China Marketing Blog

What Innate Advantages Do Western Brands Have In China - Part I

Lu-Hai Liang — Wed, 08/08/2018 - 13:07

Here's a list: KFC, Nike, BMW, Apple, Levi's, Microsoft, and Starbucks; what unites them? Not only are they examples of western brands in China who have managed to win both Chinese consumers' hard-earned yuan, but also, significantly, their hearts (though not all of them achieved this without issue… more on that later).

KFC's Products Are Well-Calolized In China
KFC is a good example of a brand with well-localized products and prices.

Western brands are associated with heritage, creativity, originality, and quality, says Wang Sharay, a senior marketing director working in Beijing. "Levi's has a long history of making jeans, with original design, and when the brand is doing marketing communication Levi's has its own global plan and promotion schedule which will make you feel this is a great brand," she says. In other words, as opposed to Chinese brands which come and go and can even disappear after just months in the playing field, western brands tend to be built on decades of hard-earned credibility and repertoire; brands like Levi’s (which have existed for 165 years) have learned to use this to progress and expand their companies.

Right now, Sharay is working with Caterpillar, the heavy machinery manufacturer, and says it's an example of brand heritage. She makes the point that although China has lots of brands producing these kinds of machines, too many are following Caterpillar's design and even brand colors.

Ikea and Costa Coffee in China - marketing
Ikea uses local dialects in their stores instead of standard Mandarin.
Costa Coffee's campaigns are tailored for Chinese market. They also co-work with local brands.

 

Western Brands Don't Always Have It Easy In China

 

Here's another list: Best Buy, Tesco, Ebay, Google, Amazon, Gap, Marks & Spencer, Dunkin' Donuts. What ties them together? They're examples of western brands who have either flopped in China or have failed to be as successful as they have been elsewhere.

Clearly not all western brands have it easy in China, and it would be wise not to assume that having those innate advantages is a surefire route to success. So, what separates the first list from the second list, and how can a western company utilize their brand to optimize their place in the China market?

One of the main failings of western companies in China is not their branding but their slowness or inability to adapt to the local market. Marks & Spencer, a British retailer, was criticized for not having a clear idea of the type of consumer they were targeting and lacking an understanding of the Chinese market (more here).

Western Brands' Weakness In China

Tesco and Best Buy did not take into account Chinese consumers' preferences for smaller, conveniently located, supermarkets and instead copied their UK/US models of building large flagship locations. Amazon was hampered by slow decision making as every decision had to go through their Seattle HQ while their local rivals, such as Taobao and JD, moved with rapid marketing and sales plans suited to Chinese consumers.

Knowing your market and target audience is key. "Brands must be very clear who their target audience are," says Sharay, "what their interests, reading habits are, and find the right communication channel."

Luca Li, who co-founded a successful fresh milk company in Beijing with his Czech business partner, says branding is not just about having a western name. "We try to portray it [their product] as a western brand. Especially with milk, this works well in China because of history [China experienced a fake milk scandal ten years ago]. It's also about having professional people on your team. Going to events in an international setting - so for us that's embassies, business partnerships, and hanging out with international people."

However, he warns that emphasizing your western brand comes with certain strings attached: "If you are a high-end brand, then that needs a high-end product or service to back it up. It raises expectations."

For his own company he says being a western-style brand with a forward-thinking product means there is an alignment between product and brand image.

Meanwhile BMW is a good case of a great western heritage brand that's gone a bit awry. BMW has always had great brand recognition and respect in China due to its prestigious associations, but over the past few years the German automaker has been suffering in the Chinese market. Sources, who prefer to go unnamed, say BMW have faced several issues connecting to Chinese consumers.

A senior marketing director, who works closely with auto firms in China, says BMW's brand is no longer clearly positioned: "And there are issues in terms of global vs local communication dynamics,” he says, although this problem is an old conundrum affecting many large car companies.

"The moment they leave too much of the communication decentralized it affects the premium-ness of the communication rather badly, which leads them to having to focus on price-based tacticals, rather than proper brand management. Because of this, they create a downward race to the bottom rather than creating, or rather, retaining a core brand premium that they can command. And then, once they centralize, it's in the hands of executives in Munich that have no idea about China."

Another key thing with BMW, and which is a universal problem (or opportunity) for brands in China, is adapting to the changing status and desires of Chinese consumers. BMW was great at connecting to the "old status" with big shiny cars announcing overt prosperity, but they have not yet found a good way to link to the core tenets of Chinese consumers' new status, which is much more about experiences and being able to express the breadth and depth of one's own life.

This new status has been having an effect on brands as varied as Nestle, Converse, Costa Coffee, MINI Cooper, Airbnb, Rolex, New Balance, and Samsung to name a few, while a new crop of online services has been catering to the new tastes and habits of Chinese consumers.

In the second part of this series we will examine what this new status means, and how important it should be for companies seeking to go big in China.

 

Takeouts

 

  • Western brands have innate advantages of being associated with quality, creative, and original products.
  • But these associations come with higher expectations.
  • These advantages must be allied with good consumer and market understanding.
  • Even the biggest of brands can come to struggle in China if they do not adapt.
  • China is experiencing a change in consumer demands and expectations for brands.

 

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