Ad Age China Branding Conference: A New Marketing Crisis Every Day

Execs Grapple With Talent Shortages, Rate Inflation and the Digital Explosion

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SHANGHAI (AdAge.com) -- There's a crisis in China. And that's a good thing.

That's what Alfonso De Dios, associate director-media, greater China, Procter & Gamble Co., told attendees at the first Ad Age China Branding Conference in Shanghai on Dec. 8. Ad Age China is Advertising Age's weekly online newsletter covering China.
Photo: Kevin Lee

McDonald's global CMO Mary Dillon gives the keynote address at AdAgeChina's conference.

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Mr. De Dios said if he's not solving a daily crisis in China, he must be missing something.

Talent crisis
Bessie Lee, Group M's CEO for China, lives with a permanent talent crisis spurred by China's fast growth. Her agency has hired more than 250 people in the past year, mostly poached from rivals. "And we still need another 150 people in 2007," she told the audience of 270 marketers and other executives.

She already anticipates a media-inflation crisis due to the 2008 Olympic Games in Beijing.

"We predict at least 25% inflation in 2008," she said. The following year, media will have to raise rates to hit growth targets based on 2008 spending.

"Post-Olympics could be a disaster period," she said.

Olympic clutter
Pre-Olympics, marketers are more concerned about fighting through the clutter. There are 40 sponsors at the local and international level, said Greg Paull, managing partner of R3, a marketing consultancy that tracks brand and star performance connected to the 2008 games.

"And 38 are using Liu Xiang," he joked, referring to the Chinese track-and-field star who appears in ads for Olympic sponsors Visa, Coca-Cola, China Mobile and local dairy Yili.

Olympic sponsors always fear ambush marketing, but the Chinese government could make life tough for offenders.

"The government is so connected to the games, and you don't want to piss off the Chinese government," said Scott Kronick, president-China at Ogilvy PR in Beijing.

Top priority
"China now represents a top priority for many Western companies from a business-development perspective," said Irwin Gotlieb, worldwide CEO of Group M, the main conference sponsor. "We are in the midst of fundamental changes in our industry with the rise of digital media."

This is especially true in China, with 120 million internet users and 791 million mobile phones. Up to 20% of the media young consumers use in China is digital.

"The internet has become the third-strongest media in China after TV and newspapers," Ms. Lee said. She estimated that 10% of all ad dollars go to the internet.

Mr. De Dios said P&G has increased its digital spending, including online and mobile-phone marketing.

"Digital is still in the early stages," he said. "It doesn't have the right models and metrics yet. The churn, in new technology and opportunities, overtakes capability and capacity."

Harder and costlier
International brands have a marketing advantage in China -- they are cool compared to local brands -- but the process is getting harder and costlier.

"[International brands] can bring the whole world to China—celebrities, sports, experiences. Chinese brands have natural limitations," said P.T. Black, a partner at research company Jigsaw, Shanghai.

"But foreign brands still need local relevance," said Richard Lee, VP-marketing, Pepsi-Cola International, who has turned Pepsi into one of China's hottest youth brands. His biggest regret: "I wish we had gotten into digital marketing earlier. Branded content now is really key."

Chinese consumers want to be modern and international, but they don't want to become Western, said Tom Doctoroff, JWT's Northeast Asia area director and Greater China CEO. And they will pay a premium for products they like to be seen using in public, such as Starbucks and Nike. Although he said China will never be a coffee culture, Starbucks has tailored its offering for China to include local pastry and office delivery.

Product innovation: corn in a cup
McDonald's has also tailored products and innovative marketing efforts to China. Keynote speaker Mary Dillon, exec VP-global chief marketing officer at McDonald's Corp., said the company's new Corn Cup -- a plastic cup filled with kernels -- is a big hit, and has made McDonald's the biggest corn buyer in China. The company also launched an interactive lifestyle website (askme.com.cn) to educate consumers. The site's web chat with Yao Ming drew 2 million online users and was the biggest ever in China, she said.

The web is also key to using packaging to connect with consumers. McDonald's "global casting call" asked consumers to send in a photo and a story about what they love about life. The 25 winners will be featured on packaging in 2007.

"The best part of all this is that we did not spend any paid media on it," Ms. Dillon said. "We announced it on our packaging and on the internet, supported it with great PR and received 13,000 submissions."
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