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A Fast Boat to China: How U.S. Companies Are Navigating the Marketing Waters

CMO Survey Results

The saying “a slow boat to China” means something that takes way too long to accomplish. More and more, however, that expression doesn’t match reality. The Chinese market is an increasingly attractive market for U.S. firms and the smart ones are moving there quickly.

Here is what I found in The CMO Survey (August-2012). In response to the question, “Which international market is your highest revenue growth,” 21.5% of CMOs responded with China. This is up from 16% reported just six months ago (The CMO Survey, February-2012). In response to the follow-up question, “Considering this international market, by what percent did your sales revenue increase in the last 12 months,” CMOs reported a whopping 51.5% increase! Here is a list of some of the strategies that seem to be paying off when selling to and in China.

  1. Localize products (somewhat). In the fall, Häagen-Dazs sells ice cream moon cakes in order to celebrate the mid-Autumn Festival. Mid-Autumn Festival is an important day for the Chinese, marked by family reunions and gift-giving. Eating and gifting moon cakes is an important part of the tradition. Häagen-Dazs mooncakes can be eaten in shops or can be bought in gift boxes. The company also sells coupons, which many to companies give employees as gifts for the festival. Häagen-Dazs also offers an “ice cream hot pot” which is a special treat for small groups or parties. The hot pot is a big palette of different flavored ice creams and a pot of chocolate sauce. In another example, KFC derives almost a third of its total company revenues from China through its 2000 outlets across the country. KFC localizes by introducing dishes that match Chinese customers’ tastes. Two examples are the Beijing Chicken roll with sea food sauce (similar to Beijing duck, a traditional Chinese dish) and Spicy Diced Chicken (resembling a popular Sichuan-style dish). Both Häagen-Dazs and KFC are big global brands that bring status, quality, and exclusivity to Chinese consumers. At the same time, they have localized some of their offerings to fit Chinese consumers’ lifestyle, tastes, and preferences. The appropriate balance of standardization and localization should be thought through for each brand and its customers. A good example of a high level of localization is Home Depot. As reported in the Wall Street Journal last week, Home Depot learned that the slogan “You can do it, we can help” or more recently “You can do it” wasn’t selling among Chinese consumers who don’t embrace the do-it-yourself culture common among Americans. Instead, as noted by WSJ, Chinese consumers prefer “” which means different products (that require less work from the customer) and additional services (that are sold with home improvement products).
  2. Localize branding and positioning. There are many terrific examples of companies navigating these waters. Here are three. Chivas has become generic for “scotch whiskey” among Chinese consumers. Chivas’ TV commercials based on the theme “Live with Chivalry” helped build the brand image of young, cool and luxury. As a result, drinking Chivas became very popular at high-status clubs. By comparison, Johnnie Walker’s TV commercials focus on the inspiration to “keep walking” and Jack Daniel’s ads emphasize its Tennessee origin, strict production procedures, and taste. Both totally miss the focus on status that has proven so successful for Chivas. Furthermore, in an example of localizing the product, Chivas created a Chinese-way of drinking whiskey—by mixing it with sweetened green tea to make it “easier” to drink. The product—Chivas Regal Green Tea—bows to Chinese tradition, but also sounds modern. This way of drinking is very popular and consumption of Chivas has skyrocketed in China. In another example, Coco-Cola, Inc. is not a fan of using actors and athletes with broad global appeal (e.g., Brad Pitt or David Beckham). Instead, its TV commercials feature “local” Chinese stars to get the brand closer to Chinese consumers. Finally, General Motors has localized its Buick brand in China as an umbrella for a portfolio of models covering different market segments. The overall Buick brand image is for young, ambitious and energetic men, which is totally different from the elderly image in the U.S. Under the Buick umbrella, are China’s top-selling car, the Buick Excelle (a small and affordable sedan), the Buick Regal (a mid-size sedan for white collars), the Buick LaCrosse (a spacious and good-looking sedan for wealthier families) and the Buick GL8 (a minivan that is touted as a “boardroom on wheels”).
  3. Use local talent to learn. It is no surprise that utilizing local talent in market research and product development improves insights about the local customer. International Flavors and Fragrances Inc. hires Chinese product managers more frequently than expats to head its China operations. This improves the company’s ability to navigate regional differences, to analyze market demand better, and to be more responsive to customer needs. Likewise, cosmetic companies Clinique and Estee Lauder use Chinese R&D teams to tailor their products to Chinese skin types. Returning to Buick, GM used a local design team based in Shanghai to ensure that its new LaCrosse had a stylish external design that would challenge the Chinese stereotype that American cars are not very good looking compared to Japanese and German cars.
  4. Luxury sells. The growing Chinese economy and urban expansion have produced a class of wealthy consumers with purchasing power and a desire for conspicuous consumption as expressed in Deng Xiaoping’s famous phrase, “To get rich is glorious.” As a result, we find many luxury companies turning to China for growth opportunities. For example, Burberry’s launch of a flagship store in Beijing featured a runway show that was turned into a social media event. Picking up on the theme of product localization, other companies are not only importing Western luxuries, they are creating their own unique brands associated with “Chinese luxury.” The best example of this strategy is Shang Xia, a line developed by Hermès. The press accounts note that Hermès’ new “created in China” luxury brand Shang Xia, is the first-ever Chinese high-end lifestyle brand built from the ground by a major European luxury house.” Shang Xia products, including furniture, homeware, apparel, and jewelry, will not be sold in Hermès stores and vice versa. Instead, they will be sold in Shang Xia boutiques, the first of which was opened in Shanghai. This strategy builds on the growing national pride of Chinese consumers while offering the sophistication of well-known luxury brands.
