globeone BRIC Branding Survey - China Edition

BRIC Branding® Survey – China Edition

The Perception of German Brands in China –

Strength, Weaknesses and Opportunities

Beijing, March 2012

Cologne | Shanghai | Beijing | Mumbai | São Paulo | Singapore

2

• About globeone

• Survey Approach

• Germany’s Image in China

• Leading German Brands in China

• Insights into Information Channels in China

• Marketing and Communication Strategies for China

• Contact

Agenda

3

Global network with strong China focus

Mumbai Office

Cologne Head Office

São Paulo Office

Singapore Office

Beijing Office

Shanghai Office

globeone is a boutique business consultancy with a strong representation in the world’s fast growth markets

We offer specialized marketing strategy consulting & project management to help driving success in the world’s key growth regions

About globeone (1/2)

4

Marketing & communication strategy consulting to drive customer success in BRIC

Exec

uti

on

St

rate

gy s

up

po

rt

Consumer & strategic market insight

1

Quantitative market research design (e.g.

market potential, segmentation)

Customer insight generation / Market trend

studies

Competitor analysis / Benchmarking

Qualitative market research (e.g. online user experience, focus groups)

2 Optimized positioning & planning

Brand architecture and brand portfolio strategies

Definition of goals and KPI’s & related strategy

development

Brand and product (re-) positioning / Value

proposition development

Business case / Market entry program development

3 Support of 360° fulfillment

Employer brand development & program

implementation

Hands-on project management & creation of professional presentations

Creation of 360°integrated activity

planning

Creation of briefings & steering of specialized

agencies (e.g. pitch support)

4 Brand performance & loyalty

Marketing spending effectiveness (e.g.

correlation of investment and sales)

Brand performance analysis and controlling

(e.g. brand monitor surveys)

CRM audit and development of CRM

strategy

Set-up of activities and programs to enhance

brand loyalty

Global Strategy + Local Adjustment = Success in BRIC

– Typical project examples of globeone for major global clients (selection) –

About globeone (2/2)

5

• About globeone

• Survey Approach





• Contact

Agenda

6

Countries/ Cities:

Brazil Russia India China

São Paulo Moscow Mumbai Shanghai

Rio de Janeiro St.Petersburg New Delhi Beijing

Porto Alegre Novosibirsk Bangalore Guangzhou

Recife Yekaterinburg Chennai Chengdu

Brasília Nizhny Novgorod Pune Wuhan

Objectives:

• Identification of Country-of-origin Image (COO-Image) relevance in BRIC

• Assessment of perception of German brands amongst urban citizens

• Strengths & weaknesses of German brands and strategic implications

Method/ Timing1:

• Inclusion of DAX, MDAX companies and other major German brands

• Computer-assisted telephone interviews: n ≈ 1,000 per country

• Field work conducted: 2011

Over 4,000 interviews in 20 of the most important BRIC cities to analyze the perception of German brands

Survey approach – Objectives and scope

Source: globeone

¹ Representative survey of urban population based on field research conducted by certified market research agencies in each country.

German brands

7

Cities:

Objectives:

• Identification of Country-of-Origin Image (COO-Image) relevance in China

• Assessment of the perception of German brands

• Analysis of China-specific strengths, weaknesses and opportunities

Method/ Timing1:

• Inclusion of DAX, MDAX companies and other major German brands

• Computer-assisted telephone interviews: n = 1,010 for China

• Selection of cities to achieve a good representation of urban China

Over 1,000 interviews in the 5 key cities in China to analyze the perception of German brands

Survey approach – Objectives and scope

Source: globeone

¹ Representative survey based on research conducted by certified market research agency in China. The city sample was selected in order to achieve a good representation of Chinese regions

German brands

Shanghai

Beijing

Chengdu

Guangzhou Wuhan

8

COO – Definition

Survey approach – Country-of-origin definition

Source: globeone

“Country of origin is defined as the country where corporate headquarters of the company marketing the product or brand are located. This does not require local manufacturing.” 2

“Consumers and customers associate positive or negative attributes with a company, product or brand if they know it originates from a certain country.“ 3

“Country-of-origin effect is one of the most analyzed phenomena in consumer behavior in international markets.“ 1

Sources: 1) Amine et al. (2005): Executive Insights: Exploring the Practical Effects of Country of Origin; 2) Daniels, J.D./ Radebaugh, L.H., (2002): International Business ; 3) White, P.D./ Cundiff, E.W. (1978): Assessing the quality of industrial products

Country-of-origin as key factor for purchase decisions in China

COO – High interest eST

9

Survey approach – Country-of-origin in China

Source: globeone

COO-Image – Important success factor in China

Upper middle class consumers in China are particularly sensitive related to the COO-Image resulting from

