KEY POINTS:
Notes for a speech given to the China Business Forum on November 30 by Lezlie Mearns, Managing Director, Maxim Group
We all have our version of the China story and it goes something like this.
• The world's fastest growing economy – with an average of 10 per cent growth over the last five years
• A country set to become the biggest market in the world – 1.3 billion buyers and suppliers
• By 2010, China is expected to have a quarter-billion consumers who can afford luxury products
• The total number of phone users in China has now reached 805 million.
• 47 cities with a population of more than 1 million people
• At least one new millionaire is created in Beijing every day
• 80 million new households will be created in the next 15 years
• There are 7,200 consumer segments to target.
China is a market of enormous opportunity for New Zealand companies. And with a free trade agreement soon to be signed; a number of advantages will fall our way.
So why are we all sitting here at yet another conference talking about doing business in China?
Would we rather talk about doing things than doing them?
Or do we lack a bit of entrepreneurial bottle? Or maybe we overcomplicate things to such an extent that we don't know where to start.
I think we can safely assume however, that many of you here today have committed or are ready to commit in one form or another, and if you have any doubts it's more a case of not knowing where to start.
So I want to provide you with some tools that will assist you with your decision making.
I'll do this by looking briefly at:
• The non-negotiables of branding and marketing
• Chinese consumer behaviour
• What's happening at a government level between China and New Zealand
• The similarities and differences of doing business in China?
• How can we use our New Zealandness
• Some examples of work commissioned for the North Asia market.
Branding and marketing fundamentals are universal
The starting point is this. China is a market place where people buy and sell things. As people, they are part of a wider economic, social and political system. They have values and beliefs. They belong to families, get educated, and go to work.
As buyers and sellers they have income to spend or dispose of. They behave in certain ways. They have preferences. They have needs to be fulfilled.
I'm sure it all sounds familiar to you.
In other words as consumers they are just like us.
Which means that as suppliers of goods and services, the branding and marketing principles that we employ in China should be the same as those we use for any other market.
From our experience, however, there are some non-negotiable principles that are critical in this market.
So what are these branding and marketing principles?
• Understand your market
Investigate the opportunity and quantify it
Understand how buyers behave and their preferences
Be prepared to make changes to your product or service to 'meet the market'
Spend time meeting people and use NZTE's trade offices to assist with in-market visits and entry strategies
Learn about the culture and in particular the Chinese negotiation style
Leverage existing relationships
Be persistent and patient
• Describe your brand in words:
this will guide the delivery and execution of your brand
and minimise waste, both in effort and investment
and enable you to be clear about your point of difference and your value proposition
and to communicate and deliver consistently, every time
• Align your business processes with your brand
A brand cannot be developed in isolation from the rest of the business
It's not just the visual expression of the brand's personality, but it must fulfil at a relationship level, it must express the brand's values and it must deliver on its promise.
• Be clear about positioning
That's the space that you are trying to occupy in people's minds relative to the competition based on your points of difference.
• Decide whether you are going to leverage other brands or brand relationships
This can take a number of forms, either as an endorsement by the parent brand to add substance and assurance to your proposition, and in the case of the sub-branding, to communicate an obvious message about ownership.
The key is to adopt a strategy that strengthens your positioning and provides clarity, compatibility and balance.
• Get your communication channels, themes and messages sorted
This is not only important in terms of selecting the right channels but also in coordinating the activities between them so that key messages are reinforced and communication resources are optimised.
And you must meet the market. It's important to create promotions that translate well both from a language, graphic, imagery and colour perspective.
• Get your visual branding sorted
Start with a visual identity that is memorable, immediately recognisable, clear and communicates the brand's personality
Everything else should be consistent, but the execution should reflect the roles they play, so a website should never look like an online brochure, just as your advertising needs to play a different role to your point of sale material. Remember China is a sophisticated market, and we have seen plenty of examples in North Asia of NZ companies that look less than sophisticated.
And at all times the full expression of your brand should be recognisable, memorable, and differentiating.
These are principles that apply to any market you operate in. It doesn't matter if it's the West Coast or Wyoming, Los Angeles of Lanzhou - these fundamentals are fundamental.
The tactics, however, that you employ will be different to the ones you would use in New Zealand or any other offshore market.
How does the Chinese Consumer Behave
We're all aware of the extraordinary rate of growth in China, and the emergence of a huge middle class.
