LABReport

WHAT DOES THE ECONOMIC SLOWDOWN MEAN FOR BRANDS IN CHINA ?

When the Going Gets Tough: The Case for Brand-Led Market Research

Why Brand Management is Even More Important in a Slowing China

RESEARCH

STRATEGY

P03

P13

Sustaining Growth through Digital Innovation

The Six Laws of Chinese Brand Naming

DIGITAL

NAMING

P09

P20

Dear Reader,

We are excited to announce the March issue of LABReport, our quarterly publication dedicated to branding in China. In each issue, we pose a major question, and leave it to our Labbrandians to analyze and answer. In our articles we alternate between five lenses in line with our specialties: naming, digital, design, research, and strategy.

For March 2016, the question we posed is omnipresent: How does the economic slowdown affect brands in China? No brand can escape the consequences of an economic slowdown. Big or small, B2B or B2C, every brand has had to carefully audit their existing practices and make long-term strategic decisions to survive in a hyper-competitive and increasingly volatile marketplace.

But what is it like in the belly of the beast, where a slowdown in manufacturing is causing anxiety around the world?

This compilation of four articles – research, digital, strategy and naming – aims to shed light on what brands can expect to see in China, from the consumer, the marketplace, and of course the brands, in a time of great growing pains.

How can your brand stay ahead? The answers may surprise you.

Vladimir Djurovic and the LABReport Teamlabreport@labbrand.com

Words from the Editor LABReport Team

chief editorVladimir Djurovic

editorsBenjamin NoyesCharlotte ZhangDenise Sabet

graphic designRachel Li

staff writersBenjamin NoyesFreya ZhangKevin GentleZoe Ju

media contactmedia@labbrand.com

Scan to follow us on WeChat: Labbrand朗标

3labbrand.com

When the Going Gets Tough: The Case for Brand-Led Market Research

There has always been a balance in the Chinese economy between agriculture, manufacturing and service.

For those of us who remember our Chinese history, agriculture was crucial to the Middle Kingdom, from the invention of rice paddies during the Sui to new agricultural technology invented during the Ming and Qing. Over time, the agricultural era waned; a connected world and a culture of strong work ethic drove Manufacturing to the forefront. Then came Deng in ’78. With China’s doors open, Manufacturing led the way, both within the national economy and on the global playing field. The Steel industry in China, to give an example, experienced double-digit growth between 2001 and 2011. Most companies who were producing a good at scale chose China as their home base for production. (Diagram 1)

Freya Zhang, Associate Research Director Benjamin Noyes, Corporate Branding Team

4labbrand.com

Now again, market dynamics are changing, for three main reasons:

• Rising production costs. Factory costs are rising – wages are increasing, political subsidies are becoming ever more rare and the cost of goods used in manufacturing is rising substantially.

• Consumers want more. The emerging middle class will spend 5% more annually and the upper middle class 17% more. More sophisticated consumers demand a higher quality of good.

• Other opportunities. More stratified and customized products led by an ever-expanding E-commerce network reward specialization in areas other than manufacturing.

As in any country, China’s best and brightest follow the money.

PUSH-PULL ECONOMIES

Marketing and Branding Strategy in the era of manufacturing was very simplistic. The key was to push your product, idea, or brand onto as many people as possible. “Build it and they will come” was the pervasive mentality.

Now, with a population of 1.3 billion and growing, consumers in China are becoming more stratified. Their tastes are more unique and their standards are higher. It is useless to just “push” product on consumers – they have unlimited options when choosing what will suit their need, so breaking into a category or growing your brand’s profitability means stealing market share through specific and strategic niche targeting.

Chinese Econimic Balance, pre – 1980

Diagram 1

Chinese Econimic Balance, 1980 – 2010

Chinese Econimic Balance, 2010 – 2050

Agriculture ManugacturingService

5labbrand.com

A brand, and its offerings, must “pull” consumers in with unique functional and emotional benefits that are uncovered during research, usually qualitative techniques. Our research shows that these emotional benefits become more and more important as leading brands build strong relationships with consumers in China, paving a different and more mature way to brand loyalty.

In so many words, consumers in China are now more attune to what the brand – rather than just the product – can bring them. So the question becomes how to leverage this.

