Millward brown warc_brandbuilding_brand_z_china_jan_2013.sflb
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Brand-building lessons from China's 50 most valuable brands:
Insights from Millward Brown's BrandZ
Doreen Wang
Millward Brown Asia
January 2013
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Brand-building lessons from China's 50 most valuable brands:
Insights from Millward Brown's BrandZ
Doreen Wang
The importance of brands to Chinese consumers is growing. As they become wealthier and more sophisticated, they are
increasingly aware of their relationship with brands and the impact brands have on their lives. The market opportunities are
enormous. But achieving and sustaining brand strength in China is challenging and complicated. Like winning at the ancient
game of Chinese chess, it requires the player to understand and evaluate all possible moves, develop thoughtful strategies,
and manoeuvre with purpose and determination.
This article looks at the findings of the BrandZ Top 50 Most Valuable Chinese Brands 2013 study, together with the key trends
that lie behind them and the opportunities and challenges they bring for marketers of brands entering or already competing in
China.
The China Top 50 tells a story of increasing brand strength and – as a result – financial strength: the brands grew in stock
market value by 5.8% between July 2010 and September 2012, while the stocks in the MSCI index fell by 5.6%.
For the first time in the three years the study has been published, the China Top 50 declined in brand value, dropping 1.6% –
largely due to a slowdown in the growth rate of China's economy. Over the past four years, the economy has expanded by
over 30% in real terms to become the world's second largest. In 2012 the growth rate slowed to around 7.5% – which is still
much faster than most of the developed world. This put pressure on revenue and profits – the financial components of the
brand value equation. Brand contribution, which is driven by brand alone, actually increased.
Of the Top 50 brands, 14 increased in value, 30 declined and two remained unchanged, while four newcomers joined the
ranking. Three categories appreciated in brand value: technology rose 35%, followed by the traditional Chinese liquor baijiu,
up 19%, and beer, with a 17% increase.
Two of the brands that appreciated most in brand value were in the technology category. Social media leader Tencent led the
Top Riser ranking with 60% value growth, with search engine Baidu fourth at 40%. Apparel brand Septwolves was the number
2 Top Riser, with 44% value growth, followed by baijiu brand Moutai at 42%.
Privately held companies comprised around 27% of the China Top 50, up from 22% in 2011. The portion of total value
Title: Brand-building lessons from China's 50 most valuable brands: Insights from Millward
Brown's BrandZ
Author(s): Doreen Wang
Source: Millward Brown Asia
Issue: January 2013
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3. attributed to State Owned Enterprises (SOEs) decreased to 74% from 78%.
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4. The influence of brand on purchase decisions is growing
As the economy strengthens, and the government introduces initiatives to encourage consumption, purchasing power and
spending are rising – as are brand awareness and consumer sophistication.
Chinese consumers expect more choice, and have begun to express a preference for more specialised products. They are
learning to buy for reasons other than price, and they view brands as useful symbols embedded with cues about quality, safety
and other information necessary for making purchasing decisions.
Consumers' relationships with local Chinese brands are strengthening and deepening. They used to lag behind global brands
in terms of brand awareness and loyalty, but they are catching up. Consumers would buy Chinese brands because they were
strong on price, and foreign brands because of their fame and image, and local brands are now gaining on this front.
The slower economy, however, has reminded consumers they also need to seek value – and their sense of value will become
more acute.
In a market with greater choice and more discriminating consumers, marketers may need to work harder. Having a highly
regarded brand means a lot more than simple name recognition – a strong value proposition is crucial. And marketers of
Chinese products need to focus on forming an emotional bond with wealthy and influential consumers, to stop them being
tempted by foreign alternatives.
Above all, brands must keep up with shifting tastes and attitudes. We may be entering an era of more cautious and discerning
shoppers; to reach them brand owners will need to be more precise in their targeting and messaging.
Consumption in lower-tier cities is rising
Tier 2 and below is where income and spending on a year-on-year basis is growing fastest. Any business serious about
establishing a meaningful presence in China must gain a deep understanding of the purchase behaviour of consumers in
these cities. For instance, purchase intentions are more family-centric, with the majority of consumers focusing on items that
satisfy family consumption and fit family budgets.
Penetration into lower-tier cities is a challenge for even established international brands. They may be strong in Tiers 1 and 2,
but their presence is not as impactful in lower-tier cities where they are competing with Chinese brands. The key is to
understand and adapt to consumer needs. Local talent and distribution can also be an asset.
It pays to be meaningfully different from the competition
According to Millward Brown research across over 1000 brands in China, both local and international, being considered
meaningfully different by target consumers produced a 37% higher contribution to brand value. Well-differentiated brands are
also 12 times more likely to grow in value than brands with only average differentiation.
