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Brands in Transition: Making it Work in China

Brands as Monuments?

Managers often talk of building brands as if they are monuments or skyscrapers. They lay the brand's foundations and buttress the brand with promotions or upgrades; they develop sophisticated architectures to manage multiple brands and see their brand as the cornerstone of the franchise.

Although harmless in its own right, these architectural analogies are misplaced when it comes to brands, for one simple reason … brands, unlike buildings are not static. They grow and they change.

A corrective to the building analogy, may be to consider brands using the image of a tree. While trees have solidity and strength derived from the roots they have sunk into the soil (brand identity and position), they also branch out and grow organically in directions that diverge from their original shape (brand extension). A robust tree can even sustain a bolt of lightning that splits its trunk in two, and continue to grow (brand crisis). The tree analogies work equally well, while serving to remind us of the dynamic nature of the brands we manage.

Regardless of the analogy you employ to translate your brand strategy, managing your brand through transitions, such as establishing (or altering) your brand position, extending your brand to new product lines or managing a crisis that threatens your brand, is a critical task for your business. China presents many unique challenges to brand managers, which often require hybrid techniques and approaches, still a strong brand, like a strong tree can be transplanted to new soil and continue to thrive.

In this second article, we'll talk a bit about a few key aspects of brands, particularly brands in transition, and explore the implications for brands facing these transitions in the China market.

Position

The subtitle to Al Ries' seminal text, Positioning is "The Battle for Your Mind." This line neatly sums up a truth about branding that is difficult for many brand managers to understand. No matter how much money you sink into advertising and displays and billboards and logos, these tangible aspects do not make the brand. They can influence the brand in one way or another, but the brand exists elsewhere.

If you want to locate your brand, you have to go to your customers, because they own your brand. After all, they are the ones that paid to own it. A brand is an intangible set of associations, emotions, sensory experiences and rationales that grows in a consumers mind and influences their attitudes and behaviour. It is akin to a meme, and can be made powerful if managers know they must cultivate the brand where it grows - in the consumers mind.

Positioning your brand is like mass psychology. In order to have a solid field in which to nurture your brand franchise, you must first ensure that you are on fertile ground. Your unique characteristics, from your heritage to your technology, from your people to your financial performance, all contribute to ensuring your customers have a positive relationship with your brand. This carves out a position in their mental space reserved for your brand, hopefully one near the purchase and loyalty centres of their brains!

To be successful in branding you need a keen eye for the future. Many of the steps you take today to improve your brand will begin to show results months if not years onward. So, brand managers need to be skilled at watching their markets and spotting trends, particularly those that will affect customers' relationships with their brand. This holds true in China as it does in other markets.

The challenge for marketers then is to accurately see the future for their brands, which means careful reading of demographic and social trends. A cursory glance at China will suggest that many brands here face a tricky challenge. Even as they build short term sales and awareness, brands must face the fact that China's population is aging, while the younger generation is becoming more and more male.

Socially, China also presents a portrait of change. The attitudes and preferences of today's generation of "twenty-something" consumers diverges markedly from those of their parents' generation. In fact, in the economically churning coastal cities, this gap is as wide as ever and growing, leading to comparisons between China today and the 1960s in Europe and the United States.

From a branding perspective, it should not be forgotten that the tumult of generational conflict and the dynamism of young, Western consumers forging their own path in a world of increasing choice led to a sea-change in the dialogue between brands and their constituencies. After the 1960s brands strove to become more approachable and genuine to appeal to cynical youth.

China, too, is likely to experience its own backlash as the conflict of generations forces social issues to the forefront. Managers who understand how to manage their brands through these transitions will be rewarded for their toil, but those who neglect or misstep in their brand management could be consigned to the dustbin of has-beens.

Extension

In business success can be short-lived. Any manager knows better than to rest on his laurels when his latest product has become a hit. The competition is circling like sharks and once the sheen of novelty wears off and prices start dropping, margins will be harder and harder to come by. At the same time, shareholders demand continuous growth. So what is the most common response? Extend the brand.

The internal logic of brand extension is strong. An established brand can lend its strength to a new product, thus reducing the cost of entry and maximizing the up-front investment needed to achieve early sales. But extending the brand to cover new product lines, particularly when these new products differ significantly from the original products that built the brand is a very risky proposition, one that can not only fail for the new product but can also damage the original brand.

