Chinese Brands go Global
Chinese brands generate impact across categories
Next challenge: building purpose and premium
Chinese brands across a range of categories are increasingly going global and proving a force to be reckoned with.
The recently launched BrandZ™ Top 50 Chinese Global Brand Builders 2019 report shows that brands from sectors as varied as fast fashion and online games are fast becoming international hits.
Many of these Chinese Global Brand Builders rank in the BrandZ™ Global Top 100, including technology leaders Huawei, Lenovo, and Xiaomi, along with the giant retailer Alibaba. Chinese Global Brand Builders also include brands like ByteDance, the internet company with social media platforms like TikTok.
These export brands are increasing their Brand Power, a BrandZ™ metric that consumers’ predisposition to choose a brand and drives sales volume, which many of the Chinese Global Brand Builders are increasing at double-digit figures year-on year.
BrandZ™ spoke with four WPP China-watchers about the rise of Chinese brands, how “Brand China” affects their fortunes, where they excel, and the lessons being learned.
The next step
Sales-driven approaches evolve to brand building
Chris Reitermann, Ogilvy Chief Executive for Asia and Greater China, says Chinese brands are pursuing overseas opportunities out of necessity, as domestic growth slows, and Beijing encourages many State Owned Enterprises to expand, rather than search for the prestige in becoming a household name.
While Chinese brands are driven by keen business acumen, using data in smart ways to identify the hottest areas of opportunity, often building a brand takes an initial backseat.
“Most of the brands, as a first step outside China, have a very sales-driven approach. It’s a very natural thing to do, and Western companies have done it the same way,” he says.
“When you enter a new market, you first think about how you get distribution, the right retail set-up, the right people in those markets, and often a later step is to think about your brand, and that usually happens when you reach a certain scale. It’s an evolution.”
How quickly that evolution happens depends on the category a brand is in; FMCG clients tend to think about brand and marketing much earlier in the process than automotive and technology brands might. And once it starts, it is a long process.
“Building a brand doesn’t take a year or two,” Reitermann says. “You can make it a priority, but many of the most successful companies in the world have built their brand over 50 or 100 years. I wouldn’t say there’s a Chinese brand that’s achieved that—even Huawei’s just at the beginning of doing that. Many of our Chinese clients mistake doing advertising for building a brand, but it’s much more complex than that. A brand is an intangible value built over time and includes much more than just advertising. It’s the product itself, the customer experience, the retail design and so on, all amounting to a clear brand purpose.
From vision to execution
“To do it well is a challenge. We often see a great deal of care for the brand at a senior level, but it’s a challenge for them to take that ambition and strategy into execution across 50 or 100 countries. It requires a strong global marketing operation, process, and most of all global talent.”
Some of the best communications Reitermann has seen from Chinese brands include smartphone brand Vivo’s work in India, and Huawei’s European campaigns.
Generally, he says the idea that “Brand China” is holding back Chinese brands internationally is overstated.
“Obviously, country of origin matters to some extent, but we did lots of research on how country of origin affects consumers brand choice, and in most categories the correlation is minimal. Actually, political sentiment towards a country can often be negative, but the perception about brands from that country remain completely unaffected.
Obviously given the case with Huawei, political sentiment matters a lot overall, but in fact doesn’t trickle down to a consumer level. People largely buy products and brands for their performance, innovation and price.
The international brand landscape will gradually include more and more Chinese giants, Reitermann says. He predicts that a decade from now, there will be one or two big Chinese global automotive brands, Huawei will become the number one handset maker in the world, many global technology brands will be from China, and we’ll see lots of FMCG brands. Dairy brands like Yili and Mengniu already have a global vision. Energy companies are also going global.
“It will be different, for sure. I’m pretty sure that in most categories, you’ll see a very strong Chinese player.”
Shifting the storytelling from product to purpose
Simon Shaw, H+K’s Global Chief Creative Strategy and Innovation Officer, says many Chinese brands have reached a point in their international expansion where they have to think beyond product; they have to focus on their purpose; ask questions like what is the social contract they are willing the make with the world, and move from shareholder value to shared value—and how to communicate that more clearly.
“To date, many brands have focused very much on product rather than purpose, and have relied very much on product innovation, product ubiquity and value as the three pillars of success,” he says.
That’s been reflected in communications, with a general focus on the speed or performance of a product, or why it is a great value choice.
“Chinese brands often use their financial muscle to create awareness when a new product launches—they buy large amounts of media space and you become very aware that something’s launched.
“The challenge with this approach is you forget it very quickly because the communication only talks about a product, not the brand. You are not building long-term brand love or loyalty. You might be buying short-term awareness, but not necessarily telling a story that will resonate in the longer term.
“What you’re seeing now is a challenge, especially in more mature markets outside China. It is not enough to focus on being everywhere, value or purely innovation when there isn’t another great technological leap to make. It becomes important to have to brand focus and build a brand through purpose, and that’s where purpose-driven storytelling has to come in—to build a story in an interesting and innovative way. That’s the challenge moving forward.”
Around a quarter of entries at Cannes in 2018 were from China, but there were only nine winners, underlining the point that a “my product is cheaper” message lacks creativity and resonance.
Having a clear and compelling story to tell is easier for some brands than others; Envision, a Chinese smart energy company, for instance, was built on its founder’s mission “to heal the wounds of the world, one step at a time starting with energy.” This is a compelling brand story. But the bigger Chinese conglomerates and the SOEs that have expanded into diverse sectors in line with areas of government focus, have a harder time succinctly explaining their mission to an audience beyond China.
They also have to overcome often-negative (though changing) perceptions of the quality that’s expected from a “Made in China” product.
