the secrets of successful brands in china
TRANSCRIPT
Cologne Shanghai Beijing Mumbai São Paulo Singapore Seoul
The secrets of successful brands in China
Na Tang & Philipp Dittes
International Marketing Conference 2014
Wuhan
July 2014
2
Agenda
• What you need to know about brand localization
• 10 strategies for successful brands in China
• A few words on globeone
3
Consumer’s view: a paradox?
Source: globeone BRIC branding survey
Local sentiments vs. Foreign leverage !
64%
think it is
important to buy
local products
60%
think owning
foreign brands is
important
4
Local versus foreign positioning – product category and product visibility matter
Source: globeone research
• Some product categories (e. g. food, liquor, medicine) are closer to local culture than other categories (e. g. cars, electronics, most B2B markets)
• It is important to know the foreign preference in your category
Status relevance
More traditional categories
More innovative categories
• Key question: How visible is the product and how relevant is it for displaying my status?
• Motivators for the use of foreign brands: Social Prestige (I can afford) & display of “Cosmopolitan Sophistication”
• Key goal: Better treatment by social reference groups
Product category
5
Consumer patriotism plays an important role – higher income level as precondition for frequent purchase
Source: globeone research
• Preference for foreign versus local brand depends on the degree of consumer patriotism
• There are certain segments in society that are more patriotic than others
• Pragmatism dominates: Even among patriotic consumers there usually is no very strict rejection of foreign brands
Consumer patriotism Income level
• The higher the degree of prosperity the higher also the preference for foreign brands across many categories
• The rapid growth of the urban middle classes in China is a key driver for the purchase of foreign brands
• Local governments sometimes dissatisfied with this tendency
6
Positioning as local, foreign or hybrid needs consideration of social class & consumption context
Status Level 1
Product 2
Patriotism 3
Income Level 4
High
Not bound to culture
Low / Medium
Affluent
Foreign
Medium / Low
Close to local culture
Medium / High
Middle Class / Mass Market
Local
Medium
Not close to local culture
Medium
Mass Affluent / Middle Class
Hybridized
Preference determining factors
Brand positioning
Source: globeone research
7
Agenda
• What you need to know about brand localization
• 10 strategies for successful brands in China
• A few words on globeone
8
10 strategies for successful brands in China
Leverage on country-of-origin (COO)
Use the middle market
opportunity
Build long-term relationships
Position on key consumption
motifs
Use educational approaches
Bet on social media
& open innovation
Bet on the right segments
Adapt products to market realities
Prepare for brand crisis & counter-action
Use the power of local beliefs
& myths
1 3 5
9 10 8
2 4
6 7
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10 strategies for successful brands in China
Leverage on country-of-origin (COO)
Use the middle market
opportunity
Build long-term relationships
Position on key consumption
motifs
Use educational approaches
Bet on social media
& open innovation
Bet on the right segments
Adapt products to market realities
Prepare for brand crisis & counter-action
Use the power of local beliefs
& myths
1 3 5
9 10 8
2 4
6 7
10
Partitioning of COO concept: Country-of-Manufacture (COM) and Country-of-Design (COD) do matter
• The country where the product is developed (generally the country with which the brand is associated)
• Trend: Globalisation of markets and increased outsourcing
• Many corporations manufacture in China and other foreign markets
• COO construct is decomposed in Country-of-Manufacture (COM) and Country-of Design (COD)
Country-of-Design (COD)
• The country in which the product is manufactured or assembled
Country-of-Manufacture (COM)
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Analysis of German brands in China in our globeone BRIC branding survey
Note: Representative survey of urban population based on field research conducted by certified market research agencies in each country (2012)
Countries / Cities:
Brazil Russia India China
São Paulo Moscow Mumbai Shanghai
Rio de Janeiro St.Petersburg New Delhi Beijing
Porto Alegre Novosibirsk Bangalore Guangzhou
Recife Yekaterinburg Chennai Chengdu
Brasília Nizhny Novgorod Pune Wuhan
Method:
• 4,033 interviews with urban citizens
Objectives:
• Understand the perception of Germany as country-of-origin
• Analyze the performance of German brands
German brands
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German image as asset – particularly large potential in the Chinese (upper) middle class
• The majority of the (upper) middle class has a positive attitude towards German brands
• Only a very small fraction (5% – 11%) in each group dislikes German brands
• Opportunity for an effective positioning utilizing the country-of-origin potential
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Income distribution in RMB/month: Emerging middle class (2,700-8,100), Middle class (8,101-18,000), Lower affluent (18,001-36,000), Upper affluent (36,001 and above). Exchange rate: 1 RMB = 0.11 € (September 2011). Q.: Do you like German brands, products or services
8%
5%
1%
38%
48%
16%
34%
7%
2%
41%
33%
12%
0%
44%
11%
I do not like
German brands at
all
I do not really like
German brands
I do not have a
preference
I like German
brands
I like German
brands very much
57% and 77% associate positive image
Emerging middle class Middle class Lower affluent
