China Marketing: Cracking the Code

As Western-style advertising floods mainland cities, foreign and local brands try to find the formula that taps into the Chinese psyche

More than any other city in China, Shanghai is inundated with the conspicuously Western- style marketing multinationals rely on to build brand equity.

From enormous billboards to tiny screens in taxi cabs, advertising is a big part of the city. And not a day goes by without myriad events sponsored by companies, many of them Western, looking to connect with local customers.

Few, however, are succeeding.

"At a lot of events they do, there are only foreigners. The organizers and promoters are all foreigners. And the brands are foreign brands," said Shanghai native Gary Wang, better known as DJ V-Nutz, the man who brought hip hop to China.

Wang runs a space in Shanghai called The Lab, where DJs can sharpen their skills and events are regularly held. Six years ago, Wang won the first Disco Mix Club (DMC) China competition, the most prestigious DJ tournament, and went on to participate in the global finals in London. He now runs DMC China.

The China competition has a handful of multinational sponsors and others, like Nike and Hennessy, have shown an interest (although Wang ended talks with Hennessy due to artistic differences).

Multinationals increasingly look to these events as a means of bonding with Chinese consumers, effectively linking their products to trend-setters. (See: Party time: Marketing through events)

But Wang thinks they are reaching the wrong audience.

"It's easy to reach foreigners because they like to go out, they like to drink and they like to party and also they know more about music than local people. Of course, if you have events you get more foreigners than local people.

"Nike doesn't need foreigners to buy shoes in Shanghai; they need local people to buy them."

BUILDING LINKS
Finding a formula that taps into the Chinese psyche remains the Holy Grail for professionals whose job it is to build market share. Companies like Nike, Pepsi, Levi's, Motorola and even B&Q want it to solidify their presence in China. Carmakers, both foreign and domestic, need it to build lifelong bonds with drivers.

Marketing and advertising executives simply want to know what it is.

Successful use of marketing tools such as the "cool factor" is the key to unlocking the Chinese consumption base. Despite the best efforts of advertisers, though, these people remain a paradoxical bunch.

Chinese consumers are more focused on brands than most of their Western counterparts. They want to know which new trends will give them added status, and buy luxury goods not because they necessarily like them but because they are representations of success.

But they are also very fickle and loyalty to a single brand virtually does not exist. They will happily jump from one label to the next with little though given to individualism.

"There are many popular things," said Tom Doctoroff, Greater China CEO at advertising agency JWT and author of Billions: Selling to the new Chinese Consumer. "Nike is popular. Adidas is popular. Some luxury brands are popular. iPods are popular. [Do] people like trendy things? The answer is absolutely yes."

Yet Doctoroff can't think of any youth brand that has really formed a passionate bond with young Chinese consumers.

"There are a lot of things that are making money," he said, "but nobody has established such a loyal franchise that there is absolute loyalty to that brand. I get lots of studies that say people switch a lot."

This quest for cool is one part of another, deeper search for a bond that can reach well beyond the confines of the large urban centers where multinationals have focused their marketing efforts.

It is all well and good to try and find a way to make an expensive running shoe, a mobile phone or an MP3 player seem cool. For products like toothpaste or toilet paper, however, this is not an option; marketers must find other ways to attract new customers, connect with them and then retain them in the long-term.

For the very large multinationals offering sophisticated products under brands that have taken much time and money to develop, raw price competition isn't the answer.