Age of Marketing
Age of Marketing
Data analytics drives rise of online brands, but brand equity will determine their future
Commanding a premium requires more than algorithms
CEO, Greater China
Within China, we’ve seen an incredible transformation in online commerce that has given rise to many digitally-native brands, defined as those brands exclusively flourishing online with no traditional brick and mortar presence.
Brands such as Three Squirrels, a nuts and snacks startup; local cosmetics brand, AFU; or even pet food category killer, Crazy Doggy, have disrupted their respective categories on online with slick packaging, unique product offers, and in-depth knowledge of consumer needs.
These brands have not always evolved from the traditional “see a need, fill a need” lucky entrepreneurs who just happened to fall into the right opportunity, but from data analysts who poured through search data and identified key product gaps not currently served by their respective category competitors.
Welcome to China’s version of Marketing 2.0, where innovation in products and services are now instantaneously driven by changes in consumer demand. Product variants are not created by a committee or a laboratory in the company, but as the result of what’s hot at the moment. Personalization is the rage.
Because digitally-native brands have lower investment costs, they can adapt quicker than traditional brands and deliver shorter product life cycles. An anti-aging dog food variant? Carbon fiber pet diapers? They’re for sale on Tmall! To me, this is pure marketing, and there’s never been a more exciting time to be in the business in China than now.
When I came to China in 2005, brands grew at meteoritic levels, and we would always congratulate ourselves on a brilliant advertising campaign. However, we have to be honest that brand awareness could also be attributed to increased distribution and not by advertising. Sales of Oreos, for example, will increase 30 percent year-on-year as they start appearing on shelves for the first time in lower tier Chinese markets.
Despite all the trade tensions, there are also many new, digitally-native Chinese global brands driving opportunities abroad. There are thousands of Chinese brands in this space. These are some of the more recognized: Anker and Sunvalley, consumer electronics marketers; DJI, the world’s largest drone brand; and ECOVACS, the robotics company best known for its robotic vacuum cleaners.
Amazon is home to most of these new brands, with cross-border trade from China now approaching $10 billion on the platform. Last year, China-sourced exports on Amazon grew a whopping 50 percent, and this growth is likely to continue. Search almost any product category on Amazon.com today, and you will likely see brands you have never heard of competing against the traditional brands. And yes, many of these brands are from China.
Among the thousands of brands, there are a lot of digitally-native brands that are simply getting it right and are growing exponentially abroad, and many, like ECOVACS, rank in 2019 BrandZ™ China Top 100. Similar to their local counterparts, these digitally-native brands are often organized in nimble teams, combining e-commerce, product development, marketing, supply chain and customer service experts working together.
Following the data is critical, and the big players are masters of optimization. By understanding search, brands can understand demand, and by combining it with the current product portfolio, gaps can be identified and filled. It’s therefore not a surprise to see successful digitally-native brands seeing their data analyst as senior and as crucial as their company chief technology officer. Once you have the data, successful digitally-native brands participate in growth hacking practices, ensuring that the product is discoverable, and traffic is being driven to your listings.
Building brand equity
Many of China’s digitally native brands going abroad rarely make it to this level, ending up competing with the masses in the low-priced sector. For those who have reached the top in e-commerce, what’s next? How do you evolve from a master manipulator of Amazon algorithms to a product that consumers actively seek out and are willing to pay a premium?
Chinese manufacturer, Mpow, for example, makes an excellent noise cancellation pair of headphones retailing on Amazon at $59.99. By contrast, a similar pair of Bose headphones can run $350, and Bose is the No. 1 seller. Besides a premium price, the difference between MPow and Bose is brand equity.
Going to the next level will require Chinese brands to start investing in marketing because online optimization can only go so far, and it’s those non-tangible, psychological factors that make people move from a rational purchase to an emotional one. Many activities within the global digital environment will help Chinese brands reach to a broader audience, and many aren’t crazy expensive.
At Wunderman, we recommend that clients adopt omnichannel e-commerce and social strategies, including these three initiatives:
- Engage in more Direct-to-Consumer (D2C) activities on the brand’s own e-commerce platform. A brand’s D2C platform will also enable it to have more enrichening conversations with the target audience.
- Take full advantage of segmented direct marketing and Dynamic Creative Optimization (DCO), which enables campaign effectiveness to be perpetually improved in real time.
- Pursue Consumer Relationship Management (CRM), a recommended strategy both within the Amazon platform and outside of it. Start out simple: you should have a way to ensure you are utilizing warranty programs, newsletters, and downstream promotions.
Chinese digitally-native brands provide the ultimate combination of creativity, innovation, and data science, adapting many local business practices and delivering a new era of marketing on the global stage that is both disruptive and a growing rapidly. While e-commerce is all the rage, it still represents a tenth of the retail market in North America. We still have a long way to go.