High Value Brands Have Healthy Balance Sheets
Business leaders in much of world have sought for a long time to build local, regional and global brands that add significant value to their organizations. Today, in China, we see the same phenomena emerging as Chinese brands move from being local to regional to national and now to global entities.
China’s people drive the change. Historically, the people of China generally have been savers rather than spenders. However, as the economy strengthens the Chinese are changing and causing the businesses they buy from to change too. Government policies and initiatives encourage the formerly conservative Chinese consumers to release some of their hard earned money and spend it on goods and services, driving GDP growth.
This slow but steady, and now very noticeable, transformation is affecting every business across China. Consumers are learning to buy more products and services for reasons other than price. They’re paying attention to brand.
Key Take Aways
1. The growth rate of China's economy slowed but only in relative terms. The market opportunity remains enormous.
2. Consumer sophistication is increasing rapidly. It's critical to keep up with shifting tastes and to respect the quest for value.
3. The convergence of these two factors—the slowdown in the rate of economic growth and the acceleration of consumer sophistication—may signal an emerging era of more cautious and discerning customers.
4. To reach customers as they adopt these new attitudes, brand owners will need to be more precise in their targeting and messaging. Brands will need to be more relevant.
5. Both entrepreneurial companies and State Owned Enterprises (SOEs) can enjoy success with these changing consumers. The integrity of the brand is more important to consumers than its pedigree.
6. International brands also can enjoy success, but in a market with greater choice and more sophisticated consumers they may need to work harder.
7. Sustaining success is another story. In several product categories the leading brands of just a few years ago declined in value either because they misunderstood the customers' needs or they responded more slowly than the competition.
8. As consumer attitudes change, they will not be uniform across all of China's geographic markets. It's possible—and important—to isolate the factors that that most contribute to consumer bonding with brands in the various tier cities. These bonding drivers help to both design market entry strategies and improve the performance of brands currently competing in the market. The BrandZ™ data that produces the Top 50 report contains this intelligence.
9. Many Chinese brands are good at providing functional benefits, but few do an excellent job bonding emotionally with consumers. Bonding is important for several reasons. It's a way to gain consumer insight. And bonding correlates positively with sales.
10. As China's media environment becomes more complicated and fragmented, many small ideas can be more effective than one big idea for reaching multiple audiences with diverse media consumption habits, with many people still tuning into TV but social media users rising dramatically.