Cheil to branch out from monogamous Samsung relationship in China

The general perception of Cheil being an in-house agency for Samsung may remain, and while it is true that Cheil's heavyweight client will still be Samsung for the foreseeable future, Lau's plan is to leverage the past experience and "creative firepower" gathered for the Korean electronics giant, and grow beyond just the Samsung business.

"Through the last 40 years, Cheil has grown with Samsung to the extent that we are now the sixth largest agency in Greater China according to R3, based on mainly one high-profile client," Lau said. "But we need to look to the future. We don't want to be just a Korean agency for a Korean client."

Of course, Samsung will "always be an important client" to Cheil, much like another famous monogamous pair: Nike and Wieden+Kennedy. But by 2017, Cheil strives to have at least one-third of its client roster and revenue coming from non-Samsung businesses.

Like any other relationships, there are pros and cons to monogamy in business. There is "no doubt" that Cheil played a role in helping Samsung grow around the world, Lau said. At the same time, Samsung has also evolved from its early days as an OEM manufacturer to an "innovative business needing more knowledge workers, creative designers and whatnot", Lau added.

By the same token, Cheil also wants to evolve, a process that can also benefit the foundation client. "When we learn how other brands build their businesses, we become more informed and can develop capabilities to contribute even more to Samsung," Lau said. Samsung recognises that; plus the brand also has been using other agencies apart from Cheil.

"The trick is as we build a wider portfolio of clients, to not lose sight of what Samsung wants," Lau said. "We still need to deliver and service their set of needs in order to retain the client," added Lau, who went on to venture another husband-and-wife analogy.

"If you have a beautful wife who's not working and staying at home 24 hours a day, sometimes the relationship will be prolonged and sometimes shortened, because the housewife could become very inward-looking and therefore when the husband comes home there is nothing to talk about," he said. "But when the housewife goes out to work, interact with other people, is exposed to all sorts of experiences, she comes home to have meaningful discussions with the husband."

The desire to avoid being too insular is easy to understand, since heritage is no longer the trump card it once was to keep a client faithful, especially a consumer-facing one like Samsung. "We are constantly under the microscope to deliver," said Lau.

In Greater China, the Korean network made its first foray in August last year by acquiring boutique agency Bravo-Asia, which will take the lead for Cheil on classic branding and advertising.

Cheil OpenTide is the network’s current digital and e-commerce offering, while Cheil Retail, a brand new unit, will handle shopper insights, shop layout designs, field marketing, retail fixtures and furniture, once the necessary licenses are obtained from Chinese authorities.

Lau pointed out that these form "a very unique business model in the agency world", as other networks provide these services by separate entities within the group, but each of them have their own bottom lines, agendas and priorities.

"This means they don't necessarily gel with one another," he said. "Whereas for us, it's basically one bottom line for all touchpoints. I look at the whole thing, so there is vertical integration in that regard."

There is a running joke among smaller digital agencies in China, who say one of their biggest "clients" is, in fact, not a brand, but Ogilvy & Mather. Despite having Neo@Ogilvy and OgilvyOne under its wing, O&M is said to be lacking in digital skills, so will sometimes outsource to external agencies, according to some commenters. The backstory is that these subsidiaries charge O&M a fee that is higher than what an external agency would ask, according to industry observers.

Even with the Bravo-Asia acquisiton last year, which is meant to help Cheil cut through the market a little faster, it is still considered a latecomer to China. Lau is not miffed. "When you are behind, you can learn from other people's mistakes," he said.

Still, Cheil has some convincing to do in the market. Its subsidiaries Bravo-Asia and OpenTide are still very distinct, as the network is not ready to publicly align them due to legal issues and client perceptions.

"Some of Bravo-Asia's clients, like New Balance and Moët Hennessy, are not comfortable to be serviced [again] by a big multinational agency, especially if they came out of that environment and chose a small boutique agency," Lau said.

It will take a while for these clients to want to go back to "square one", until Cheil proves it is different from other advertising MNCs. "I imagine it will be at least a year more before we can call every entity 'Cheil XXX'," he added.

The mid-term intent is to at least refresh all subsidiary logos to create a common visual identity with the Cheil brand, which will be put forward in the industry with a number of initiatives like monthly newsletters, seminars, 'Cheil-out' creative nights, scholarships and grants to universities.

The purpose is to get the Cheil name better known outside Seoul. Scooping some clients from BBDO, such as Amorepacific's Laneige and Mamonde in Shanghai, was a start, even though they are notably Korean as well.

Other Korean clients already under the roster of Cheil Greater China include: Orion, Hankook Tire, SkinFood, Ssangyong Motors, Binggrae, Korea Tourism Organization (KTO), Busan Air.

But of course Cheil, with its 1,200 full-time staff in Shanghai, Beijing, Chengdu, Shenyang, Taipei and Hong Kong, is gunning for more than just homegrown peers.

Domestic Chinese clients are "very finicky" about their agencies and the value of a long-term agency is minimal to them as they change agencies frequently, said Lau. "To operate in China, we may have to bend the rules a little in terms of contract length, but the canvas is much bigger," he said.

As of end-May, Lau claimed Cheil is already seeing 35 per cent revenue growth, above the full-year forecast of 20 per cent. Beijing is its largest office, with 900 people servicing Samsung's headquarters in the same city, which is a size almost comparable to Ogilvy.

Hong Kong and Shanghai are the two smaller offices Lau is trying to build up with an undisclosed M&A strategy, considering agencies with expertise in shopper insights, which are in high demand.