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Eight Ways to Fail In China The China Journey - by DDB China Group Planning


Eight Ways to Fail In China The Yellow Paper Series

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“Ability will never catch up with the demand for it.” - Confucius

Business in China Searching for ”Business in China” on Google pulls up a whopping 2,750,000 entries. Looking for books on Amazon for the same keyword, returns 35,284 products on that topic. We can safely assume that doing business in China is important for every company doing business outside Kentucky. China’s economy has been and is the main engine of the global economy – and it’s been growing by an average of 10% over the past 30 years. It‘s now the second biggest economy in the world and this blooming market shows no signs of slowing down any time soon. At the same time, it’s a market with a unique history, a unique culture and a unique political system – a combination that presents very specific challenges to global brands entering the market in the hopes of reaching 1.3 billion potential consumers.

DDB’s Know-How Over the past 15 years, DDB has advised numerous global brands on how to develop marketing communications effectively and efficiently in China across all channels. We’ve learnt a thing or two along the way and uncovered a unique set of barriers and drivers. Combining DDB Greater China Group’s experience and know-how in the market, we identified eight fool-proof ways to on how to fail in the market.


Eight Ways to Fail In China The Yellow Paper Series

THE CHINA JOURNEY

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This Yellow Paper is developed and written by DDB Greater China’s planning group as a thought leadership series to share our collective knowledge and perspectives on navigating China’s increasingly complex, contrasting and connected landscape. This paper is authored by Tim Schlick, Co-Head of Strategic Planning, DDB Greater China Group.

by DDB China Group Planning

1. Fully rely on your global experience Most global brands have a proven-track record of entering or even conquering markets outside their home turf. Western markets like the US or Western Europe are generally speaking mature markets for most categories and demand a very similar approach of marketing communications. Consumers’ cultural background and specific market situations may vary, but at the end of the day marketing follows a very similar process from Boston to Paris. Even though global marketers have tackled more challenging markets like Japan, India or Dubai, China is in a class of its own. On different levels, China annihilates global experience and renders it useless.

a.

b.

c.

China’s biggest difference is the sheer scale of the market and, more importantly, the ability of local competitors to take advantage of their experience in the market. This is especially true in terms of leveraging the massive workforce and the ability to use established work-relationships with official bodies.

Talent. Not only is talent a rarity in this massive country, global companies usually face the challenge of having to chose between bulimic plague or cholera. Local talent knows the market inside/out and has a cultural and lingual advantage – but usually has little much experience of working in a global context. Foreign talent is experienced on a global scale, but lacks the in-depth understanding of Chinese market.

A unique system. The legal system of the US or tax laws in Europe might be – but China’s unique political system and jurisdiction surfaces new challenges for global players (e.g. new regulations or high concessions for new business ventures).


Eight Ways to Fail In China The Yellow Paper Series

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2. Be ultra-strict on global brand guidelines Of course, consistency is key for a brand operating on a global scale. Being true to the same values and attributes regardless of whether you’re selling products in Iceland or Vietnam is one of the key drivers of manageability and ultimately, economies of scale. However, the Chinese language and culture makes it imperative for global brands to gain local relevance. Most Chinese consumers do not speak English. And actually, only 53% of the population in China is able to speak Mandarin. Chinese is a very unique language and has 292 distinctive variations actively spoken. For global brands this means that all key characteristics like brand names or trademarks are in jeopardy. “Just Do It” might be very catchy, but it loses it edge if not understood. Just as “李宁官方网站” does for Americans.

A global brand that got it right is French hyper-market chain Carrefour. The Chinese expression for this is “Jia Le Fu” – which loosely translates into “House of Happy Family”. Combined with a specifically created claim in Chinese signs, the brand is a huge success throughout China.

3. Compete on price To say that price is important to the Chinese consumer is similar to saying that fish like to swim. Although China is growing at a mind-boggling speed and is home to US$140,000 millionaires in Shanghai alone, it still is a country where a worker from a rural area earns US$200 a month and works full-time, 6 to 7 days a week. Even China’s university-educated, up and rising middle-class in major cities average a salary of just RMB100,000 a year. That’s about US$15,400. Although daily expenditures are significantly lower than in Western markets, global brands and products are still relatively expensive. VERY expensive. This has resulted in a myriad of local Chinese suppliers manufacturing inexpensive products with similar functionality to their global counterparts. Chinese consumers are willing to spend significantly more time in finding and getting the best value for money than in any other market worldwide. Best Buy had to learn this lesson the hard way. The brand closed its nine stores in China after a three-year market preparation and five-year launch. At every location Best Buy opened, one of its local competitors (eg. Suning) opened another store, beating Best Buy on price. The brand will now focus on partnering with a Chinese chain.