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5. Meaningful difference is not being different for its own sake – this may create a 'buzz', but without any anchoring principle in
what the brand is fundamentally about it will fall short of the mark. Nor is it solely about innovation, which continues to be
evident in the China Top 50, especially in technology. Loyalty in this category is low, however, because the speed of
innovation is so rapid that the next 'best idea' is often just around the corner.
Any difference needs to benefit consumers' lives in a distinctive way that they recognise and appreciate. It also should be
based on a consumer insight that has a business value attached to it.
Communicating differentiation is another challenge for marketers. A memorable ad, for example, can easily leave people
entertained but without any clear understanding of why to select one brand over another. Weaving meaningful differentiated
aspects into all communications is more powerful. The brands in the China Top 50 that most effectively differentiated
themselves – Yunnan Baiyo or Haier, for example – did not limit their efforts to branded communication, but infused everything
from product to service delivery with the brand essence.
Cultural distinctiveness persists across the country
Consumer attitudes will not change in a uniform way across all of China's geographic markets. There is no mass national
market in China: the country is vast, and people are very different in each city and province.
Thinking 'I'm going to China to create a market' may therefore not be the right approach to take. Brands should start with:
where is the niche? They need to look at where the consumer needs are that they can meet and where there is an absence of
major international or Chinese brands; then go in, play strong in the market, and gradually grow.
Many Chinese brands are good at providing functional benefits, but few excel at bonding emotionally with consumers.
Marketers must aim to isolate the factors that that most contribute to consumer bonding with brands in different areas and
cities, and design brand strategies around them.
The media landscape in China has fundamentally changed
Brands in China no longer have the luxury of creating one 'big idea' on one channel, most often TV, and expecting it to reach
and influence all audiences. Chinese consumers today access information via multiple channels and multiple screens. Digital
media has grown exponentially and the number of social media users is rising dramatically.
As the media environment becomes more complicated and fragmented, marketers may find that creating a bundle of smaller
ideas with a consistent brand expression is more effective. They should consider each target audience and the relevant
channels for addressing it, and be willing to invest in separate multi-channel programmes that will drive both audience reach
and impact.
They also need to create compelling content: journalists and consumers alike are looking for good stories, and respond
positively to activities that reflect a commitment to improving Chinese society.
Combining traditional media with social media activities can strengthen influence, so brands need to meaningfully incorporate
social media touchpoints into their digital marketing strategies. That means not just listening, but actively becoming part of the
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6. conversation. In the China Top 50, the Top 20 brands in social media presence average $10 billion in brand value, compared
with an average value of $3.9 billion for the other 30 brands.
Chinese consumers use social media for recreation as well as communication, and the leading sites effectively combine the
two, giving brands a platform for extending the brand experience using videos and games, for instance.
Trust is more important than ever – but it's declining
Product health and safety remain important concerns for Chinese consumers, and the Trustworthy Score for the Top 50 Most
Valuable Chinese brands declined 2% in 2012. This erosion of trust is in part is due to the rise of social media, which has
contributed to an increased number of high profile brand crises by extending and amplifying the voice of disgruntled
consumers.
Some Chinese brands have taken steps to build reputation by making their products safer, for example by forming alliances
with international brands to rapidly achieve best practices. But many still lack the strong and consistent brand identity that is a
necessary foundation for sustained consumer trust.
A clearly defined vision and values, consistently delivered, will boost credibility in the eyes of consumers. The vision should
honestly reflect the brand's reason for being and the contribution it wants to make to the community it serves.
Brands also need to effectively insert themselves into ongoing online conversations, and build trust through open and genuine
dialogue with their consumers in credible online environments.
Chinese brands are becoming global entities
Twenty seven per cent of the China Top 50 brands export to overseas markets, up from 22% in 2011. Many used to be
Original Equipment Manufacturers (OEMs) for leading Western brands, and are now posing a direct threat to them – Lenovo,
for example, has become the world's largest PC brand.
Their strategy tends to involve establishing sales channels, or mergers and acquisitions, rather than effective brand building.
But many Chinese players are now putting this on their priority list, realising they need to be able to tell the brand story
effectively and persuasively to international consumers and stakeholders. Over 65% of overseas consumers are willing to
consider Chinese brands, according to Millward Brown research, but 83% cannot name a Chinese brand. Brands should
become more important for SOEs, in particular, as they expand into overseas markets where they are relatively unknown.
Now that the appetite for brands – local and international – has been created in China, we'll never see a time when they don't
matter. China is a consumer economy, and people will choose the products and services that best meet their rational and
emotional needs.
The most successful marketers will be those who create a carefully thought-out and executed brand strategy, grounded in
insight into consumers' changing perceptions, attitudes, needs and behaviours. It will be those brands that deliver important
differences in a relevant context, targeted at certain people, which will win in China by building the strong, coherent and
motivating brand perceptions that influence purchase decisions and add value to their business.
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