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The Global Brand
China Ascending
“The Global Brand” by Nigel Hollis, chief global analyst at Millward Brown was first
published in English by Palgrave Macmillan in 2008. The book was recently published
(July 2009) in Mandarin by Beijing Normal University Publishing Group. For the
release of the Mandarin edition, a team of our local experts from Millward Brown
ACSR’s Beijing and Shanghai offices co-authored a new chapter, “China Ascending.”
We have translated this exciting new chapter into English to share with you. “China
Ascending” offers an excellent overview and insight into this rapidly growing market.
The chapter also highlights some of China’s fastest growing brands as well as global
brands successfully expanding in this region. Many thanks to Peking Tan, Jason
Spencer, Yee Mei Chan, and William Wei for sharing their expertise and insight.
Peking Tan
R&D Department Director, Millward Brown ACSR
Peking Tan (谭北平), based at Millward Brown ASCR in Beijing, leads R&D in China. He joined the company
in 2003 and is responsible for innovation in the areas of data collection and analysis and modeling including
SEM, ROI, segmentation and conjoint. One of his many accomplishments is the development of a robust
online panel in 2004, which today is the main database of Lightspeed Research in China.
Peking helped author the new “China Ascending” chapter for “The Global Brand”, and translated the
book from English to Mandarin. Peking holds a master’s degree in psychology from Chinese Academy of
Sciences, Beijing, and a bachelor’s degree in biology from Tsinghua University, Beijing. He also lectures
regularly at Renmin University, Peking University and Chinese Academy of Sciences in China.
Jason Spencer
Managing Director, Millward Brown ACSR
Fluent in Mandarin, Jason Spencer has spent 14 years living, working and studying in China, Taiwan, Hong
Kong and Singapore. Although Jason is Australian and arguably a native English speaker, his broad experience
in Asia enables him to uniquely interpret research data and apply it to the marketing and business needs
of leading clients in Greater China.
Jason, based in the company’s Shanghai office, joined Millward Brown ACSR in 2003 after working for
several years as a researcher in Hong Kong, Taiwan and China.
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China Ascending
Yee Mei, who is based in Millward Brown’s Shanghai office, leads an account team of 20 researchers. She
has been with the company since 2003 and has extensive experience in market research working with
FMCG and technology clients. She is also familiar with the regional markets, having worked on projects
spanning Singapore, Malaysia, Indonesia and now China.
Originally from Singapore, Yee Mei is Fluent in Mandarin, English, and Cantonese. She is passionate about
working with clients to uncover and deliver insights to solve their business needs.
William Wei
Account Director, Millward Brown ACSR
William Wei’s research and consulting experience spans a wide range of industries including FMCG,
automotive, consumer electronics, and chemical products in the areas of marketing, sales, supply chain
management, and new product development. William joined Millward Brown ACSR in 2004 and is based
in the company’s Shanghai office. Prior to joining the Millward Brown, he worked as a business analyst
for at the Shanghai branch of Thomas Group Consulting Inc., a NASDAQ-listed American management
consulting firm.
William, who is fluent in English and Mandarin, holds a master’s degree in international business management
from the University of International Business & Economics of Beijing.
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The Global Brand
China Ascending
Even in the face of the current global financial crisis, most data show that the Chinese economy continues
to grow, and the numbers are staggering: China, with a population of 1.3 billion, has over 100 million
middle–class consumers, 300 million Netizens1, and more than 600 million mobile phone users. The
potential of China as a market has caused brand managers from all industries around the world to sit up
and take notice. There is a lot at stake in China.
When China’s economy reopened to international trade in the late 1970s and early 1980s, brands from
Western multinational companies (MNCs) didn’t have to work hard to appeal to Chinese consumers. The
superiority of Western brands was not questioned; they were believed to be high quality and worth the
premium prices they commanded. However, attitudes have changed in the 30 years since Deng Xiaoping
first initiated China’s economic reforms. Increasingly sophisticated Chinese consumers now give careful
consideration to where they will spend their money, and local brands in China provide MNC brands with
serious competition.
