China’s culture, economy, politics and way of thinking are…slightly different when comparing things to the ways of the West. These differences are compounded when developing a business in China – your market strategy should reflect these differences. Despite the decline in government spending the Chinese consumer is still flexing their spending power with a preference towards foreign brands. Foreign brands have taken notice and have become more involved in the Chinese market.
As we’ve discussed in previous posts, the legal environment in China can be difficult to navigate for foreign brands.
Trademark rights are given to the first to file rather than rightful owners which can result in brands like Tesla, Apple, Castel and Burberry spending millions of dollars in compensation and or court fees to use their own brands in the region. In China, Michael Jordan doesn’t even own the rights to his own name.
This is where the “start small” strategy becomes so dangerous in China. It only takes one person to notice the potential of your brand and register your trademark to derail your Chinese brand expansion. Our advice to brands has always been to stay out of China until you have a legal framework in place. An equally important step that brands should consider before entering the region is their market strategy.
“Chinese consumers don’t think the same way as their Western counterparts” claims Jeff Stewart, MD of Shanghai based Brand Asia. “Brands need to consider what will drive consumption of their brand in China”.
Driving consumption of your brand is more than just marketing, it’s ensuring your legal framework is in place, supply chain, distribution channels, regulatory issues (which change in China from province to province) and having a deep understanding your consumer.
“There’s a good chance that your target audience in China won’t be the same as it is in the USA or Europe”.
Having worked across Asia with a focus on China for over 7 years, Stewart has seen countless examples of this type of mismatch. Nike elsewhere in the world is sold under the sporting goods sector, in China Nike is considered a luxury brand and is sold alongside Gucci and Armani. Their ads, their slogans, their spokespeople, even their name, all had to be reevaluated for the China market. (Nike is known as Nai Ke in China, which means “Enduring and Preserving”).
Unfortunately not every business is able to make the positive expansion the way Nike has, a U.S. hair loss treatment entered the market targeting hair thinning and balding in men. Had they done their research beforehand, they would have realized that this sector is targeted equally at both men and women in China. Their first year’s marketing neglected half of their target audience.
Stewart believes small brands in particular are keen to launch without complete understanding of their consumers.
“One sector where we see this rush to market happening regularly is healthcare. The Chinese are an increasingly health conscious population and there is a huge demand for nutritional supplements. Unfortunately, this demand does not necessarily mean consumers have an understanding of the supplements benefits. Brands that have been successful in this sector have focused on the education of why – “That education is not just for consumers but your distributors too.”
The consumer and benefits of anti-aging cream is universally understood amongst the Western market. This is another example of how critical it is to reevaluate your product or service when entering the Chinese market. In China, anti-aging products are used generally for skin whitening rather than for the treatment of lines and wrinkles. If distributors aren’t educated about your product – they don’t know how to position it and your brand exposure suffers.
“Not every brand has a vast research budget, but no brand should enter China assuming their product is well understood and consumed by the same demographics that they see in the West” Stewart warns. “Even a modest research budget may be the best investment you ever make in China”.
Brand Asia offers this list of key considerations when aligning your brand to the China market:
- Ask your audience – Whether it’s a focus group, in depth product testing or an online survey to thousands of potential customers across China – the best way to understand them is to ask. Don’t do this just for the launch. Connect with consumers on an on-going basis to stay abreast of concerns, engagement and consumer growth.
- Key Influencers – Family is first in China when it comes to decision-making. Mum, Dad and grandparents still hold a lot of sway over their adult children. Online reviews and testimonials will have far less impact on purchasing decisions than family. This is particularly true for major purchases like education, health, insurance and automotive – family is generally consulted first.
- Chinese brand name – A balance is needed when it comes to localizing brand names. You want to make sure the brand itself isn’t misunderstood or pronounced in such a way as to make it negative (as was the case with Coca Cola, BMW and Heineken all of whom are known by different names in China). There is however, more trust in foreign brands than local brands; they are perceived to be better by default. If your brand name sounds foreign and doesn’t translate to something negative (or unpronounceable to the Chinese), there are strong reasons for keeping it. Regardless you’ll still need a version of it in Chinese characters.
- Be open to changes – Be prepared to review and adjust your strategy to the ever-changing market, brands in China have to change regularly due to cultural shifts, legal shifts that can happen overnight. As occurred earlier this year when the Chinese government completely overhauled the grocery and medical supplement sector. It’s important to continually track your brand and readjust your strategy in order to ensure continued growth.
- Be end-to-end prepared – Too many brands hold an activation event in China before they’ve completely sorted their distribution channels, supply chain or regulatory requirements. Many of these elements take time to set up properly but without them, your big bang market entry could ultimately damage your brand.
- Plan for competition – You’ll always have competitors in China, you’ll probably have far more competitors than you have in the West. Expect them and have a plan for how you’ll defend or differentiate your brand.
- Don’t expect instant success – Success in China takes time, Chinese consumer markets are saturated with new brands. The brands on the shelf of your grocery store in China change monthly as brands enter and exit the market. The brands that do it right don’t expect to have an impact on China in 3 months. It’s a 12-month process of understanding the consumer, distribution channels, driving consumption and brand awareness.
Western brands will continue to have an influence over Chinese consumers but as this relationships continues to develop it will be interesting to see how Chinese consumers will gain influence over Western brands.