BOOK EXCERPT: When product benefits are externalised, brands are a means to an end

BRAND MANAGEMENT IN CHINA: THREE GOLDEN RULES

The Chinese worldview, not to mention its brandscape, differs profoundly from other markets. In my fourteen years here, I have not encountered a single brand that did not require significant modifications to positioning and marketing before it succeeds in the PRC. This, of course, does not preclude the feasibility of a global brand idea—Nike should breathe a “Just Do It” spirit everywhere. But, to maximize relevance and trigger loyalty that results in a sustainable price premium, global brands must appreciate Chinese cultural and operational realities. At the risk of dramatic oversimplification, there are three golden rules to which marketers must be sensitive before landing on the mainland.

MAXIMIZE PUBLIC CONSUMPTION TO JUSTIFY PRICE PREMIUMS

In China, a Confucian society torn between stifling regimentation and relentless ambition, consumers regard brands as tools for success. Face, the primary currency of upward mobility, is rooted in status projection, generating societal acknowledgment for one’s ability to scale the socioeconomic hierarchy. This is why brands that, directly or indirectly, are publicly consumed are able to command huge price premiums relative to goods used in private or within the house. As I highlighted earlier, all leading mobile phone brands are international. The leading household appliance brands are, without exception, cheaply priced domestic names.

Internal vs. external benefits. The public display imperative leads to fundamental positioning differences versus what works in Western markets. As a general rule, benefits should be externalized, not internalized. Even for luxury goods, unadulterated individualism—reinforcing “what I want, how I feel” irrespective of societal consequences—does not work. Bath gels should not promote sensorial indulgence in the shower, they should help the user to start busy days with a kick; beauty products must help a woman move forward and enhance her ability to open doors professionally or control her man. Even mass-market beauty brands should focus on helping lower-income women be admired as a great mom or adored wife. Automobiles should make a statement about a man on the way up. BMW has successfully fused its global “ultimate driving machine” proposition with a Chinese declaration of ambition.

Display and business models. It’s worth repeating that public display is also a critical consideration in shaping business models. One more time: Starbucks successfully established itself as a public place in which professional tribes gather to proclaim affiliation with the new-generation elite. Likewise, both Pizza Hut and Häagen Dazs have built megafranchises rooted in out-of-home consumption. (No Chinese is willing to pay $4.50 to eat a pint of ice cream
while watching an illegal DVD.)

SIMPLIFY COMMUNICATIONS/BENEFITS TO ENHANCE COMPREHENSION

Simplify, simplify, simplify. Chinese, irrespective of income or geography, are overwhelmed—yet excited—by the explosion of brands, both local and international. Twenty years ago, the public phone was the only way to make a telephone call; today, there are more than three hundred brands of mobile devices, ranging from US$30 basic models to state-of-the-art smartphones. Making matters worse, China’s media landscape is extremely cluttered. According a study by WPP’s MindShare, a large media-buying and -planning agency, the average Shanghai resident
is exposed to three times as many ads in one day as UK consumers. In Beijing, television screens, mostly owned by Focus Media, are ubiquitous—in taxis, elevators, restaurants, building exteriors, locker rooms, and bathroom stalls.

Direct is best. Complicated messages therefore are not easily digested, even among the most brand-literate subsets of the population. Consistent messages must be conveyed directly, requiring as little cognitive processing as possible. Advertising must be ruthlessly single minded about the visualization of key benefits, leveraging demos as creative ideas—that is, slice-of-life formats that dramatize product performances in extreme circumstances and so on. Celebrities must be carefully selected so that their star attributes reinforce a core brand proposition. (In nine cases out of ten, celebrities should be Chinese. Unlike the Japanese, mainlanders are profoundly nationalistic and relatively unfamiliar with Caucasian personalities, with the exception of superstars like Michael Jordan, Lady Gaga, or Jennifer Aniston.)

To conform to the simplicity mandate, heavy mass media—television and print that is passively consumed and seen by many people—is ideal. China’s untamed landscape requires that brands be created from scratch; television is flexible enough to forge broad-stroke equity and brand character. Digital media, actively digested, is increasingly critical to deepening engagement and loyalty but, even for high-involvement/heavy search categories such as autos and financial services, mass media will remain the most important plank for years to come.

EXTEND BRANDS DOWNWARD TO GENERATE BOTH SCALE/AFFORDABILITY AND MARGIN

Margin and scale. To succeed in China, multinational brands must boast both profit and mass-market scale. Most multinationals have little problem charging a price premium because, with few exceptions, Chinese consumers maintain an active preference for the reliability and prestige of foreign brands. The tough nut, however, is establishing a pricing strategy that kills two birds with one stone: sustaining a premium image while creating broad sales reach. Scale, the
most potent signal of performance reliability, is critical in a reassurance-driven market such as China. It also forges operational order from chaos, exerting gravitational pull throughout distribution channels and the sales force.

Lower price tiers. The only way to target a broad swathe of price-sensitive consumers is to extend premium-priced brands downward across lower price tiers, always by reducing costs and simplifying benefit structures. At the same time, the risk of negatively affecting quality perceptions of the entire brand must be minimized. This is often accomplished by investing advertising funds in communicating the benefits of the premium variants while relying on in-store and other promotional efforts to push sales of the less expensive items. Colgate toothpaste was an early innovator on the mass-market front. Colgate Total Oral Care premium toothpaste, composed largely of imported ingredients, cost approximately 200 percent more than local brands and maintained a 3 percent share. Colgate Herbal and Colgate Strong, however, used local ingredients, had a lower cost of goods, and were priced slightly higher than local brands. The combined Colgate franchise controls a phenomenal share—more than 20 percent—of the toothpaste market, one with hundreds of regional and national competitors. In recent years, Nestlé and some Procter & Gamble brands—notably Crest—have adopted a similar strategy. So too have higher-involvement categories such as mobile phones.