OPINION: Marketing beyond China’s borders

According to a recent survey conducted by leading global research agency, Millward Brown, 83 per cent of consumers beyond China's borders can’t recall a single Chinese brand. Near double-digit GDP growth on an annual basis over the last 30 years has made this somewhat of a moot point within China. With the largest number of domestic consumers in the world at their fingertips, some Chinese companies may believe global growth isn’t a priority.

However, if Chinese companies don’t diversify their revenue streams by tapping into consumers abroad, they run the risk of failing as growth slows in China over the next decade. Although a majority of foreign consumers are not able to identify any Chinese brands, some Chinese companies understand the importance of global growth and are starting to extend their reach beyond their home borders.

China’s Zhejiang Geely Holding Group (“Geely”), which acquired Volvo in 2010, recently unveiled a marketing partnership with the emergent New York Knicks superstar Jeremy Lin in several international markets, with the U.S. being a top priority. This development reflects Chinese companies’ growing focus on building successful global brands. However, sheer determination and economic strength are not enough to realize this goal.

Chinese companies’ success at building competitive global brands arguably depends on their ability to market products and services. To examine this in more detail, I turn to the “Marketing Mix” (or the “Four P’s”: Product, Price, Promotion and Place), which provides valuable insights about where Chinese companies stand globally in their evolution of marketing products.

Leading multinational companies succeed because they don’t lose sight of creating products that fulfill customers’ needs and almost as importantly, pour resources into creating brand awareness and recognition. For US companies the results are self-evident: American brands define Americans and America, both domestically and abroad. This is far from the case for China, and the phenomenon is due to a fundamental economic imbalance between American consumption and Chinese production.

While Chinese companies are perhaps the best in the world at producing products, some of the country’s leading and more successful consumer-facing companies, such as Haier, Lenovo and Tsingtao Beer, have relatively shorter histories operating in international markets. Chinese companies need to utilize research to better understand foreign consumers and then tailor products to fit their needs. Simply put, Chinese brands won’t be successful until the local markets they operate in say so.

Among the Chinese, price is a perpetual topic, and while asking “How much did you pay?” might be uncouth elsewhere in the world, it is a common question in China. Global consumers want quality at a competitive price. Savvy companies take advantage of well-defined market segments where they can maximize profit through product differentiation. The Chinese market, on the other hand, is flooded with products. Chinese companies have a tendency to compete on volume, producing at the lowest costs possible. This should not be surprising given that more than 500 million Chinese were pulled out of poverty over the last 30 years and now have purchasing power. It will take time to understand and segment these newly created consumers and meet their needs by offering products with varying levels of quality and price. Chinese companies must understand the differences in domestic and foreign consumers’ purchasing priorities to be competitive abroad.

Promotional activities among multinational corporations are increasingly integrated and multi-level in nature. In China, public relations, personal selling and sales promotion channels are still developing. To put this in perspective, when women’s underwear manufacturer Maidenform was launching its controversial “I Dreamed” bra campaign in 1949, the Chinese Communist Party was ending a civil war and founding the People’s Republic of China. Even just 20 years ago, China’s consumer market as we know it barely existed.

Today, marketing is leapfrogging traditional and interacting in non-traditional promotional channels on an unprecedented scale. China Mobile, the largest carrier in the world as measured by subscribers, went from approximately 3 million to more than 667 million customers in a 15-year time period. Furthermore, the company reported approximately 59 million 3G users at the end of March 2012, which is only a 9 per cent penetration rate of their existing mobile customer base. The Chinese equivalent of Twitter, Sina Weibo, recently added approximately 50 million users over a three-month period, bringing its total users to 300 million. This mind-blowing growth in non-traditional communication channels makes integrated promotional activity in China more challenging and leaves Chinese companies unprepared for promotional platforms in more developed countries.

While online retail will continue to take market share from traditional brick-and-mortar players in the US a strong infrastructure is what makes it easy to purchase goods in one of the nearly 50,000 malls across America. Interestingly, it’s this overabundance of placement options that often causes problems for Chinese companies as they evaluate how to distribute their products in the US.

In China, infrastructure is being built as you read this. In 2009, Beijing rolled out a $586 billion stimulus package with 38 percent (approximately $222 billion) dedicated to upgrading infrastructure: highways, airports, bridges, a nationwide high-speed railway, etc. Economists will continue to debate the impact of the stimulus, but one of the primary goals of China’s central government was to lay the foundation to support domestic consumption.

Chinese companies face the challenge of figuring out how to best distribute products in their rapidly growing home market as well as learning how to navigate more sophisticated infrastructure landscapes abroad. They need to quickly understand what-sells-where to succeed in a developed country like the US.

The “Marketing Mix” tool highlights a number of the cultural differences and shortcomings in product marketing experience that many Chinese companies face. In order to overcome these hurdles, Chinese companies need to focus on tailoring their products for foreign markets, identifying the differences in domestic and foreign consumers’ purchasing priorities, launching integrated and multi-level promotional campaigns, and understanding the infrastructure distribution landscape abroad.

Nothing will intensify this effort more than slowing growth in China. Expect Chinese companies to become more aggressive on this front, as Geely has, by leveraging a brand ambassador like Jeremy Lin to close the gap with foreign consumers. Asked how he relates to the company, Lin said, “…both of us are striving to be better and smarter at what we do, and to do it our own way.” This type of communication is a step in the right direction. Only time will tell if the message resonates enough with foreign consumers to offset slowing domestic growth.