How Chinese Brands Can Sharpen Their Skills Locally/Globally

Best China Brands 2014: How Chinese Brands Can Sharpen Their Skills Locally and Globally

Six years ago, Interbrand published a paper entitled “Made in China: The Challenge for Chinese Brands Going Global.” The paper showed findings from a survey Interbrand had conducted globally with over 700 business people. One of the key survey questions was: Do you believe the “Made in China” label helps or hurts Chinese brands today? 66 percent of the respondents thought it hurt, 4 percent thought it helped and 30 percent were neutral.

Last month, Interbrand undertook a similar survey. This time, we asked the following question: What is your impression when you hear the words “Made in China”? The findings were almost identical. 69 percent had a negative connotation, 1 perecent had a positive connotation and 30 percent were neutral.

Why has so little changed in the past six years? And why have Chinese brands (with only a few exceptions) had relatively little impact on Western consumers?

This past October, Huawei became the very first Chinese brand to appear on Interbrand’s Best Global Brands league table. The timing, therefore, seems right to closely examine the challenges and opportunities currently facing Chinese brands—both in their home market and as they plan a move overseas. Specifically, how can ambitious Chinese brand owners sharpen their skills?

In Interbrand’s latest survey, we probed deeper into the reasons why there are so many negative perceptions when China is listed as a source country. Quality issues emerged as the primary reason (36 percent), followed closely by associations with cheapness (25 percent). Imitation products and poor working conditions also contributed to the negative perceptions (12 percent each).

A whole set of issues facing Chinese brand owners lie behind these statistics. The issues—from marketing a Chinese brand domestically to taking a Chinese brand overseas— are part structural, part cultural.

One of the newest and most dramatic structures on The Bund in the centre of Shanghai is called “the bottle opener.” The enormous building earned this nickname because of its unique open space just below the top. It is, quite simply, beautiful. At night, seen from the side, there is a continuous strip of blue light that runs from street level to the clouds. It is very dramatic except for the fact that, from about the midpoint of the building on, the ascending lights get dimmer. It slightly spoils the overall effect. My guess would be that, to save money, someone changed the specification of the lights halfway through construction. They opted for price over beauty—and quality suffered. I have seen a similar mindset applied to numerous Chinese brands.

There is a reluctance to spend a little more to get that last marginal bit of better. Many brand owners would rather pocket the margin than build quality into their brand. They think people won’t notice, but of course they do. Great brands know that every little detail counts and that you ‘shave’ brands of their quality at your peril.  Chinese brand owners it seems have yet to truly embrace that attitude.

A further dimension to this problem is that local brand owners can be led to believe that branding simply equals good product quality. In some local ‘Best Brand’-type award schemes, for example, the main judging criterion can be just the combination of good quality plus high awareness. Whilst quality is, of course, a critical part of brand building, local brand owners need to think more holistically if they are to build deeper and more meaningful customer relationships.

The corollary of this is that there is also a lack of belief in the value of insights or creativity. I have seen numerous examples of ideas being judged by volume rather than by quality. I have seen where there was no real sense that imagination can have a commercial value that is worth paying for. Smart brand owners, however, know that great creative ideas do not come cheap—and this is because they can, oftentimes, make the difference between success and failure in the marketplace.

At Interbrand, we see brands as one of the last remaining sources of “unfair” competitive advantage. That is because great ideas can give parity brands an unassailable lead when it comes to perception.  Many Chinese brand owners are yet to be persuaded of that truth.

The final structural/cultural issue concerns decision-making. I have been surprised by the number of times I have heard the phrase “the big boss” in discussions about executional proposals, or getting approval for a project. Whilst we would applaud senior management taking a keen interest in strategic decisions about their brand, that does not mean that the Chairman or CEO needs to get involved in every tactical marketing decision, especially if this delays the process or demotivates the greater team.

In these cases, it sometimes feels like the principles of specialisation, expertise and devolved decision-making do not apply—and the real decisions (good or bad) are made by the top executive, whatever his/her skillset might be. Whilst what I have described may be more true in state-owned enterprises than in private companies, Chinese brand owners generally need to trust the brand and marketing professionals within their own organisations and devolve decisions (and budgets) to those experts.

Why does all this matter? If Chinese brand owners want to compete effectively against U.S. or European brands in the Chinese market, they will have to address these issues as a matter of urgency. If not, increasingly discerning Chinese consumers will see such brands as less-than-acceptable substitutes to the foreign incomers.

And those Chinese brand owners who aspire to market their brands in the West will also need to address these issues now, or they will not experience success in the new markets they wish to enter.

