1. Sponsors kick off massive Olympic ad campaigns
The opening ceremony to launch the Olympic Games in Beijing won’t take place until Aug. 8, 2008, but for sponsors such as Adidas, Coca-Cola, Lenovo, Volkswagen, UPS and McDonald’s Corp., next year’s games are already underway. Sponsors have created ambitious marketing programs ahead of next summer's games that dwarf their past Olympic activities. They range in scope from massive marketing campaigns, including the Adidas effort pictured, to road shows visiting thousands of Chinese cities.
Marketers believe the 2008 Olympics provide a once-in-a-lifetime opportunity to connect their brands with Chinese consumers, who are fiercely nationalistic about Chinese teams and athletes, as well as the very notion that their country will host the Olympic Games. With the eyes of the world on China, marketers have turned their gaze to Chinese consumers.
But executing Olympic campaigns is a tough job, particularly since the Beijing Olympic's organizing committee has sold sponsorship status to dozens of companies at the local, regional and national level. Chinese consumers are confused about which companies really are Olympic sponsors, media rates have skyrocketed, and clutter is an enormous issue for sponsors and non-sponsors alike.
2. Manufacturing problems damage “Made in China” label
China’s global image was badly bruised this year, when problems with product safety and quality led to the recall of products ranging from pet food to toothpaste. Toy maker Mattel Inc., for example, had to recall millions of toys like Batman action figures and Big Bird dolls. The controversy has impacted the Christmas shopping season, as parents avoid products made in China--which turns out to be just about everything.
Until this year, most Chinese products had earned a reputation among U.S. consumers as being cheap-but-good, much the way Americans once regarded products made in Japan. Now, many cautious consumers wonder if Chinese goods are even safe, much less well-made. Besides tarnishing China's international image, the safety scandals have created big problems for Chinese advertisers hoping to become global brands.
3. Youth marketers let consumers drive campaigns
To forge connections with young, urban white-collar Chinese, advertisers like PepsiCo and Nokia increasingly are turning over control of their marketing programs to consumers. Two of the most innovative campaigns of the year, the Pepsi Creative Challege and Nokia’s Ncool site, were built around user-generated content.
Like last year's competition, in which consumers helped Pepsi develop a TV commercial starring Asian superstar Jay Chou, this year's contest challenged Pepsi consumers online in one of the world's biggest internet markets. The U.S. food and beverage company invited consumers to submit personal photos to a Pepsi web site, Pepsi.163.com, where they could also vote on other people's pictures. Eighty-four photos were selected to run on four regional cans, while 21 appeared on cans that were distributed nationally.
Late last month, Nokia launched Ncool, an online meeting point marketed with an edgy online and viral campaign about the world's supposed first rapper--a farmer from Inner Mongolia called "MC Farmer”--that was seeded on YouTube-like Chinese video sites like Tudou.com and Youku.com.
Designed to promote the N-series of smart phones, Ncool is an interactive web destination where users congregate to exchange opinions, photos and links. Visitors can submit their profiles to be shared with other users, and comment on submissions as they come in.
4. Yi Jianlian joins NBA
Chinese basketball fans and sports marketers watched gleefully as one of China’s most talented players, Guangdong native Yi Jianlian, took part in the NBA 2007 draft and, after prolonged negotiations, signed a multi-year contract with the Milwaukee Bucks in late August. Mr. Yi is following in the path of Yao Ming, China’s greatest basketball player, who plays for the Houston Rockets.
While Mr. Li is a newcomer on the global basketball stage, he's well known to marketers in China such as Coca-Cola and Nike, who have already inked sponsorship deals with the highly touted rookie. Sports marketing experts in China say his talent, on-court charisma, off-court geniality and good looks could easily make him an even bigger celebrity, and corporate endorser, than Yao Ming.
Although superstar Yao Ming has contracts with companies like Reebok, McDonald's, Visa, and Pepsi, he has never seemed at ease promoting commercial products like hamburgers. Yi Jianlian, however, is likely to score as many points with marketers as he does on the court.
5. Advertisers push for branded content deals
With media rates on China’s national broadcaster, China Central Television, rising fast ahead of the 2008 Olympic Games, Chinese advertisers are turning to branded content opportunities.
For example, Groupe Danone spiced up the personality of the royal character fronting its Prince cookies range by partnering with a Shanghai children's show, Dr. Arty Farty, that teaches kids how to draw. The French food company sponsored 13 episodes of the weekly educational program, produced by a joint venture between Viacom's Nickelodeon and Shanghai Media Group.
Coca-Cola Co. created 13 ten-minute animated films for its Qoo brand, featuring the Qoo character as well as animated versions of Coke's stable of celebrity endorsers. In one episode, for example, Qoo is lost in the woods and learns how to jump over tree trunks from the track-and-field star Liu Xiang. Then Qoo shows the athlete how to perform his trademark dance and make friends with the village natives.
And Ford Motor Co. took 18 Chinese on a road trip last July called China Excitement Challenge, in an effort to give its brands a more dynamic image. They traveled through the mainland for 21 days--the length of time psychologists say it takes to form new habits--to inspire the particpants to visualize and demonstrate the value of excitement. Their experiences were filmed reality TV-style and published online at excitechina.com.cn. According to JWT, Shanghai, which created the campaign, the site attracted 32 million visitors.
6. China puts an end to talent shows
Despite the huge popularity of American Idol-style talent contests in China, they essentially ground to a halt this year on Oct. 1, at the insistence of local media regulators.
In a particularly crippling blow, shows are now banned from allowing viewers to vote for contestants, whether by sending text messages from mobile phones, calling telephone hotlines or voting online via web sites. They cannot air during prime time (7:30-10:30pm), last more than 90 minutes, and broadcasters aren't allowed to offer prizes to attract contestants.
