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Global 2015: REGIONS | CHINA

A decade ago, Chinese consumers preferred Western brands. Western brands were well known and trusted at a time when Chinese brands were just emerging in categories such as real estate, apparel and appliances.

Ten years ago consumers primarily sought value for money. They held foreign brands in higher esteem because of perceived quality, safety and status. Even fast food brands represented a special experience.

Since then, however, as Chinese consumers increasingly traveled abroad and gained experience, Western brands lost some of their mystique. Some differentiators eroded when Western fast food and dairy brands experienced safety issues similar to those of the Chinese food brands.

Today, multinational brands don’t automatically connote status or luxury. Chinese consumers seek brands that they feel are most suited to their needs and with which they connect emotionally. Product efficacy counts more than provenance.

The Internet also drove the change in consumer attitudes toward brands. The Internet provided unprecedented access to brand information. And e-commerce enabled consumers to conveniently purchase a broad range of products.

With greater exposure to brands and products, along with rising wealth and a greater sense of personal well-being, Chinese consumers today are willing to experiment with more brands.

Change in Chinese brands

Ten years ago Chinese brands focused primarily on manufacturing and selling products, not marketing. Chinese brands aimed to become big and famous. Branding equated with advertising, and campaigns often relied on celebrities.

Today, marketers of Chinese brands attempt to create advertising around consumer insights and relevance to consumer needs. The change in Chinese brand marketing reflects the greater sophistication of Chinese consumers, and the lessons learned from the marketing practices of multinationals.

In some ways, Chinese brand marketing has surpassed multinational marketing. Chinese brands are closer to local consumers. Multinationals maintain offices in China,

but often rely on a global decision- making process. The Chinese brands are more sensitive to local nuances, which is important in a market as large and diverse as China.

And Chinese companies build brands somewhat differently than multinationals. They tend to start with distribution and get products into the market as quickly and widely as possible, making refinements nimbly on the run. Multinationals are more likely to perfect brands strategies before launch.

In addition, the multinational brands usually establish in the large coastal cities before expanding to the lower-tier cities and villages where the majority of the population lives. Chinese brands typically originate regionally and grow into national presence. Snow Beer, originally a northeastern regional brand, is an example of this process. 

Going global

Chinese brands in certain segments, like appliances, enjoy significant overseas sales, but until now these companies have grown from their manufacturing skill as OEMs. They have not exerted the marketing effort required for global brand building.

That’s the next step, and it’s happening, based on the record IPO of Alibaba and the success of Xiaomi in building a quality and well-designed smartphone at an affordable price. Huawei, the Internet infrastructure provider and mobile phone maker, derives two-thirds of its revenue from overseas business.

Meanwhile, the meaning of “Brand China” seems to be progressing along the familiar arc of developing economies that first produce cheap manufactured goods and mature into marketers of desirable value- added products and services. In a virtuous circle, each global success of a Chinese brand moves “Brand China” along, and the improving perception of “Brand China” helps propel the global growth of more Chinese brands. 

FUTURE VIEW

More openness means opportunity and competition

China is much more open to brand building today than in
the past, and this trend will continue. This development is a double-edged sword, however. The political environment encourages a more open market, but that openness invites more competitors.

Meanwhile, with greater choice, more knowledge about brands and greater self-confidence, Chinese consumers are more selective. Brands need to stand for more than fame and status.

In a competitive Chinese market with sophisticated consumers, brand becomes more important, especially when reaching the millennial generation, which is individualistic. Among anticipated trends and developments:

  • Chinese consumers will be much less driven by status;
  • The provenance of a brand, whether it’s local or foreign, will matter less than its efficacy and ability to emotionally connect with consumers;
  • Certain categories, like technology, will lead growth;
  • Healthiness and well-being, trends that are impacting entire categories in the West, will continue to be important in China.

    Despite all these changes and the greater sophistication of Chinese consumers, interaction with brands is still relatively recent. Consequently, Chinese consumers will try new things (an opportunity); but they’ll be less loyal (a threat).