Of course, brand extension can succeed. Ask Steve Jobs if he is pleased with the results of extending the Apple computer brand to encompass consumer electronics and digital music. Still for every iPod there are hundreds, maybe thousands of Xerox Computers. Never heard of a Xerox Computer? I didn't think so. Brand extension should generally be approached as a secondary option, and the risks should be carefully weighed. It can be a very expensive mistake.

Chinese brands are far from immune to the lure of brand extension. In fact, recently some of the largest Chinese brands have been bitten by the bug … witness Haier and Lenovo mobile phones and Yanjing juice and soft drinks. Are these new lines close enough to the original brand promise to benefit from its halo-effect, or are they too far for consumers to make the connection and potentially deadweight? Time will tell, and some of the results may be surprising to the owners of those brands.

Generally, similar rules about brand extensions apply in China as they do in more developed markets. It is important to realize that the farther the fruit falls from the tree, the more likely it will be sour. In other words, if the new product line cannot be linked directly back to the original product line, it has a greater chance of failure. The problem often boils down to clearly defining the original product line. For instance, if Yanjing means beverages, then you would expect fruit juice to be successful, but if it means beer, there may be an irresolvable conflict.

Several years ago, Chinese companies were keen on studying the Korean chaebol model in which one massive conglomerate makes everything from toothpaste to CD players. This model differs from the approach of US companies that focus on core competencies, and was perhaps seen as an "Asian alternative," For the most part those experiments have not proved very fruitful as Chinese consumers have displayed a tendency to be sceptical of claims that one company can do everything well. Focus and caution are the watchwords for brand extension.

Protection

Whether strong or weak, all brands are under threat in China, and not only from their competitors. A few recent, high-profile cases involving brands such as Kentucky Fried Chicken, Procter and Gamble and SKII are just the latest in an ongoing onslaught of consumer activism. Chinese consumers have discovered the power of their pocketbooks and the media and they are holding brands accountable.

Consumer complaints can be particularly damaging to a brand because they challenge its very foundation, the promise the brand represents in a crowded marketplace. Brands therefore need to be prepared for this threat. Judging by current trends, it is highly likely that your brand will come under suspicion, if not outright threat sometime in the next five years in China.

So how can a brand face a crisis and maintain its reputation? There is no easy answer, but there are a few things brands can do to improve the odds of their survival. First, and foremost, prepare. Don't go about your business hoping that you will miss the axe only to find it swings at your head when you are not looking. Crisis planning should always include brand management scenarios and guidelines.

Also, brush up on the identities and loyalty of your brand stewards and apostles, the third parties that help promote and/or protect your brand in the marketplace. When a crisis hits, your anxious customers will look not only to you but to independent third parties to ensure them of the integrity of your brand. Make sure your brand remains strong and positive in these influencers' minds. In China, when consumer crises occur, official support or assurance can help dampen the blow.

One thing that is not very useful in China, particularly for foreign brands, is to be overly legalistic or arrogant. This is often viewed with a cynical eye. Although Chinese consumers buy many foreign brands now, believing them to be superior to local offerings, there is also an undercurrent of nationalism, which causes them to doubt the motives and ethics of foreign companies.

Alternatively, when things are not going well for your brand, humility and humanity are more likely to reassure your customers and keep them loyal to the brand than plying them with "proof" of your innocence. Talk to them directly and honestly, and show genuine concern for their interests. They will respond. Their response, whether warm or vindictive, will determine how you weather the transition.

This dialogue between you and your customer is central to your brand. Going back to our analogy, the brand tree grows in your customers mind. If the soil is fertile and well-tilled then roots will take hold. When you branch out into new areas, make sure you are careful that you do not ask your customers to accept illogical, jarring moves away from what they have come to know and trust. When lightning strikes, quick, smart action could determine whether your brand survives the disaster or whether it becomes a charred hunk in the middle of an empty field.

Christopher Millward is the CEO and "brand guru" of Firbrands, a Beijing-based consulting company. For further information contact Millward at: Tel: +8610 84472575 or e-mail: chris@millwardconsultants.com