The CMO Survey Blog

The CMO Survey reported that China will be the focus of the most dramatic increases in U.S. company sales revenues in international markets during the next 12 months. When asked to list the top three international markets for sales growth, approximately 20% named China.

Here is a list of some of the strategies that seem to be paying off.

• Localize products (somewhat). KFC, which gains almost a third of its revenues from China through its 2000 outlets across the country, is an excellent example of this strategy. In addition to its core recipes, KFC continuously innovates by introducing dishes that match the Chinese customer’s tastes. Two examples are the Beijing Chicken roll with sea food sauce (similar to the Beijing duck, a traditional Chinese dish) and Spicy Diced Chicken (resembling a popular Sichuan-style dish). As another example, Pizza Hut, also a division of Yum! Brands, positions itself as an upscale restaurant in China by offering an expansive salad bar and even serving snail in red wine sauce. On the other hand, too much localization can harm marketing strategies in China. Global brands bring status, quality, and exclusivity. When deciding whether and how much to localize, global brands should weigh the costs and benefits of this decision. For example, Coke introduced a type of tea to the Chinese market under the Sprite name. However, customers associate Sprite with fun and refreshing drinks and did not intend to buy a traditional drink from Coke.
• Translate with care. Brand name choices in China can be a little tricky for foreign firms, as they need to choose a word that delivers the core message, sounds phonetically similar to the original name, and builds an image the company wants to deliver. Microsoft had to rebrand their Bing search engine in China since the definition of the mandarin characters pronounced Bing implied “diseases”—probably not the best meaning for a computer product. The name was then revised to Bi ying, which means “response without failure.” Similarly, Carrefour chose the name Jia-le-fu, which means “happy and prosperous families” because the sound “fu” has an auspicious meaning in Chinese.
• Collaborate with established vendors. A partnership with an established vendor can also lead to marketing success in China. To capture the attention of consumers in Shanghai and Beijing metro stations, DuPont partnered with several brands in China to promote its Teflon fabric protector. For the promotional program, DuPont chose domestic active-outdoor brands Anta, Semiar, and Qiaodan, which already had a strong retail presence. This DuPont partnership created customer interest in DuPont, increased store traffic for the partners, and led to more purchases of apparel with Teflon brand hangtags.
• Jump in early when demand is new. McKinsey’s report “The Products Chinese Customers Want” argues that many companies can make substantial early gains by offering products that are novel or unfamiliar to Chinese customers. As they note, “Fabric conditioners and pure fruit juices were rare in China a few years ago, but about half of all urban households regularly buy both now. Similarly, vitamins and mineral supplements, almost non-existent before America’s Amway launched Nutrilite in the late 1990s, has grown into a $6.5-billion business.”
• Get close and stand out. Chinese customers today have many choices when it comes to product selection. Therefore, to stand out, it is important to begin with the customer need and to offer products that follow closely. Through its market research, Johnson & Johnson identified leakage protection as the top priority of female sanitary protection products, which customers rated over comfort and superior absorption. This enabled the company to launch a product with a set of features that are distinctive from its competition.
• Luxury sells. The growing Chinese economy and urban expansion have produced a class of wealthy consumers who have purchasing power and a desire for conspicuous consumption as expressed in Deng Xiaoping’s famous phrase, “To get rich is glorious.” As a result, we find many luxury companies turning to China for growth opportunities. For example, Burberry’s opened up a flagship store in Beijing and launched the opening with a runway show that was turned into a social media event. Picking up on the theme of product localization, other companies are not only importing Western luxuries, they are creating their own unique brands associated with “Chinese luxury.” The best example of this strategy is Shang Xia, a line developed by Hermès. The press accounts note that Hermès’ new “created in China” luxury brand Shang Xia, is the first-ever Chinese high-end lifestyle brand built from the ground by a major European luxury house.” Shang Xia products will not be sold in Hermès stores and vice versa. Instead, they will be sold in Shang Xia boutiques, the first of which was opened in Hong Kong. This strategy builds on the growing national pride of Chinese consumers while offering the sophistication of well-known luxury brands.
• Trust USA. Some other U.S. retailers have found it effective to introduce private label brands into their stores. For example, Walmart’s private labels “Great Value” and “Mainstays” were brought to China with the names “Hui Yi,” which means both “good price” and “quality” and “Ming Ting,” which means “bright hallway/yard.” These brands also appeal to Chinese customers because they come from a U.S. company. With health scares and worries about the safety of local Chinese products, many Chinese customers will spend a little more on Walmart’s private label.
• Target non-urban centers. In addition to its three major cities, Bejing, Shanghai, and Hong Kong, China also has many tier-two cities that are less wealthy. To tap this potential market and develop products that match their price points, many firms look to develop and manufacture products locally. Honeywell opened a global engineering center in the western municipality of Chongqing to develop instrumentation products for mid- and low-tier markets in China. Because of their low price, these products are often exported to other emerging markets. In the case of Honeywell, this includes Taiwan, Thailand, and Indonesia.
• Make history matter. Other brands that have a history in China have found it helpful to play up that connection. The history of Buick is an excellent case in point. As one study observed, “…the most influential Buick customer of all time—even if he didn’t recognize it—was the last emperor of China. Emperor P’u-i bought two of the cars in 1924. They were, in fact, the first motor vehicles ever allowed to pass through the gates of the Forbidden City. His endorsement was so critical that by 1930 one in every six cars in China was a Buick, the company boasted in an advertisement from that era. ‘Buick owners are mostly the leading men in China,’ it declared.” GM has stayed true to this heritage. This brand positioning helped GM sell 3 million Buicks in just 12 years. In fact, General Motors became the country’s first passenger carmaker to sell more than a million vehicles in a single year (2010).
• Respect culture. China is a country deeply rooted in culture and values with strong respect to their cultural symbols. Nippon, the Japanese paint manufacturer, once developed an advertisement that depicted a dragon slipping from one of the pillars in a monastery due to the smooth finish of the paint. Customers reacted negatively because they viewed it as a sign of China slipping against another country.
• Use local talent to learn. It is no surprise that utilizing local talent in market research and product development improves insights about the local customer. International Flavors and Fragrances Inc. hire Chinese product managers more than expats for heading their operations in China. This improves the company’s ability to navigate regional differences, to analyze market demand better, and to be more responsive to customer needs. Likewise, cosmetic companies Clinique and Estee Lauder use Chinese R&D teams to tailor their products to Chinese skin types.
• Get the business model right. Companies may need to rethink their business models when operating in China. Amway uses a direct-selling approach in USA and Europe. However, in China, direct-selling operations function as a base for criminal activity. Also, the Chinese market is riddled with unscrupulous operators selling substandard goods with poor services, claiming to be legitimate direct marketers. As a result, Amway’s direct-selling techniques raised concerns in the Chinese government. Amway thus had to revise its business plans to sell its products only through its own retail outlets.

Best of luck marketing in China! 祝您在中国营销成功