Starbucks Delves Deeply Into Local Culture to Reach Chinese Consumers

Marketers and Agencies Share Strategies for Branding in Lower Tiers at Ad Age Conference in Shanghai

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As marketers in China focus more on lower-tier cities after building strong presences in Shanghai and Beijing, Starbucks is designing a store in Fuzhou that draws heavily from the local culture of this second-tier city in Fujian province.

Starbuck's Marie Han Silloway: capitalizing on local culture.
Starbuck's Marie Han Silloway: capitalizing on local culture. Credit: Kevin Lee, Getty Images

"We look at what's special about a market and how we can celebrate that culture," said Marie Han Silloway, Starbucks' chief of marketing for China, at Ad Age 's conference Market to Watch: Building Brands Beyond Tier One in China.

Ms. Silloway and other marketers speaking at Ad Age 's Sept. 5 Shanghai event, held in partnership with Thoughtful China, talked about the challenges and opportunities upon entering less developed markets where the vast majority of Chinese live. Fuzhou, for instance, "is a small town with a population of 7 million," she said.

While a Starbucks in Shanghai or Beijing may look like one in New York, the new Starbucks for Fuzhou has the style of a local courtyard home. It has sliding doors, soaring ceilings and a screen inspired by the black and white playing pieces of the chesslike Chinese game weiqi. Outside, a big rock from the nearby stone mountains will be engraved with the Starbucks logo. "Everywhere in the store, you're surrounded by wonderful parts of Fuzhou culture," Ms. Silloway said.

That's a big investment in effort and design for one store, but Starbucks sees it as serving as a flagship in a hub location with major growth potential and as an inspiration for future stores.

"In China, you have to be strategically tactical," Ms. Silloway said.

Most marketers divide China into five tiers -- ranging from Shanghai and Beijing in tier one to rural communities in tier five -- based on criteria like size and local incomes.

Kaiyu Li, Young & Rubicam's head of planning in China, who said he and his Y&R colleagues grew up in lower-tier communities, had a few tips for marketers entering the lower tiers.

Small can trump big. Incomes are lower, and consumers want every cent they spend to count. Experimenting with smaller sizes can appeal to consumers who are economical in their use of products, and minute sizes enable them to try out better-quality brands.

Use the right local cues to signal upscale. Don't assume if you have a premium product that everyone can see it's a premium product. "A lot of shoppers miss the cues," Mr. Li said. For instance, if a product is elegantly displayed with a lot of empty, white space around it, that 's a sign "it's a product nobody wants."

JWT's Tom Doctoroff sheds light on the Chinese habit of saving.
JWT's Tom Doctoroff sheds light on the Chinese habit of saving. Credit: Kevin Lee, Getty Images

Tom Doctoroff, JWT's North Asia CEO and a popular China commentator, explained a typical Chinese outlook: "People don't assume they're safe. That's why Chinese are ruthless savers -- 35% to 40% of annual income -- because they have to save for a rainy day. In the upper tiers, there's more optimism that you can transform your life if you're smart enough. Mass-market consumers are starting to believe in a better tomorrow -- but this is a very precarious hope, based on nothing going wrong."

Mr. Doctoroff laid out a few rules for success in marketing in the lower tiers.

Protection trumps projection. Safety, stability and order are crucial. He cited ads for childrens' products: A spot aimed at consumers in a lower tier promotes a milk brand as protecting a child against sickness. A similar product in tier one is all about enhancement, helping a child be smarter and taller.

Conformity counts. Family comes first, and fitting into society trumps standing out. Mr. Doctoroff quoted a Chinese saying: "The leading goose gets shot down."

Bigger is better. Scale reinforces safety, and a reputable brand is used by many people. That's an advantage for a brand like Lenovo that 's found everywhere, with almost 5,000 retailers in lower-tier cities, Mr. Doctoroff said.

The China Advertising Association's chairman, Dongsheng Li, said in opening remarks at the conference that many companies haven't yet entered second-, third- and fourth-tier cities but realize they need to since consumers' incomes there are steadily increasing. Mr. Li said the Chinese government understands the importance of the media industry, including advertising, and will be developing policies and incentives to encourage growth.

Later in the day, Gilles Beroud, general manager Asia for Yves Rocher, was asked how he knows which lower-tier city to enter next. "I wait for Starbucks to open," he quipped.

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