Brand value increases across categories

Part 4 | The Fast Growing Markets
(2) More Chinese brands will be able to
satisfy this expectation. Chinese entrepreneurs
have learned what’s driving brands
in other parts of the world. They can interpret
those trends for China.
The animating impulse is less about
imitation and more about adaptation.
Knowledgeable Chinese consumers and
entrepreneurs know what products are
available and what they should cost.
Chinese businesses are advantageously
positioned to deliver branded products
that are relevant and competitively priced
for Chinese consumers.
It’s not that Chinese consumers will lose
desire for Western products, but Western
provenance alone may not excite them.
This new reality requires abandoning
Insight
Brands build Internet
expectation
Because of the proliferation of the
Internet, people actually know about
brands a lot earlier than the brand
physically shows up in their city. So
there’s a lot of pent up expectation,
especially among young people or
people who are more Internet savvy.
This phenomenon also happens with
luxury brands, which usually want to
regulate exposure to build desire.
Theresa Loo
National Director – Strategic
Planning, Analytics & Insight
MEC China
Theresa.Loo@mecglobal.com
118 BrandZ Top 100 Most Valuable Global Brands 2013
the old presumption: That the Chinese
consumer has limited knowledge of
product and brand; therefore suppliers
need to offer only a limited selection.
Some international brands now view
China as a second home market. They
know not to downplay a brand’s foreign
heritage, but to modify the product so that
it’s appropriate for China and Chinese
consumers. Hermès invested in a Chinese
luxury home fashion brand called Shang
Xia, and Estée Lauder launched Osiao as
a Chinese-brand skin care product.
Word of mouth
The changing attitudes of Chinese consumers
resulted not just from international
travel, but also from the power of word of
mouth and the rapidity with which opinions
and impressions can be shared because
of social networks and mobile.
Mobile surpassed all other devices last
year as the gateway to the Internet. At
this inflection point, Tencent’s mobile
app, with social networking and location
utilities, rocketed in just two years past
300 million subscribers.
The closeness of Chinese families also
influences the speed of communication.
Young people and laborers, who migrate
to coastal cities for work, share their
impressions during regular phone calls with
the families that remain in China’s villages.
The Internet and mobile deliver greater
awareness of brands to places where
people have online access to products and
services that may not be present in local
physical stores, although that’s changing
as international retailers, like Walmart
and Carrefour, open hypermarkets.
Until now, Chinese rather than
international brands have generally
enjoyed the advantage in these locations
because they have greater understanding
of the local distribution systems, which
can be complex. But it’s not always easy
to ascertain whether consumers prefer
Chinese or international brands because
Insight
Well-traveled consumers
expect more choice
Even people in third and fourth tier
cities have money and are traveling
abroad. They return home with a new
idea of what the consideration set for
products and brands could be. For
brands, this development means that
we’re approaching a new horizon
where brands will need to cater to
the demand for greater variety. The
concept had been: This is what the
Chinese consumer knows; therefore
this is what we give the Chinese
consumer. It no longer holds true,
particularly for these affluent
Chinese consumers.
Scott Pollack
Senior Strategy Director, China
Wunderman|AGENDA
scott.pollack@wunderman.com
many international brands, in China
for a long time, have deemphasized
their origins.
The ability to talk fast and cheaply
on mobile throughout China also
is shaping public awareness of the
nation’s challenges. Going forward to
the next stage in China’s development
requires simultaneously repairing the
environmental damage caused by the
last stage of fast growth, the degradation
of air quality and food safety, and the
related erosion of trust.
The SOEs
Competition drives
concern with brand
The State Owned Enterprises (SOEs)
are becoming more concerned about
branding and differentiation.
The conventional wisdom has been:
The bigger and more monopolistic
the enterprise is, the less it’s
interested in brand. That’s changing
for one key reason—competition.
The SOEs understand that sustained
success in a more competitive
Chinese market requires brand
knowledge and brand building.
And these government-controlled
organizations are willing to invest.
The interest in brand building is most
pronounced among the competitive
SOEs in the consumer products like
food and dairy. But the strategic
SOEs, the banks and oil and gas
companies, have reasons to build
brands, too.
A wider trend
The focus on brand building is part
of a wider strategic effort to improve
overall management, which also
includes optimizing supply chains
and resource planning. Many SOEs
are sending executives for continuing
education courses or investing
in internal programs to cultivate
executive leadership skills.
Two fundamental changes drive the
interest in understanding consumers
and producing products that better
meet consumer needs:
First, the shift in China from
being the world’s factory to
being more of a consumerdriven
society pushed
companies, including the
more competitive SOEs,
to look for answers.
Second, the Chinese assumed
that Western companies, with
experience competing in market
economies, had all the answers.
That notion was shaken by
the global financial crisis.
Chinese observers concluded that
simply imitating a flawed structure
made little sense. They’ve since
attempted to understand Western
management in order to appropriate
what works and modify it for China.
Role of government
The need to advance the
government’s interests also
may drive the effort to build
Chinese brands.
Domestically, the interest in brand
building appears to be pragmatic:
If Chinese consumers increasingly
desire brands, it makes sense to
encourage the development of more
Chinese brands.
Internationally, strong SOE brands
accomplish a political mission by
projecting the soft power of China.
They lubricate the international
relations required for establishing
Chinese brands abroad.
As the SOEs move into developed
Western capitalistic democracies,
brand becomes important for
media and government relations,
to help overcome any resistance to
commercial ventures controlled by
the Chinese government.
Brands also help demonstrate a
long-term commitment to making
an economic contribution to the
wider community and not to simply
exploiting its natural resources. In
this respect the role of brand for a
Chinese SOE is similar to the role
of brand for an International Oil
Company (IOC) entering overseas
markets.
China
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