However, we need to appreciate that we're not witnessing the westernisation of China. Yes it is going through a transformation, but this is a civilization of more than 40 centuries. It's not about to abandon what it stands for and what is believes in.
It has been undergoing a process of commercialisation – a shift from a traditional/mixed economy to something else.
A traditional market economy? Maybe.
A recent McKinsey study found that:
• While Chinese consumers are besotted with brands they don't always buy the same ones, or even those they prefer
• Consumers can go into a store with the intention of buying a particular brand, but price differences and point of sale promotions can change their mind in a flash
• So market share can rise suddenly and then just as quickly plummet
• Another reason for the perceived lack of brand loyalty is the novelty factor – consumers are exposed to a wide range of products. Is it any wonder they are experimenting? Whereas in developed markets the novelty has worn off and brand preferences are well established.
• Also, the role of function is more important than the emotional attributes we normally associate with branded products, because Chinese consumers are still learning the value of a myriad of products in their market.
Two lessons come out of the McKinsey work:
There is a greater emphasis on below the line price promotions and in-store demonstrations, and there is a need for well trained salespeople who can instruct retailers and buyers on a product's functional features and benefits.
However, this finding can't be applied to every region and every demographic segment. While older consumers trust Chinese made products more than foreign ones, it is the opposite for younger adults.
Some consumer segments will mature rapidly especially in the cities and will become brand loyal, but as new consumers come into the market, these first time buyers will be eager to try new brands
So what are some of the cultural considerations we need to know about China?
It is a country with a vast history – 46 centuries worth.
And for most of that time they were the most advanced civilization and the biggest economic power in the world. So there is a deep sense of history.
And in terms of recent history China believe that it has suffered 250 years of colonisation and shame.
So one of the drivers of the process they are going through at the moment is to make China strong so this will never happen again.
At first glance there are characteristics that we appear to have in common: Patience, reciprocity, diligence, trust and family.
But let's look more closely at some of these concepts.
Chinese have long planning horizons and great reserves of patience, whereas New Zealander's have more of a short-term focus. Understandably, they have some doubts about our resilience and staying power.
The quality of the relationship in China is fundamental to deciding to do business. While it is a factor for us, the price and quality of the service or product are our main criteria.
And when the contract is signed for the Chinese the negotiation is just beginning.
What is happening at a government level between China and New Zealand?
We already know that as a country we have some credibility
We have strong government to government relationships.
And we have had diplomatic ties with China since 1972.
We support a one China policy.
Since 1995 there have been more than 60 ministerial visits.
New Zealand was granted approved destination status in 1999.
And we're currently working through the prenuptials of a Free Trade Agreement.
In short, we have a trouble-free relationship with the world's largest country.
All of that sounds very rosy, but we shouldn't have the impression that New Zealand is the name on everyone lips.
Or that when New Zealand is uttered there are immediate associations of innovation, entrepreneurialship and sophistication.
The associations are more likely to be:
Clean air, sheep and green pastures
5/10 million people
6 hours away
So there is not a high level of unprompted awareness of New Zealand.
And what they do 'know' about us are perceptions, not our reality.
How can we use our New Zealandness?
Having said all that our situation is far from desperate. The points are made so you don't underestimate the issues that need to be overcome.
Recently Maxim worked with NZTE to develop its strategy and promotional positioning for the North Asian market.
This was done within the context of the New Zealand New Thinking brand positioning.
• The cultural background to this was our pioneering spirit and legacy of innovation, adventure and 'get things done' attitude – much of which was developed because of our earlier isolation from international markets.
• The contemporary focus is now on our status as a new pacific nation. One that is resourceful, entrepreneurial, and has the space and openness to think and create.
But there is one Proviso. While New Zealand and perceptions of the region may have some value, the positioning statement New Zealand New Thinking maybe limiting in China. Recent research suggests that the 'take out' lacks an emotional connection, that it is too abstract, non-differentiating, lacks tangible evidence of 'new' or 'thinking' and that 'thinking' can be viewed as passive rather than active.
In saying that I need to emphasise that it doesn't prevent us using attributes that clearly belong to New Zealand and which serve to provide us with a measure of differentiation – which is illustrated in the New Zealand Focus brand.