CONSUMER COLLABORATION

The answer is simple: ask! Pinpointing emotional benefits of a growing segment through research is the only way to ensure relevancy to your audience. We find ourselves in the age of Consumer Collaboration – people want to be heard. They want to know that a brand is listening and tailoring their offerings, to a certain extent, from that insight.

Consider Rexona, a deodorant brand of Unilever, the largest deodorant supplier in the world. Rexona was troubled by a lack of consumer responsiveness. So, they set out to understand the market and collaborate with consumers through Focus Groups and Digital Customer Communities, a unique MR tool that functions as a medium-population online discussion platform, measuring attitudes and perceptions over several weeks.

It turned out the core problem was actually with the cognitive mapping of the product category. The original category name, 止汗香体 [zhĭ hàn xiāng tĭ], implied blocking/stopping sweat and spawned health concerns – respondents noted that while sweating can be uncomfortable and should not be noticed by others, “blocking” sweat was extremely unhealthy and suffocating to one’s body. Through our research methods we discovered that the feelings of freshness and confidence were most in tune with what consumers wanted – so, Rexona changed the category name to 爽身香体 [shuăng shēn xiāng tĭ], which evokes meanings of coolness, chillness, and a good-smelling body. Rexona realized increased profitability as a result.

6labbrand.com

FOLLOWING BRANDS

FOLLOWING BRANDS

FOLLOWING BRANDS

FOLLOWING BRANDS

Understanding how these emotional connections change over a consumer’s lifetime is the minimum for an agile brand. How do needs evolve with a job change, a family change, a living environment change? All of these directly impact consumption patterns and brand preference.

But collaborating with consumers does not mean you have to follow – sometimes the best method is to carve a path forward. (Diagram 2)

By looking at the past and analyzing in-depth what is happening right now, in terms of pop culture, macro trends, and overall product category preferences, brands can create product innovations that capture the attention and the loyalty of their target as they evolve. The stakes are high as shaping such preferences requires a mastery of the local market. But the rewards are even greater.

QUAL V QUANT

Whether your goal is product innovation or repositioning, market research provides the building blocks for a strong brand strategy. A question frequently

asked in the MR realm in China is how to use quantitative research versus qualitative research to inform brand strategy development.

When comparing the two, quantitative gets all the attention. This may be because it has been around longer, is more commonly accepted, or because it is a more scalable business model for research agencies. But quantitative also has its limitations. (Diagram 3)

Qualitative research is often used for more exploratory research objectives. The goal is to discover insights by talking to real people – unearthing their opinions, probing their answers, and eventually uncovering deep-seated trends that are the basis of a brand’s strategy.

The benefits of qualitative run deep as moderators have the opportunity to see how consumers react to stimuli both emotionally and physiologically, be it a newly designed logo lockup or a new type of on-the-go packaging. Quali gives the opportunity to grow customer intimacy by rooting brand strategy in consumer collaboration and brand co-creation.

Diagram 2: The Leading Brand vs Following Brands

7labbrand.com

QUANTITATIVE INSIGHTS QUALITATIVE INSIGHTS

DEEP

SURFACE

DEEP

SURFACE

LEV

EL O

F IN

SIG

HT

INDIVIDUAL RESPONDENT

LEV

EL O

F IN

SIG

HT

INDIVIDUAL RESPONDENT

EXPLORATORY HYPOTHESIS

LEV

EL O

F IN

SIG

HT

HYPOTHESIS CONFIRMED

ENTIRE POPULATION

LEV

EL O

F IN

SIG

HT

SAMPLE RESPONDENTS

Pop.

DEEP

SURFACE

DEEP

SURFACE

A research hypothesis comes from this deep-rooted research and oftentimes becomes the pillar for a strong brand strategy, but to have a hypothesis guaranteed, quantitative techniques are useful. Proving it correct can mean extrapolating insights about an entire target population – resulting in a true and complete understanding of how your audience thinks. (Diagram 4)

Consider the case we encountered with TripAdvisor. The global travel brand was facing stiff competition from local competitors who had years of experience building relationships with Chinese consumers. TripAdvisor decided to reposition at the core by renaming its brand in the context of the local market. So, they set out to understand local perceptions of travel.

Step one was uncovering Chinese perceptions of travel; through six targeted focus groups in three major regions around China, Labbrand probed to find three common themes: self-discovery, self-development, and enjoyment. We further collaborated to shortlist down to three names that were unique, consistent with travel, and evoked positive associations.

