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MARKETING: The Rise of Chinese Brands
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The Rise of Chinese Brands

By Justin Toy

For the past five years, Millward Brown; a global company focused on brands, media and communications; has conducted extensive research on the top Chinese brands. 2015's results have uncovered a number of surprises and trends to keep an eye on. The biggest shock this year was that Tencent, the technology and internet portal that created QQ and Wechat, grew by almost 100 percent and became China's most valuable brand. Alibaba entered the rankings this year at number 2 after a highly publicized and successful IPO. In fact, technology companies have become a dominant force in China and have surpassed financial institutions as the highest value category (106.9 billion USD), making up 23 percent of the top 100 brands' value.

Tencent was able to dethrone China Mobile who has held the top spot since Millward Brown began this study in 2011. This year also marks the first time a private 'market driven' enterprise has held the number one spot in China. When this study began, the top five brands were all state owned enterprises (SOEs). However, brands from the private sector have been growing at a blistering pace. Since 2013, market driven firms have grown by 97 percent while SOEs have declined by 9 percent over the same time.

Trends to Keep an Eye on in 2015

Erosion of Multinational Brand Power

Chinese brands have been able to narrow the gap between themselves and multinational brands. In recent years past, multinational brands were seen as superior and a default choice for some consumers. However, Chinese brands have been catching up by improving their development and execution of marketing strategies. Many Chinese brands have also increased their use of big data and analytics to better understand the rapidly changing consumers in China.

Chinese consumers have been changing rapidly. They increasingly see brands as a symbol of value and not just as a reflection of status. This shift in preferences has resulted from greater sophistication, brand awareness, and thriftiness in the face of a Chinese economy that is cooling down.

The brand dimensions that Chinese brands were able to improve upon in the minds of Chinese consumers were meaningfulness (meeting functional needs and forming an emotional bond) and consistently salient (being vibrant and coming to mind quickly). However, in terms of being seen as different, standing out from the rest and being a trendsetter, Chinese brands still lag behind foreign brands.

BT 201504 25 Marketing Erosion of Multinational Brand PowerMobile
Mobile phone users in China reached a total of over 1.2 billion, 92.6percent of the total population, as of August 2014. Smart phone users are estimated to be over 480 million and growing strong. Given how connected China is, brands have been ramping up their mobile presence with enhanced services and communication.

Mobile payments have been increasing rapidly in China as well. China Everbright Bank reported an increase in mobile payments of 126 percent in the first half of 2014 while China Merchant Bank reported an increase of mobile traffic of 186 percent over the same period.

BT 201504 24 Marketing
BT 201504 27 Marketing 2Media
In order to take advantage of mobile and technological trends, brands have been reorganizing their media plans into more digital spending. Multi-screen users in China looked at a screen for almost eight hours a day with two thirds of that time spent evenly between smartphones and laptops. In 2014, the internet accounted for about one third of all media spending, while TV accounted for less than 5 percent for the first time ever. Since 2009, media spending on the internet rose from 3.4 billion USD (8 percent of media spending) to 24.3 billion USD, an increase of almost 600%. Over the same time span, TV spending has increased by about 33 percent from 27.1 billion USD to 36.2 billion USD. However, during that time, television's media spending share has decreased from 63 percent, to 47 percent.

Premium Positioning
BT 201504 28 Marketing 3As a growing number of Chinese consumers reach the upper classes of society and as the gap between foreign and domestic brands shrink, more and more Chinese brands are beginning to offer up premium products and services. This trend has been most noticeable in the airline industries as Air China, China Southern Airlines, and Hainan Airlines have all increased their offerings for higher paying passengers. Hainan Airlines has recently introduced limo pick-up services in some North American cities that it services. Yashili, a soy milk and dairy company, has begun to offer high-end imported dairy products (mostly to gain consumer confidence in an industry that was rocked by scandal several years ago). Tsingtao and Snow have begun to invest more in promoting premium labels. This trend can help Chinese brands catch up to foreign brands in terms of brand differentiation; the important brand dimension that Chinese brands still lag behind in.

E-commerce and technology websites have been busy expanding their operations; bringing their products and services offline. Alibaba, Tencent, and Baidu all focussed on expanding from their core business into integrating offline ecosystems in order to be able to connect with customers on a more constant basis. Yihaodian, an online grocer, improved its distribution by setting up package pick-up locations in major apartment complexes and in over 300 Family Mart locations (convenience stores) in Shanghai.

Meanwhile, many brick and mortar firms have developed their online presence. New Oriental, an education company, has established a joint-venture with Tencent. The venture will help New Oriental expand its reach and help offer more products and services. The food company Sanquan launched a new online platform called Sanquan Fresh. The service allows for online ordering and offline delivery.

China's top brands are becoming increasing known for their innovation and creativity, a dimension not usually associated with Chinese brands. Led by the technology and retail sectors, Chinese consumers see brands in these sectors not only as creative, but also wise and straightforward. Being creative has helped China's top brands to compare favorably with global brand leaders. Looking at global technology leaders from Millward Brown's global study, Tencent ranks fifth in the world in brand value, just behind Microsoft. While Baidu ranked eighth, just behind Facebook.

BT 201504 23 Marketing China DemographicsChina's demographics are top heavy. The median age in China is 35.2, compared to 25.9 in India and 30.5 in Brazil. Brands in China are starting to offer more products and services that correspond with this reality. Chia Everbright Bank has offered more pension services. CR Sanjiu, a health care provider, is offering more over-the-counter remedies. Real estate developers are planning and developing retirement communities while insurance and finance brands offer more wealth management services.


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