China’s homegrown brands are growing along with China’s economy. Five Chinese brands (China Mobile,
Industrial and Commercial Bank of China, China Construction Bank, Bank of China, and China Merchants
Bank) are included in the 2009 BrandZ™ Top 100 Most Valuable Global Brands2 ranking. Other Chinese
brands, such as Haier, Lenovo, Li Ning, Huawei, Baidu, and Taobao3, have become huge brand properties
that are competing successfully against foreign brands both at home and abroad. These successful Chinese
brands are exploring the international market with hopes of fulfilling their ambitions of becoming global
brands.
1. The unique aspects of Chinese consumers and the mainland China market that managers of
multinational brands need to understand to succeed in China.
2. The opportunities and challenges for Chinese brands in exploring the global market.
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China Ascending
Tier 1 markets are big cities4, such as Beijing and Shanghai, with populations close to or exceeding 10
million and city consumption power over 200 billion Renminbi (RMB). Tier 2 markets are smaller cities
with populations between 2 million and 10 million and city consumption between 20 billion and 200 billion
RMB. Tier 3 markets are less developed cities with populations ranging from 100,000 to 2 million and
consumption capacity ranging from hundreds of millions up to 20 billion. Tier 4 markets, where over half
of the Chinese population lives, are the rural areas.
In 1978, China’s leader Deng Xiaoping launched a series of reform measures that allowed peasants in rural
areas to buy and sell their products freely in small open markets. As China’s leadership saw the incomes of
rural citizens improve with no deleterious effect on the social order, they began to unleash similar reforms
in Special Economic Zones, Shenzhen being the best known of these. After this action was also successful,
restrictions on commerce were lifted in most eastern seaboard cities, which, because of their location, were
well placed to trade with the outside world. Over the years, reforms gradually moved westward into the
cities of China’s less developed interior.
Most consumer categories penetrated Tier 1 markets first and then moved to lower-tier markets. For
example, Tier 1 cities have become important markets for automobiles, LCD TVs, and other luxury goods,
while penetration rates for these products are still low in Tier 3 and Tier 4. In general, there is more
emphasis on price in Tier 3 and Tier 4 markets; consumers in these markets are more frugal, and take
notice of even small price differences.
Distribution channels are at different stages of development across the various market tiers. In Tiers 1 and
2, the major distribution channels are big supermarket chains and home appliance stores. However, in
Tiers 3 and 4, traditional distribution channels such as wholesalers, small independent supermarkets, and
mom-and-pop grocery stores predominate. Indeed, the management of traditional distribution channels
presents a significant challenge to marketing and sales managers of MNCs.
Local brands enjoy a number of advantages in Tier 3 and 4 markets, including their familiarity with the
established distribution channels and their understanding of what’s important to local consumers. But
increasingly, MNCs are focusing on these markets. As early as 1996, P&G embarked on road shows through
tens of thousands of villages and towns. They offered personal care products such as soap, shampoo,
and toothpaste, with packaging and
prices appropriate for rural areas. In
2003, P&G mounted a campaign in
rural markets introducing a new package
of the shampoo Rejoice that would be
available only in rural areas for a price of
RMB 9.9 (U.S. $1.50). Having established
a beachhead in distribution channels
as well as production lines in the less-
developed tiers, P&G continues to focus
on rural areas and has highlighted this as
a strategic priority in China.
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The Global Brand
Consumer shopping habits vary with the retail environment. In Tier 1 cities, consumers tend to shop once
a week in the hypermarket, but in Tier 3 cities, where hypermarkets are less common, consumers tend to
shop more often in small- to middle-sized supermarkets.
The geography of China is vast and varied, and as a result consumer needs vary according to geographical
factors. For example, dry weather in the north makes fabric softeners more popular there than in other
areas. Therefore, in northern cities, manufacturers emphasize the role of fabric softener in preventing static
electricity, while in the warm and humid regions in the east and south (where deodorant products enjoy a
bigger market share than they do in the north), they communicate the benefit of keeping clothes smelling
fresh.
