all outlets

but takes action quickly when alerted to problematic news reports.79 The effect is a press that

exercises self-censorship and stays inside the “red lines.” The 2003 press law does offer basic

guarantees for a free press. Article 8 states that “freedom of expression is guaranteed in the

different media of publication within the limits of Sharia Rules and Law.”80 The law then goes

on to offer a long list of types of prohibited journalism.

Article 9 provides several areas that allow for restrictions in speech including public order,

incitement of criminal acts, harming the economy, and not being objective. The article first

mandates that printed material “shall not lead to breach of public security, public policy or

serving foreign interest that conflict with national interest.”81 The article also bans anything that

excites “fanatical instincts or stir(s) up discord among citizens.” With these broad directives,

authorities have wide latitude in determining what type of reports may be prohibited in order to

maintain public order.

Finally the law requires that journalists “observe objective and constructive criticism that aims at

public interest and which is based on facts and evidence.” Deciding on clear delineations of

constructive versus destructive criticism may prove difficult. Deciding which criticism serves the

public interest and which stokes discord could also be a challenging task. In countries with

developed press freedoms, the government avoids issuing directions about types of coverage or

banning “false news.” While noble in their approach, such government demands invariably lead

to self-censorship. Article 38 of the press law provides stiff penalties for journalists who violate

its rules. The law allows for a fine of up to 50,000 Saudi Riyals (about $13,500) as well as the

closure of the outlet for up to two months. Contrary to other published reports, the media law

Institute of Management Sciences BZU Multan MBA(evening) 6th semester 17

doesn’t specifically proscribe imprisonment for any offense. But, it does note that the law

doesn’t supersede “more serious penalties” from other laws. In practice, journalists can be jailed

for what they report for other offenses such as “instigating protests” or upsetting public order.

The result of these prohibitions is a media environment that is consistently ranked “among the

most repressive in the Arab world in 2010.”85

Saudi Arabia has the strictest blasphemy enforcement of any GCC nation, although the definition

of the crime is inexact. “Saudi Arabia does not have a penal code,” writes one observer, “and the

crimes of ‘insulting Islam’ or ‘cursing God’ are not precisely defined.”86 The result of this

nebulous system is many cases in which critics complain freedom of expression has been

severely hampered. Saudi frequently jails and sometimes executes citizens and expatriates

accused of blasphemy. A journalist, Rabah al- Quwai’I, was charged with blasphemy for Internet

writings in 2005.87 And another journalist and blogger, Hamza Khashgari, is currently awaiting

trial in 2012 for tweets he posted and quickly deleted concerning the Prophet Mohammed

(PBUH).88

Institute of Management Sciences BZU Multan MBA(evening) 6th semester 18

TRADE REGULATIONS, CUSTOMS,

AND STANDARDS

- Membership in Free Trade Arrangements

Saudi Arabia is a member of the Gulf Cooperation Council (GCC), which consists of Kuwait,

Qatar, Bahrain, the UAE, Oman, and Saudi Arabia. Membership confers special trade and

investment privileges within those countries. The GCC implemented a Customs Union on

January 1, 2003 that stipulates free movement of local goods within member states. Leaders of

the GCC have approved to allow Yemen gradual entry into their Council. The member states

also agreed that they would switch to a single currency by January 1, 2010 at the latest, a

common market in 2007, and a monetary union in 2005. Saudi Arabia is also a member of the

Arab League. Recently, Arab League states have agreed to negotiate an Arab Free Trade Zone.

- Tariff and Non-Tariff Barriers/Tariff Rates

Saudi Arabia is currently seeking membership in the World Trade Organization (WTO). Once

Saudi Arabia is admitted, the country's trade regime should become more transparent and more

accommodating to non-Saudi businesses. Moreover, the Saudi Arabian leadership has

embarked on a wide-ranging restructuring of the entire Saudi economy. A number of economic

and policy reforms are underway that will lay the foundation for a better climate conducive to

foreign enterprises. Some of the legislation and regulations promulgated within the past few

years are:

- Import Licensing Guidelines/Procedures (2000/2002)

- Sanitary and Phytosanitary Measures (2000)

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- Law on Ownership of Real Estate by Non-Saudis (2000)

- Saudi Arabian Standards Organization Technical Directives (2000)

- Negative List excluded from Foreign Investment (2001 with revision in 2003)

- Telecommunications Act (2001)

- GCC Patents Law (2001)

- Private Laboratories Law (2002)

- Trademark Law amendments (2002)

- Trade Information Law (2002)

- Copyright Law amendments (2003)

- Capital Markets Law (2003)

- Law on Publication of Government Contracts (2003)

- Insurance Regulatory Law (2003)

- Tax Law (2004)

- Enhanced Money Laundering Regulations (2003)

Regulations under review include:

- Commercial Agency regulations

- Companies’ Law

- Unfair Competition Law

- Anti-dumping Law

- Customs Valuation guidelines

Institute of Management Sciences BZU Multan MBA(evening) 6th semester 20

- Labor and Workmen Law

- Residence and sponsorship regulations

- Tourism guidelines

As of the date of this report, Saudi business and laws still favor Saudi citizens, and Saudi

Arabia still has trade barriers, mainly regulatory and bureaucratic practices, which restrict the

level of trade and investment.