The tricky part for TripAdvisor came down to their targeting: a quantitative survey confirmed that preference was split by demographics. The data validated our hypotheses from the qualitative research that 猫途鹰 [māo tú yīng] is overall more unique, easy to remember, and an extremely strong fit with the Owl logo, which Chinese consumers adore. Since rebranding as 猫途鹰 , TripAdvisor has seen increased awareness and site traffic amongst their Chinese audience (Diagram 5). Knowing your targets inside and out allows you to approach a new culture with confidence and conviction.

Diagram 3

Diagram 4

8labbrand.com

25

47

10

UNIQUENESS OF THE NAME FIT WITH LOGO FINAL VOTE

20

47

10

37

38

9LOW

NAME A NAME B 猫途鹰

HIGHU

NIQ

UEN

ESS

LOW

NAME A NAME B

Unit:Number of Votes Unit:Number of Votes Unit:Number of Votes

猫途鹰 NAME A NAME B 猫途鹰

HIGH1st

2nd

3rd

FIT

19

39

17

40

37

23

40

27

33

20

36

44

54

39

3

18

34

22

A NEW TYPE OF CHINESE CONSUMER

TripAdvisor’s consumers’ starkly different opinions are hardly surprising. As the younger generation steps into the decision-making role, brands can expect a more stratified and opinionated consumer in China. Unlike past generations, these brand-centric customers pride price over frugality, exclusivity over commonality, and above all, their own unique image.

Pair this with an expected spending rate this is twice as high as that of the older generation, and it is clear that companies need to focus brand strategy budgets on research. What will be the next biggest home-grown trend in China? How will a newly wealthy population grow alongside a digital world? What major psychographic segments will emerge?

Brands must learn to evaluate both who they should target (which segments in China will be the most profitable) and how to do it (what are the smartest cultural levers to pull). Extracting answers during Focus Groups and discovering evolutions in Digital Customer Communities can together take on this task. At the end of the day, research simply serves as the bridge between brand and consumer.

For brands, this new era of consumerism in China is a good chance to develop more distinguished and unique brand elements, DNA, and offerings. As Freya Zhang, Associate Research Director at Labbrand states, “You can see now strong examples where if they have done good research on the target, then they build a relationship – engaging together, moving up together, and developing new innovation together.”

But don’t forget: it will also be a challenge for brands facing this new generation, so strong in self-expressions, so strong in energy and leadership. They want to be led by the brand that speaks to them. Do you have the insights it takes to guide the way?

Diagram 5

9labbrand.com

China’s manufacturing is moving elsewhere.

As income levels for unskilled labor rise beyond the affordable level, companies are outsourcing manufacturing to other APAC countries and importing the finished product into economies that will spend the money – China being one of them. Mass consumption is on the rise, a more brand-conscious demographic is fast taking the reins, and thus the importance of brand grows. The value of consumers’ loyalty has never been bigger.

Sustaining Growth through Digital InnovationKevin Gentle, Digital Strategy Director

10labbrand.com

But brands are subject to growing pains just like anyone else; with cost structures top of mind, certain brands may be tempted to ax digital investment, mistakenly seeing it as non-essential to their core competencies. This would be a huge mistake for it is precisely in these situations that digital innovation can be a brand’s saving grace.

Companies could afford to remain complacent when sales were steady and the economy was strong. There was sufficient purchasing power such that merely maintaining the status quo was enough to produce a hefty bottom line. But with the competition more fierce for consumers’ extra cash, brands that remain stagnant will be buried alive. It is only through increased innovation that a brand will survive, excel, and lead.

In this piece, we explore how brands should adjust and step up their digital efforts to come out ahead in the slowdown.

DOUBLE DOWN ON DATA AND ANALYTICS EFFORTS

In periods of rationalization, knowing where you stand is more important than ever. Simply put, brands need to have the right tools to be able to prioritize what works and adjust what doesn’t. This can only be achieved through increased investment in data and analytics.

Data and analytics have always been a pain point in China, from fake social media fans to unreliable web analytics solutions and “black box” style media-buying practices that don’t give clients the full view on media costs. This situation might have been tenable in the past but clearly isn’t today – the stakes are too high to compromise on quality.