The vastness of China also makes media buying a challenge. Forty-seven satellite TV channels cover the
entire country, while there are as many as 2,000 TV stations at province, city, and county levels sending
out more than 6,000 TV channels in all. On average, each family receives 60 channels. While the national
channel, CCTV, has relatively high penetration, its ratings vary by region. CCTV gets high ratings in northern
cities, mid–level ratings in the east (where local and provincial channels do better), and low ratings in
southern cities, where it competes not only with local channels but also those from Hong Kong. Marketing
managers need to adapt their media buying to this fragmented media market to achieve optimal results.
Consumers’ understanding and acceptance of advertising also varies across the different tiers of cities.
People in Tier 3 and Tier 4 cities tend to value advertising for the information it offers about products, while
people in Tier 1 cities tend to expect more entertainment from advertising.
The best way to grasp the current situation of China is to observe it firsthand. Not long ago, we helped
Smith Kline and French (SK&F), a joint venture of the international pharmaceutical company GSK, conduct
door-to-door interviews. Dozens of members of SK&F management visited Beijing, Langfang, (a Tier 3
market in Hebei province), and Yongqinghe (a Tier 4 market in Hebei province). They spoke to consumers
and also visited the hospitals, clinics, and pharmacies where their products were distributed. Xu Weilun, the
marketing director of SK&F, believed that this experience, which increased management’s understanding
of the variety of both distribution channels and consumer behavior in China’s different market tiers, would
help global management understand the levels of support needed by local marketers.5
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China Ascending
In the past 30 years of economic development, the major influence on Chinese culture came from
developed countries in the West. In the early stages, Western culture was enormously attractive for
Chinese consumers; however, now that the Chinese economy has developed, it seems unlikely that China
will continue its westernization. On the contrary, we believe that China’s traditional culture will exhibit its
influence again, and an understanding of Chinese culture will be very important to those seeking to position
brands in China.
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The Global Brand
A brand that does not have its name translated into Chinese may encounter difficulties as a result. According
to the BrandZTM Top 100, Google is the most valuable brand in the world, with extremely high market
share and strong consumer loyalty in most countries. However, in China, Google trails the local search
engine offering, Baidu. Our tracking research indicates that Baidu had overtaken Google by 2004, and that
currently its market share is three times that of Google. There are many reasons why Baidu has achieved
superior market share, including its local language search advantage and an interface designed to suit the
browsing habits of Chinese consumers, but another factor may have been its Chinese brand name. Google
had never translated its brand name, in China or anywhere else, while ironically Baidu came up with a
Chinese name that had semantic connotations similar to Google’s root name “googol” (which means 10 100).
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China Ascending
The basis of “face” is a personal relationship, in which consideration and respect are both given and
received. A Chinese person might explain it this way:
1. In order to maintain face myself, I need the consideration and respect of other people.
2. To prevent other people from losing face, I need to give them my consideration and respect.
The results of our consumer research attest to the importance of face. An analysis of BrandZTM 7 data shows
that in developed markets, such as Hong Kong, Japan, Korea, the United States, and Europe, the top driver
of consumer bonding with a brand is emotional affinity, followed by popularity. In China, however, the order
is reversed. Furthermore, when we drill down into the components of emotional affinity for China, the
statement “I want to be seen using this brand” ranks much higher than “appeals to me more than others,”
suggesting that consumers expect to gain face through their brand choices. (See Table 17.1 for the relative
importance of these statements across countries.) In part this may be a reflection of the current stage of
consumer-brand relationships in China (where, in early stages, consumers appreciate brands for the status
they convey), but the importance of face in China makes the respect and the opinions of other people at
least as important to a brand user as his or her own feelings.
When choosing automobiles and other durables, a brand’s reputation is extremely important, because the
brand will only provide face when other people know the brand and its price. Therefore, a brand targeting
high-end consumers must not only enhance the brand’s reputation through advertising, but must also
deliver the message that the brand is high-end.
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The Global Brand
Japan Thailand
UK India
Korea UK
China U.S.
India Europe
Our research on the refrigerator market in China revealed that because kitchens are small, people tend to
place their refrigerators in the living room. In this location, the refrigerator is not only used to store food,
but to represent the personal taste and lifestyle of the owners. Thus, models with an attractive door design
as well as a large capacity are likely to be favored by consumers.
