AdAgeChina: Can Western marketers build brands in China?
Tom Doctoroff: Yes ... but there's a big challenge, the downward pull of commoditization. China is an industrial landscape riddled with overcapacity, the lingering effects of a command economy. That results in downward pricing and margins going down, and people who aren't interested in long-term brand building when their back is up against the wall.
Who has been most successful in China? There's no question about that. It's Procter & Gamble. In their first several years here, their strategy was just about being the Prince of Enlightenment in consistency. They did the basics right, they have defined each category's benefits and then owned the high ground. Now they're leading the market into the new frontier that will move their brands beyond gold-standard niche positions, by extending brands downward.
Who has crashed and burned? Kellogg did not optimize its market entry by committing some very fundamental mistakes, and is no longer in the market. Its pricing was too high. [Kellogg's] products cost 140% of what consumers pay in the U.S., that was mostly a matter of an inefficient distribution system. ... Whenever you introduce a product in China, ... you have to twist it to conform to Chinese tastes. ... Everything about a Chinese breakfast is non-cold cereal, it has to be warm and comforting.
Volkswagen also committed a big mistake. They came in low-end, as a car for taxis, and then tried to move up. That's much more difficult than what General Motors did, which is come in high-end with Buick and then start expanding downward-create cachet, aspiration, value-added quality and apply all that to higher-volume products like Chevrolet.
When will China develop a more creative culture? Things have progressed dramatically in the past couple of years, but it's going to be a challenge to develop a creative culture in the way that exists in Western countries. The first barrier is the overall conservatism of Confucian society, so challenges to society are unsettling.
Also, the appropriateness of breakthrough advertising at this stage is questionable, because of the unformed brand landscape. This is primordial soup, things are being defined for the first time, and that requires very simple messages. You have to lead consumers to the proposition quite directly. If there's one mistake that Westerners make it's not being simple enough. I don't mean dumb or boring, just simple. ...
What do foreigners need to know to operate in China? If you think Chinese are becoming Western, you are sadly mistaken. They want to become modern and international, but they do not want to become Western. The one thing that has unified them over thousands of years is a belief in the superiority of that Chinese world view.