Ellen Hou
Oct 4, 2017

Chinese startups falling into trap of 'safe' branding

Identifying their convictions and sticking to them is something many of China's startups are failing to do. Carat's Ellen Hou gives a brand-building lesson.

Ellen Hou, CEO of Carat China
Ellen Hou, CEO of Carat China

In the current bike-sharing craze in China, we are seeing new startup brands emerging one after another. Recently, the competition has escalated to territorial fights for capital and wars of words between the brands.

But while each model is a different colour; none of these brands' efforts amounts to real brand-building. I do not see any conviction in their attempts to change the mode of transportation for mankind, or see any real meaning for their existence. We may see one bike-sharing brand being overtaken by another as soon as the competitor catches on, but in the end it all boils down to little more than a capital game.

Amazon founder Jeff Bezos compares brands to people, stating: “Your brand is what other people say about you when you're not in the room”. Like a person, a brand has its own identity, voice, value, belief, story, personality, attitude and soul. And because the human brain is very good at handling stories and less good at handling logic, building a startup brand means telling the story of the brand as if it were a person.

Many start-ups in China lack self-confidence, and use branding methods that are safer. But this is the biggest trap: no originality, no brand.

Fundamentally, brand-building lies in answering three questions: what is your brand’s belief? Why do you put so much emphasis on this belief? How does your brand realise this belief? The key to the branding success of a startup is whether the founder’s belief is reflected in all of the company’s actions. This is the best guiding force: externally, it allows others to understand what this startup is all about, and internally it acts as an adhesive, keeping old timers and new joiners together.

Branding is not just advertising, however. It should not be something that happens simply because a budget has been secured. Building the brand equals building the company itself. It is the foundation for everything and should be prioritised from day one. Startups will encounter a lot of uncertainty, so the startup’s brand conviction offers something for everyone to strive for. Without this something, neither the startup nor its team will be stable.

There is a startup called Supercell (not a Carat client) that I really like. They had a very simple brand concept when the company was first set up: they wanted to make great games that people would play for years. Yes, it’s that simple; it isn’t even a slogan. At the same time, the brand name also reflects the startup’s core logic: a small, independent team infused with speed and passion. Today this gaming firm, which launched in 2010, has become an enterprise with an operating income of USD$2.3 billion, while its global headcount is only 230. From the beginning, every team member knew that their job meant developing the most popular games. There were no KPIs: whether people love playing their games is the only thing that matters. A simple conviction has made a very cool enterprise.

Supercell in its early days (credit: Supercell)

All startups face the dilemma in their initial stages of growth of whether to sell the product or sell the brand. Startups generally face existential challenges, and how to stay alive is an everyday question. So branding, though important, is often considered the least urgent as start-ups are dealing with immediate problems. Gradually, it can get forgotten, and as a result, the startup’s products will increasingly deviate from the brand’s initial aspirations. The brand risks the loss of its own vitality and the products risk the loss of differentiation and sustainable development.

Rush into advertising without understanding the true meaning of the brand can be a huge waste of financial resources. Most early-stage start-ups do not possess professionalism in brand-building, and this is where agencies come into the frame. But startups do not have to burn their cash on advertisements from the off. Their agencies should first help them master and organise their brands, sorting out the brand essence (core values), brand spirit (organisational structure), and brand identity (main image). Early-stage startups should look for agencies that share the same entrepreneurial spirit, are insightful about the cultures, customer clusters and markets related to the startup and are capable of converting insights into strategies.

I need to emphasise a point here. A startup can only succeed in a mature market by rewriting the market rules of mature enterprises. Hence, startups must avoid having the same brand content as mature competitors. They must find different ways to promote themselves, bringing any disruptive potential into full play. Many start-ups in China lack self-confidence, however, and use branding methods that are safer. But this is the biggest trap: no originality, no brand.

From my observations, it seems relatively easy for start-ups to obtain funding in China. But as soon as funding is available, it’s squandered with promotional tactics.

Firstly, they regard celebrity endorsements as a quick way to brand-build. They forget that China’s stars can be the spokespeople for luxury watches, soya milk and fast food, all at the same time. If the same star is also hired to endorse an unknown startup, is the money spent worth it?

Creating noise is another favourite option—the louder the better. But if the product involves building new consumption habits or changing consumer behaviour, promotions need to be synchronised with the pace of market acceptance. Alcopop and fresh-food chains are two of countless examples of start-ups going too fast, with their brand assets being depleted prematurely.

In China, start-ups that have the patience to wait it out are rare. Their founders, lacking vision, rush into IPOs or exits within a few years’ time. It’s no surprise that their branding is weak when only commercial considerations exist.

To sum up: a start-up should look inward, not outward, to derive its energy and to build its brand. There are no tricks in branding. Offering the most authentic product experiences is the most effective way of promoting the brand and showing the true face of the startup.

Ellen Hou is CEO of Carat China

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