• Local consumers’ demand for prestigious brands to highlight their social progress

• Lower availability and higher novelty of foreign brands is also boosting their image

• Limited trust: Lower Level of quality and marketing competence of local brands in most emerging markets

China-specific relevance of a positive COO-Image

A positive COO-Image can:

• Increase perceived quality and prestige of a brand

• Promote consumers’ purchase intentions in favor of a brand

-> Potential for increasing brand performance dependent on industry and product category

General relevance of a positive COO-Image – Perception of a brands’ corresponding country of origin –

!

http://www.fahnenkontor24.de/javasc






10

• About globeone

• Survey Approach





• Contact

Agenda

11

47% associate positive image

• Roughly half of respondents have a positive attitude towards German brands

• Only a very small fraction (6%) that dislikes German brands

• Opportunity for an effective positioning utilizing the country-of-origin potential

German image as asset – Half of urban population in China confirms positive image of German brands

Germany’s image in China – General attitude towards German brands

Q.: Do you like German brands, products or services?

– General attitude towards German brands in China –

Source: globeone

!

Sample size in China: 1,010

1%

5%

47%

38%

9%

0%

10%

20%

30%

40%

50%

I do not likeGerman brands

at all

I do not reallylike German

brands

I do not have apreference

I like Germanbrands

I like Germanbrands very

much

12 Source: globeone

Germany’s image in China – Income-class-specific attitude towards German brands in China

German brands enjoy substantially higher reputation in middle class/ upper middle class

I do not like German

brands at all

I do not really like German

brands

I do not have a preference

I like German brands

I like German brands very

much

Q.: Do you like German brands, products or services?

– Liking of German brands across social classes (according to gross monthly income in €) –

– Middle class – (> 2,000)

2%

41%

34%

7%

16%

– Upper middle class – (> 4,000)

0%

11%

44%

11%

33%

– Emerging middle class – (< 900)

2%

38%

47%

5%

8%




13

Germany’s image in China – Detailed perception of brand and product attributes (1/2)

1

2

3

4

5

6

7

0% 20% 40% 60%

Germany most strongly associated with traditional values like quality and reliability

– Perception of brand and product attributes of brands from different countries in China based on respective countries –

Excellent quality

Good reliability

High durability

High performance

Outstanding design

High prestige

Sophisticated

Q.: We are interested in the important brand & product characteristics e.g. design, quality etc. Which countries are most strongly associated with these characteristics?

Germany

US

Japan

China

Source: globeone


14

German brands are not seen as very innovative or exciting but score high in terms of being trustworthy

1

2

3

4

5

6

7

8

0% 20% 40% 60%

Innovative & high-tech

Fashionable & exciting

Close to local customer needs

Good after-sales service

Good value for money

Trustworthy

Good corporate citizenship

Protecting environment & climate

Germany’s image in China – Detailed perception of brand and product attributes (2/2)

Source: globeone

Germany

US

Japan

China

Sample size in China: 1,010 Q.: We are interested in the important brand & product characteristics e.g. design, quality etc. Which countries are most strongly associated with these characteristics?

– Perception of brand and product attributes of brands from different countries in China based on respective countries –

15

Source: globeone

26%

31%

39% 40%

46%

0%

10%

20%

30%

40%

50%

France China US Japan Germany

German brands enjoy the best reputation in China based on 15 relevant performance indicators

Germany’s image in China – Country image strength index

– Country-of-origin image strength index –

(average scores of 15 relevant dimensions)


16 Source: globeone

• German brands are mostly perceived as relatively expensive reflecting their focus on the premium segments

• Large potential to target emerging middle class with more locally adjusted product portfolio consisting of less expensive German brands/ products

1% 3%

40%

50%

6%

Very cheap Relatively cheap Similar to othercountries' brands

Relatively expensive Very expensive


– Price perception of German brands in China –

Q.: What do you think about German brands in terms of price?

Very cheap Relatively

cheap Very

expensive Relatively expensive

Similar to other countries` brands

56% of interviewees in China perceive German brands as relatively or very expensive

Germany’s image in China – Price perception

17 Source: globeone

– Industries/ categories most commonly associated with Germany –


13%

16%

16%

16%

17%

30%

42%

47%

57%

78%

0% 20% 40% 60% 80% 100%

Eco friendly technology

Detergent

Food

Clothing / Fashion

Services (insurance etc)

Cosmetics / Perfume

Pharmaceuticals / Medicine

Home appliances

Football

Machinery

Automobile / Motorcycles

• Traditional industries like automotive and machinery lead the ranking

• Eco-friendly technology not yet strongly associated with Germany yet

• German brands less likely to be associated with consumer goods and services

Q.: What categories do you think German brands are famous for?