NZ Focus
NZ Focus was established to test and market NZ products to Hong Kong and mainland Chinese buyers, distributors and consumers.
It is a concept store situated on Hennessey Road, one of Hong Kong's busiest thoroughfares. The store is on three levels and features 500 New Zealand retail products, and representation by Fisher and Paykel, Air New Zealand, New Zealand Immigration and the New Zealand Chamber of Commerce.
Maxim was commissioned to create a compelling and memorable brand signature and retail and exhibition environment. A provocative statement that made visitors think this is a 'New Zealand that I recognise – it's clean and green, but also unique and innovative – a creative trading nation.
We identified 'invigorate' as the single minded proposition – to demonstrate in an exciting retail environment the essence of this new offering.
Light was used as the idea to express this concept, which we illustrated through clarity, brilliance, energy, drama, and sense of openness and space. All qualities that reflect New Zealand.
While the colour palette reflects the New Zealand environment, in choosing these colours we were mindful of the cultural meaning of certain colours in the Chinese market. Blue and white can have associations with death and mourning, and black – our national colour, has associations with death.
This doesn't mean that colours with negative associations should never be used, but that they should be used sparingly as a secondary or subsidiary colour.
We needed to avoid communicating a predictable image of New Zealand. While our brief was to present a 'new thinking' experience, we also recognised the need to 'meet the market' by delivering images that had resonance with current perceptions, and with a focus on the functional benefits of the offerings.
In order to create a truly compelling visual experience we focused on capturing a sense of New Zealand through abstract references to the colours, textures and shape of the landscape, and New Zealand's unique light.
So what did we learn?
The brand signature and environment had to work as a backdrop for a diverse range of products and services.
Market visits were critical, as was having 'connected' people in the market to negotiate with various suppliers and key stakeholders.
Understanding that 'yes' can mean 'no' at times and vice versa was another key learning.
Patience in negotiation, was critical.
All brand names and key messages needed to translate well into Mandarin.
And finally, understanding that what we see as implicit quality standards may not necessarily be interpreted as the same way in the local market.
Parksons
The New Zealand Focus concept has migrated into Mainland China, in the form of satellite stores within a store, at Parksons, a high end supermarket chain.
The brief was to take the broad concept of New Zealand, and the key propositions of 'New Zealand's Finest Choice' into an in-store environment to promote New Zealand products as fresh, exciting and healthy products for local shoppers. The focus, in this environment, was on presenting products that consumers can 'try today'.
Food & Beverages is a sector for which NZ has a global reputation
For China, the focus is on food and beverages that come from a clean, healthy and sustainable (not sure that this attribute is correct) environment.
The key brand messages are – life force, pure taste, naturally brilliant, natural selection, food for life and pure nourishment.
The images represent freshness, innovation and quality, and we 'met the market' by capturing features of the New Zealand environment that connect to the food images through shape, colour and texture, for example, avocados and Moaraki Boulders, to inject an unexpected and visually differentiated quality into the communication – so we could claim our own space.
One of the other sectors we have been involved with is wood processing.
While there is an emphasis on building solutions based on natural style and energy efficiency; the key brand messages are naturally engineered, living quality, building value and foundations for growth. While, the images are functional, the execution treatment is always unexpected and visually challenging.
Attributes
So in summary, the New Zealand attributes that we are trying to leverage are resourcefulness, innovation and entrepreneurship, with the physical attributes of openness, clarity and resilience.
Final Takes/Conclusion
Before I leave you I would like to briefly summarise the main points I have made.
• Ensure your brand is fighting fit – that it's; well defined, aligned with your other business disciplines, and that it visually looks the part.
• The principles of marketing and branding are the same irrespective of the market. However, when we go into a new market, particularly those that have significantly different cultural values, we need to focus hard on the non-negotiable principles.
• We need make certain adaptations to the Chinese world view, especially in relation to time. Our long-term is more like their short-term. So think, act and resource exceedingly long-term.
• Promotional tactics must to be responsive to local circumstances
• Relationships are very positive at a government level and there is the impending FTA to look forward to, but its no silver bullet. We generally fly below the radar and the perceptions that are held are short of reality.
• Using our New Zealandness is critical but it needs to be applied with strategic nous.
One last thought:
If we do have another conference about China in two years time let there be 20 of you from this audience talking about how successful you have been in breaking into the China market.
Good luck.