To ensure a higher degree of quality, brands must invest a higher proportion of their budgets towards forward-thinking data gathering methodologies. From social word of mouth to website testing and keyword performance analysis, clarity is needed now more than ever. Most importantly, these data points must be articulated in a single customer journey view, allowing brands to clearly project consumer flows across touch points. Through sustained data and analytics efforts, brands can free-up budget in the future with no detrimental impact on current performance, and can allocate this money to more long-term digital innovation projects.

11labbrand.com

ACHIEVE BETTER BALANCE BETWEEN ACQUISITION AND CAPITALIZATION EFFORTS

Over the past few years, digital spending has mostly been concentrated on what can be called acquisition-related efforts. Reach, for example, has been expressed by social media fan numbers, site traffic increase or total e-commerce sales; these numbers are often main metrics for success and the key determinant of many a manager’s end-of-year bonus.

While acquisition efforts certainly have their place in any digital investment plan, now is the time for brands to give more attention to capitalization-related efforts. For instance, instead of chasing new social media fans, brands should place more emphasis on engagement rates or fan base quality. In addition to considering site traffic, they should take a closer look at optimizing journeys to get more people to convert along the way. Instead of looking just at total number of transactions, they should attach more significance to average basket size and purchase frequency. Achieving a more balanced investment portfolio between acquisition and capitalization will help brands get more from their existing assets and achieve healthier digital growth.

STREAMLINE AND UNIFY ALONG A SINGLE DIGITAL VISION

Our experience shows that many brands have complicated, fragmented ecosystems with little continuity or coordination between touch points. It is too often that IT, e-commerce, media, social, ePR and other teams don’t act in sync and pursue their own priorities with no vision of a coherent end-to-end digital customer journey. This silo effect is sometimes made worse by skewed incentives that reward the wrong behavior and encourage short-termism in digital investment. Long-term strategic thinking can’t possibly take place in such an environment and thus brands build for the next quarter, instead of building for the next years.

Unlocking new long-term efficiencies will require organizational change from brands. Top-management starting with the C-suite must lead this change and become seriously invested in taking digital governance to the next level. More long-term KPIs must complement quarterly targets, cross-functional teams must work together in sync and a unique digital vision must be shared across the company to coordinate actions around common goals.

12labbrand.com

DIFFERENTIATE THROUGH DIGITAL BASED PRODUCT AND SERVICE INNOVATION

Market structures in many industries in China are unsustainable with too many undifferentiated players competing to get a piece of a pie, one that isn’t growing as fast as it used to. Add on top of this Chinese customers’ notoriously low levels of brand loyalty and it becomes clear that brand differentiation is a key success factor. Brands need to stand out through unique experiences that are hard to replicate and for which customers are willing to pay a premium. This is where we see digital innovation as having the biggest potential impact: enabling brands to innovate in their product and service offerings.

Brands must carefully audit their existing experiences, identifying pain points through research and spotting deep-seated unserved customer needs. They must then explore ways to digitally bring upon a meaningful improvement of their product or service by exploring the full scope of emerging technologies, such as connected objects, wearables, big data, and machine learning. A real estate agency, for example, can invest in a virtual reality experience that allows customers to visit apartments from the comfort of their homes. A hotel brand can embark on a full digitization of the user’s stay experience by using wearables and connected devices to track guest data,

anticipate their needs, and streamline certain steps such as check-in, payment or room service ordering. All of these are efforts that will pay off in the long-term and will create defendable brand equity.

CONCLUSION: DIGITAL AS A KEY CAPABILITY FOR THE FUTURE

In the end, we believe that the slowdown we are going through will serve as a catalyst for brands’ digital maturation. The market will reward brands that invest in data and analytics, take a long-term view of digital performance, balance their investment portfolio, align the organization, and explore digital applications that truly make a difference for customers. The main issue isn’t one of budget but one of mindset: from digital as an expense and a tactical performance driver to digital as an investment and a key factor for long-term brand performance. Gone are the days where everybody was a winner and brands could just ride the wave. The next few years will see digital innovators breaking away, winning market share and customer loyalty while other brands struggle to keep up.

13labbrand.com

Why Brand Management is Even More Important in a Slowing China

China’s annual economic report for 2015 indicated a year-on-year GDP growth of 6.9%, the lowest since 1990. With economists painting a glooming picture and investors taking caution, many companies choose to reduce spending by downsizing or cutting budgets allocated for branding. To the understanding of many, branding is a large investment that requires long-term planning but doesn’t see immediate return. Is this really the case?