“I often say that the challenge is people like me, who grew up with plastic toys with “Made in China” written on the bottom that broke. You’re trying to convince me not to buy an iPhone but to buy a product ‘Made in China’,” Shaw says. “Obviously if you’ve not grown up with toys that all broke, but Huawei phones and other amazing technology, then you don’t have that issue.”
One way Chinese brands can quickly establish their quality credentials is through smart partnerships. Huawei has Leica lenses in its smartphones, and Lynk & Co is a car brand formed by Geely and Volvo, which Geely now owns.
“I know Huawei’s partnership with Leica has been incredibly successful, because we all know who Leica is and there’s an element of thinking ‘well, if Leica is in partnership with Huawei, it must be a good product.’ You’ll see collaborations like this more and more.”
Shaw says perceptions are gradually evolving, “moving away from the challenge of it being “Made in China” to a positive view that something is “Created in China”; a place of innovation, technology and agility, which is much truer reflection of the China I see”.
Technology and Data
Brand expansion reflects China’s global aspirations
Mark Heap, CEO of MediaCom APAC, sees a symmetry in the soaring numbers of Chinese brands seeking to expand, and the government’s encouragement of businesses across many sectors to look beyond the domestic market.
“I don’t think it’s just the global aspirations of Chinese brands that have changed over the past 20 years; it’s the global aspirations of China,” he says.
Chinese brands have a presence like never before on the global stage; at the World Cup in 2018, almost half of the official sponsors were Chinese.
The route from home-grown hit to global success isn’t an easy one, Heap says, and the manufacturing brands that first attempted to go global spotted opportunities but didn’t always know how to seize them.
“I don’t think there was enough appreciation among Chinese brands going overseas of just how diverse ‘overseas’ was.”
International consumers are generally used to having a vast choice in most categories and had been raised with a sophisticated understanding of brands that hadn’t been part of Chinese culture. The need to customize products and communications for new markets tended to be overlooked.
“There’s not been much of a legacy of brand building in China. The Chinese are great entrepreneurs, great inventors, but there’s not such a strong culture of brand building,” Heap says.
“It tends to be about recognition and awareness rather than brand building and meaning.”
Now, technology brands are leading the charge from China to the world; because of the sector they’re in, they tend to be inherently agile. And they’re emerging from a China that’s changed immensely over the past decade, and where consumers are now just as demanding and discerning, though maybe in different ways, as they are in other parts of the world.
They also come from a highly connected market that’s probably the most advanced in the world when it comes to collecting and using data to cater to individuals’ preferences.
“The Chinese companies using (data) well are often doing it a lot better than many of their Western competitors because they’ve got more to play with,” Heap says.
“As they expand overseas, they’ve got muscle memory; they believe in the power of data and logic. You could maybe argue where Western companies have an advantage in appreciating the emotional power of brands, maybe Chinese brands have advantage in understanding the power of data.”
That said, there are Chinese brands doing a great job of making emotional connections that meet the needs of consumers in international markets.
Heap particularly enjoyed the Tmall Singles Day campaign in 2018, which used eye-catching creative content in landmark locations around the world, including New York’s Times Square. It led to a 50 percent rise in overseas sales on Singles Day.
“Tmall really understood that, unlike in China where they’re a completely dominant player, they’re going into a lot of overseas markets as a challenger brand.”
Heap says the stigma that “Made in China” had 20 years ago has gone—global consumers realize that most of the things they buy come from China anyway, and they expect things they buy to work as they should, regardless of where they’re from.
“There was an ignorant world view of China as a third-world country full of peasants, but now, if you go to any major city in the world you see wealthy, sophisticated Chinese consumers busying property, buying cars. This must have an impact on how China is seen—as a successful country.”
Up the Value Chain
Brands poised to shift from price to premium
Jackson Ng, Client Strategy Director at H+K Strategies, says Chinese brands need to take a long-term view of their place in the global marketplace.
“Chinese brands are very good at disrupting from the affordable end of a category due to their value proposition. They come in at a low price and often knock out the competition.
“However, for them to improve their profit margins in the longer term, and to extend the offering to services, which are always more profitable, the next big question for global Chinese brands is to see how they could next charge their global consumers a premium by moving up the value chain.
“This is very challenging, especially since the big global players as well as other local champions usually have better local insights and are therefore perceived as having higher relevance to the local market.”
Ng says Chinese brands, quite naturally, are primarily focused on building scale. “There’s nothing wrong with building a business—that’s where your profit margins are—but to go global successfully, they need to be investing in brand building too.”
The risk is that when there is a gap between innovations, while the next big thing is in development, customers will simply go somewhere else if their only connection is with a business, rather than a more meaningful link with a brand.
“Brand, and the love of brand, is the important thing that holds the customers close to the business and keeps people coming back. And only a brand can enable a business to charge premium.”
“At some point, they need to turn to purpose expressed though brand. What do they stand for and how do they make a difference to your life, as opposed to ‘it’s got great battery life’.”
Great and small
The Chinese brands proving most adept internationally are those that use communications to project the image of a global brand, rather than a Chinese brand going abroad. Ng says they strike a globally resonant tone and use globally relevant media channels to deliver an emotion-based rather than product-based message.
He points specifically to Alibaba’s “The Greatness of Small” brand campaign to mark its sponsorship of the Olympics, which draws parallels between individuals’ sporting achievements and the power of small businesses when given the right support.
DJI also stands out for its clever use of Instagram, not just to showcase its own videos and photos, but also to encourage users of its drones to hashtag their own footage –free marketing for the brand as well as creating a community.
Ng says the new generation of Chinese businesspeople is increasingly wise to the long-term value of building a brand alongside building a business.