The new rules make it more difficult for provincial satellite channels, which have near-national reach through cable distribution, to gain approval for new programs or recruit contestants who aren't local, which hints at the real reason China is pulling the plug on a format that has become extremely popular in the mainland. The trend started with the second season of Supergirl, a singing contest created by Hunan Satellite TV and sponsored by Mengniu dairy.
Supergirl became a national sensation in 2005, breaking ratings records in China and inspiring dozens of copycat shows. CCTV has tried its hand at the concept with limited success and the government is eager to protect the national broadcaster from nimble provincial competitors. Also, talent contest reality shows introduced a concept that makes China's government nervous: voting. That's a dangerous precedent for a population that has never been allowed to vote for its leaders.
7. Alipay lets Chinese shop online globally
Alibaba Corp., China's largest e-commerce company, launched an online payment service called Alipay that makes it possible, even easy, for tens of millions of middle class Chinese to shop online anywhere in the world for the first time.
Alipay, developed three years ago for the company’s business-to-business flagship site Alibaba.com, is similar to global online payment services such as eBay's Paypal, but until now has only handled transactions in RMB, the currency of the People's Republic of China. Since few Chinese possess credit cards, they lack a secure payment method to shop online, in China or overseas.
Through a partnership with Bank of China and Industrial & Commercial Bank of China, Alipay facilitates transactions in 12 foreign currencies, including U.S. dollars, Japanese yen and euros. That development could revolutionize the way retailing is done in China, by transforming the mainland into a vast new market for global businesses lacking the scale and manpower to set up retail operations in China.
Alipay also makes it easier for medium-sized retailers in the mainland's most developed markets, Beijing, Shanghai and Guangzhou, to expand into China's second- and third-tier cities, where it becomes significantly more challenging to set up a presence among the mom-and-pop retail sites that dominate those towns.
8. Multinational marketers move beyond tier two
Most multinationals have taken the same path in China--they start with Beijing, Shanghai and Guangzhou and then come up with marketing, sales and distribution strategies for tier two, as China’s provincial capitals are called. For major companies like Lenovo, Unilever, Procter & Gamble, McDonald’s and Coca-Cola, that’s no longer sufficient--they want and need to expand into third and fourth tier cities to maintain growth.
Tier three encompasses about 150 county capitals, most home to over one million people. Tier four covers thousands of towns ranging in size from 100,000 to one million people, and tier five includes China's smallest towns and villages, the refuge of farmers and very few brands. Annual salaries from tier two to tier four cities are between $2,000 and $4,000, and disposable income is growing by 10% or more.
So these cities are not small, but they are an enormous challenge. Incomes are lower, management talent is reluctant to live in or even visit those markets, and finding the right strategies is difficult. While consumers in places like Shanghai, especially younger ones, often know as much about global brands as the average American, their rural counterparts probably have never heard of brands like Lipton, Minute Maid or Kraft until recently, if at all.
They also read fewer newspapers and magazines, shop in small mom-and-pop stores, may not own refrigerators or microwaves, and their purchasing decisions are more influenced by friends and family. That means advertising, products, packaging and distribution strategies often have to be rewired as marketers move from China's prosperous eastern seaboard to its interior.
9. Demand for luxury goods is rising fast
Forget the old image of China as a land of drab workers pedaling bicycles. Today, urban Chinese are fashion-conscious, brand-savvy and ready to shop. China accounts for 12% of global sales for luxury goods, such as watches, fashion apparel, perfumes, cosmetics, jewellery, automobiles and premium spirits, and that figure is likely to double within a decade.
The lure of China is so great, LVMH became the first luxury fashion brand to hold a runway show on the Great Wall last October. The global luxury goods giant transformed a portion of the wall at Juyongguan Pass, 50 kilometers northwest of Beijing, into an 85-meter catwalk to launch Fendi's spring and summer 2008 collection with 88 models--half of them from China and 44 from the rest of the world.
Sales of luxury goods in China are over $2 billion a year, according to Ernst & Young. By 2015, the firm expects that figure to top $11 billion. Such growth would make China the world's largest market for brands like Louis Vuitton, Versace, Chanel, Giorgio Armani, Lancôme, Swarovski, Cartier and Tiffany & Co.
To succeed in China, luxury marketers should charge high prices, because price is not a barrier for affluent Chinese and it sends the message that their product is the best. The brand must be international and not too localized, which will diminish its stature. And even middle-class Chinese will save money to pay for high priced items.
10. China slowly starts to go green
China's environment is getting worse, with 16 of the world's 20 most polluted cities, according to Worldwatch Institute in Washington D.C. Local citizens are catching on to the notion of going green. Asked about their "feelings regarding the effects of climate change," 68.5% were either "very concerned" or "somewhat concerned,” according to a Synovate research study conducted this year. That figure is about equal to the global average, and higher than the U.S., where only 57% showed the same level of concern.
As consumers, the Chinese are slow to support the environment. Most aren't prepared to pay a premium for products marketed as environmentally friendly. But that too is changing, particularly for organic foods.
While few Chinese currently think green when they go shopping, their concern for the environment is an untapped opportunity for advertisers. Only a handful of multinationals such as General Electric, China Mobile, Procter & Gamble, McDonald's and Toyota, maker of the Prius hybrid car, have launched green-based marketing campaigns.
Given the pace of change in China, however, a call for more green products could spring up quickly, producing a slew of sponsored recycling programs, conservation plans and roadside cleanup projects. Earlier this month, for example, the state-owned Chang'an Automobile Group started making its own hybrid cars, the first such move by a Chinese automaker.