Agencies urged to answer lower tier expansion in China

Local agency acquistions in China outside of the big three centres of Beijing, Shanghai and Guangzhou are nothing new, but according to many in the industry, 2011 could signal a new and different expansion push. The increasing sophistication in these markets, combined with the continuing need for better marketing services in the lower tiers is pressuring agencies to step up their presence.

“In the past, agencies have looked at acquisitions in the lower tiers and have indeed made acquisitions, particularly in the retail activation and promotions arena,” says Eddie Booth, chairman CEO of Leo Burnett Greater China, citing WPP’s purchase of Always and the acquisition of Betterways by Publicis Groupe. “Going forward, however, looking more into traditional agencies is where the next wave may occur.”

The motivation is two-fold. On the one hand, there are the decentralised MNC brands that use a central platform but work with distributors and other vendors in the lower tiers. On the other, there are the ambitious domestic clients that wish to remain loyal to their local markets.

And while the gap between international agencies in the tier one cities and local agencies in lower tier cities in terms of agency culture and operational practices has previously proven difficult to bridge, this is changing.

Catch the rest of the article in the April issue of Campaign Asia-Pacific magazine out now.