Three Golden Rules of Brand-Building in China

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The Starbucks at Dongguan Mission Hills Golf Club in China.
The Starbucks at Dongguan Mission Hills Golf Club in China. Credit: Starbucks

Two conflicting factors motivate Chinese consumers: They want to project their status, but they also want to protect their economic and social interests.

This conflict is clear in the rhythms of daily life in China. Passion for luxury brands, over-the-top names of apartment buildings ("The Gathering of All Heroes under Heaven," for example) and omnipresent VIP cards are expressions of the former; sky-high savings, an acute fear of germs and a fixation with feng shui -- the harmonization of design with the environment to minimize risk -- are expressions of the latter.

The duality can be perplexing for companies trying to earn Chinese consumers' loyalty. So how do brands win? By resolving the projection-protection tension through three golden rules.

1. Maximize public consumption. In China, consumers will pay a premium for goods consumed -- and admired -- in public. Several multinational brands have embraced this insight.

  • Starbucks, which operates over 2,600 outlets in China, has performed a marketing miracle by selling coffee in a land of tea drinkers. The company's Chinese real estate strategy focuses on Grade A office buildings, while its stores are smartly positioned as gathering sites for professionals. A cup of coffee emblazoned with a Starbucks logo is 30% more expensive than in the U.S. But unbranded sandwiches are half the price.
  • Häagen-Dazs does not operate ice cream parlors in Japan, but there are more than 600 in China, where a cone costs $6. Chinese millennials want to be out in public, seen eating the treats with friends.

2. Externalize the pay-off. This is a country where "early MBA" courses for 5-year-olds are popular. Brands must deliver externalized benefits that show they are a means to an end. Luxury brands, non-essential in the West, are tools of advancement in China. Johnny Walker's Blue Label holds exclusive "whiskey appreciation summits" to help people expand their professional networks.

Several brands that offer Chinese consumers external "pay offs" achieved high scores in Prophet's latest Brand Relevance Index, including sports apparel companies like Adidas that enable players to "reach higher" in life and auto makers that promise middle-class arrival, such as Ford and Volkswagen.

3. Provide reassurance. China is a society with limited institutional protection. There are no impartial courts. Bank loans are secured through an opaque web of personal relationships. Food safety is not taken for granted. And "face," the currency of advancement, is won or lost in political power struggles.

Brands can provide reassurance by offering value-added products and services that are reliable, available widely and affordable. However, reassurance is a low bar. The best brands make reassurance sparkle by resonating emotionally with Chinese people.

  • Digital payment system Alipay pulls at the heartstrings with claims of "being by your side through the vicissitudes of your life … and your child's."
  • Alibaba Group's Singles' Day e-commerce shopping event projects ego-affirming scale. Originally a promotional event for the lovelorn, the event has morphed into a patriotism-fueled demonstration of national spending power. In 2016, $18 billion in sales was generated in 24 hours. Singles' Day is also an online televised party. Mega-celebrities such as David Beckham, Scarlett Johansson, Katy Perry and Kobe Bryant drop by to sprinkle star dust across shopping transactions.
  • Haier, China's largest appliance manufacturer, advertises sales heft around the world to buttress stature at home.

Reassurance, no matter how artfully reinforced, still does not justify a premium price or sustained market share. Smartphone maker Xiaomi, once extolled as "the Apple of China," is a cautionary tale of diffused energy. Xiaomi's online community of brand fans was no bulwark against mindless diversification, bargain-basement pricing and founder Lei Jun's narcissism.

The white space for brands in China is vast. By tapping into each of the golden rules, brands can take advantage of this opportunity to become more relevant in one of the world's most competitive consumer markets.

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