Brand Building: The China Challenge

Nigel HollisDecember 10, 20101883 min

Brand Building: The China Challenge

China is the “must win” market for global brands. The future potential offered by its vast population and strong economic growth has made China a magnet for multinational corporations. This potential has not gone unnoticed by the Chinese government and local brands. Competition that was once fierce has become white hot, and some of the things that risk getting burnt, are the brands themselves.

I have spent the last couple of weeks meeting with clients and colleagues in China. All have stated how difficult it is to create brand loyalty with consumers, many of who are relatively new to the concept of brands.

It is true that the Chinese consumer is on average more likely to be price driven than those in other countries, and often chooses between brands primarily on the basis of price. It is also true though that the Chinese consumer is less likely to be price driven than they were even five years ago. Instead, people are increasingly becoming repertoire shoppers, choosing between a set of acceptable brands. In this environment, the challenge to marketers is to ensure that their brand is the one chosen most frequently.

Creating loyalty of the sort seen in other countries requires a blend of two different disciplines: brand building and sales activation. The former requires the marketer to create a desire to buy the brand based on its functional and emotional benefits. The latter requires the marketer to make sure that pre-existing desire is fulfilled at the point-of-purchase. From what I have seen, far too many marketers here in China have become focused on activation to the exclusion of brand building.

Don’t get me wrong, I know that winning at the point-of-purchase is critical, but if you win on the basis of mindless innovation and discounts, then you have won a skirmish but not the war.

The biggest challenge that brands face in China is to create meaningful differentiation. Right now an analysis of Millward Brown’s BrandZ equity database suggests that brands in China are locked in a race to be different, but have forgotten that there is no point in being different for difference’s sake. Across a wide variety of product and service categories, perceptions that brands are different are increasing strongly, while perceptions of quality and appeal lag behind.

One brand that has not forgotten this is General Mills-owned Wanchai Ferry, a food brand with  frozen dumplings within its product portfolio.

In a country where dumplings are ubiquitous, Wanchai Ferry stands out from a crowd of competing brands and sustains a premium price. Part of the brand’s success is owed to its product quality, but part is due to its story.

Wanchai Ferry became successful based on the recipes of Madame Chong, who sold handmade dumplings from a wooden cart at the Wanchai Ferry pier in Hong Kong, starting in 1977.

This story helps create a meaningful point of differentiation for the brand that informs innovation, brand-building and sales activation. Despite limited distribution, 28 percent of Chinese in the top 10 cities are attitudinally loyal to Wanchai Ferry (four times the average food brand in China), and its potential for growth is the highest of any food brand measured in the 2010 BrandZ survey.

In contrast to Wanchai Ferry, I have come across many brands in China that seem to have lost sight of their meaningful differentiation, be it their origins or the functional and emotional needs they serve. The pressure to win and grow in China is immense. The real challenge is to win profitably, and not win at any cost.

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Nigel Hollis

One comment

  • David Aaker

    December 11, 2010 at 8:15 pm

    The way to really win in China is not to think differentiation with restion to competitiors in establilshed categories but to actually create new categories or subcategories for which others are not relevant. That is how KFC and Yum have been so successful in China and it also explains the success of the European fashion brands. In each case they have developed brands with characistics local brands cannot match in some part because of their country associastions. My book Brand Relevance: Making Compeititors Irrelevant elaborates.

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