Five lessons for brands looking east to China
Liberalisation of the Chinese economy is set to accelerate under the stewardship of recently appointed president Xi Jinping, opening up a host of new opportunities for brands but opportunities must be taken or become threats, according to WPP Group CEO Sir Martin Sorrell.
Sir Martin was speaking at an event hosted by WPP and UK Trade & Investment to detail its Millward Brown BrandZ Top 50 most Valuable Brands in China report alongside speakers including Culture Minister Ed Vaizey, Bank of China UK CEO Wenjian Fang and Peter Nolan, Professor of Chinese development at the University of Cambridge.
Marketing Week picks out five takeaways for British brands to consider when thinking about China.
1: Appreciate the value of branding
Sir Martin Sorrell, CEO of WPP Group, says China is “under-branded and under-advertised” but appreciation of brand building is growing. Brands that invest in this area as well as growing awareness will prosper amongst China’s growing middle classes.
Doreen Wang, director of Millward Brown China and the BrandZ China Top 50, says the top CEOs of Chinese businesses are beginning to see “brand building is the future” when they see that financially, companies in the Brand Z Top 50 are outperforming the rest of the Chinese market.
It is causing a shift from “passive brand protection to active brand building”, she says. Local brands are starting to establish a tier 1 brand image when they build their brands in second tier cities, according to Wang, which means that when they enter tier 1 cities like Shanghai, they already have the right mentality, image and strategy.
2: Think not what China can do for your business, but what you can do for China
China has set out a number of ambitions for its own economy, including being less reliant on exporting and increasing domestic consumption. As part of this, and the increasing importance placed on brand building, Chinese businesses are looking for ways to move up the value chain.
Wenjian Fang, CEO of Bank of China UK, says British brands that can demonstrate how they can help drive this shift in China’s economy will do well. He says: “If you can think along the lines of what you can bring to the Chinese market. If you can help business move up the value chain, that would be very welcome.”
3: Trust and meaningful differentiation
In a nation known for the proliferation of counterfeit products, brand trust has an “urgency” in China that doesn’t exist in the UK, according to Magdalena Wong, non-exec chairman of brand consultancy Added Value China. Brands that can offer reassurance and deliver on their promises will gain the trust of Chinese consumers.
She says: “You may wonder if the search for safety and trust is the same for all consumers everywhere but the fact is brand trust in China, really has a sense of importance that is not the case in the UK. It is not news that fake products are rampant in China but you may not fully appreciate the extent of the fear and distrust that has built up in recent years.”
Millward Brown China’s Wang says the most successful brands in the China Top 50 are building trust differentiating in a way that is meaningful to Chinese consumers, adding it will be a “deciding factor” for brands’ success in coming years.
4: Explore the hinterlands
The bright lights of China’s top tier cities has an obvious appeal for international brands but they are not where the growth is. Brands looking to do business in China should look beyond to the “hinterlands” of China, says Bank of China UK’s Fang.
He says: “It might sound boring but you need to look into the hinterland, the middle and western part of China have great potential. More and more people are realising the importance of the western parts as the coastal areas have been saturated.”
Sir Martin Sorrell agrees that international brands need to look beyond the surface of China. He says: “We tend to judge China and India on Beijing, Shanghai, New Delhi and Mumbai but that’s totally wrong. You have to look in great depth in second tier cities. That’s where government is prioritising growth.”
5: Understand consumer psyche and appreciate cultural differences
China is a unique country, and understanding its history is “fundamental” if British business are going to successfully engage with its consumers, according to Peter Nolan, Professor of Chinese development at the University of Cambridge. He says that the West is an an “important juncture” with China but must do a better job at understanding the way it is.
The same applies to retail. Added Value China’s Wong says brands must embrace the practices in China rather than attempting to force new approaches.
She says: “The critical success factor in doing business in China is to understand what goes on underneath locally. What may seem chaotic, or a simple discount strategy on the surface requires sensitivity and knowledge to understand and a totally unique set of marketing strategies.”
BrandZ revealed in December that China Mobile retained its number one spot in the annual top 50 Most Valuable Chinese Brands study, with a brand value of US$50,589m.