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How Agencies (Try to) Deal With Local Marketers in China

Horror Stories Abound, but Domestic Clients Are Improving, Experts Tell Thoughtful China

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China's advertising community is rife with tales about local companies that have stiffed ad agencies.

Agency execs privately grumble that even major manufacturers sometimes shuffle invoices around departments for years until the agency gives up hope of receiving payment and walks away, while others use creative ideas presented during a pitch without paying the agencies for their use. As a result, few agencies dared to take on local clients during the early days of China's economic boom

Today, there are still a few bad apples, but China's desire for a key role on the global political and economic stage is prompting local companies to play by established Western rules when it comes to intellectual property -- especially since some of China's leading players like Lenovo Corp. are now themselves the victims of piracy and copy cats just like Western companies.

Many privately-owned manufacturers now have senior staff with overseas management experience and Western MBAs who value the role of branding alongside sales, distribution and R&D.

Local clients "may not know how to build a brand but they certainly have the desire and the need, we don't need to tell them why they need a brand," said Viveca Chan, chairman-CEO of WE Marketing Group, who appeared on this week's episode of "Thoughtful China," an online marketing affairs talk show produced in Shanghai.

At the same time, Western ad agencies in mainland China are increasingly run by Chinese executives who are savvier about choosing good local clients than their laowai (Chinese for foreigner) predecessors. The drive for growth in a hotly competitive market is sending them into the arms of potential local advertisers.

Local companies "are coming to us. We receive five or six calls every week" to take part in pitches, said Bernard Wong, general manager, Grey Group, Shanghai. He believes the change started around the 2008 Olympic Games in Beijing and was buoyed by the 2010 World Expo in Shanghai, events that local companies used to expand in the West.

In fact, a strong roster of local brands is now considered necessary by leading agencies, both to build their bottom line and to be seen as a viable player in China's advertising industry.

Consider JWT, which had no local clients ten years ago. "Today, Chinese businesses account for 45% of [JWT] revenue in China. Obviously, there is progress," said Tom Doctoroff, the WPP agency's North Asia area director and CEO, Greater China CEO, during an earlier episode of "Thoughtful China."

While agencies and local firms are choosing to work together more often, they still have to overcome vastly different business styles. For instance, Chinese advertisers expect ad agencies to play a role in marketing far beyond normal standards in overseas markets.

When WE Marketing Group works with Chinese companies, "We are always part of their team. We help them with the positioning, we help them with suggestions in products and how to build a total brand experience. We get involved with them in a much bigger way," Ms. Chan said.

Local clients are "very straight forward, very transparent and very results-oriented. The challenge we are facing is how to find a different team to work for them. The way they use the agency is not to find an advertising company, but more like a marketing services partner," said Ellen Hou, head of planning, Greater China at TBWA Worldwide.

Chinese companies are also very top-down in their management style, said Melvyn Goh, Mindshare's president, China. "They are quite patriarchal. When you sell back to the top [leader], and the top guy may not have a clear understanding of marketing ... you can waste a lot of time."

Normandy Madden is senior VP-content development, Asia/Pacific at Thoughtful China, and Ad Age 's former Asia Editor. See earlier episodes of Thoughtful China here.

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