11%

Germany most famous for cars, machinery, home appliances and pharmaceuticals

Germany’s image in China – Categories with highest association

18

8%

8%

10%

11%

11%

18%

20%

31%

35%

38%

39%

43%

0% 10% 20% 30% 40%

Zwilling

Puma

Nivea

Bayer

Porsche

Adidas

Metro Cash & Carry

Audi

Volkswagen

Siemens

Mercedes-Benz

BMW

– Unaided awareness for German brands in China (top 12) –

Q.: Which German brands do you know ? Please name as many as come to your mind spontaneously.

0%

20%

40%

60%

80%

100%

Can recall aGerman brand

Can't recall aGerman brand

Vast majority of interviewed Chinese population is consciously aware of multiple German brands

Source: globeone

85%

15%

Germany’s image in China – Unaided awareness


19

• About globeone

• Survey Approach





• Contact

Agenda

20

• German car manufacturers lead the top 12 ranking

• BMW (98%) is best-known German brand followed by Audi (97%)

• Siemens (95%) is only non-automotive brand among top 5

• Nivea (65%) is only FMCG brand in top 12

– Aided awareness in China (top 12) –

Q.: I will read you a list of German brands. Please tell me, which brands do you know?

0% 20% 40% 60% 80% 100%

BMW

Audi

Mercedes-Benz

Siemens

Volkswagen

Adidas

Porsche

Puma

Nivea

Metro Cash & Carry

Skoda

Bayer

98%

97%

97%

95%

93%

85%

82%

73%

65%

65%

53%

52%

(991)

(979)

(977)

(959)

(941)

(862)

(832)

(737)

(657)

(656)

(536)

(530)

Source: globeone

Leading German brands – Aided awareness (1/3)

Top 12 – Car manufacturers lead best-known German brands with BMW as single most known brand


21

• Deutsche Bank (35%) is leading financial service brand in ranking followed by Allianz (27%)

• smart (17%) with significantly lower awareness than other German car brands, while MINI commands much higher awareness (42%)


0% 20% 40% 60% 80% 100%

52% Braun

Miele

smart

MAN

Carl Zeiss

Hugo Boss

Lufthansa

Allianz

Deutsche Telekom

Leica

Continental

Becks

Deutsche Bank Henkel

Bosch

Osram

MINI 42%

41%

38%

37%

35%

32%

29%

28%

28%

27%

26%

23%

23%

19%

18%

16%

(527)

(428)

(410)

(379)

(369)

(356)

(327)

(297)

(287)

(280)

(269)

(258)

(230)

(230)

(195)

(177)

(161)

– Aided awareness in China (rank 13 to 30) –

Source: globeone

Rank 13 - 30 – Deutsche Bank and Allianz as most prominent financial service brands


33% Zwilling (336)


22

7%

7%

7%

10%

– Aided awareness in China (rank 31 to 45) –

• Media Markt (13%) opened its first Chinese store in 2010, however, its awareness is higher than Dr. Oetker (11%) and Paulaner (11%)

• ERGO (8%) is least known service brand in ranking

• Worldwide industry leader ThyssenKrupp (7%) and SAP (7%) last the ranking


0% 20% 40% 60% 80% 100%

16% Hansgrohe

Haribo

Bertelsmann

Boehringer-Ingelheim

Media Markt

Dr. Oetker

Paulaner

DHL

LANXESS

BASF

ERGO

Grundig

Linde

SAP

ThyssenKrupp

15%

15%

13%

13%

12%

11%

11%

11%

9%

8%

(157)

(156)

(147)

(134)

(127)

(119)

(115)

(115)

(107)

(106)

(90)

(73)

(73)

(71)

(76)

Source: globeone


Rank 31 - 45 – B-to-B brands overall with lower brand awareness among urban citizens


23

• German top 12 brands are liked by 71% or more of respondents

• Automotive brands lead ranking with BMW and Mercedes-Benz (both 88%) as best liked brands in China

• Siemens (79%) is the only non-automotive brand among top 5

• Metro Cash & Carry (74%) as only B-to-B brand among top 12

Leading German brands – Positive image (1/3)

Q.: Do you like this brand in general? (Only brands known to interviewee)

– Positive attitude towards German brands in China (top 12) –

Source: globeone

Top 12 – Automotive industry leads ranking with BMW and Mercedes-Benz (both 88%) as best liked German brands

0% 20% 40% 60% 80% 100%

BMW

Mercedes-Benz

Audi

Porsche

Siemens

Adidas

Metro Cash & Carry

Volkswagen

Zwilling

Carl Zeiss

Braun

88%

88%

87%

87%

79%

79%

74%

73%

72%

72%

71%

(991)

(977)

(979)

(832)

(862)

(959)

(656)

(941)

(336)

(230)

(527)

71% MINI (428)


24



Rank 13 - 30 – Bayer leads ranking as best liked German pharmaceutical brand in China