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4. China is China Many market entries in China begin with a CEO visit, most likely to Shanghai or Beijing. Tier 1 cities like these are ultra-modern megacities that can rival the likes of New York or Tokyo. These cities have a highly-efficient infrastructure with the latest technology at every corner. It’s no surprise that most global brands have a presence. But most of China though is comprised of lower tier cities such as Nanning or Ningbo. They may be similar in terms of population size, but they have nothing in common with a metropolis. Most importantly, consumers in lower tier cities think, behave and ultimately shop very differently from their counterparts in Shanghai or Beijing.

Richard Wang, 36 from Shanghai

Neil Zhong, 33 from Tier 3 city

Internet

TV

National Daily

Local daily

Two

None

Twice a year

Once every three years

Once a month

Twice a year

Mall

Local supermarket

One bedroom flat near the city center

Small house in the suburbs

Hours spent watching TV

1 per day

3 per day

Hours spent online

3 per day

0.5 per day

Dining, Trendy Things

Fitness, Family

Main Source of News Newspaper Credit Cards Owned Travels for Leisure Shopping for clothes Grocery Shopping Accommodation

Likes

Values, media consumption, purchasing criteria and trigger points are completely different. Careful planning of segment specific paths of purchases and the development of matching marketing communication initiatives is key to success.


Eight Ways to Fail In China The Yellow Paper Series

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5. On a fundamental level, all consumers are the same. The thought is as understandable as it is tempting: getting through to basic emotions can be key to marketing communication success. Nothing is as strong as an emotional bond, even if it is with a brand. Highly effective campaigns have used this principle to raise brand awareness or sell products. China’s culture is unique on many levels – so is the culture in France or Brasil. However, China is one of the few countries that has made the switch from a very authoritative poster-child communist country with massive restrictions and implications on everyone’s everyday life, to a very open (yet still communistic) society that embraces personal growth at all cost on the one hand side and centuries old values such as family or face on the other. Chinese consumers decode messages in a different way than most. An emotional response is as powerful in China as it is in Gabun. The triggers are completely different and suprising. An interesting example of this is the success of Cadbury’s TVC “Gorilla” – it features a Gorilla playing the famous drum solo of Phil Collins’ In The Air Tonight – not showing any of Cadbury’s products. It is widely regarded as one of the most impactful campaigns globally. Research (BrainJuicer) has proven that the campaign triggers an unusually high emotional response with consumers. IPA research has proven its significant effectiveness. Not so in China. Chinese consumer responses vary from astonishment (“Why on earth is a Gorilla playing the drums”) to downright disgust.

Chinese consumers decode messages in a different way than most.


Eight Ways to Fail In China The Yellow Paper Series

6. When in doubt, be loud. In some categories, the market leader benefits from the Matthew effect. When a brand has been around for a long time and has spent significantly on media, it usually results not only in a large share of voice, but ultimately in a large market share. Even when entering a new market, deep pockets alone can make the difference between success and failure. China is not an exception to that. But confusingly it’s also a big exception at the same time. It is currently the second biggest advertising market after the US with a media spend of US$38.3 billion. In some categories a market entry without a significant budget for above-the-line media is the conditio sine qua non to get awareness, especially when marketing to lower tier cities. However, it is also a market in which media inflation for key channels peak at 30% annually. A strategy of outspending competitors will ultimately result in a significant loss in profit due to extensive spending. Global brands that consider competing in such an expensive market should aim for a sophisticated mix of marketing communication taking social creativity into account.

DDB China’s Chicken Wings Challenge is an example of how to do this. The campaign helped McDonald’s to increase its chicken wings sales by 120% using only a small-scale digital campaign and social media. We invited people to pledge their love for McDonald’s chicken and promised something very special should we get more than 1 million pledges. In only two weeks we accumulated more than 2 million pledges and allowed customers to get a rebate for every coupon they brought to the store. Even if it was from a direct competitor. In a second phase we opened seven stores in seven cities for seven days where we gave away McDonald’s chicken wings for free. The entire promotion cost only a fraction of what a classical campaign would have cost and is regarded as one of the best examples for word-of-mouth marketing globally – it featured in Harvard Business Review among other publications.

In only two weeks we accumulated more than 2 million pledges.

