Consumers expected more choice and began to express a preference for more specialized products. They expressed interest in less casual, smarter clothing. Beer consumption continued to increase, but with a growing taste for more premium brands.
As the market becomes more competitive, and price alone is no longer sufficient motivation to purchase, meaningful differentiation becomes more important. Meaningful differentiation not only attracts customers, it measurably adds to brand value. In a recent Millward Brown BrandZ™ study meaningful differentiation raised brand value 37 percent.
Meaningful differentiation is in part about being relevant, but it's more. The most meaningfully differentiated brands start with consumer insights to find ways for the brand to be distinctive in all aspects, from functionality to communication to how it makes the consumer feel.
Health and Safety
Product health and safety remained important concerns. Dairy brands, especially hurt by tainted food scandals, took steps to make food safer, such as forming alliances with international brands to rapidly achieve production, supply chain and marketing best practices. Unlike most past alliances, these seemed intended to build the reputation of the Chinese brand rather than the foreign entrant.
Innovation continued to be critical and was especially evident in technology, the category that appreciated most in brand value. The speed of innovation was so rapid, however, sometimes rivals offering new ideas and incremental improvements surpassed the innovators of just a few years ago. Loyalty is low because the next best idea is just a click away.
Chinese brands continued to expand overseas. With some notable exceptions—like Lenovo, which derives 58 percent of revenue from overseas business— they remain better at the logistics of international growth and less effective at the brand building. The State Owned Enterprises (SOEs) led the global push. Banks added overseas branches, airlines acquired new routes, oil and gas brands formed overseas ventures to explore reserves. Brand should become more important for SOEs as they expand to new overseas markets where they're relatively unknown. Overseas consumers are open to Chinese brands, according to Millward Brown research, but they express reservations about the quality and durability of Chinese products.
Lower Tier Cities
Both Chinese and international brands competed beyond Beijing, Shanghai and Guangzhou in tier two and three cities where purchasing power is increasing. In some instances, the absence of major international or Chinese brands opened a market niche. Some brands aimed to become the upper tier brand in the lower tier cities. Despite converging household income levels, the tiers remain culturally distinctive. Consumers in the lower tier cities are generally more practical and tend to choose value over bling.
Concern with food and dairy safety generalized to a measurable erosion of trust that crosses many categories. The Trustworthy Score for the Top 50 Most Valuable Chinese brands declined 2 percent, according to Millward Brown analysis of BrandZ™ data. The decline in trust in part mirrored the rise of social media as a popular communication channel where the information and opinions recorded by bloggers reaches and influences a wide audience. Understanding the immense brand building power of digital and mobile communication, brands tried to understand how to most effectively insert themselves into the ongoing conversations.