– Positive attitude towards German brands in China (rank 13 to 30) –

Source: globeone

• Bayer (69%) leads the brand image in pharmaceutical sector

• Beer brand Becks (61%) enjoys greater popularity than Paulaner (56%)

• FMCG brands Nivea and Haribo liked by more than 63% of interviewees

0% 20% 40% 60% 80% 100%

Leica 70% (287)

Bayer 69% (530)

Osram 69% (410)

Bosch 68% (379)

Nivea 67% (657)

Puma 66% (737)

Hugo Boss 65% (230)

Haribo 63% (156)

Lufthansa 62% (258)

Becks 61% (327)

Hansgrohe 61% (157)

Boehringer-Ingelheim 61% (134)

smart 60% (177)

Henkel 57% (369)

Grundig 57% (76)

Dr. Oetker 56% (119)

Paulaner 56% (115)

AEG 57% (67)


25



Rank 31 - 45 – ERGO and Deutsche Telekom enjoy relatively low positive attitude

• DAX 30 aspirant Continental leads lower third with 55% of ranking

• Financial service providers like ERGO, Deutsche Bank and Allianz with relatively low positive image (maximum 47%)

• Service provider SAP with relatively low positive recognition

0% 20% 40% 60% 80% 100%

53% DHL (115)

52% Skoda (536)

ThyssenKrupp 52% (71)

Miele 50% (161)

MAN 49% (195)

Media Markt 46% (127)

BASF 46% (106)

Deutsche Bank 45% (356)

Linde 45% (73)

Bertelsmann 40% (147)

ERGO 40% (90)

Deutsche Telekom 39% (280)

Allianz 47% (269)

– Positive attitude towards German brands in China (rank 31 to 45) –

Source: globeone

55% Continental (297)


SAP 37% (27)

26

Leading German brands – Recognition of German brand origin (1/3)

Q.: Do you think this brand is originally from Germany or not? (Only brands known to interviewee)

Source: globeone

• Deutsche Telekom and Deutsche Bank lead ranking due to “Deutsche” in brand name

• None of leading car manufacturers among top 7

• MAN (77%) with its Chinese translation “German MAN” claim scores highest recognition of German origin among mobility brands

• German origin of niche player Zwilling scores by 80%

Top 12 – High recognition of “German origin” for top 12 brands

94%

93%

89%

84%

80%

77%

77%

77%

75%

75%

75%

75%

Deutsche Telekom

0% 20% 40% 60% 80% 100%

Deutsche Bank

Continental

Boehringer-Ingelheim

Zwilling

Siemens

Metro Cash & Carry

MAN

Mercedes-Benz

Bayer

Lufthansa

ThyssenKrupp

(280)

(356)

(297)

(134)

(336)

(959)

(656)

(195)

(977)

(530)

(258)

(71)

– Recognition of “German brand origin” (top 12) –


27


• Car brands with relatively high recognition of “German origin”

• Volkswagen using its “Das Auto” claim scores 69%

• Grundig, now owned by Turkish Koç Holding, still perceived as a traditional German brand (63%)

Source: globeone

Rank 13 - 30 – German car brands like Volkswagen with relatively high recognition of German origin

74%

73%

70%

70%

69%

67%

65%

65%

64%

64%

63%

63%

61%

59%

56%

55%

55%

54%

BMW

0% 20% 40% 60% 80% 100%

Braun

Audi

Bosch

Volkswagen

Osram

Henkel

Becks

Leica

Carl Zeiss

Grundig

Linde

Haribo

Hansgrohe

BASF

Allianz

Adidas

(991)

(527)

(979)

(379)

(941)

(410)

(369)

(327)

(287)

(230)

(76)

(73)

(156)

(157)

(106)

(269)

(862)

– Recognition of “German origin“ of German brands (rank 13 to 30) –

Q.: Do you think this brand is originally from Germany or not? (Only brands known to interviewee) Sample size in China: 1,010

MINI (428)

28


Q.: Do you think this brand is originally from Germany or not? (Only brands known to interviewee)

Source: globeone

• Volkswagen’s Skoda (33%) and Mercedes-Benz’s smart (51%) with relatively low recognition of its “German origin” in automotive sector

• Nivea has the least German recognition among FCMG brands

• Hugo Boss (51%) and Puma (43%) both have relatively low recognition of “German origin”

Rank 31 - 45 – Skoda with lowest “German origin” recognition despite its German mother company

53%

LANXESS 52%

51%

51%

50%

49%

49%

48%

47%

43%

40%

39%

39%

37%

33%

0% 20% 40% 60% 80% 100%

smart

Hugo Boss

Dr. Oetker

Bertelsmann

Paulaner

ERGO

Puma

Nivea

Miele

AEG

DHL

Media Markt

Skoda

(107)

