China's Advertising World

A New Crisis Every Day

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SHANGHAI--"There's a crisis in China--and that's a good thing," Alfonso De Dios, associate director-media, greater China, Procter & Gamble Co., told attendees at the first AdAgeChina conference in Shanghai on Dec. 8. The complex market moves so quickly, explained Mr. Dios, if he's not solving a daily crisis, he must be missing something.

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."

Finding relevant ways to connect brands with the 2008 Olympic Games in Beijing is another challenge for multinationals operating in the mainland.

Sponsors such as sportswear marketer Adidas have a natural tie-in with the games, said Li Sheng, Visa's Shanghai-based VP & head of marketing for China. "But we have a unique challenge, marrying a payment system to the Games is going to be hard. The breakthrough will be matching the brand to the spirit of the Games and Olympic ideals."

Less than two years away from the games, marketers are already 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...If he were a race car driver, he'd fall over from all the logos on his chest," 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. He also represents Nike, which isn't an official sponsor, but the U.S. sportswear company is supporting several Olympic athletes and teams in China.

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.

But, countered Erica Kerner, Shanghai-based director of Adidas' Olympic program, "China is a big country and it can't be everywhere. Also, a lot of Chinese ambush marketers don't know they are breaking the rules. They think they're doing a good thing by supporting the Games."

Rise of the Internet

"China now represents a top priority for many western countries from a business development perspective," said Irwin Gotlieb, New York-based worldwide CEO of GroupM, the main sponsor of the AdAgeChina conference, but "we are in the midst of fundamental changes in our industry with the rise of digital media." (The event's silver sponsor was SEEC Media Group, which publishes a local edition of Sports Illustrated in China and other magazines like Caijing.)

This is especially true in China, with 120 million internet users and 791 million mobile phones. Up to 20% of the media consumed by young Chinese is digital. As a result, the internet has become the third-strongest medium in China after TV and newspapers, according to Ms. Lee. She estimated that 10% of all ad dollars go to the internet.

Given the "sheer scale and size of the country, technology is a key partner for entering China," said Mark Fischer, managing director, China for NBA Properties.

Online media also cost effective, since rates for airtime on TV channels in top cities like Shanghai are now "much more expensive" than in developed markets, because "competition is more intense and consumers are craving a unique value proposition, so it's harder to reach them [through mass media] with a niche product while building scale and viability," said Shanghai-based Richard Lee, who has turned Pepsi into one of China's hottest youth brands through innovative online promotions. Currently VP-marketing for Greater China at Pepsi-Cola International, Mr. Lee will relocate to New York next month for an international position at the U.S. food and beverage company. His title has not been announced, but he will take on a global marketing role.

His biggest regret in China: "I wish we had gotten into digital marketing earlier. Branded content now is really key."

Even mass-market consumer goods companies such as P&G are slowly increasing their digital spending, including online and mobile-phone marketing, although the bulk of P&G's media spending still goes into TV advertising.

Mr. De Dios declined to say what percentage of P&G's media budget is going online, but commented, "Digital is still in the early stages. It doesn't have the right models and metrics yet. The churn, in new technology and opportunities, overtakes capability and capacity."

Foreign brands are still hip

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

"Foreign brands still need local relevance," Mr. Lee added quickly. Chinese companies are learning quickly about how to develop brands. They often understand local consumers better than foreign marketers, they can produce products that are less expensive and they usually have better distribution.

Consumers are also becoming more sophisticated, observed P.T. Black, a partner at research company Jigsaw in Shanghai. Chinese kids "are no longer a blank slate [but 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.

Chinese consumers want to be modern and international, but they don't want to become western, said Tom Doctoroff, JWT's CEO, China and area director, Northeast Asia. 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.

McDonald's goes online

McDonald's has also tailored products and innovative marketing efforts to China, such as a peppermint-flavored soda called Blue Haven, a Sprite-based beverage called McFizz sold in orange and berry flavors and a spicy Fish Filet sandwich.

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 two million online users and was the first 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."

Changes in China's media industry have also created new opportunities for marketers. While rates on China Central Television (CCTV) continue to grow about 10% annually, provincial and local broadcasters are working together to develop programming that appeals to Chinese consumers, and the farther they are from Beijing, the communist country's capital, the more innovative they can be when working with marketers.

But the Olympics are already raising ad rates in China's TV market, said Ms. Lee, and she anticipates a media-inflation crisis is on the way. "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-Olympic
s could be a disaster period."

Fortunately, marketers in China like Mr. De Dios are now accustomed to disasters.

Contributing: Normandy Madden


Ten keys to success in China

1. Don't take your global CEO to dinner on the Bund in Shanghai; the pricey locale gives an inflated idea of what Chinese consumers can afford.

2. Don't get your name wrong; make the translation appropriate for your brand.

3. Don't ignore the mass market.

4. Don't support too many brands.

5. Don't enter China with a low-end brand in a bottom-up approach.

6. Don't hurry to go national.

7. Don't give control, especially over marketing, to your joint-venture partner.

8. Don't impose global values on your Chinese marketing strategy.

9. Don't become too Chinese.

10. Don't ignore local insights.

--adapted from a presentation by Tom Doctoroff, JWT's CEO, China and area director, North Asia
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