Can Nationalism Hurt Your Brand?

Fierce Patriotism Can Have Both a Positive and Negative Impact on Multinationals in China, Says Ogilvy Group and Millward Brown

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SHANGHAI (AdAgeChina.com) -- Nationalism has been a recurring and unpredictable theme in China's political, social and business life, particularly during 2008. It can also be a sticky issue for multinationals.

The 2008 Olympic Games in August 2008 in Beijing were a major source of pride for the entire country, benefitting the local and foreign companies that sponsored the games such as Lenovo Group, Coca-Cola Co., Adidas, McDonald's Corp. and even Nike, which sponsored many local teams and athletes.

Many of the sponsors enjoyed a significant upswing in sales and brand awareness through their connection to the Olympics. Unfortunately, other events in China during a tumultuous year have fueled the flames of nationalism with less positive results.

The events in Tibet last spring and the devastating earthquake in Sichuan province in May unleashed enormous nationalistic sentiment that turned shopping into an act of patriotism for many Chinese consumers.

Relations between France and China soured last spring after a Chinese wheelchair-bound torchbearer was attacked during the Olympic torch relay in Paris.

Many Chinese also called for a boycott of French companies such as Carrefour. They were accused of supporting the Dalai Lama and France's pro-Tibetan agitators. Western news outlets like CNN International were also criticized for airing coverage perceived by China as biased of the protests surrounding the torch relay.

About the same time, millions of MSN users in China began inserting a picture of a red heart shape and the English word "China" in front of their online signatures to show their unity and patriotism.

After the earthquake, consumers claimed they were buying products made by companies that had donated the most to victims in Sichuan. Blogs and web sites carefully tracked how much individuals and corporations donated during the crisis.

Shortly after the Olympics, Chinese consumers were furious at local companies such as Sanlu Group, after thousands of children were killed or sickened by tainted milk produced by unscrupulous local suppliers. Sales of foreign milk products have risen sharply as a result.

From a corporate communications or crisis management point of view, "it is important for companies to be prepared," said Kunal Sinha, Ogilvy & Mather's executive director of discovery for Greater China in Shanghai.

Ogilvy Group and market research firm Millward Brown ACSR, both WPP Group companies, examined the effects of nationalism and its impact on brands. The quantitative study was conducted soon after the earthquake, between May 26 and June 6, 2008, using Lightspeed Research's online panel of 900 Chinese citizens between the ages of 16 and 45.

Respondents were based in nine tier one and tier two cities--Shanghai, Beijing, Guangzhou, Wuhan, Xi'an, Nanjing, Hefei, Hangzhou and Shenyang. Ogilvy also mined web blogs and online bulletin boards to gauge the nationalist sentiment.

"In what will surely be seen as a watershed year for China," said Jason Spencer, managing director of Millward Brown ACSR in Shanghai, four key issues emerged.

1. The ease of participation in an online movement shrinks the gap between awareness and action.

For the anti-Carrefour initiative, and awareness of the MSN "I Heart China" and anti-CNN campaigns, the biggest source of awareness was online, which underscores the importance of the internet in spreading opinions and creating mass movements in China.

Almost two-thirds of those who knew about the MSN "I Heart China" campaign, for example, joined in.
Kunal Sinha
Kunal Sinha
2. The quality of the product, the brand and the price emerged as the most important factors in purchase decision.

At the outset, it was clear that respondents favored Chinese brands over brands from other nations, with the preference being higher in lower-tier cities.

Eighty-four percent of the respondents said they would buy more Chinese brands from now on.

But a deeper look into which factors influenced purchase decisions indicated the importance of country of origin fell.

"When consumers spend their hard-earned money on a brand, they are seeking a certain reassurance about its quality and performance," Mr. Sinha said.

3. Awareness of the country of origin of brands differed by product category.

For instance, 25% of the respondents said they believed Lotus Supermarkets was a Chinese brand, and 34% didn't know the country of origin (Tesco Lotus is a joint venture between Thailand's Charoen Pokphand Group and Tesco, the U.K.'s largest supermarket chain).

Twenty-six percent of respondents believed Procter & Gamble Co.'s Olay was a Chinese brand and 32% did not know Beiersdorf's Nivea brand was from Germany. The provenance of luxury brands, apart from Louis Vuitton and Chanel, was also uncertain.

Consumers were most knowledgable about consumer electronics and automobiles.

Most respondents correctly identified Buick as an American brand and Samsung, LG and Hyundai as South Korean. They knew Siemens was German and Renault and Citroen were French car makers. They recognized Sony, Panasonic, Honda and Toyota as Japanese brands and knew Lenovo and Haier products were made by Chinese companies.

Awareness of the country of origin of brands is often complicated by other factors such as mergers, or a brand having being around for a long time in China.

4. Certain countries appear to set the standard for different product categories.

For skincare and luxury products, France sets the standard; Germany for automobiles, and Japan for consumer electronics. For higher-priced products, foreign brands are preferred.

To measure the impact of nationalism on brands, one group of respondents was prompted about activities such as the anti-Carrefour and anti-CNN movements; the other group was not.

Respondents in the first group were asked which brands they were likely to purchase in the near future. The only two brands that saw a notable drop in purchase intention--Carrefour (37% to 30%) and Louis Vuitton (47% to 39%)--were the ones exposed to the greatest online vitriol.

"On the flip side, the brands that saw a rise were the Chinese skincare brands T-Joy (23% to 30%) and Dabao (29% to 37%). Maybe this was indeed the opportunity for Chinese brands to take advantage of," Mr. Sinha said.

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