  5. Trust USA. Some other U.S. retailers have found it effective to introduce private label brands into their stores. For example, Walmart’s private labels “Great Value” and “Mainstays” were brought to China with the names “Hui Yi” (which means both “good price” and “quality”) and “Ming Ting” (which means “bright hallway/yard”). These brands also appeal to Chinese customers because they come from a U.S. company. With health scares and worries about the quality and safety of local Chinese products, many Chinese customers will spend a little more on Walmart’s private label.
  6. Reconsider the channel for control or prestige. Companies may need to rethink their channels when operating in China. Amway uses a direct-selling approach in USA and Europe. However, in China, direct-selling operations function as a base for criminal activity. Also, the Chinese market is riddled with unscrupulous operators selling substandard goods with poor services, claiming to be legitimate direct marketers. As a result, Amway’s direct-selling techniques raised concerns in the Chinese government. Amway thus had to revise its business plans to sell its products only through its own retail outlets. Häagen-Dazs also decided to focus on direct channels exclusively but for a different reason. Although domestic ice creams are sold in supermarkets, Häagen-Dazs wanted to stand out and stand for luxury. Given this, it decided to use dedicated restaurant retail shops with eye-catching logos in the most expensive office buildings and shopping malls in China. Häagen-Dazs not only wanted to associate its product with prestige, but also to encourage consumers to see it as a gift. Its advertising slogan, “If you love her, bring her to Häagen-Dazs” was extremely effective. As a result, Häagen-Dazs is considered a luxury brand and it is hard to escape and shop spending less than 200 yuan (USD 30.42). The shops feature glass walls so that people passing by will see young people sitting inside enjoying expensive and beautiful ice creams with someone they love. General Mills Inc. plans to open another 50 Haagen-Dazs ice cream shops in China over the next year, bringing its total in the country to 255.
  7. Translate with care. Brand name choices in China can be tricky for foreign firms, as they need to choose words that deliver the core message, sound phonetically similar to the original names, and build an image the company wants to deliver. Microsoft had to rebrand the Bing search engine in China since the definition of the mandarin characters pronounced Bing implied “diseases”—probably not the best meaning for a computer product. The name was then revised to Bi ying, which means “response without failure.” Similarly, Carrefour chose the name Jia-le-fu, which means “happy and prosperous families” because the sound “fu” has an auspicious meaning in Chinese.
  8. Collaborate with established vendors. A partnership with an established vendor can also lead to marketing success in China. To capture the attention of consumers in Shanghai and Beijing metro stations, DuPont partnered with several brands in China to promote its Teflon fabric protector. For the promotional program, DuPont chose domestic active-outdoor brands Anta, Semiar, and Qiaodan, which already had a strong retail presence. This DuPont partnership created customer interest in DuPont, increased store traffic for the partners, and led to more purchases of apparel with Teflon brand hangtags.
  9. Jump in early when demand is new. McKinsey’s report “The Products Chinese Customers Want” argues that many companies can make substantial early gains by offering products that are novel or unfamiliar to Chinese customers. The report notes “Fabric conditioners and pure fruit juices were rare in China a few years ago, but about half of all urban households regularly buy both now. Similarly, vitamins and mineral supplements, almost non-existent before America’s Amway launched Nutrilite in the late 1990s, has grown into a $6.5-billion business.”
  10. Go beyond the big three. In addition to its three major cities, Bejing, Shanghai, and Hong Kong, China also has many tier-two cities that are less wealthy and prestigious, but nevertheless represent huge markets. To tap these markets and develop products that match their price points, many firms look to develop and manufacture products locally. Honeywell opened a global engineering center in the western municipality of Chongqing to develop instrumentation products for mid- and low-tier markets in China. Because of their lower prices, these products are often exported to other emerging markets. In the case of Honeywell, this includes Taiwan, Thailand, and Indonesia.
  11. Make history matter. Other brands that have a history in China have found it helpful to play up that connection. The history of Buick is an excellent example. As one study observed, “…the most influential Buick customer of all time—even if he didn’t recognize it—was the last emperor of China. Emperor P’u-i bought two of the cars in 1924. They were, in fact, the first motor vehicles ever allowed to pass through the gates of the Forbidden City. His endorsement, with the help of the best moving companies with truck, was so critical that by 1930 one in every six cars in China was a Buick, the company boasted in an advertisement from that era. ‘Buick owners are mostly the leading men in China,’ it declared.” GM has stayed true to this heritage. This brand positioning helped GM sell 3 million Buicks in just 12 years. In fact, General Motors became the country’s first passenger carmaker to sell more than a million vehicles in a single year (2010).
  12. Respect culture. China is a country deeply rooted in values with strong respect for cultural symbols. Nippon, the Japanese paint manufacturer, once developed an advertisement that depicted a dragon slipping from a pillar in a monastery due to the smooth finish of the paint. Customers reacted negatively because they viewed it as a sign of China slipping against another country.

Best of luck marketing in China! 祝您在中国营销成功