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China Markets its Marketing Strategy

by AmbikaBehal

October 22, 2012

Ads in New York’s busy Times Square commemorate President Hu Jintao’s US visit in January 2011. In recent years, Chinese brands have started advertising heavily in this mecca of digital advertising.

 

Chinese brands are out to sell themselves to the world, but why, and how?

It’s August 2012, and London is gearing up for the Olympics. One of the city’s trademark red double-decker buses passes through the streets, and Londoners stop to do a double take. Why? Because the ad splashed across the bus shows a smiling Chinese family and is written entirely in Mandarin.

It wasn’t just one bus–this summer 400 double-decker buses across London were decked with ads for Yili-Shuhua Milk, a product sold only in China.

So why advertise in London then, one would ask?

The answer to this question is not so simple. As their purchasing power increases, many Chinese consumers have started looking at Western brands. Therefore, Chinese companies are trying to win over domestic consumers by building a global reputation–never mind the fact that most people seeing these ads abroad do not have access to the product.

“It’s a resurgence in national pride that has spurred this, in the same way as we saw with the Chinese obsession with winning gold medals at the Olympics,” says Interbrand Shanghai Managing Director Thomas Chen.

This was not Yili’s first attempt at targeting domestic consumers on a global scale-the company reported a 12% increase in domestic milk sales after a cameo product placement in the 2011 Hollywood blockbuster, Transformers 3.

“When Chinese brands started going abroad in the 1970s, the goal was not to make money in the overseas markets. The goal was to build a brand and sell more domestically,” says Sun Baohong, Dean’s Distinguished Chair Professor of Marketing and the Associate Dean of Global Programs at CKGSB.

Today, although that trend still exists in a big way, it has become more “sophisticated”, she adds. Take for instance, the Chinese advertising videos and billboards across New York’s Times Square, the mecca of digital ads. Chinese brands as varied as Xinhua News Agency, Wuliangye Liquor and Erdos Group (a cashmere company based in northern China) have been spending their advertising dollars on Times Square billboards. While these ads mainly target domestic Chinese consumers, they are also an attempt at breaking into the Western market. These companies are trying to target any viable market in which China can hold a presence.

Chinese Roots, Western Looks

With a domestic market that is quickly reaching saturation and competition getting stronger, the goal now is to make money–whether in the domestic or international market. As a result, new marketing patterns are emerging.

Some Chinese companies are even going as far as hiding their ownership and hiring solely in the local US or UK markets to try to localize their strategy, says Sun. Despite the economic slowdown, the sheer affluence of Western consumers is still a major attraction for Eastern producers looking to sell abroad.

“A lot of Chinese companies dream big, think big, and they believe they can go global,” says Interbrand’s Chen. One of the most common discussions among Chinese companies these days, he says, is about how to enter the Fortune 500 list, and they are actively selling themselves to the world in pursuit of this effort. Chinese companies are addicted to rapid growth, and they’re indicating this through fast and somewhat risky expansion into markets that have never heard of their brand before.

In the past few months alone, Chinese clothing retailer Bosideng, virtually unheard of outside the mainland where it has 10,000 outlets, opened a store on London’s fashionably pricey South Molton Street; telecom company Huawei launched its own-branded mobile handsets in the UK, and sports apparel maker Li Ning entered the German market. Interestingly, Li Ning boldly ventured into Nike’s home turf, in Portland, Oregon, in 2010. In 2011 CEO Zhang Zhiyong told the Wall Street Journal that they were going to invest $10 million in the US business, but the office instead underwent a series of layoffs, and closed down their storefront as the year wore in. Earlier this year, Li Ning quietly shifted operations to Chicago, where they are targeting the e-commerce space. They have sponsored three NBA basketball players. Their marketing strategy, however, is on shaky turf. Despite that, as one of the forerunners looking to break into a space that Western companies already have well covered, it could be interesting to watch Li Ning’s Germany foray.