American and European consumers do care about quality at the margin. It is precisely that “edge” that allows brands in those regions to command and sustain a premium. To not offer that quality is the quickest way to be consigned to the group of brands that are soon forgotten.

American and European brand owners—often, if not always—set great store by welcoming strong creative ideas, true insights and imaginative innovations. Furthermore, they are prepared to pay for these. To believe that you can get such things “on the cheap” would be a grave mistake.  Ambitious Chinese brand owners are gambling with their brands’ futures if they think they can enter First World markets with anything less than first class ideas.

Anyone who has been to the U.S. and has seen the future of shopping, brand experiences and “digital everything” knows that speed of response, real-time knowledge and having your finger on the people’s pulse are all vital—vital to the kind of “rapid reaction marketing” that today’s brands need to deploy. Long or inefficient lines of communication back to China are not going to be fit for purpose in that world. Devolved decision-making and delegating with confidence will be the name of the game. The ‘big boss’ in China will need to focus on global strategy, not local tactics.

But there are, of course, exceptions to all of the above. The top three Internet players (Baidu, Alibaba and Tencent) have beaten off all of their global counterparts (Google, eBay, Amazon, Yahoo, Facebook, etc.) in the domestic market. Coca-Cola has never cracked the Chinese soft drinks market; Wahaha and Master Kong still lead in market share. Walmart and Carrefour only rank 4th and 7th in the Chinese retail industry, and so on. Many Chinese companies are leveraging their understanding of local customs and customers and using insights around evolving choice behavior to great advantage. These deepening brand management skills are keeping the incumbents ahead of the incomers.

There are also two areas that have really struck me as being true brand opportunities in China: Digital and experiences.

The first—digital—is a real curiosity. Chinese consumers are well equipped and the infrastructure is superb. Yet, as I look around, I do not see examples of the kind of all-encompassing uptake of digital into the core of people’s everyday shopping behaviour that I see in New York, for example. And when I have pressed the case with clients here on issues like inbound or outbound marketing, or even old-fashioned CRM, I have had push back—two of the most typical responses being “It’s not for us yet” or “Customers aren’t that interested.”

Almost all the clients (and certainly all the agencies) we meet in China agree that digital is crucially important. They talk enthusiastically about social media, the cloud, big data and so on. But if you ask what they have actually done in the digital area, many will tell you “Our business is still too small,” or “It’s too early to talk about a comprehensive digital strategy in our company right now.” The big exceptions are, once again, the Internet companies. They are breaking into more and more traditional sectors. Where they lead, others will surely follow—and, hopefully, quickly.

As I compare markets, the conclusion I have come to is this: There is a journey from capability to intent to implementation. The U.S. (especially cities on its East and West coasts) has travelled the whole distance; Tier One Chinese cities have the capability and the intent, but not the delivery.

There is a real opportunity here for smart, digitally-savvy brand owners to learn from peers in the West and gain significant competitive advantage by being ahead of their competitors. Whether through gaming, social media strategy, AR at point-of-sale, enhanced online user experience or just better interactive websites or apps, those brands that embrace the full potential of digital technology in their brand marketing with a sense of urgency are going to steal a lead.

In a similar vein, the area of brand experience still feels like “new news” to many Chinese brand owners. I see too few examples of genuine out-of-the-box thinking when it comes to bringing brands to life across multiple touchpoints, multiple senses and multiple experiential dimensions.

At Interbrand, we often talk about how, whenever we think about strategy, we should also think about experience. And whenever we think about creativity, we should start with motion. It is that kind of mindset that will give great brands great experiences—not just great campaigns. Not enough Chinese companies, in my view, see this as a vital step.

In Chinese companies, there is no lack of new ideas, but there is perhaps a shortage of really innovative and creative thinking that can help to develop compelling brand experiences and, ultimately, create value. Chinese companies are great at learning from global brands about product design, specs, or ingredients. They are also good at then cutting production costs whilst maintaining acceptable quality, and getting the product to market quickly. But, if Chinese companies really want to maximise the value of their brand, that kind of commercial product creativity needs supplementing with creative thinking about experiences.

China is still a highly diversified market. Many business owners still operate in largely sales-driven environments whilst others, including most of the joint-venture businesses, have brought professional brand management into their companies. Earlier this year, President Xi Jinping encouraged state-owned enterprises to build their brands more professionally. As a result, more and more local companies will begin to recognize the importance of being consumer-focused and brand-driven.

Whilst challenges remain, this country is so vigorous, so energetic and so practical that I feel certain its brand owners will rise to the occasion and we will see more great brands engaging with their customers in new and powerful ways.