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11 Jan 2011
China's expanding consumer market clearly has an appetite for Western brands. For U.S. companies that want to bring their brands into the Chinese market, here are a few points to keep in mind:
1. A brand is a very different thing between our two countries. For the Chinese, cachet or prestige drives demand. For the U.S. a brand is many things but generally involves years of exposure and dollars spent positioning the brand to its respective markets (assuming high quality and value are the cost of admission).
In the past decade China has been bombarded by new brands. These have neither the endorsement of the previous generation (parents) nor have they positioned themselves in terms of long term quality or value. There has been little demand for Chinese consumer brands for basic day to day essentials and it will take intensely focused campaigns to convince consumers they need to pay a premium for something that previously had no national brand requirement.
However, thanks to the gateway of information available through the internet, television and other media there is almost built-in demand for established brands from the West.
"Multinationals like Yum Brands and Omega fuel their global profits with sales in China because they have managed to engender trust and brand loyalty with Chinese consumers," says Shaun Rein of Bloomberg Business News, a foremost authority on branding in China. "Yum's KFC has opened over 2,200 stores in China, and Omega controls 70% of the luxury men's watch market."
2. Target the new generation. With an estimated 4.4 million affluent households by 2015, brand managers will be wise to focus on this new and more sophisticated market -- one that is e-commerce experienced and savvy. With this will also come increased opportunities to build brand equity with parents of toddlers. Although there has been some loosening of China's one child policy, Little Emperors are spoiled rotten by their doting parents and present unprecedented opportunities with the new consumer class in China for apparel and consumer goods.
3. Safety and quality are key factors in determining purchasing decisions. U.S. companies wanting to tap into the China market should consider brands like Loreal, Buick, and Coke to see what has been successful and what has failed. You can't simply put a known label on a piece of junk and believe you'll capture the loyalty of the Chinese market. The Chinese want prestige, but they focus on safety and quality too.
In February 2010, Tsinghua University and Ruder Finn Asia released insightful data on consumer safety research in the China marketplace by looking at Chinese consumers' expectations and perceptions of CSR performance and its influence on consumer behavior. They concluded that product quality is the primary concern of Chinese consumers, followed by environmental protection, management integrity, and philanthropy.
4. Do your research on distribution channels. We may understand traditional retail here but it is a completely different game in China. According to the China Chain Store and Franchise Association, the number of stores of the 100 largest retailers in China increased 18.9% in 2009. The 100 largest retail chains sold only 11% of all consumer goods in China. Do U.S. marketing firms have experience selling through kiosks and into local neighborhoods? How do you set up a sales force to tap into a billion person market?
About the Author: David Alexander is President, North America at Baysource Global and a member of Dragon Business Network - View profile
About Baysource Global: Baysource Global assists companies with their offshore manufacturing projects in the areas of factory identification and selection, quality control, tooling, first article of inspection and sample coordination and shipping and logistics. In essence we act as an extension of our clients' operations capabilities becoming their China Supply Chain managers. Our clients eliminate the inherent risks associated with sourcing overseas.
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11 Jan 2011
Bringing a U.S. Brand to China? Consider these Points
by David Alexander, President, Baysource Global|
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1. A brand is a very different thing between our two countries. For the Chinese, cachet or prestige drives demand. For the U.S. a brand is many things but generally involves years of exposure and dollars spent positioning the brand to its respective markets (assuming high quality and value are the cost of admission).
In the past decade China has been bombarded by new brands. These have neither the endorsement of the previous generation (parents) nor have they positioned themselves in terms of long term quality or value. There has been little demand for Chinese consumer brands for basic day to day essentials and it will take intensely focused campaigns to convince consumers they need to pay a premium for something that previously had no national brand requirement.
However, thanks to the gateway of information available through the internet, television and other media there is almost built-in demand for established brands from the West.
"Multinationals like Yum Brands and Omega fuel their global profits with sales in China because they have managed to engender trust and brand loyalty with Chinese consumers," says Shaun Rein of Bloomberg Business News, a foremost authority on branding in China. "Yum's KFC has opened over 2,200 stores in China, and Omega controls 70% of the luxury men's watch market."
2. Target the new generation. With an estimated 4.4 million affluent households by 2015, brand managers will be wise to focus on this new and more sophisticated market -- one that is e-commerce experienced and savvy. With this will also come increased opportunities to build brand equity with parents of toddlers. Although there has been some loosening of China's one child policy, Little Emperors are spoiled rotten by their doting parents and present unprecedented opportunities with the new consumer class in China for apparel and consumer goods.
3. Safety and quality are key factors in determining purchasing decisions. U.S. companies wanting to tap into the China market should consider brands like Loreal, Buick, and Coke to see what has been successful and what has failed. You can't simply put a known label on a piece of junk and believe you'll capture the loyalty of the Chinese market. The Chinese want prestige, but they focus on safety and quality too.
In February 2010, Tsinghua University and Ruder Finn Asia released insightful data on consumer safety research in the China marketplace by looking at Chinese consumers' expectations and perceptions of CSR performance and its influence on consumer behavior. They concluded that product quality is the primary concern of Chinese consumers, followed by environmental protection, management integrity, and philanthropy.
4. Do your research on distribution channels. We may understand traditional retail here but it is a completely different game in China. According to the China Chain Store and Franchise Association, the number of stores of the 100 largest retailers in China increased 18.9% in 2009. The 100 largest retail chains sold only 11% of all consumer goods in China. Do U.S. marketing firms have experience selling through kiosks and into local neighborhoods? How do you set up a sales force to tap into a billion person market?
About the Author: David Alexander is President, North America at Baysource Global and a member of Dragon Business Network - View profile
About Baysource Global: Baysource Global assists companies with their offshore manufacturing projects in the areas of factory identification and selection, quality control, tooling, first article of inspection and sample coordination and shipping and logistics. In essence we act as an extension of our clients' operations capabilities becoming their China Supply Chain managers. Our clients eliminate the inherent risks associated with sourcing overseas.
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