Our insights and actions for building brand value in a rebalancing China
1. Meaningful difference is key to building strong, high-value brands in China.
Be different. With investment in marketing communications and their extensive retail presence, Chinese brands have caught up with foreign brands in terms of their sheer presence and salience. However they lag behind in a crucial element of brand equity—being meaningfully different. Being meaningful is important because it helps create an emotional bond between a brand and its customers. And being different ensures that a brand stands out in how it uniquely benefits the customers’ lives.
Act your age. Our analysis divides brands into three groups, according to age: brands born before the formation of the People’s Republic in 1949; brands born in the years leading to “Reform and Opening Up” in 1978; and brands born during China’s 30-year growth spurt. The senior citizen brands, born before the PRC, have heritage and respect but may need reinvention. Brands driven by government investment during the early years of the PRC may need to be weaned from dependence in order to develop a taste for brand building. Brands propelled by the past 30 growth years need to perform a reality check, make sure they still understand customer needs, and then refine the attributes that will sustain brand momentum.
Value heritage. Not long ago in China, most everything old was bad and most everything new was good. The verdict today is less unequivocal. Some of the new—excessive energy consumption and development—creates pollution. And some of the old— the teachings of Chinese sages—provides stability and guidance. Established brands need to make their heritage relevant. Recent brands need to offer something more than new and shiny. Points of difference will follow.
2. The government’s rebalancing agenda touches all brands and categories.
Forget the past. The culture of lavish spending that drove sales of baijiu, the white traditional liquor, and other products, is over, at least for now. The government is discouraging excess and consumers are adjusting priorities. People haven’t lost their fondness for luxury, but luxury alone sometimes isn’t enough. Achieving personal satisfaction can be more important than impressing friends and neighbors. Brands need to present their products and services in ways that that respect this attitude shift.
Lose the label. Revised government priorities mean SOEs (State Owned Enterprises) that implement national strategies, and the banks that finance them, will compete in a market economy. In a market economy, the label—SOE or market-driven— doesn’t mean as much as a strong brand. SOEs retain advantages of scale and connections. But, whether owned by the government or an entrepreneur, all brands need to focus on the same prize—the customer’s loyalty.
Advance the dream. The “Chinese Dream,” still being formed, can be a powerful statement of national volition that shapes the goals of the country and its people. It asserts that the enterprises of a country’s citizens are not random activities. Rather, they serve a collective purpose that, as it’s achieved, raises people individually and the nation as a whole. When a brand advances the dream it also elevates the brand and the business.
3. Consumers are rebalancing, too.
Understand new priorities. China’s rebalancing is not only about government rebalancing initiatives. It’s also about consumers rebalancing priorities: life and work; excess and moderation; material possessions and experiences. Be sensitive to this shift, to how your brands can serve changing consumer desires. And be alert for potential opportunities as new priorities inspire new categories.
Earn trust. The decline of trust in Chinese brands has stabilized. But trust won’t rebound automatically. It will need to be earned with actions that demonstrate transparency and a brand’s commitment to the welfare of its customers and to the wider society, not only to itself. Being trusted is good and it’s also good business.
Sustain trust. Consumer scrutiny will be higher in categories where trust levels were lower. In food, for example, the usual considerations—what’s the price? how does it taste?—will still be important. But consumers will ask other questions: what are the ingredients; are they healthy; how and where was the food sourced and how was it processed? For brands that answer positively and honestly, trust can be a powerful differentiator.
4. Acceptance of Chinese brands is increasing at home and abroad.
Go west. The government will continue to promote urbanization to sustain economic growth, more evenly distribute wealth, and improve living standards and buying power throughout the country. Since the East is about as urban as it’s going get, focus shifts to the middle and Western regions of China. There’s a lot of potential for brand building in the hundreds of second, third and fourth tier cities. Many are becoming conurbations with a core city of several million people surrounded by towns and villages connected by roads and public transportation. Consumers in these places have less access to brands. But they’re aware of brands and desire them, because of the Internet. These cities are the next frontier for brand growth.
Look abroad. If you’re planning to expand abroad in the future, start planning your itinerary now. International expansion takes understanding and investment of time and money. It’s not for all brands. But it is increasingly an option for many Chinese brands. Especially in fast-growing markets, acceptance of Chinese brands and consideration of purchase, are gradually increasing. Once international expansion reaches its tipping point, lines at the departure gate to many destinations will be long. You’ll want to arrive early.
Support “Brand China. ” Every Chinese company that expands internationally can provide more reasons for overseas consumers to consider purchasing a Chinese product or service—or not. Every brand that expands abroad can burnish the reputation of “Brand China” and help increase acceptance of Chinese brands— or not. Be an ambassador, for your brand and for “Brand China.”
5. Communication is vital in the world’s most digitally connected society.
Think digital. China is the world’s fastest growing e-commerce market. Over 42 percent of Internet users shop online. Digital media can create two-way communication between brands and consumers and drive brand relevance. Digital is not an add-on in China. It’s the center of an omni-channel strategy.
Be mobile, and more. With 1.2 billion mobile phones in China, mobile is the fastest and most direct way to reach consumers. But it’s not the only way and it’s not always the best way. Consumers may be annoyed to receive a mass ad on a personal device. Most brands need a comprehensive communications program for delivering their messages.
Be human. It’s fine to be all over social media and present on every mobile device a consumer owns. But mobile is an intimate medium. The messages need to be sharp and break through the clutter—all of that. But mostly they need to touch another human being.
Seek advocates. And look for them in unusual places. People from rural China who migrate to the cities for work and then return home for holidays don’t return home empty handed. They bring gifts, information and opinions. They can introduce an entire village to the latest products, services and brands.