The smart way to enter the China market
China’s culture, language, economy, politics and way of thinking are different – that’s why your market strategy should be different too.
Whilst the Chinese economy may have slowed down with regards to government spending, the Chinese consumer is still spending big and showing a strong bias towards foreign brands.
The result? More brands than ever are taking their products to the Chinese market.
It’s tempting to start small in China, testing the market’s reaction to your brand and adjusting your China strategy accordingly.
Whilst that approach might be recommended advice in other regions, it’s a very dangerous approach in China.
The legal environment in China can be treacherous for foreign brands.
Trademark rights are given to the first to file rather than rightful owners which can result in brands like Tesla, Apple, Castel and Burberry spending millions of dollars in compensation and / or court fees to use their own brands in the region.
In China, Michael Jordon doesn’t even own the rights to his own name.
This is where the “start small” strategy becomes so dangerous in China. It only takes 1 person to notice the potential of your brand and register your trademark to derail your Chinese brand expansion.
Our advice to brands has always been stay out of China until you have a legal framework in place - but there is an equally important step that brands need to consider before entering the region – their market strategy.
“Chinese consumers don’t think the same way as their Western counterparts” claims Jeff Stewart, MD of Shanghai based Brand Asia. “Brands need to consider what will drive consumption of their brand in China”
Driving consumption of your brand is more than just marketing. It’s ensuring your legal framework is in place, your supply chain, distribution channels, regulatory issues (which change in China from province to province) and you have a deep understanding of who your consumer is.
“There’s a good chance that your target audience in China won’t be the same as it is in the USA or Europe”
Having worked across Asia with a focus on China for over 7 years, Stewart has seen countless examples of this type of mismatch. Take Nike for example, who elsewhere in the world are sold under the sporting goods sector. In China, Nike are considered a luxury brand and sold alongside Gucci and Armani.
Their ads, their slogans, their spokespeople, even their name, all had to be re-visited for the China market. (Nike is known as Nai Ke in China, which means “Enduring and Preserving”)
In another example, a US hair loss treatment entered the market targeting hair thinning and balding in men. Had they done their research beforehand, they would have realised that this sector is targeted equally at both men and women in China. Their first year’s ad spend missed half their target audience.
Stewart believes small brands in particular are keen to launch without understanding who will buy their brand, why they buy it or how much they even understand about the product.
“One sector where we see this rush to market happening regularly is healthcare. The Chinese are an increasingly health conscious population and there’s a huge demand for nutritional supplements. Unfortunately, there’s not necessarily an understanding for what the benefits of a supplement mean. Brands that win in China; focus on the education of why it’s important to have a healthy digestive system, for example. That education is not just for consumers but your distributors too.”
Take a product line that is a common sight in the west such as anti-aging cream. We might assume that everyone knows what this product does and who should use it, but in China, anti-aging products are used generally for skin whitening rather than for the treatment of lines and wrinkles. If distributors aren’t educated about your product – they don’t know how to position it and your brand exposure suffers.
“Not every brand has a vast research budget, but no brand should enter China assuming their product is well understood and consumed by the same demographics that they see in the West” Stewart warns. “Even a modest research budget may be the best investment you ever make in China”.
Brand Asia offers this list of key considerations when aligning your brand to the China market:
Ask your audience – Whether it’s a focus group, in depth product testing or an online survey to thousands of potential customers across China – the best way to understand who your target market is and what they want? Is to ask them. Don’t do this just for the launch. Connect with consumers on an on-going basis to stay abreast of concerns, engagement and consumer growth.
Key Influencers - Your key influencers will be very different. Family is first in China when it comes to decision making. Mum, Dad and grandparents still hold a lot of sway over their adult children. Online reviews and testimonials will have far less impact on purchasing decisions than family. This is particularly true for major purchases like education, health, insurance and automotive. The family is generally consulted first.
Chinese brand name - When it comes to localising brand names, a balance is needed. You want to make sure the brand itself isn’t misunderstood or pronounced in such a way as to make it negative (as was the case with Coca Cola, BMW and Heineken all of whom are known by different names in China). There is however, more trust in foreign brands than local brands; they are perceived to be better by default. If your brand name sounds foreign and doesn't translate to something negative (or unpronounceable to the Chinese), there are strong reasons for keeping it. Regardless you’ll still need a version of it in Chinese characters.
Be open to changes - Be prepared to review your strategy to adjust to the changing market. Brands in China have to change regularly due to cultural shifts, legal shifts that can happen overnight (as occurred earlier this year when the Chinese government completely overhauled the grocery and medical supplement sector). It’s important to continually track your brand and readjust your strategy in order to ensure continued growth.
Be end-to-end prepared – Too many brands hold an activation event in China before they’ve completely sorted their distribution channels, supply chain or regulatory requirements. Many of these elements take time to set up properly but without them, your big bang market entry could ultimately damage your brand.
Plan for competition – You’ll always have competitors in China. In fact, you’ll probably have far more competitors than you have in the West. Expect them - and have a plan for how you’ll defend or differentiate your brand.
Don’t expect instant success - Success in China takes time. Chinese consumer markets are saturated with new brands. The brands on the shelf of your grocery story in China change monthly as brands enter and exit the market. The brands that do it right – don’t expect to have an impact on China in 3 months. It’s a 12-month process of understanding the consumer, distribution channels, driving consumption and brand awareness.
More than possibly any other country, China is changing rapidly. Already the world’s largest consumers of luxury goods and tourism their buying power is unparalleled. Yet only half of that population is online. There’s still more than 600 million Chinese waiting to enter the global online consumer market. As a result, the Chinese impact on the way the world trades and market to them will continue to evolve over the next decade.
Whilst Western brands will no doubt have an influence over Chinese consumers; an equally likely outcome is that Chinese consumers will have an influence over Western brands.