(230)

(177)

(147)

(119)

(90)

(115)

(657)

(737)

(67)

(161)

(127)

(115)

(536)

– Recognition of “German origin“ of German brands (rank 31 to 45) –


Porsche (832)

29

• Top 12 mainly consists of brands from B-to-C sector led by Adidas (56%) and Siemens (48%)

• Volkswagen (15%) as most purchased/ used German automotive brand

• Adidas’ competitor Puma only bought/ used by 28% of the interviewees, 28% lower than Adidas

Leading German brands – Purchase/ usage (1/2)

Q.: Which German brands have you bought or which services have you used? (Only brands known to interviewee)

– Purchase/ use of German brands in China (top 12) –

Source: globeone

56%

48%

39%

37%

28%

18%

19%

Adidas

0% 20% 40% 60% 80% 100%

Siemens

Metro Cash & Carry

Nivea

Puma

Braun

Bayer

Zwilling

Osram

Henkel

Becks

(565)

(485)

(390)

(371)

(282)

(190)

(179)

(125)

(111)

(131)

(97)

Top 12 – Leading brands with high purchase/ usage rate with Adidas at top spot


12%

11%

11%

10%

Volkswagen 15% (148)

30

Leading German brands – Purchase/ usage (2/2)

– Purchase/ use of German brands in China (rank 13 to 30) –

Source: globeone

• Audi (7%) as second most purchased/ used German automotive brand and first most purchased/ used German premium car brand ranked 14th

Rank 13 - 30 – Audi as most purchased/ used German premium automotive brand

Audi

0% 20% 40% 60% 80% 100%

Leica

Carl Zeiss

Mercedes-Benz

BMW

Lufthansa

Skoda

Haribo

Bertelsmann

Continental

Allianz

Miele

Hansgrohe

DHL

Porsche

(68)

(22)

(73)

(69)

(47)

(45)

(37)

(34)

(27)

(33)

(16)

(21)

(20)

(33)

(14)

(10) MINI

Q.: Which German brands have you bought or which services have you used? (Only brands known to interviewee) Sample size in China: 1,010

7%

7%

7%

Bosch (101) 10%

5%

4%

6% Hugo Boss (65)

4%

3%

3%

3%

2%

2%

2%

2%

2%

1%

1%

31

• About globeone

• Survey Approach





• Contact

Agenda

32

Internet is the most used source to learn about foreign brands in China

Sample size in China: 1,010 1 Category Internet includes Internet search engines, social media and corporate website research Q10.How do you generally find out/ learn more about foreign brands?

– Sources of information to find out/ learn more about foreign brands –

Insights into information channels – Key sources (1/2)

Source: globeone

0% 10% 20% 30%

Family/ friends

Internet1

TV

Shopping center/ store

Newspaper/ magazines

Radio

34%

17%

12%

11%

7%

3%

16%

Event/ tradeshow

33

Within digital communication, internet search engines, social media and corporate websites are most relevant

Q10.How do you generally find out/ learn more about foreign brands?

– Sources of information to find out/ learn more about foreign brands –

Insights into information channels – Key sources (2/2)

Source: globeone

0% 10% 20% 30%

Internet search engines

TV

Family/ friends

Shopping center/ store

Social media

Event/ tradeshow

Radio

16%

12%

11%

7%

5%

17%

Newspaper/ magazines

Corporate website

17%

12%

3%


34

• About globeone

• Survey Approach





• Contact

Agenda

35

Further improving China performance through effective strategies

Strategies for China – Leveraging maximum brand potential to grow sales

• Success in China requires dedicated action and a clear strategic roadmap

Strategic implications for corporations:

Source: globeone

• 1:1 transfer of ‘developed market’ strategies rarely successful

• Almost continental complexity of China as key challenge for annual strategy development and alignment of country organizations

• Fact-based adjustments regarding strategic focus, relevant target groups and brand strategy necessary

• Different levels of brand performance require a differentiated approach and COO - strategy

- China brand performance analysis -

36

Selected communication challenges China

Strategies for China – Leveraging maximum brand potential to grow sales (1/2)

Corporation with low brand awareness and thus low general brand performance in all major dimensions in China

- Key challenges - • Lack of fact-based ‘one-world-strategy’ for China • Local organizational setup not sufficient • Inability to bridge gap between HQ and country team • Unclear definition of market-driven strategy and

local target groups and needs • Ineffective activation strategy & media investment to

communicate above ‘perception threshold’ • Ineffective utilization of media vehicles / insufficient

media investment

25%

50%

75%

100%

0%

Corporation with high awareness but weak image as compared to industry benchmarks

