Global Economics

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. 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.

REACHING OUT

An increasingly popular means of engagement is inviting customers to generate brand-related content. Pepsi did this when it invited drinkers to create an ad that aired last year.

Or, as JWT did for the Kit Kat chocolate bar in Japan and then China, it can be linking a product with a basic emotion.

Through an integrated campaign of online, television and print ads, they got customers to use Kit Kat as a stress-breaker. One spot, for example, featured students taking high pressure exams. They pulled out the chocolate bars and broke them, not only to relieve the stress, but also for luck.

Almost overnight, Kit Kat achieved lucky charm status. Sales "skyrocketed," said Doctroroff.

In China, the company tried something similar, encouraging boyfriends to log onto the Kit Kat website and express their love for their partners. Here also, the level of exposure it generated was unexpected.

"The difference between passive exposure and active engagement is fundamental," said Doctoroff. "One of the reasons why brands have not become cult brands, where loyalty is practically absolute and people buy them as a fundamental part of their identity and lifestyle, is because the media is not nearly as engaging as it needs to be."

JWT now focuses much of its work on engagement planning.

"It is having a creative idea that becomes something that you can participate in. Chinese people are wired for engagement. Chinese youth, I would say."

The company is restructuring its entire operations network to create engagement at multiple levels. More than that, it looks to bring together different media - television, radio, internet, print - under a single idea. It is not about having a single sales pitch; it is an engagement platform aimed at a remarkably fickle set of consumers.

"We don't call it a creative idea any more. We don't call it a branding idea. We have an engagement idea," said Doctoroff.

"You cannot turn a tube of toothpaste or a roll of toilet paper into a tennis shoe or an investment or an education choice. But everything can be moved from relatively low involvement to relatively high involvement."

Brands and the people that manage them want the ability to be intrinsically linked to people's lifestyles. Events remain one avenue open to companies that want to generate involvement. However, foreign players have learned to tailor their strategies to fit in with China's unique values, beliefs and love of status.

Alcoholic drink companies - which have dedicated sales people in bars across China and regularly sponsor events - are a prime example of this.

"The drinking habits are different here. People buy bottles instead of cocktails," said Michael Ohlsson, the Shanghai DJ and promoter. "I think these companies, at least the first ones, learned that the hard way."

TROUBLE WITH THE LOCALS

Later this month a small crowd of the best hip hop DJs in China will compete in the annual DMC competition. They are arguably at the vanguard of Chinese cool as they try to make a storied, deeply urban and very Western musical style into something with Chinese roots.

But even they know that reaching an authentic local audience can be difficult.

"When local people go to a club, they don't care who sponsors or who organizes. They don't even listen to music. They just go there and play dice," said Gary Wang.

Trends come and go in China and the local audience is often quick to jump on and off the bandwagon. The trick may be to understand that, like consumers everywhere, not all will have similar likes and dislikes despite the shared values.

Even those who actually listen to hip hop may not be as committed to the music and the ideas it represents as marketers would like them to be.

"The local audience is hard to understand," said Wang. "If hip hop is gone in two years and something else comes up, they will just follow that music."


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