key to succesful branding in china

Works Cited

Rein, Shaun. "The Key to Successful Branding in China." Business Week Online (26 Sep. 2007): 11-11. Business Source Premier. EBSCO. [Library name], [City], [State abbreviation]. 5 Apr. 2008 <http://search.ebscohost.com/login.aspx?direct=true&db=buh&AN=26817561&loginpage=Login.asp&site The Key to Successful Branding in China Don't dilute cachet the way Buick did. Companies must solidly define their image, and relate with their consumer base, to succeed on the mainland Many marketers complain that the Chinese are not brand-loyal. Consumers in China, they moan, will latch onto a new brand one day only to discard it in favor of a competitor the next. Exasperated marketers argue that confronted with such mercenary consumption patterns, they cannot understand their core markets.

While there is some truth to the complaint that Chinese consumers switch brands frequently, it is not a function of Chinese culture, as some may suppose. Rather, Chinese consumers remain fickle because China is in a phase of its development where companies bombard consumers with vastly more choices than they had even a decade ago. Another problem is that multinational companies have not always done an adequate job of identifying and understanding their core markets in order to target them effectively.

Actually, Chinese consumers are fiercely loyal to brands that suit their needs. New Chinese brands such as Tencent Holdings' QQ instant message service, Belle International's Belle shoes, and Alibaba's Taobao consumer-to-consumer e-commerce service are incredibly successful because they know how to relate to Chinese consumers. Domestic firms that survived the post-1978 reforms, like White Cat detergent and White Rabbit candy, have built trust with Chinese consumers and thrive because of it, much as Tide and Mars have done in the U.S. Target the Younger Generation Success is not limited to domestic firms. Multinationals like Yum Brands (YUM) and Omega fuel their global profits with sales in China because they have managed to engender trust and brand loyalty with Chinese consumers. Yum's KFC has opened over 2,200 stores in China, and Omega controls 70% of the luxury men's watch market.

To foster brand loyalty in China, companies need to learn from these successful examples and focus on three critical points: Define their brand position, understand and relate to their consumer base, and target China's younger generation, which has the product sophistication and disposable income to be tomorrow's loyalty leaders. If multinationals do not position themselves strategically over both the short and long term and understand the changing needs of Chinese consumers, they will lose China to more market-savvy companies.

When General Motors (GM) reintroduced its Buick brand to the China market a few years ago, its advertising mavens positioned Buick as a brand for senior executives and other elites. Marketers tried to show that China's last emperor, Pu Yi, had a Buick in the 1920s as did the Chinese leaders like Sun Yat-sen and Zhou Enlai. Some of the models boasted sticker-prices topping those of Mercedes and BMW and were an instant hit. GM quickly sold more Buicks in China than in the U.S., topping 665,000 about five years after the first Buick assembly plant in China opened in the late 1990s.

Buick Diluted Its Brand China is now the world's second-largest auto market, driven by the 250 million members of its emerging middle class wanting to live the dream of owning a car. To take advantage of this growth, Buick leveraged the position it created and started selling lower-end models in the $12,000 price range. Sales boomed initially as Chinese baby boomers snapped up the cheaper Buicks.

Unfortunately for Buick, diluting the brand image caused market share to plummet in the first half of 2007, leaving GM to discount heavily to attract price-sensitive customers and overcome lackluster sales.

Buick's mistake is obvious, and the remedy has nothing to do with price. Business titans do not want

to drive the same car that middle-class, first-time buyers are driving. And middle-class buyers are upset because they thought they were buying into the Buick brand and Buick quality but instead received a watered-down car that did not meet their expectations. As one recent buyer of a low-end Buick said to my firm, the China Market Research Group [CMR], in an interview: "I bought Buick for the luxury associated with the brand as all these business leaders have chauffeured Buicks, but the quality is terrible. I am very disappointed."

Understand and Relate to Consumers Buick's mistake was not clearly defining its brand for consumers. No one knows what the Buick brand stands for. Is it low end or high end? As a counterpoint to Buick, BMW sacrificed short-term sales by not going after the mass market, choosing instead to maintain its premium positioning for affluent consumers. BMW is now seeing booming sales, with growth of 50% in 2006. China is now the second-largest market for its high-end 7 Series and has some of the brand's most loyal consumers. Long term, BMW will continue to grow as Chinese get more and more affluent and aspire to the life associated with owning a BMW. Clarins and L'Oreal are two hugely popular personal care brands around the world. However, their China stories are very different. L'Oreal and its associated brands are very successful, and they have developed brand loyalty with Chinese male and female consumers. One 43-year-old chief financial officer of an investment bank told us in an interview, "I only buy Lancme as it makes me feel young and beautiful." On the other hand, Clarins has struggled when trying to target male consumers.

The mistake that Clarins has made is to use models for their advertising campaigns to whom the typical Chinese male cannot relate. Already nervous that caring about their appearance means that they are not manly, Chinese males have been put off by Clarins' advertising campaigns. To advertise male grooming products, Clarins chose ethnically diverse, metrosexual models that presented an image most Chinese men could not identifiy with. When viewing ads, potential buyers were confused as to why and how they would want to look like the models using Clarins products.

Little Brand Orientation From Parents L'Oreal has been much more successful recently through its choice of Korean movie stars for its male cosmetic brand, Biotherm. These Korean stars exhibit a look, style, and personality that Chinese men aspire to and that Chinese women wish their boyfriends would exhibit.

Clarins is not alone in portraying its brand in an odd light to Chinese consumers. Too many brands launch advertising campaigns centered around preppie blond models lounging on sailboats. In a country where sailboats and the Hamptons are not in the popular imagination this advertising tack does not work.

Many of the brands Americans use are ones that people chose because their parents used them.

Often young adults use Tylenol or Colgate because their parents introduced them to the brands when they were young. In China under Mao, there was little brand choice, so today's youth are trying brands without any teaching by their parents. But these Chinese youth are becoming very savvy as they determine what they like and what they do not.

Chinese Concerned About Safety Too The key for multinationals in China is to develop a following among Chinese baby boomers. People from the generation born after 1978 are coming of age and having children of their own. They have grown up using different brands. While still susceptible to the machinations of Madison Avenue's reach in China, many have begun settling on what they like and are teaching their children what to buy.

For instance, Chinese consumers are every bit as concerned about safety as consumers in the U.S., and they are crying out for safe products that will not harm their health or that of their families.

Brands like Midea, Haier, Pepsi (PEP), and Unilever (UN) have been successful in establishing themselves as providing the level of quality and trustworthiness that Chinese consumers demand.

The companies' bottom lines tell the story of of their success.

To develop a brand successfully in China, it is not enough to take a short-term outlook and try to sell into every available market. This risks eroding long-term prospects. It is better to first define what your brand is supposed to embody and then work to support that image. Multinationals must understand that Chinese consumers in the first-tier cities of Shanghai, Beijing, and Guangzhou will soon be as brand savvy as any in New York, London, or Paris. And consumers in the second- and

third-tier cities like Chengdu and Dalian will move with lightning speed to catch up with international trends. ~~~~~~~~

By Shaun Rein