Zoe Ju, Brand Strategy Team

14labbrand.com

BUSINESSSTRATEGY

FINANCE

HR

MARKETING

SALES

OTHERSAFTER SALES SERVICES

PURCHASING

BRAND STRATEGY

COMMUNICATION STRATEGY

FINANCE

HR

MARKETING OTHERSAFTER SALES SERVICES

PURCHASING

BRANDSTRATEGY

SALES

BUSINESSSTRATEGY

First of all, the slowdown in the economic growth doesn’t mean a weak economy. On the contrary, China’s contribution to the global economy is much more significant than 10 years ago. Meanwhile, the aggregate economic volume is still growing. Former Chairman of the US Federal Reserve once pointed out that the slowdown is quite natural given that the Chinese economy is transitioning from an exporting and manufacturing led labor-intensive economy to one that focuses on technology development, market consumption and the service sector. Gone are the days that companies are able to get away with unsophisticated, unsustainable and value-lacking management.

BEF

OR

E

AFT

ER

Secondly, the role of brand strategy and management has changed. It is no longer a component that simply serves to guide marketing tactics, but has become a core organizational principle that drives performance, culture, experience and behaviors. Therefore, with the evolution of the Chinese economy, the formula of branding has transformed as well. Before, many agencies offered abstract brand concepts and broad implementation recommendations. Now, a systematic roadmap of brand actions needs to be developed. (Diagram 1)

Diagram 1: The Transformation of the Role of Brand StrategyBranding has gone beyond marketing and guides marketing.

15labbrand.com

WHO I WANT TO BE:BRAND POSITIONING

WHAT I SAY:MESSAGING

HOW I ACHIEVE:ROADMAP

HOW I BEHAVE:BRAND ENGAGEMENT

HOW TO OPTIMIZE PORTFILIO:BRAND ARCHITECTURE

HOW I IMPROVE:BRAND EQUITY TRACKING

THEBRAND

HOW DOES THE BRAND DO?

WHAT DOES THE BRAND DO?

DIFFERENTIATE FROM:COMPETITOR

BE RELEVANT TO:CUSTOMER

LEVERAGE:INDUSTRY

FINDS

Branding is a detailed and systematic long-term process, which should be continuously adjusted based on different stages of brand development. A brand experiences several stages during its growth: new brand (birth), growing brand (growth), and leading brand (leadership).

In the following article, we will discuss in detail what the focuses should be for different branding phases in an evolving economic environment (Diagram 2).

CONVINCE THE AUDIENCE WITH PRECISE BRAND POSITIONING – WHO I WANT TO BE

Brands should first clearly define “who they want to be”. This is a prerequisite for success. We often determine this positioning based on three aspects: the industry, the customers, and the competitors. Years ago, an unclear brand positioning might not have a devastating impact in certain industries where there wasn’t much direct competition (e.g. high-end toys, healthcare, online tourism etc).

Diagram 2: Sophisticated Branding Roadmap

16labbrand.com

Nowadays however, an increasing number of international and domestic brands are entering the Chinese market. Many industries have become so saturated that competition is no longer limited to one category. For example, while a hot chocolate brand may have no direct competition within its category, it still competes with a multitude of beverage and snack brands. Because of this replacement consumption, there remains practically no industry that contains zero competition. (Diagram 3)

Meanwhile, the economic slowdown affects the confidence of investors, making them cautious about investing big capital into the market. They need conviction. In this case, brand positioning plays the role of the persuader – it showcases products, services, and creativity, and tells the story behind business plans and financial success.

This brings us to another milestone of China’s economy – the growth rate of consumption has surpassed that of investment for the first time,

transforming into an economy that thrives on internal demand and consumption. According to a Chinese consumption trends report recently published by Boston Consulting Group, China is estimated to become the world’s second largest consumption market in the world with 5% of global consumption volume, and growing by $2.3 trillion over the next five years. 65% of this growth will be generated by China’s post 80s, 90s and 00s consumers.

These new consumers spend very differently than their predecessors. It is crucial for brands to investigate into this unique, independent, and ever-changing group of people to better target their brand strategies.

At its core, brand positioning should not just consider the industry, the consumers and the competitors, but rather should lead the industry, meet the needs of the target consumers, and establish differentiation against the competitors.