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7. You cracked Social Media already. Due to its unique culture, history and political system, the Digital landscape in China is vastly different to any other place in the world. The usual suspects are missing: no Facebook, no YouTube, no Twitter. China has RenRen, YouKu and Weibo. Many marketeers make two significant mistakes in judging and adapting a Chinese Digital Strategy:

a. The same logic applies Facebook is the world’s marketeers new holy grail. Soclal media experts around the globe are very good at leveraging the power of six degrees and run successful marketing campaigns on social networks. But China is different in a way which is surprising: the speed of information and impact is much higher than in the West. A mistake on Facebook can be very expensive, a mistake on Weibo can ruin a brand. For Chinese consumers born after 1980, especially in Tier 1 and 2 cities, social networks are ubiquitious. They spend almost every waking minute of their day on a social network – hooked up constantly. The motivation to rely on social networks is rooted in the knowledge, that unfiltered information and news is not available through TV or Print publications – hence the strong belief and connection to digital offerings.

b. The same functionalities, the same approach Weibo and RenRen are the Chinese equivalent of Twitter and Facebook – they are not regarded as inferior copies though. Chinese netizens believe that their local platforms are superior in every aspect: reach, usability and functionalities – and they are right about that: functionalities are available that are unknown in the West: video conferencing, full mobile integration, ultimate performance. “Facebook” pronounced in Chinese sounds similar to the expression “it must die.” – which is quite a common belief about the Western platform in China anyway.


Eight Ways to Fail In China The Yellow Paper Series

8. Be hasty, be greedy China is very, very tempting. A country running on rocket-fuel, an entire middle-class emerging with new needs for new products. 1.3 billion potential customers. Many companies entering the market cannot wait to get things started fast in order to stake claims early. The Chinese government and Chinese companies have become immensely good at getting the best out of every joint venture or cooperation – and there are no other ways into the market. An integral part of Chinese negotiation strategies is the willingness to put pressure on the opponent by seeming unaware of timelines or project milestones. Global companies still tend to be single-minded when opening up a factory, store or presence in a region, forcing their local representatives to pick ďŹ ghts about conditions they cannot win. From a Chinese perspective, global brand value is only one side of the coin: potential demand and sales are the others. Regardless of which Chinese state you want a presence: take your time and make concessions.

SUMMARY China is running on rocket-fuel, offering incredible opportunities for some companies around the globe. The scale and growth are unequaled around the world. Success for companies hinges on the delicate balance of understanding China and the Chinese nuances that stems from deeper understanding across its unique history, culture and political system. For more information, contact us: http://www.ddbchinagroup.com/

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About DDB China Group The DDB China Group (www.ddbchina.com) of agencies (DDB, DDB Guoan, Tribal DDB and RAPP) is united behind our founder, Bill Bernbach's belief, that creativity is the most powerful force in business. Today, we use that creativity to develop ideas that people want to play with, participate in, and pass on. We call this Social Creativity. DDB China Group is one of the most awarded agencies in China, leading in creativity and effectiveness. We are ranked The Number One Most Effective Agency Office in China and Greater China Region by the 2011 China Effie and 2012 Global Effie Effectiveness Indexes and constantly awarded across local, regional and international award shows, including winning the second ever Gold Cannes Lion for China. At the 2010 Campaign Agency of the Year awards, DDB China Group was named Greater China Creative Agency of the Year, while Tribal DDB China was named Greater China Digital Agency of the Year.

About DDB DDB Worldwide Communications Group Inc (www.ddb.com) ranks among the top five consolidated advertising and marketing services global networks, according to Advertising Age. Consistently one of the world’s most awarded networks for creative excellence, DDB was Campaign’s 2009 Global Network of the Year, the 2010 Spikes Asia Network of the Year, Eurobest Network of the Year, Campaign Asia-Pacific Creative Network of the Year and captured both the Cyber Grand Prix and Film Craft Grand Prix at the 2010 International Advertising Festival in Cannes. With more than 200 offices in over 90 countries, the DDB Group helps grow the value and influence of leading brands around the world. We believe that creativity is the most powerful force in business, allowing us to develop ideas that people want to play with, participate in and pass along. We call this Social Creativity. DDB Worldwide is part of Omnicom Group Inc. (OMC).

For enquiries, please contact: Richard Tan

President & CEO of DDB Group North China richard.tan@ddbchinagroup.com

Michelle Tan

Director of Communications & Knowledge Management, DDB China Group michelle.tan@ddbchina.com


Eight Waysto FailIn China