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Germany most famous for cars, home appliances, machinery and pharmaceuticals
– Industries/ categories most commonly associated with Germany – • Traditional industries like automotive and machinery lead the ranking
• Eco-friendly technology not yet strongly associated with Germany
• For consumer goods and services, German brands less likely to be associated with
11%
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Q.: What categories do you think German brands are famous for? Total sample: 1,010 respondents from China
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Germany most strongly associated with traditional values like quality and durability
– Perception of brand and product attributes of brands from different countries in China
based on respective countries –
Excellent quality
Good reliability
High durability
High performance
Outstanding design
High prestige
Sophisticated
Germany
US
Japan
China
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Q.: We are interested in the important brand & product characteristics e.g. design, quality etc. Which countries are most strongly associated with these characteristics? Total sample: 1,010 respondents from China
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German brands not seen as very innovative or exciting – but very trustworthy
Innovative & high-tech
Fashionable & exciting
Close to local customer needs
Good after-sales service
Good value for money
Trustworthy
Good corporate citizenship
Protecting environment & climate
Germany
US
Japan
China
– Perception of brand and product attributes of brands from different countries in China
based on respective countries –
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Q.: We are interested in the important brand & product characteristics e.g. design, quality etc. Which countries are most strongly associated with these characteristics? Total sample: 1,010 respondents from China
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A positive COO-Image is in many cases a key driver of brand performance
Source: globeone
• The COO-Image is particularly important in dynamically developing economies
• Perceived quality and a brand’s perceived prestige
• The potential depends on industry and product category
German image potential !
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10 strategies for successful brands in China
Leverage on country-of-origin (COO)
Use the middle market
opportunity
Build long-term relationships
Position on key consumption
motifs
Use educational approaches
Bet on social media
& open innovation
Bet on the right segments
Adapt products to market realities
Prepare for brand crisis & counter-action
Use the power of local beliefs
& myths
1 3 5
9 10 8
2 4
6 7
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China’s social structure is undergoing rapid and significant changes
Source: McKinsey (2013); figures may not sum up to 100% because of rounding
Today’s market strategy needs to incorporate these dynamics
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16% 5%
54%
14%
20%
56%
11% 25%
2012 2022
Affluent
Upper middle class
Mass middle class
Poor
Urban private consumption, %*
10,048 billion RMB 26,804 billion RMB
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Most of them live in ‘Cities Unknown’
In 2025 China to have 220 cities with more than 1 million inhabitants
Harbin Shenyang
Jinan
Hefei
Nanjing Fuzhou Chongqing
Chengdu
Wuhan
Xi’an
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Reaching a broad customer range with horizontal category flooding
Source: globeone
Examples: Coca Cola and Pepsi (China)
Traditional
consumers
Modern
consumers
Traditional
consumers
Modern
consumers
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10 strategies for successful brands in China
Leverage on country-of-origin (COO)
Use the middle market
opportunity
Build long-term relationships
Position on key consumption
motifs
Use educational approaches
Bet on social media
& open innovation
Bet on the right segments
Adapt products to market realities
Prepare for brand crisis & counter-action
Use the power of local beliefs
& myths
1 3 5
9 10 8
2 4
6 7
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Crucial for success: proper market segmentation
Source: globeone
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• How?
Dividing a broad target market into consumer groups with similar needs and preferences
Identification of crucial product criteria and emotional factors (key purchase drivers) for each group based on research
• Why?
Basis for the design & implementation of strategies which specifically address relevant consumers
Marketing tools (e. g. pricing, communication) can be applied in a more (cost) efficient way
Identification of “white spots”
Product innovation & portfolio
optimization
Targeted promotion
& advertising
Pricing strategies
Market segmentation
23
10 strategies for successful brands in China
Leverage on country-of-origin (COO)
Use the middle market
opportunity
Build long-term relationships
Position on key consumption
motifs
Use educational approaches
Bet on social media
& open innovation
Bet on the right segments
Adapt products to market realities
Prepare for brand crisis & counter-action
Use the power of local beliefs
& myths
1 3 5
9 10 8
2
7
4
6
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Adapting products to market realities
Source: Daxue Consulting
Starbucks
• Larger accommodation to provide space for socializing
• Starbucks as part of a “sophisticated lifestyle”
• Menu and products modified to fit local Chinese taste (e. g. moon cakes)
Examples: Starbucks & Häagen-Dazs 1.