25%

50%

75%

100%

0%

Awareness Image Recognition Purchase Loyalty

Awareness Image Recognition Purchase Loyalty

- Key challenges - • Under-utilization of local customer insights and thus

no quick wins • Absence of a relevant positioning adjusted to local

target group expectation (e.g. prestige appeal) • Low differentiation to key competitors/ local hero

brands in China • Lack of creative execution and effective media

strategy • Shortcomings in locally relevant story-telling

- China brand performance -

Source: globeone

Awareness challenge 1


Image challenge 2

37

German origin and activation challenge

Strategies for China – Leveraging maximum brand potential to grow sales (2/2)

Source: globeone

German roots of the brand not properly recognized

- Key challenges - • Missing link to German origin of a brand • Advertising, PR, event or online activities lacking

proactive communication of German brand heritage and thus no realization of additional image and price premium potentials

• Lack of story telling related to the brand history although brand history is one of few competitive advantages that cannot be easily imitated

• Absence of educational approach

Brand enjoys good reputation but purchase behavior and loyalty remain below industry benchmarks

Awareness Recognition Purchase Loyalty

- Key challenges - • Lack of a strategy to appeal to middle income groups

as well (e.g. creating low-cost brands for more price sensitive target customers)

• Limited local distribution points • Lack of implementing sequential expansion

strategies in line with regional development • Under-utilization of global CRM basics and related

systems in the local market • Lack of effective activation at POS & in social media

German origin challenge 3

Activation & loyalty challenge 4


Image

25%

50%

75%

100%

0%

25%

50%

75%

100%

0% Awareness Recognition Purchase Loyalty Image


38

• About globeone

• Survey Approach





• Contact

Agenda

39

Global offices

globeone

Cologne Head Office

Kranhaus Süd

Im Zollhafen 24

50678 Köln

Germany

Shanghai Office

16F Feidiao Internat. Building

1065 Zhao Jia Bang Road

200030 Shanghai

People's Republic of China

Mumbai Office

B 806, Sagar Tech Plaza

Sakinaka Junction

Andheri Kurla Link Road

Andheri (East)

Mumbai 400072

India

São Paulo Office

Singapore Office

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Office 39, Room 509A

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39

Contact

Cologne I Shanghai I Beijing I Mumbai I São Paulo I Singapore

Thank you!

41

Factors that drive the need for local adjustment

Different macroeconomics

and political environment

Different ways to conduct business

Different key competitors

Different regional/city

structures

Different cultural background and

expectation

Different experience levels

Different languages

Different perceptions of

brands and country image

Different habits and media behavior

Different ways to display social

status

Different needs and expectations / brand drivers in key target

groups

Need for sufficient adjustment as far as required to ensure

business success

42

- Relevant impact factors in China (selection) -

A successful approach to branding recognizes these cultural specifics of transitioned

Economy in transition Regional disparities Cultural differences

• Cultural differences are relevant for fashion-makers as well

• Strong tensions that arise from increasing levels of individualism in a traditionally very collectivist society (e.g. family acceptance, personal relations)

• Specific communication habits (e.g. preference for personal communication and relationship building, importance of word-of-mouth and recommendations)

• Socialist heritage (e.g. clear rejection of uniform offers, strong wish not to be treated as 2nd class customer)

• The quick transition of the Chinese economy influences purchasing patterns

• Buying as symbolic consumption (e.g. as manifestation of the own social status and cosmopolitan sophistication)

• High prestige value of foreign brands • Intensive wish to “catch up” with

customers in other countries (global village idea)

• Low level of brand loyalty and high readiness to try new concepts

• Social heterogeneity of target groups and broadly varying economic and social backgrounds

• Increasing need to reflect regional differences in a pragmatic way

• Tremendous regional differences with regard to various marketing-relevant parameters

Income and price sensitivity

Specific customer needs

Purchase behavior

Preferences

• Many companies apply a pragmatic city-tier approach that differentiates between 2-3 regional segments

43

Some common factors in BRIC markets 1/2

• Higher heterogeneity and complexity to be considered • Need to work with city tiers and regional clusters • Sequential entry approaches ( it’s all about timing) • Local relationships required

Huge geographical size: The BRICS are more continents than countries

• Importance of proper market segmentation • Understanding key brand drivers (e.g. status appeal, convenience, …) • Different relevance of foreign brands • Quick changes of segments and correct selection of growing segments

• High media cost (e.g. Shanghai as expensive as New York) • Usual trap of communicating below the necessary level for perception • Importance of clear and straight format positioning • Importance of cut-through creative execution and PR

• Need for local competitor analysis / best practices • Need for differentiated and relevant positioning + USP • Understanding of ‘category killers’ required • Need to maintain good relationship with local authorities / government

- Factors - - Implications / Selections -

Local champion brands and competitive pressure

1

2

3

4

Fast transition of economy: Emerging middle class changes behaviors quite quickly

High competition for share of voice

44

Some common factors in BRIC markets 2/2

• Adjustment of specific marketing-mix parameters required • ‘Educational’ marketing approaches ( e.g. brand academy) • Storytelling and brand heritage is key to develop price premium • Systematic lead generation and loyalty building required

• Awareness about local price sensitives and competitor prices • Understanding ‘added value’ of the foreign brand correctly • Consideration of brand stretching or creation of ‘value brand’ • Fact-based pricing and cost management • Impact on global pricing scheme / brand architecture likely

• Extremely high importance of digital COM channels • High overlap between higher incomes and digital access • Higher activation through E-CRM • The internet is mobile !