Diagram 3: The Transformation of Competition.

HOT CHOCOLATE

HOT CHOCOLATE

OTHER CHOCOLATE PRODUCTS:CHOCOLATE ICE CREAMCHOCOLATE COOKIECHOCOLATE CANDY BARCHOCOLATE TRUFFLE...

OTHER HOT DRINKS:TANGCOFFEECHINESE TEAMILK TEA...

17labbrand.com

Brand positioning is not just the guide for marketing communications. It is the emotional realization of a company’s core competence, value proposition and unique attributes. Most importantly, it is the framework with which business strategy should be examined.

CONSISTENT BRAND MESSAGING – WHAT I SAY

Every day from the moment we open our eyes, we are dealing with an enormous amount of information, the majority of which is coming from different digital mediums. A brands’ day to day communication is amongst this ocean of information. How does a brand integrate its positioning into daily communication with its target audience? How can a brand ensure consistency across all platforms and effectiveness in content? This is the subject for brand messaging management.Brand messaging management has similar principles as everyday interpersonal communication. Different choices of wording and expressions that we naturally use shape people’s opinion of us – in order to convey our personality in an effective way, we choose to highlight certain oral and verbal expressions. This is called “tonality”.

Defining the tonality is a basic tool for a brand. It enables a brand to convey its values and visions in a clear and consistent way, painting a comprehensive brand image and imparting vivid brand associations. Verbal communication is just as instrumental to a brand as its visual elements.

In order to ensure proper implementation across different touch points, brands should create a specific and detailed messaging guide that:

• Illustrates the brand’s positioning• Defines the brand’s messaging, targets and communication tonality• Guides external branding actions, such as PR and advertising• Guides the internal strategic brand planning

SYSTEMATIC BRAND ROADMAP – HOW I ACHIEVE

Undoubtedly, brands also need a systematic roadmap that lays out periodic milestones and creates a measurement index to track and realize the brand’s transformation from status quo to the ideal brand positioning. Every effort along the way accumulates brand equity and impacts the brand towards market leadership.

ILLUSTRATES BRAND’S POSITIONING

GUIDES EXTERNAL BRANDING ACTIONS

DEFINES BRAND’S MESSAGING

GUIDES INTERNAL STRATEGIC BRAND PLANNING

18labbrand.com

No matter what the category is, brands develop alongside the market as consumers’ understanding grows. Brand development goes through different stages: differentiation makes the brand stand out, relevance follows, and as the brand becomes established in the marketplace its esteem and knowledge increase gradually (Diagram 4). The brand roadmap should take into account these development stages to identify relevant key objectives, map out which activities to prioritize, and grow towards a leadership brand.

INTERNAL BRAND MANAGEMENT – HOW I BEHAVE

Internal brand building, often neglected, is equally important to how a brand is perceived by consumers. Every employee is a brand ambassador. Every action they take speaks for the brand. Companies should implement internally an engaging program in order to infuse the brand’s essence to their employees’ daily work, creating a meaningful experience that is admired and aspired to by outsiders looking in. This is especially meaningful for companies during the slowing down economy.

Through pinpointed management of daily operations, internal brand building can be achieved by integrating a seemingly abstract brand concept into every employee’s daily work habits, regardless of discipline or hierarchy. Only by growing from the core outwards can the brand essence be actualized and touch the consumers.

Diagram 4: Brand Equity Model

BIRTH

COMMODITIZATION

BRAND STATURE LOW HIGH

HIGH

LEADERSHIP

GROWTH

NEW

DECLINING

BR

AN

D S

TR

ENG

TH

Differentitation RelevanceEsteemKnowledge

19labbrand.com

EVALUATE THE BRAND ARCHITECTURE – MULTI-BRAND MANAGEMENT

The fast economic growth over the past 30 years has led to the rapid expansion of many businesses. Over time, any successful brand will develop a brand architecture to cross over into other offerings or markets, whether vertically or horizontally. A massive and unorganized brand system undoubtedly confuses consumers and affects brand equity. A systematic and logical framework to organize and structure existing and future (sub) brands is needed in order to create organic synergy between the brands.

Meanwhile, such a clear architecture will help customers and stakeholders to understand their relationship with the brands and to facilitate cooperation. Surely, brand architecture has multiple forms and should not be static. For brand owners, this selection should be based on their current needs and vision for the future, and should fundamentally consolidate the company’s business model.