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Häagen-Dazs
• Adapted China-specific flavors, products (e. g. dessert style hotpot), promotions, and overall image
• Provides a 5-star / VIP luxurious dining experience
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10 strategies for successful brands in China
Leverage on country-of-origin (COO)
Use the middle market
opportunity
Build long-term relationships
Position on key consumption
motifs
Use educational approaches
Bet on social media
& open innovation
Bet on the right segments
Adapt products to market realities
Prepare for brand crisis & counter-action
Use the power of local beliefs
& myths
1 3 5
9 10 8
2 4
6 7
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Using the power of local beliefs & myths…
• Flavors contribute to nutrition balance in the sense of hot and cool balance (Yin & Yang)
“Cool Cucumber”
“Lemon Tea”
“Sour Fish”
“Spicy Hotpot”
Example: Frito Lay Chips / Rejoice
• Toothpaste with green tea flavor fresh and clean
• Rejoice-Shampoo with ginseng and ginger ginger with healing effects on the body & hair
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10 strategies for successful brands in China
Leverage on country-of-origin (COO)
Use the middle market
opportunity
Build long-term relationships
Position on key consumption
motifs
Use educational approaches
Bet on social media
& open innovation
Bet on the right segments
Adapt products to market realities
Prepare for brand crisis & counter-action
Use the power of local beliefs
& myths
1 3 5
9 10 8
2 4
6 7
28
• Communication still needs to educate the inexperienced consumer
• For experienced consumers emotionalization becomes more relevant
Education is still needed – but not in all segments
Source: corporate website
• ‘
• Arrival’ of ca. 100 million people in the ‘Upper & lower affluent’ layer in the next 10 years new wave of unexperienced consumers
• Communication of strengths & relevant product information to build-up credibility
• Also high relevance for B2B companies & SMEs: Whereas in their home markets most potential customers know what they stand for, this is not necessarily the case in China
• Utilize the lack of buying experience of potential customers and consumers
30% of Chinese premium car buyers
are first-time buyers
Source: McKinsey, 2013
In the overall passenger car market are first-time buyers
70% 1.
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Education as tool for B2C and B2B
29
10 strategies for successful brands in China
Leverage on country-of-origin (COO)
Use the middle market
opportunity
Build long-term relationships
Position on key consumption
motifs
Use educational approaches
Bet on social media
& open innovation
Bet on the right segments
Adapt products to market realities
Prepare for brand crisis & counter-action
Use the power of local beliefs
& myths
1 3 5
9 10 8
2 4
6 7
30
A powerful cultural heritage influences purchase drivers…
Source: corporate website; 财经 magazine
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Confucianism Collectivism National pride
• High relevance of status and social prestige (strong desire to show personal success
• Wish to be recognized as a driving force of China (“movers and shakers”)
• Strong perceived importance of family and children as well as pressure to meet expectations of parents/ancestors
Expression in
advertising
Related consumption
motifs
“Let other people see your commitment to the future”
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…but the impact of “The new China” also needs to be considered
Source: corporate websites
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Transformation into market economy Modernization Individualization
• Desire to “explore the world” and to experience exciting things (be part of the “global village”)
• Discovery of the individual ‘me’ and wish to select a brand that fits the own emotions and individual style
• Show cosmopolitan sophistication
Expression in
advertising
Related consumption
motifs
32
10 strategies for successful brands in China
Leverage on country-of-origin (COO)
Use the middle market
opportunity
Build long-term relationships
Position on key consumption
motifs
Use educational approaches
Bet on social media
& open innovation
Bet on the right segments
Adapt products to market realities
Prepare for brand crisis & counter-action
Use the power of local beliefs
& myths
1 3 5
9 10 8
2 4
6 7
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The retention challenge in China
Source: Goodstein & Partners, globe one; McKinsey; The Economist (2014)
• Readiness to experiment with new brands – ¾ of Chinese consumers are eager to try new brands*
• Post 90ies become mainstream consumers
• Online media with huge influence on purchase decisions
• Established brands face new local competition
• Strong desire of consumers to trade-up
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"As consumers become more knowledgeable, they feel safer trying out lesser known brands." (McKinsey &
Company, 2012)
Challenges for established brands
Existing need to develop strategies to retain customers
From “good &
expensive” to
“outdated”?
34
10 strategies for successful brands in China
Leverage on country-of-origin (COO)
Use the middle market
opportunity
Build long-term relationships
Position on key consumption
motifs
Use educational approaches
Bet on social media
& open innovation
Bet on the right segments
Adapt products to market realities
Prepare for brand crisis & counter-action
Use the power of local beliefs
& myths
1 3 5
9 10 8
2 4
6 7
35
• The internet is the most important source for learning about foreign brands
• Among the BRICs, social media enjoys highest commercial maturity in China
• Digital communication is a great way to reach the relevant crowd in a more cost efficient way – even for niche brands / products
• Social media can be a real booster for dCRM & sales
Great marketing potential in the world’s largest social-media market
Source: psfk, January 2012, CNNIC, Financial Times, Daxue consultant, EnfoDesk; Ipsos OTX
Sources of information to learn more about foreign brands 1.
