Alf's Articles

An Inside View Of China And Its 1.3 Billion Marketing Opportunities

by Alf Nucifora

With China matters dominating the business press, I jumped at a recent opportunity to talk with branding expert Martin Roll, author of "Asian Brand Strategy: How Asia Builds Strong Brands". Having worked on the ground in Asia and most regions of the world, and with a consulting practice that he maintains out of Singapore and Denmark, Roll delivered insights into the development process in Asia for both local and Western brands, and provided an interesting glimpse into the growing appreciation of brands in a corner of the world that will drive global brand consumption at a pace that is currently unimaginable.

NUCIFORA: Do you see any diminishment in terms of the cache and authority of Western brands marketed in Asia?

ROLL: They still have the clout and the leading edge. There is no doubt today that in most of the Asian regions and markets, Western brands are very much the ones that most people are coveting, for the simple reason that they have much more aspirational value. The Western brands are still very good at creating that aura, particularly in action wear, apparel, cosmetics, cars, soft drinks, even technology brands like the iPod.

NUCIFORA: In your book you talk about the fact that Asian brands have not developed to the degree that Western brands have. Why is that?

ROLL: Until this point in time, they haven't been forced to do it. They have been the back end of the world's factories, producing a lot of volume at very low margins. They have seen themselves as having a low-cost commodity advantage, but they don't have that advantage anymore. The globalization of the world means that the world is much smaller. Singapore had it for awhile. Taiwan and Korea used to have it. Today, Korea is a fairly expensive country to produce in. I even see companies along the eastern coast of China that are deciding to go to Vietnam because they can produce in Vietnam at one fifth the cost whereas the overall cost of producing in China sometimes would be around 50-75% of the Western price.

You also have intellectual property and trademark privacy issues. A lot of Asian managers who believe in branding will say "Why should I do it (create a brand) because I'm just going to get clobbered in Vietnam, China or India?" And it costs a lot of money.

NUCIFORA: What Asian brands are applying an aggressive marketing approach?

ROLL: Hospitality brands such as Banyan Tree from Singapore and Singapore Airlines. Banyan Tree today is the #2 luxury brand in the world. It actually emerged from a typically small Singapore-Chinese trading company. In the early '90s, the owner realized that he was competing on lower and eroding margins, and continued getting beaten by the Chinese and Indonesians who were much bigger than he was. As a result, he opened Banyan Tree Hotels and Resorts and put the first property in Thailand 10 years ago. Now they have 16-18 locations around the world with profit margins way above any of the competition.

NUCIFORA: Western brands coming into Asia, relatively recent brands, Starbucks for instance, how is it that those brands can take off so quickly?

ROLL: Because what Westerners are very good at is to productize and standardize their operations, and then build aspirational value around their brands. Westerners are great at building and managing iconic brands.

NUCIFORA: How does a Singapore or a Chinese consumer get the Starbucks message? Is it through the advertising?

ROLL: Word-of-mouth, a bit of collateral and most of all good experiences in the stores on an everyday basis. Starbucks hasn't really used advertising to build the brand.

NUCIFORA: What about at the very high end? How do Asian consumers acquire that appreciation or that desire?

ROLL: Primarily through advertising and word-of-mouth. They hear it on the radio, see it on TV and read about it on the Internet. People also talk to each other. One thing that is very strong in Asia is word-of-mouth, which is highly effective in the more conformist and collectivist cultures compared to the Western world.

NUCIFORA: What percentage of China's 1.3 billion population is emerging middle class?

ROLL: It's still small - probably around 100 million but I think there are another 150 million beginning to emerge. It's happening very quickly because now you have an industrialized economy and a focus on rapid development of infrastructure.

NUCIFORA: But when you travel there, are you seeing upward mobility?

ROLL: You feel it in the sense of the cars people are driving, the mobile phones they use, they clothes they wear. I feel it every time I travel from Shanghai Airport to Pudong downtown. There are new skyscrapers everywhere. You can come back 14 days later, and you have a new building. It's emerging from everywhere - high-end restaurants, clubs, etc. You have all the luxury brands represented there.

NUCIFORA: Talk about traditional brand building in the United States - the Procter & Gamble model. Does that brand building methodology still work in Asian countries?

ROLL: I think it's worked very well. But I think those brands that are doing very well in Asia are the ones that are collaborating with local partners. Take a look at Volkswagen from Germany. It went into China quite early and partnered with a local company and formed the Shanghai Volkswagen Automotive Company. They were until recently the #1 car brand in China. They've done remarkably well. Why? Because they've got access to distribution. You also have to make sure that you customize your products. P & G has done that with soap powder in small sachets. They realize that people are not driving into Wal-Mart or carpooling to downtown to buy 40 kilos of soap powder for their family. The big opportunity lies at the bottom of the pyramid. Those are the people outside the big cities, people on small salaries who are only going to pick up a little sachet of soap powder. You still have this strong brand affiliation, but it has to be delivered in a much, more affordable fashion. That means a lot in terms of distribution and the way you get it to all those different communities outside the big cities of China.

You also have to be very careful about your message - be culturally sensitive. A very good example is De Beers Diamonds. In the West, they use the line "A diamond is forever". In China, they have to change that positioning because for young people in the very affluent cities, Shanghai, for example, marriage is almost seen as a path to the graveyard. Very final. But if you position it with a twist, that "We are a couple, we're going to have some children, we're going to walk through life together to achieve mutual success", then the diamond can be an acceptable part of that journey. That's a totally different take than the more romantic notion that is persistent in the West.

NUCIFORA: The successful young Asian marketers, what separates them from the herd? Are they successful because they were trained in the West?

ROLL: No, not necessarily. I have three building blocks to successfully building brands. First, you need to have the resources. Second, you need to have the right skills. But the most important thing is what I call mindset and beliefs. It's this third element that is generally lacking in Asian business culture. But it is changing. Asian businesses are moving up the value chain and will challenge Western businesses dramatically over the next 10-15 years.