In promoting brands in China, marketers must be attentive to face. In particular, when communicating
with consumers, brands cannot make other people lose face. One important implication of this rule is
that jokes that might be effective in advertising in many countries will not work in China. When humor
comes at the expense of another person, it
causes that person to lose face; therefore it
is unacceptable in China.
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China Ascending
concept of self focuses on an individual, while in China, the focus is on a more collectivist self, a self that is
closely connected with a social circle including family members and working peers.
In most parts of the world, sporting goods are strongly associated with individual sports heroes. To some
extent this is true in China, but in general, Chinese people prefer athletes that reflect more selfless values,
values that resonate with what they feel Chinese society represents. High-profile athletes with strong
individual (i.e., “individualist”) character may generate publicity but are not often looked up to as role models.
The types of sports celebrities most admired in China are those that keep a low profile and are diligent in
their service to their sports. Wang Nan, a top player in table tennis, continues to push herself to improve
despite being ranked very highly. Athletic teams that model a collective effort analogous to Chinese society
are also appreciated. The Chinese women’s volleyball team of the 1980s generated much admiration for
being a symbol of China opening up and for representing the country successfully and with humility at
international events.
Even though the concept of individualism is attractive to Chinese consumers, the way it is integrated into
their aspirations is very different than in other cultures. Chinese consumers want to be individuals, but not
in a way that alienates them from the people around them. This dichotomy of attitudes was captured well
by an Adidas campaign in 2008. A series of
out-of-home ads using simple line drawings
illustrated the individual efforts of a large
crowd of Chinese citizens literally supporting
and holding up their chosen athletes to
succeed at the highest level of competition,
the Olympics. The individual people in
each crowd were painstakingly drawn to
be different from each other, highlighting
individual contribution being channeled into
collective success.
Ads in other categories also highlight this Adidas Olympic outdoor advertisement, Shanghai, 2008
concept of respecting and acknowledging
the individuals who sublimate themselves to the greater good. In promoting Fenbid, a brand of pain reliever,
SK&F drew on the stories of the unknown heroes in Chinese life. The first is Shi Qinghua, a teacher who
founded the Guangai School (in the suburbs of Beijing) to help 103 children who could not obtain education
for various reasons. He suffered from achy joints and muscles caused by hard work, but by using Fenbid,
he was able to overcome the pain and continue to devote himself to the greater good (the children’s
education). Another ad continues this theme by telling the story of a lawyer, Guo Jianmei, who devotes
much time to pro bono cases. By focusing on self-sacrificing heroes and associating them with the brand,
Fenbid was able to tap into an existing Chinese sentiment to build brand equity in China.
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The Global Brand
This concept of internal balance has been successfully leveraged in the canned beverage market. Within
Chinese traditional medicine, there is a concept of internal heat, resulting from ingesting too much food
or drink with “heaty” properties. Wanglaoji is an herbal tea drink that contains “cooling” properties; such
products are believed to help adjust internal balance by providing cooling elements to offset the effect of
foods that have heaty properties. Indeed, carbonated soft drinks (CSDs) are supposed to be heaty, and
Wanglaoji has directly addressed this in its advertising campaigns fighting to gain share from CSDs. In 2009,
according to the latest research on the beverage market by AC Nielsen, Wanglaoji passed both Coca-Cola
and Pepsi to become the top brand in the Chinese canned-beverage market.
Other categories have been quick to identify their products with traditional Chinese medicinal ingredients
that bring connotations of health, balance, and natural treatment. The brands most benefiting from this
trend are the ones built on rich cultural provenance. Successful examples include Bawang shampoo and
Yunan Baiyao adhesive bandages and toothpaste.
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China Ascending
Even KFC, the well-known American fast-food brand, has adapted its business model to succeed in China
by adopting a distinctly Chinese menu, including items such as congee, Peking duck wraps, and Szechuan
chicken. This strategy has worked well for
KFC so far; there are about twice as many
KFC outlets in China as McDonald’s.
CHINESE MNC
Bonding 3 2
Advantage 0 3
Performance -6 2
Relevance 1 -2
Presence 1 -2
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The Global Brand
perceptions are based on facts or outdated stereotypes, they represent an obstacle that Chinese brand
owners must overcome if they are to compete effectively with MNC brands.
