globeone BRIC Branding Survey - China Edition

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The majority of urban consumers in China is highly aware of a multitude of German brands and holds a strong preference. Most interesting: The higher the income, the stronger the perceived appeal of German brands. However, some weaknesses also appear: In general, the recognition of the origin of German brands still holds improvement potential.

In total, over 1,000 Chinese consumers from Beijing, Shanghai, Canton, Wuhan and Chengdu have been interviewed. The China results are part of globeone’s comprehensive BRIC Branding Survey with 4,000 consumers-interviews in the 20 most important cities in China, India, Brazil and Russia.

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globeone BRIC Branding Survey - China Edition

  1. 1. 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. 2. 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. 3. 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. 4. 4 Marketing & communication strategy consulting to drive customer success in BRIC ExecutionStrategysupport 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. 5. 5 • 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
  6. 6. 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. 7. 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. 8. 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. 9. 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 – !
  10. 10. 10 • 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
  11. 11. 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 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
  12. 12. 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% 46% associate positive image 77% associate positive image 57% associate positive image
  13. 13. 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 Sample size in China: 1,010
  14. 14. 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. 15. 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) Sample size in China: 1,010
  16. 16. 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 other countries' brands Relatively expensive Very expensive Sample size in China: 1,010 – 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. 17. 17 Source: globeone – Industries/ categories most commonly associated with Germany – Sample size in China: 1,010 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. 18. 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 a German brand Can't recall a German 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 Sample size in China: 1,010
  19. 19. 19 • 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
  20. 20. 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 Sample size in China: 1,010
  21. 21. 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%) Q.: I will read you a list of German brands. Please tell me, which brands do you know? 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 Leading German brands – Aided awareness (2/3) 33%Zwilling (336) Sample size in China: 1,010
  22. 22. 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 Q.: I will read you a list of German brands. Please tell me, which brands do you know? 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 Leading German brands – Aided awareness (3/3) Rank 31 - 45 – B-to-B brands overall with lower brand awareness among urban citizens Sample size in China: 1,010
  23. 23. 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) Sample size in China: 1,010
  24. 24. 24 Leading German brands – Positive image (2/3) Q.: Do you like this brand in general? (Only brands known to interviewee) 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) Sample size in China: 1,010
  25. 25. 25 Leading German brands – Positive image (3/3) Q.: Do you like this brand in general? (Only brands known to interviewee) 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) Sample size in China: 1,010 SAP 37% (27)
  26. 26. 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) – Sample size in China: 1,010
  27. 27. 27 Leading German brands – Recognition of German brand origin (2/3) • 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. 28. 28 Leading German brands – Recognition of German brand origin (3/3) 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) – Sample size in China: 1,010 Porsche (832)
  29. 29. 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 Sample size in China: 1,010 12% 11% 11% 10% Volkswagen 15% (148)
  30. 30. 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. 31. 31 • 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
  32. 32. 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. 33. 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% Sample size in China: 1,010
  34. 34. 34 • 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
  35. 35. 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. 36. 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 benchmarks25% 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 challenge1 - China brand performance - Image challenge2
  37. 37. 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 challenge3 Activation & loyalty challenge4 - China brand performance - Image 25% 50% 75% 100% 0% 25% 50% 75% 100% 0% Awareness Recognition Purchase LoyaltyImage - China brand performance -
  38. 38. 38 • 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
  39. 39. 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 OfficeBeijing Office Office 39, Room 509A No. 4 Gong Ti Bei Lu Chaoyang District 100027 Beijing P.R. China Av. Cidade Jardim, 400 20th floor – room 08 01454-000 São Paulo Brazil 10 Collyer Quay, 40-53 Ocean Financial Centre Singapore 049135 Singapore Email: mumbai@globe-one.com Phone +91 (0) 22 6770 3718 (ext. 11) Mobile +91 99 2066 3306 Fax +91 (0) 22 6645 9842 Email: saopaulo@globe-one.com Phone +55 (0) 11 3818 0837 Mobile +55 (0) 11 9300 9039 Fax +55 (0)11 3818 0899 Email: singapore@globe-one.com Phone +65 6808 6050 Mobile +65 9725 5320 Fax +65 6622 5999 Email: beijing@globe-one.com Phone: +86 (0)10 6593 5451 Phone +86 135 0129 8737 Fax +86 (0)10 6593 5463 Email: shanghai@globe-one.com Phone +86 (0) 21 5158 1688 (ext. 1352) Mobile +86 1381 65 44 122 Fax +86 (0) 21 5158 1686 Email: cologne@globe-one.com Phone +49 (0) 221 788068-0 Fax +49 (0) 221 788068-29 www.globe-one.com 39 Contact
  40. 40. Cologne I Shanghai I Beijing I Mumbai I São Paulo I Singapore Thank you!
  41. 41. 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. 42. 42 - Relevant impact factors in China (selection) - A successful approach to branding recognizes these cultural specifics of transitioned Economy in transition Regional disparitiesCultural 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. 43. 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. 44. 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. 45. 45 Importance of a strong and locally adjusted brand Differentiation from other competitor brandsHigh 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  Marketimpactfactors
  46. 46. 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. 47. 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. 48. 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. 49. 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. Product category Patriotic orientations Income level
  50. 50. 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. . Product category Patriotic orientations Income level
  51. 51. 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. . Product category Patriotic orientations Income level
  52. 52. 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. 53. 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. 54. 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. 55. 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. 56. 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. 57. 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. 58. 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. 59. 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 Processinput 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)
  60. 60. BMW 7 Series. Recent example of a brand campaign with focus on brand heritage Slide 60 | March 2009 | BBDO Consulting Shanghai
  61. 61. BMW 7 Series. Slide 61 | March 2009 | BBDO Consulting Shanghai Recent example of a brand campaign with focus on brand heritage
  62. 62. BMW 7 Series. Slide 62 | March 2009 | BBDO Consulting Shanghai Recent example of a brand campaign with focus on brand heritage
  63. 63. BMW 7 Series. Slide 63 | March 2009 | BBDO Consulting Shanghai Recent example of a brand campaign with focus on brand heritage
  64. 64. BMW 7 Series. Slide 64 | March 2009 | BBDO Consulting Shanghai Recent example of a brand campaign with focus on brand heritage

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