Aiming for Sophistication

With a past that spells ‘low-cost manufacturing’, it could be a challenge for Chinese companies to attract a more sophisticated consumer. There are lessons to be learnt from some of the pioneers. For instance, Hong Kong-based Shanghai Tang, a Chinese-style clothing and accessories company founded in 1994, has been a success story in marketing their products globally at Western designer-level pricing. Sun says that Bosideng, for example, is taking the ‘Shanghai Tang’ approach, and trying to compete on a global scale. “Chinese-made products still can’t compete on quality and design, but if they can sell the China element, then they can become successful,” she says.

“It is the next logical step for Chinese brands to move up the value chain from ‘low cost’ to ‘value-added’ –once this has been achieved, these brands are in a better position to compete with established global brands on the world stage–with a ‘greater value’, at the ‘right price’ positioning,” says David Brabbins, Managing Director of Figtree Hong Kong, a branding agency.

There is still a long way to go in terms of Chinese brands being fully recognized in the West. High-decibel advertising, and product placement in movies helps, but is not enough, says Brabbins, the man behind Taiwanese company HTC’s incredibly successful branding campaign. “People need to understand what brands stand for–their vision, values and value propositions,” he says.

Bringing an international strategic marketing perspective is helping, with companies such as the UK-headquartered Figtree using their experience with Western brands to help Chinese brands move beyond the perception of cheap manufacturing and low quality, and morph into household names. However, there are many local challenges to be overcome, says Chen.

“Companies are not used to driving the brand behind their business,” he says. “Management still has a ‘my sell’ mentality.” This attitude has previously seen Chinese chief executives lacking communication skills bringing the entire company into agreement over strategic moves–each has been out for himself, and doesn’t care about what others think. This has largely happened because the formula for success up until now has been pricing– “branding is about the promise a brand should offer their customers–and the additional social value or emotional value a product can bring,” says Chen. This premise has not entirely penetrated the Chinese business mindset and companies need to address.

Sun says that many Chinese business owners these days have been educated abroad and as a result of foreign exposure, they are bringing in increasingly different operating tactics. They would, for instance, give their company a foreign brand name so that it can fit in the international market and appears as an aspirational Western brand to Chinese consumers. An example is Chinese furniture manufacturer DaVinci, which calls itself a “fine living” brand. DaVinci has a very Western look and feel both of the brand as well as its products, which makes it a perfect fit for both the Western and domestic markets.

Another example of a company bypassing traditional sales methods is e-woo, a company selling electronic cigarettes and lighters, among other things. The company has opened showrooms in the US, through the auspices of the Chinese and US governments allowing them to exhibit and do business directly with their US counterparts.

Sun says that politics are not as much of a problem as one would think. As long as the Chinese don’t take jobs through export, she says, the US has been fairly open to Chinese companies operating businesses there.

Younger Chinese companies taking a different route though–in the fashion world, local designers selling a highly-sophisticated Chinese product are now pushing e-commerce as a means to bypass traditional distribution channels and sell to foreign customers. It’s an indication of how even larger businesses may sell their products in the future, with an emphasis on quality.

Let’s talk about another Chinese success story: Lenovo, which according to very recent data from research firm Gartner, is now the number one PC-maker in the world; replacing Hewlett Packard’s six-year run in this position. Analysts had predicted that the company could never reach this position-it lacked the wherewithal, and just couldn’t compete with the famous US brand names and icons. Despite the naysayers, Lenovo seems to have done better than just ‘okay’.

There is no doubt that the world order has changed–these once nameless, faceless Chinese brands are now entering the global platform and the world is taking notice. Although the domestic market is booming with wealth, it is also reaching saturation with a gamut of brands and products flooding the market–however, with a nuanced strategy, Chinese companies appear to be doing a better job of marketing themselves today than they once did.

(Image courtesy: Flickr @ hto2008)

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