However, the data also shows that between 1998 and 2005, Chinese brands advanced significantly in the
eyes of consumers. (See Chart 17.2.) The importance of low price as a reason for bonding with Chinese
brands decreased, while other factors such as being trendy, popular, appealing, and functional increased
in importance.
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While competing with local brands in China, especially outside of Tier 1 cities, MNC brands need to make
their brands accessible in terms of price, but they must be careful not to damage their brands in the
process. The best way to maintain a brand’s integrity is with a “branding-down” strategy that identifies
different levels of offerings at lower price points in a way that does not negatively impact the brand equity
“upstream.” Once a brand’s equity is damaged, it is hard to rebuild its high-end image among consumers.
The local brands in China need to shift their attention to brand-building and positioning if they are to bond
with consumers on higher levels than just price and availability.
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China Ascending
The next 10 to 15 years will be critical for Chinese brands seeking to enter the global marketplace. The
continued globalization of the world economy seems inevitable, and as Chinese industry has developed its
output to feed the demand from overseas markets, overcapacity has become a serious concern, especially
in the light of the recent downturn in the world economy. It is imperative for Chinese manufacturers to seek
new market opportunities.
Many Chinese brands have already marched to the global market with great determination and ambition. A
few — those that have pursued new opportunities through constructing factories and making acquisitions
— have already made great progress in business, but very few have made inroads into establishing strong
brands. The government has also highlighted the need for Chinese industry to develop brands and to
become global.
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The Global Brand
of mediocre quality. Such negative associations with “Made in China” represent a significant obstacle for
Chinese brands to overcome. However, associations between brands and their countries of origin run both
ways. A few good brands can generate a reputation for the country they come from and enhance the
perception of other brands from that country. For example, all Japanese home appliance brands benefit
from the favorable perceptions of Sony and Panasonic. The performance of BMW and Mercedes-Benz
creates favoritism for German automotive brands. Consumer preference for Chanel, Louis Vuitton, L’Oréal,
and Lancôme helps make France the top choice for skin care and luxury goods. So, as Chinese brands
come to be recognized for something unique or noteworthy, a favorable image of “Made in China” will
develop and facilitate the success of other Chinese brands.
Currently Lenovo is working to integrate cultures and improve international operations. To achieve these
goals, the company has launched special programs such as “Everyone Learn English” and “Smile Activity.”
The “Everyone Learn English” initiative requires that all management staff study English for at least one
hour per day to enhance internal communication capabilities. The “Smile Activity” program is intended to
help Chinese employees adapt to Western communication style and communicate more effectively across
cultures.
In exploring overseas markets, Haier found a niche in small refrigerators. These units are popular among
U.S. university students, who use them in dormitories. Haier made some changes to accommodate the
specific needs of students, making their refrigerators more suited to dorm life by creating models that also
serve as computer tables. Chinese brands will need to do more of this to succeed in the future.
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China Ascending
Li Ning, a sports apparel company, has aggressive plans to expand overseas. The company cites its Asian/
Chinese provenance as something that it will capitalize on to build a distinct position for itself in overseas
markets.
Notes
1 23rd Statistics Report of Internet Development in China, China Internet Network Information Center, March
23, 2009
3 Haier is a major whitegoods manufacturer; Lenovo (previously Legend) is China’s largest PC brand; Li
Ning is a major supplier of athletic shoes and sportswear; Hauwei supplies equipment for networking and
telecommunications; Baidu is a Chinese search engine; and Taobao is an online retail marketplace.
4 City consumption power is calculated by annual urban city consumption based on the population, economy,
and consumption index of the city.
5 Interview with Xu Weilun, Marketing Director of GSK Consumer Healthcare China (TSK&F), May 2009.
6 Laurent Philippe, interview with Jacques Penhirin, McKinsey Quarterly, July 24, 2004, page 53.
7 The BrandZ study, commissioned by WPP and conducted annually by Millward Brown, measures the brand
equity of thousands of global “consumer facing” and business-to-business brands, and has interviewed
over 1 million consumers globally.
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