- Factors -

Generally lower experience and brand knowledge in many product categories and lower levels of brand loyalty

5

7

Higher digital and mobile media affinity

Pressure on prices / higher price sensitivity

6

- Implications / Selections -

45

Importance of a strong and locally adjusted brand

Differentiation from other competitor brands

High competition for share of voice

Downward pressure on prices in many categories

Cultural specific factors

Brand as an important decision-criterion after price for high-income target groups

High share of customers who have not yet chosen a favorite brand

Building of long lasting brand preferences

Emotional benefit and appeal of foreign brands / concepts if adjusted properly

Strong impact on sales and leads

Generation of price premiums

Mar

ket

imp

act

fact

ors

46

Local adjustment is not localization !

• Reducing the foreign appeal or even pretending to be a local brand

• Fully embracing the local culture, and local tastes

• Playing in the same field with local heroes

• Limiting negative influences if consumers’ patriotism or government intervention is high

• High relevance for local target groups

• Utilizing local brand drivers

• Highlighting status appeal and sophistication of the foreign brand

• Highlighting the Country-of-Origin (if appropriate) to differentiate and create price premium

• Avoiding inappropriate messages / acceptance barriers

• Using locally effective and cost-efficient marketing mix

Brand adjustment Localization

Optimizing performance, not becoming a local brand !

Becoming a local brand (can be functional in some extreme cases)

47

Successful corporations recognize the need for careful brand adjustment

• Launch of Crest toothpaste with jasmine flavor. Chinese consider jasmine as a universal remedy for bad breath.

• Packaging and shelf space differ according to premium or middle brand in order to avoid confusion and cannibalization.

• Development of a differentiated pricing system with the aim to compete better with local cheap brands as well as simultaneously maintain the perceived value of the brand.

• The waiving of their famous “do it yourself” approach in China. But instead offering of assembly service at home for a low fee.

• Selection of store locations in the cty centers and an offer of special delivery services.

• The name in Chinese “Yi Jia” means: comfortable home for the family.

• Nokia was one of the most expensive mobile phone brands until 2002.

• In order to approach and younger generation and grow in the middle market Nokia developed a new low-price range for below 1,000 RMB ($120).

• Simultaneously Nokia ensures to strengthen the positioning as a premium-brand. For example the Nokia 8800 was offered at a price of 8,800 RMB (€ 880).

• Traditional offers such as sandwiches with Beijing duck, tomato-egg soup and bamboo sprouts were integrated in the menu.

• A breakfast special was introduced (not available in the USA).

• Chinese holiday decoration is extensively used during bigger festivals (especially during the Chinese new year).

• Home delivery service.

48

The preference for foreign vs. local brands depends on a set of key factors

Status relevance

• Illustrating buying power and prosperity is one of the key drivers for many purchase decisions

• In transitional economies: Consumers generally use foreign brands as a tool to display status

• Motivators for the use of foreign brands: Social Prestige – (I can afford) Display of “Cosmopolitan Sophistication” “Being part of the global village” Overcome the shortcomings of the past

• Key goal: To experience a better treatment by social reference groups

Source:

Product category Patriotic

orientations Income level

49

The decision for a local versus foreign brand is heavily dependent on the product category

Status relevance

• The product category is a key factor to decide between a foreign and a Chinese brand

• Some product categories are close to local culture (e.g. food, medicine, liquor for festivals)

• Other categories are not strongly bound to culture (e.g. more innovative categories like cars, electronics, sports equipment and most B2B markets)

Source: Various sources compiled by globeone . Literature upon request.



50

Consumer patriotism is also important for the individual to make a choice

Status relevance

• Preference for foreign versus local brands also depends on the degree of consumer patriotism

• There are certain segments in Chinese society that are more patriotic than others (e.g. „traditional party elites“, lower income consumers, elderly)

• Chinese pragmatism: Even among patriotic consumers there usually is no strict rejection of foreign brands or even Japanese brands

Source: Various sources compiled by globeone. Literature upon request. .