For example, only Saudi nationals are permitted to engage in trading activities and only Saudis

are permitted to register as commercial agents. All industrial enterprises are open to non-Saudis,

and they can also trade in the products they manufacture. Restrictions on individual professions

also are in force, such as who can practice law, medicine, accounting and financial services, and

other similar professions.

Institute of Management Sciences BZU Multan MBA(evening) 6th semester 21

Marketing and Advertising

Advertising and marketing firms are beginning to refocus their established techniques. Direct

marketing previously was not a widely used technique in Saudi Arabia. Personal relations

between vendors and customers were, and in some cases still are, extremely important in the

Kingdom.

However, advertisers and marketers have come to recognize the demographic shift in Saudi

Arabia. These fields are currently beginning to concentrate and incorporate into their strategies

two new, growing targets. The first of these new targets is a growing and more dynamic private

sector. The private sector is broadening and deepening the arena for corporate and retail

marketing, along with media. The growing private sector has increased product and service

participation in the country’s economic development. Therefore, with this increase in business

there is a need for more ad campaigns and marketing support. Along with more foreign products

and services and the introduction of foreign-owned companies competing in local markets, the

Kingdom will experience more aggressive marketing plans using an increasingly sophisticated

means of media. A stronger private sector will also mean more business-to-business

communication. The second target is the massive youth population, which will become an

increasingly receptive audience. According to the Central Department of Statistics, more than 45

percent of the Saudi population is under the age of 14, and more than 72 percent of the

population is under the age of 29. Many types of direct marketing practiced in other countries are

not practiced in Saudi Arabia due to Islamic practices concerning gender segregation and privacy

in the home.

Limitations of the Saudi postal system are also a factor. Businesses and private citizens use post

office boxes because home delivery and postal insurance are not available. Limited direct

Institute of Management Sciences BZU Multan MBA(evening) 6th semester 22

marketing is being conducted through commercials on satellite television by providing

consumers with a local telephone number to arrange purchase and delivery. Advertising is a

rapidly expanding business in the Kingdom and is crucial in gaining retail sales and market

share. A million a year is spent on advertising in Saudi Arabia. Pan-Arab advertising, including

Saudi Arabia, is close to a $1 billion annual market. Most companies now choose to

advertise in a wide range of media, including television, newspapers, trade magazines,

billboards, and trade promotion events. Companies lately have been advertising through national

festivals, events, and sweepstakes drawings that occur usually in malls and shopping centers.

Television commercials are broadcast on the two Saudi channels during limited periods of the

day. Both channels are broadcast over the entire Kingdom, one in English and the other Arabic.

Contents of commercials must conform with religious and moral codes. Satellite television is a

major contributor to the growth in Saudi Arabia’s per capita advertising expenditure.

Opportunities are available to advertise through international TV 21 channels such as CNN, the

Middle East Broadcasting Corporation (MBC), and Arab Radio & TV (ART). MBC and Al-

Arabiya are similar to CNN with a variety of interesting programs. ART covers more

entertainment and sports. Other Arabic satellite channels such as Al-Jazeera have been launched

and are attracting numerous advertisers. Orbit, a Saudi-owned satellite service, has a number of

different channels that present American movies and various other programming.

Print advertising is also important. Among the popular magazines in the Kingdom are Al-

Majallah, Al-Yamamah, and Sayidati. Newspaper advertising is carried out in local English and

Arabic papers. Advertising rates vary greatly, but the rates are considerably lower than in the

U.S., largely because of a much smaller readership. Two local dailies published in English have

circulations between 50,000 and 75,000: Arab News (Jeddah) and Saudi Gazette (Jeddah). The

Institute of Management Sciences BZU Multan MBA(evening) 6th semester 23

leading Arabic newspapers have nationwide distribution and circulation of between 70,000 and

100,000: Al-Sharq Al-Awsat, Okaz, Al-Hayat, Al Jazira, and Al Riyadh. Um Al Qura is the

official government newspaper. Other relevant newspapers have lower circulation and at times

only regional distribution: Al Bilad, Al Madina, Al Nadwa, and Al Youm.

Institute of Management Sciences BZU Multan MBA(evening) 6th semester 24

Top Five Advertising Agencies

1. TDA

o Jeddah

o 0096626998791

o 88 Al Bokhari St, Alshatee, Jeddah

2. Al Moalen Advertising & PublicityAgency

o Jeddah

o 26513663

o Sharafiyah, Jeddah

3. Al-Mulen Advertising

Madinah Road,Al-Muhagereen Street,Al-Sharfiyah Dist. 9,P.O.Box 6295 , Jeddah 21442Ph#

966-2-6513663, Fax#966-26531192 , e-mail:-gm@almulen.com

4. Al Ghwainem Publicity & Advertising Agency

o Alhasa

o 35860524

o Hofuf, Alhasa

5. Al Ghowainem Advertising Agency

o Riyadh

o 00966 3 5924417

o Dammam- Al Hasa, P.O.Box 1112 Hofuf 31982, Riyadh