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Mobile payments grew 127% in 2013 –
alipay alone registered 2.78 billion mobile
payments in 2013
91% of the online
population in China has an account on a social media
site
66% of Chinese
social media users follow
brands
33% of Chinese users share things online frequently (US: 15%, Germany 9%)
36
Example McDonald’s McSpicy Wings – Igniting a buzz
Goal: Convert Chinese consumers to McSpicy wings (instead of KFC wings)
The campaign was announced on social media, which
included 5 videos that quickly became viral
10% sales rise in
chicken wings
3 million videos
were viewed
186,986 videos
were forwarded on to friends
500+ in the
press, online and TV
McDonald‘s invited consumers who had coupons for
chicken wings from any other restaurant in China,
including KFC, to use them to buy McSpicy Wings
- Results of the campaign -
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One of the
years‘s most buzzed campaigns
37
10 strategies for successful brands in China
Leverage on country-of-origin (COO)
Use the middle market
opportunity
Build long-term relationships
Position on key consumption
motifs
Use educational approaches
Bet on social media
& open innovation
Bet on the right segments
Adapt products to market realities
Prepare for brand crisis & counter-action
Use the power of local beliefs
& myths
1 3 5
9 10 8
2
7
4
6
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• Powerful state government with control over most media
• Internal wish to boost domestic companies in identified key factors
• Large and very active social media community with the ability to form strong opinions
• Companies must learn the rules of the game in social media and engage consumers accordingly
• It is important to build relationships and engage with key opinion leaders before a crisis hits
“Shitstorms” – a special danger in China
Source: globeone
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Examples of “shitstorms” in China
Source: weber shan
McDonald’s targeted at the Consumers Rights Day (March 15)
Mislabeled and sold ordinary chickens as premium at higher prices
Annual TV show to target companies which supposedly abuse consumer trust 2013 show with interesting line-up
Sold chicken wings past their sell-by period
Accused of distributing spam messages to customers, leaking personal information
• Very fast response: Draft of official statement, legal approval, interview, Weibo message under 1 hour
• Next steps: launched self-investigation, meetings with official departments and ongoing communication with consumers
• Hash tag #I want to support McDonald’s with more than 500,000 posts
• Weibo statement received more than 11 Million views within 3 days
McDonald’s with immediate response
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Agenda
• What you need to know about brand localization
• 10 strategies for successful brands in China
• A few words on globeone
41
We deliver a global service portfolio out of our regional hubs
42
Global strategy meets local opportunity
43
We accompany mandates throughout implementation, helping our partners reach long term goals.
We position brands, organizations and other entities in markets with relevant target groups.
Market-Driven Positioning
Market-Driven Positioning – the core of what we do
We work based on market research and insights from consumers, customers, stakeholders.
We craft strategies for growth: market entry, market expansion, re-positioning, organizational transformation.
44
Brand Performance Monitor
Market Structure Analysis
Customer Insight Generation
Definition of Market Drivers & Segmentation
Competitor Bench-marking/COM Analysis
Growth Area Mapping
Digital Excellence
Transformation Road-mapping
Integrated Marketing & COM Planning
Strategic Positioning Initiatives
Integrated Campaign Development
Lead Generation Processes (CRM/dCRM)
Agency Selection & Steering
Performance Measurement
Insight Transfer Strategy Planning Roll-out
Internal COM Screen
Growth & Expansion Plan
Stakeholder Alignment
Project Management Support
Market-Driven Positioning – our services
Market-Driven Positioning
45
globeone is a recognized thought leader featured in leading global business press
46
Survey among German consumers: Perception of Chinese brands and Chinese products in general
Visit us on www.globe-one.com to receive the survey and more insights!
Tatjana Martens-Pearce Managing Director globeone Shanghai phone: +86 138 1654 4122 [email protected]
Na Tang Senior Manager globeone Shanghai phone: +86 138 1878 7060 [email protected]
Want to know more?
Tatjana Martens-Pearce has gained nearly a decade of experience in advising worldwide leading industrial companies in the development and implementation of marketing and communication strategies in China. Before joining globeone, Ms. Martens-Pearce worked for international firms in the advertising and marketing industry in both Germany and China.
We’re looking forward to hearing from you! Or visit us at www.globe-one.com
Having worked with leading brands in China, Italy and the UK, Na Tang has extensive experience across countries and industries. Her unique expertise in marketing, finance and management makes Na Tang a powerful and versatile consultant for brands developing the Chinese market.
Cologne Shanghai Beijing Mumbai São Paulo Singapore Seoul
Thank you!
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