China Marketing: Cracking the Code

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This is particularly the case in a domestic market crammed with generic alternatives produced on a shoestring and farmed out through effective and inexpensive distribution channels.

The button these multinationals press is the Chinese affinity for status and the widespread lack of safety in the market. This forms the bedrock of many a showy television spot produced by the likes of Procter & Gamble (P&G) and Unilever, makers of a wide range of necessary products like soap and detergent.

BIG SPENDERS
According to ACNielsen, pharmaceutical, cosmetics, toiletries and retail services accounted for half of the total advertising spend in China in 2006.

Spending on shampoo and conditioner alone came to US$2.6 billion. Ads for skin care products were worth more than US$2 billion and toothpaste and oral hygiene more than US$1.5 billion.

By far the largest adspend by a single brand was for cosmetic Oil of Olay, with almost US$1 billion spent. Crest and Colgate toothpastes, Rejoice shampoo and Lux soap were all in the top 10.

Television accounted for about 81% of the US$50 billion spent on traditional advertising last year. Newspapers took 17% and magazines 2%.

Along the road, P&G and Unilever have turned their back on an established Western marketing principal - in some cases, rather than pushing individual brands, it is better to put the parent company's name to the fore.

The market is so fragmented, the number of new brands so large and the fear of fakes so ingrained that firms can best reach customers by buying status.

The larger Chinese companies have been doing this for quite some time.

"Brands like Haier and Lenovo have been criticized by transnational marketers for overemphasizing the corporate brand over the product brand," said Jing Wang, a professor at the Massachusetts Institute of Technology who is writing a book on branding in China.

She sees this approach as a natural one in the China market.

"Because of the safety appeal issue, the Chinese consumer would tend to believe in a corporate brand they know than pick up any brand or any product given the overflow of counterfeit products.

"That is why there are so many foreign advertisers making bids at the CCTV advertising auctions."

At last year's auction for advertising slots with the state broadcasting giant, P&G spent some US$50 million in one fell swoop. A big chunk of that money went to secure a slot a few seconds before the national news, when CCTV has a monopoly across the country. Just by being able to afford that slot, P&G gives itself - and by extension its products - a credibility no local brand could afford.

"P&G have been doing it very well because they realize that visibility is linked to the issue of safety in the minds of Chinese consumers," said Wang.

"You pick the most important medium, the most important channel, the most important time slot. You want to make sure that most of the country will be watching you for 60 seconds."

GENERATING BUZZ
Beyond status, companies want to create the kind of chatter often associated with cool products. They want to generate buzz.

This is as close as China's "cool hunters" have come to finding their Holy Grail, and this is often limited to large urban centers where people have higher incomes, more choice and more media.

"Buzz marketing is a big trend in experiential marketing which is very appealing to young people," said Wang. "It empowers the consumer."

Despite increased communication from brands, though, Wang doesn't believe Chinese customers, particularly younger ones, have become more loyal.

"Young people are fickle. They move from one eye-grabbing spot to the next."

Nevertheless, for those involved in marketing, life is a constant battle for this consumer mind space. Buzz is the product of successful engagement and this can take many forms. For example, it can be as basic as convincing consumers to regularly revisit a store, as illustrated by the rapid in-store fashion cycles employed by companies like H&M.