UTILIZE BRAND EQUITY TRACKING TO MANAGE MARKETING SPENDING

As legendary Chinese military strategist Sun Tzu once said, “Know the enemy and know yourself, and you can fight a hundred battles without defeat.” It is undeniable that branding requires high investment whose value goes beyond sales volume. How should brands evaluate their return on investment?

The answer is Brand Equity Tracking. It is a comprehensive management tool that diagnoses branding performance in terms of Brand Equity Mapping, Brand Driver Analysis, Competitive Landscape and Information Sources. It also sheds light on the branding direction for the next few years with a clear set of strategic options, and enables brands to make well-balanced and informed decisions regarding the development and implementation of new branding and marketing strategies.

Brands should conduct such audits on a regular basis to evaluate what has been achieved through carefully planned roadmap and implementation, and diagnose the overall branding performance. Once a problem is identified, brands can adjust and react strategically, so that positive and sustainable brand growth can be assured.

CONCLUSION

The transformation of China’s economic structure is an important turning point for brands. It is an opportunity to examine themselves in the context of an increasingly sophisticated market situation. As with any long-term investment, branding is a systematic process and cannot be perfected instantly. Yet, the accumulation of brand equity is a key leveraging point for a company’s success, so there is no better time than now to get started.

20labbrand.com

It is widely recognized that for a brand to be globally dominant, it must consider the Chinese market in its business model. With 1.3 billion people experiencing a dramatic rise in wages, and the economy enduring a painful shift away from manufacturing and into an FMCG and service-based economy, the spotlight for the world’s second-largest economy shines on brands. China right now is the land of opportunity for brands. The younger generation is 8 times more likely to graduate college, two times more likely to travel abroad, and is noticeably more discerning, educated, and cosmopolitan. These “brand conscious” decision makers offer significant (and increasing) disposable incomes, and they demand a brand speak to them before they buy.

But entering the Chinese market is complicated: wildly successful brands have all failed in China, including Mattel, eBay, Google, and Home Depot. Why?

The Six Laws of Chinese Brand NamingBenjamin Noyes, Corporate Branding Team

21labbrand.com

Local competition with a higher baseline for market agility swallows up brands not accustomed to quick market cycles. Consumer behavior in China remains shrouded in mystery by unique cultural dynamics. Without the knowledge and toolkit necessary to localize, a brand gets pushed out.

Naming is one of the most tangible ways to localize your brand. At Labbrand, we believe that brand naming is comprised of specific technicalities.

Simply stated, the Chinese naming process is an exercise in localization that can make the difference between consumers accepting or rejecting your brand.

But any agency can preach necessity. Here are the six laws of naming explained, with examples to paint a picture.

“Naming is a brand identity vehicle that needs to be legally

available for use (the trademark aspect), suitable for

different languages (the linguistic aspect), and designed

to create a bond with consumers (the rational, emotional,

and subconscious response aspect).”

- Vladimir Djurovic, CEO of Labbrand.

1. Chinese consumers are increasingly using Chinese brand names when looking for information about a brand.

All over the world, digital advancements are giving consumers the upper hand in their relationship with brands. Nowhere is this more true than in China. The reality is that brands do not control the way consumers look for them online, and Chinese netizens overwhelmingly use their own language when researching brands on search engines, social media and other online channels. With Chinese netizens outweighing the entire population of the United States 2:1 and leading the world in terms of sophistication, online spending and brand engagement; companies would be foolish to forget this simple reality.

22labbrand.com

2. If a company doesn’t give its brand a Chinese name, someone else will.

Regardless of whether you include it in your entrance strategy, your brand will be given a name in Chinese – be it by your clients, competitors, distributors, or even counterfeiters.

Consider the relatively benign case Labbrand discovered when performing ethnographic research into the luxury market in Tier II cities. A luxury consumer, in describing his affinity for the shoe brand Tod’s, called it 土豆 [tŭ dÒu], the Chinese word for potato and a close phonetic translation. This is likely not the desired brand association for Tod’s.

3. A Chinese name allows a brand to better build and maintain its brand equity.

For some companies, failure to localize results in much more dire consequences. Lacoste became extremely popular in China because of its iconic logo and classic

polo shirts. However, as the original name is quite difficult for Chinese natives to say, brand recognition was mostly limited to the crocodile icon. This provided an opening for counterfeiters. Failing to register their name or logo in China, competitors popped up all over China imitating the brand, leaving consumers confused about which the real “crocodile brand” is. Lacoste’s iconic crocodile became associated with the word fake – destroying powerful brand equity.