51

A higher income level is a precondition to a frequent purchase of foreign brands

Status relevance

• The preference for a certain brand is highly dependent on the target group’s: Income level Ability to afford foreign brands

• Having reached a certain degree of prosperity, the urban Chinese consumers show a relatively high preference for foreign brands across many categories

• The rapid growth of the Chinese middle class (“little rich”) is likely to have a positive impact on the purchase of foreign brands

Source: Various sources compiled by globeone. Literature upon request. .



52

The emergence of the middle class: Consumption behavior and brand choice is in constant flux

Source: : National Bureau of Statistics of China; Farrell, D. et al. (2006).

Emerging of

lower middle

class segment Emerging of

upper middle

class segment

Upper Middle Class (40.001 – 100.000 RMB)

Lower Middle Class (25.001 – 40.000 RMB)

Poor (below 25.000 RMB)

Mass Affluent ( 100.001 – 200.000 RMB)

Affluent ( more than 200.000 RMB)

estimation

53

Excursus: Different countries, different target groups

- Example: Financial services for relatively affluent customers -

Germany China

Most affluent group: 42-62 28-40

Characteristics of key target group:

Conservative, serious, experienced Young, prestige-driven, curious, playful, willing to try

new things

Loyalty: High Low, frequent switching

Key dimensions for branding:

Reliability, trust, security, service Prestige, services, high yield performance, excitement

Typical market approach: Mailings, traditional newspaper ads “Hello Kitty“ co-branded credit card,

aggressive field promotion teams

54

There are three major positioning configurations

Source: : globeone

Status Level: High

Product: Not bound to culture

Patriotic Orientation: Low

Income Level: Affluent

Status Level: Medium

Product: Not closely related to culture

Patriotic Orientation: Medium

Income Level: Mass Affluent/Middle Class

Status Level: Medium/Low

Product: Close to local culture

Patriotic Orientation: Medium/ High

Income Level: Middle Class/Mass Market

Global

Hybridized

Local

1

2

3

4

1

2

3

4

1

2

3

4

55

Examples for elements that might require selective adjustments to boost market performances

What is a brand?

‘ It is the consumers’ idea of a product or service’

Memorable

Meaningful

Likable

Unique

Brand name

Price positioning

Packaging

Claim / Slogan

Logo, design and colors

Brand association, key visuals

Symbolism (e.g. cultural symbols)

Positioning and key messages, target group

Country-of-Origin (COO)

Brand

name and

CI

Brand

Values

Other factors (selection)

56

Importance of marketing and communication excellence in BRIC: Why bother?

Source: : globeone Shanghai

Corporate performance

and shareholder

value

Enhanced brand value* More sales growth

Generation of price premium through proper strategy and positioning

Enhanced stock market performance through aligned story-telling

* More market penetration = higher brand value

1 2

3 4

57

- Example for a consumer market segmentation-

High importance of understanding the market structure and dynamics

Source: globeone, market research partners

• Lifestyle and value orientation are

important influence factors of

preference and purchase decision

• Correct identification of the main

preference of target group based

on qualitative and quantitive

researches

• Find ways to bridge tradition and

modernity

• Example luxury car:

Researches show high

relevance and complexity of

social status in China which is in

the transformation !

!

!

2010 ( current) Possible segmentation 2013 (Illustration)

Brand

Essenc

e

50

%

CO

O

Brand drivers of the modern business elite 1. Distance to the old system

2. Social status

3. Demonstration of superiority

4. Outstanding security

5. Technology

58

Local values and consumption motifs heavily impact positioning and messaging

Source: : globeone

Confucianism

Collectivism/ Social responsibilities

National pride

Transformation into market economy

Foreign influences and modernization

High relevance of status and social prestige (strong desire to show

personal success)

Wish to be recognized as a driving force of China (“movers and shakers”) and to cosmopolitan sophistication.

Desire to “explore the world” and to experience exciting things

(be part of the “global village”)

Strong perceived importance of family and children as well as pressure to

meet expectations of parents/ancestors

59

globeone’s BAM®- Methodology – Fact-based adjustment of leading brands

- Analytical process of brand adjustment translates in an optimised brand positioning that is transferable into precise marketing plans-

Source: : globeone

Basic VP concepts according to local key preferences

Fine tuning and test of final concepts

Analysis of key competitors regarding brand status and communication

Global brand essence and brand status

Pro

cess in

pu

t

VP routes adjusted to global brand essence/-status (Consistency, Reliability)

VP routes with high degree of distinction (Differentiation)

VP routes market potential (Relevance)

Preferred concepts, which could be tested with focus group (optimised concepts)

BMW 7 Series.

Recent example of a brand campaign with focus on brand heritage

Slide 60 | March 2009 | BBDO Consulting Shanghai

BMW 7 Series.



BMW 7 Series.



BMW 7 Series.



BMW 7 Series.

