Jenny Chan 陳詠欣
Aug 4, 2014

Chinese agencies move from ideas to creation

From product development to shouldering business risks, ad agencies are upping their game to forge new sources of revenue.

Soft kitty: From a one-line brief, Grey developed a full range of cosmetics to capture the ‘princess-schoolgirl’ market.
Soft kitty: From a one-line brief, Grey developed a full range of cosmetics to capture the ‘princess-schoolgirl’ market.

Big ideas in China have had to get bigger. Creative ideas alone can only be monetised so far in a market where both the media environment and consumer preferences evolve constantly. To up their game, agencies in China, big and small, have launched strategic product development services. DDB, Grey, WE Commerce and Arkr are just a few agencies that have started to co-create products and brands with clients, rather than restrict work to pure creative. 

The work these agencies do goes beyond product development and into business solutions. Arkr Group, co-headed by managing partner Aaron Zhang, persuaded local medicinal brand Yunnan Baiyao to employ a consumer-to-business (C2B) model to gather consumer insights through online research — a first for the conservative company. Arkr used the information to develop tailor-made products. The result was a product range called ‘bao qi san qi’. Derived from panax pseudoginseng elements, they are now sold on the company’s new Tmall and WeChat in-app stores. Using these additional digital channels to increase retail sales was another first for the company. Rather than a fee, the agency receives an undisclosed cut of sales from the product range — almost unheard of in the industry. 

WE Commerce, meanwhile, is shouldering business risks for clients, including Nin Jiom, Kjeldsens Butter Cookies, Campbell’s and Swanson, by taking on product inventory and then operating e-commerce platforms on their behalf. 

“Technology is now capable of transforming marketing and messaging into a service, a solution and even a product,” said Saurabh Sharma, planning partner, Ogilvy & Mather Beijing. “This will lead to us solving people’s problems and not just selling to them. It’s very big, but we don’t see it happening at scale yet because the social, data and brand disciplines in both companies and agencies do not work as one people-oriented team.”

Although most agencies dip their toes into product or business solutions for clients in some form or another, end-to-end providers are still rare. Smaller, nimbler agencies are finding it easier to adapt their business models to changing market demands. 

“There is no shortage of traditional ad agencies, digital agencies and e-commerce agencies in China, but I believe we are the only group offering all these services and even buying the client’s merchandise and selling it ourselves,” says Viveca Chan, chairman and CEO at WE Commerce. “We can now link all the stages from awareness, interest, engagement, advocacy to purchase.” 

Progress has been slower at larger, multinational agencies, but DDB and Grey Group are among the ones that have been making inroads. DDB has been co-creating memory foam pillows with Sinomax’s R&D department and also handling the product’s distribution management through e-commerce and physical stores, says Jason Wu, business director for China. 

Grey’s Innovation Lab meanwhile, has developed ‘Cats and Roses’ a range of cosmetics targeted at tweens for cosmetic client Proya (see case study). The lab was started in 2012 by then newly appointed CEO, TH Peng, who said at the time he was acutely aware of the need to tweak the agency’s business plan. “We don’t see innovation as a monologue process,” he said. 

Haidong Guan, executive planning director at Grey Group China, says the lab is intended to be a “future-facing strategic growth engine for our clients, driven by the philosophy of value-innovation, meaning innovation that adds value to the total brand experience, from perceived benefit to product usage”.

Guan, who has been running the lab since it started, says that prior to the launch of ‘Cats and Roses’ in January, the lab’s primary role was adapting GSK’s packaging to suit Chinese ideas about health and wellness.

“Creativity for the sake of creativity is a lost cause,” says Arkr’s Zhang. “Traditional creative agencies can’t survive unless we really help clients to earn money and gain market share. It’s not a matter of being ‘on-brief’ anymore, where the client throws out a question and we find the answers. We’re sure to lose if we can’t immerse creativity into a consumer-oriented need.”


CASE STUDY: A short brief comes up Cats & Roses

When Hangzhou-based cosmetics maker Proya gave agency, Grey, a one-line brief: “Customise a new makeup brand for the Watson’s sales channel” the agency pulled out all the stops.

Market research spanning both semiotics and cultural anthropology discovered a gap in the cosmetics market for young girls between 11 and 16 who were just starting to use makeup. The study found that these girls felt overwhelmed when selecting between existing cosmetic brands which primarily targeted more experienced women. Grey also found a niche in the princess-schoolgirl style, which is embraced by higher-end brands such as Anna Sui and Lolita Lempicka, but less so by brands with product ranges that cost less than RMB100 (US$16).

The result is ‘Cats & Roses’ (貓語玫瑰), which Grey describes as “Anna Sui for Watsons”. Launched on 15 January, the brand has been a success with first-day sales from a single Watsons store raked in more than RMB10,000, according to Proya. 

 

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