4. A Chinese name, if well developed, can make the verbal identity linguistically appealing and attractive to the target market.

As a verbal identity vehicle, a name draws immediate reactions in the minds of consumers. Harnessing the power of it to work towards your brand essence is the key to effectively explaining your brand in the context of the local market.

LinkedIn experienced early and easy adoption among consumers in China, growing from 4 million users in February 2014 to 13 million users 18 months later –

23labbrand.com

• to lead, to usher, to guide

• have jurisdiction over, be in possession of

• receive, draw, get (a prize)

• converge, gather together

• things collected• class

• abundant, plentiful• great• luxuriant

• hero, outstanding person

• excellent, brave• English

Diagram 1: Ling” strikes a particular chord in the Chinese language: one revolving around leadership, professionalism, and excellence.

Diagram 2: The name is perceived by many Chinese citizens as auspicious because it implies profitable business exchanges.

no small task, considering it is the first foreign internet brand to be successful in China. The company’s name was developed to draw associations relevant to its brand personality. (Diagram 1)

By drawing from all these meanings, LinkedIn’s Chinese name solidifies its positioning towards young professionals that strive to be the next wave of China’s leadership. Coupled with the similar phonetic sound, LinkedIn positions itself as being a necessity for anyone in China trying to get ahead.

5. The Chinese brand name is the local embodiment of the brand’s culture, values, personality and vision, which allows for communication on a localized and distinctly cultural scale.

Consider the example of HSBC (Hong Kong and Shanghai Banking Corporation), which first opened its doors in March 1865. Its name could have very easily been directly translated, combining “Shanghai” and “Hong Kong” with “bank”, but the brand decided to go through this process strategically. Its name, 汇丰 [huì fēng], brings to mind great success and prosperity. 汇 [huì] means to exchange, to remit or to accumulate; it also means to converge or flow together. 丰 [fēng] means abundant and plentiful. (Diagram 2) By connecting the burning desire for success within the Chinese business world with the cultural tendency to believe in luck and happenstance, HSBC successfully developed a clever name that appeals to its consumers.

24labbrand.com

6. Finally, the exoticism of foreign names that used to appeal to Chinese consumers is balanced by the risk of being perceived as one of many giant international brands that are distant from Chinese consumers.

Back when foreign brands were first beginning to enter the market, an international name was thought of as luxurious. Many premium brands saw great success capitalizing on this cultural trend; Louis Vuitton, Chanel and BMW were among them.

But nowadays the market is saturated with a plethora of foreign brands that do not bring to mind luxurious quality. In order to stay relevant, brands have localized their names – Chanel chose the name 香奈儿 [Xiāng nài ěr], using a close phonetic match that draws upon elegance and international appeal; Louis Vuitton adopted the directly phonetic name of 路易威登 [lù yì wēi dēng]; BMW selected the name 宝马 [băo mă], using a Chinese name drawn from a famous poem that stands for power and strength.

IN SUMMARY

Naming is a tricky business. You must decide your company’s most prominent verbal asset very early on – oftentimes before the brand’s essence or positioning have been cemented. Once this name has been chosen, it is extremely difficult to change. This process is best done cautiously and with respect.

The common practice of creating a Chinese name opens up a unique opportunity for companies seeking to target its 1.3 billion Chinese consumers more precisely. By choosing a Chinese name that embodies your brand’s personality, and by adding a localized cultural flair, you can better communicate, associate, and connect with the enigmatic Chinese consumer.

SHANGHAI OFFICEM50 Creative Industries Park Building 7 Unit 202, 50 Moganshan Road Shanghai 200060 China

PARIS OFFICE2E, 21-23 boulevard Haussmann75009 Paris, France

Labbrand is a leading China-originated global brand consultancy, working collaboratively with consumers and corporations to build and strengthen brands through culturally relevant actions.

To achieve success and brand innovations, we seamlessly coordinate research, strategic decisions, and creative implementation.

T +86 21 6298 8956F +86 21 6298 0775E shanghai@labbrand.com

T +33 1 53 43 29 29E paris@labbrand.com

labbrand.com