Building a new brand culture in China, a market traditionally reliant on trademarks

A large part of the problem is that China still relies heavily on trademarks, indicators that differentiate and protect their products and services, rather than brands. According to the State Administration of Industry and Commerce (SAIC), 800,000 trademark applications were submitted in 2009 alone.

“Chinese brands can be strong on relevance or esteem but they seldom possess a truly differentiating attribute, or engage effectively with consumers,” says Vladimir Djurovic, managing director at Labbrand Shanghai.

Djurovic points out that while many companies - such as the state-owned banks and the petro-chemical giants - are successful in a financial sense, this is mainly due to their access to the Chinese market. However, their success does not reflect consumers’ perceptions. “Chinese brands often compete tactically against each other, a strategy that was efficient in an empty market, but is less and less viable with growing saturation and against international brands that have bold value propositions and strong innovations now competing on larger scales in China.”

There are, of course, those that have successfully made the transition from trademark to brand, with all the cultural and emotional connections that such a move implies. Haier, for example, is known for its quality and value for money, while Li Ning proposes on a ‘Chinese connection’ to sports. Both these brands share an emotional equity with consumers.

But the majority of local companies lack this identity. The simplest explanation is the cut throat domestic competition. In most product categories, hundreds or even thousands of firms compete for domestic market share, leaving profit margins razor thin. And because foreign brands have taken much of the market’s high end, most companies are forced to compete on cost, leaving little room for investment in research and development or marketing.

Lei Wang, strategic planning director of JWT Hong Kong, suggests that most Chinese companies just do not value brands as highly as Western companies. At least not yet. For the most part, they do not understand the value in spending large amounts of money to create positive brand name recognition in places like the US.

“Marketers in China place no value in consistency,” adds Eddie Booth, chairman of Greater China at Leo Burnett. “A company launches, becomes profitable the year after, and then changes its strategy. The fast culture of consumerism in China has little patience and gets bored easily.”

Djurovic says that transforming trademarks into brands is a problem of resources, not of money. “Allocation of money to long-term strategies is not common. Companies want immediate results.”

But the potential for home-grown brands is huge considering the size of China’s market. Wang sees this as a “whole new consumer class in the world economy”.

Booth agrees but also points to the fact that, in some segments of the Chinese market, a strong brand is still not a firm advantage. While consumers in first and second tier cities base their purchasing decision on brands, mid-tier cities put more weight on the functionality of the products and lower-tier markets have no choice but to choose costs per value. “Marketers in China are hugely mistaken that what works for others will work for them too,” says Booth. Clients in China currently “over-research” when it comes to launching a marketing plan, he says, which results in everyone playing safe and not making a difference.

Got a view?
Email [email protected]

This article was originally published in the 25 February 2010 issue of Media.