Post-Olympic China: What’s Next for Marketers?

Tom Doctoroff, CEO of J. Walter Thompson Greater China, is one of the most recognized and influential advertising executives in the Middle Kingdom. According to a recent study by Grupo Consultores and China Consultancy- R3, his name is cited by more China-focused marketing executives than any other individual in the business. Given the long build-up to August’s Beijing Olympics and the conversations about how the Games would serve as “China’s Coming-Out Party,” The Internationalist asked Doctoroff the NEXT big question — “What does the Post-Olympic environment mean for marketers and brand building in China?” And in typical style, Tom Doctoroff has some surprising and insightful answers from his Shanghai-based vantage point.

“The Olympics did not transform the marketing landscape in China,” asserts Tom Doctoroff.
“It is still the market it was before — one of many challenges, but also one of tremendous opportunity. But even after 6 weeks of wall-to-wall messages tied to Olympic themes, the Games do not represent an inflection point in advertising in China.”

Of course, Doctoroff acknowledges that the Games were a bright burst of marketing efforts. He also cites how some companies, like Coca Cola, strengthened its brand in China through an association with the Games. Coke’s torch run sponsorship not only brought moments of joy to 100 million Chinese, but the effort was rooted in a brand idea that was truly of heroic proportions. Combined with favorite Coke moments and concepts like a Coke World Store — which redefined retail space marketing, Coca Cola certainly demonstrated branding at its best and opened the door for big marketing ideas.
Now, however, Tom Doctoroff believes that the two big game changers in China will be how the market embraces both the service economy and the digital economy.

Doctoroff, who is also the author of Billions: Selling to the New Chinese Consumer and a keen observer of the country’s “emerging affluent,” believes that the rapidly-expanding Chinese middle class now requires a different service orientation that the state cannot deliver. This new service frontier will create more opportunities for Western marketers, particularly in categories like banking, insurance, and travel. Those business sectors that benefit dramatically by building loyalty through customer care interactions and relationship marketing concepts will be the next areas slated for development.
There is also a digital revolution now going on in China, and a country of 250 million internet users means that more minds are open to new products and services. It also means that marketers must adapt their communications models for this fast-changing audience. A new digital era in China also neatly dovetails with the growth of a service economy. Technology can enhance a consumer’s involvement with products and services, while it also builds the brand and lowers the cost of customer acquisition. In China’s dawning digital age, Doctoroff is enthusiastic about finding new niche audiences with cross-selling opportunities, especially for banks like JWT’s client, HSBC. He has little doubt that CRM activities will increasingly migrate to online in China.

In an evolving China, many Western companies are now realizing that they cannot meet mass market demands on their own. For example, it is a challenge for marketers to understand the scale of China, particularly when distribution requires they target the fifth-level cities. Mobilizing a field force seems like an impossible task. However, JWT is finding answers. De-regulation in China has now made it easier to acquire non-traditional companies that provide true brand integration and scaled diversification. Thompson has now acquired Always, a local field force company, comprised of tens of thousands of young women hired to do promotional sampling as part of a shopper marketing strategy. This kind of personal contact and direct introduction to brands helps considerably to gain awareness and preference.

Another positive result of China’s less regulated economy is the increased listings on stock exchanges — at home and abroad. Suddenly more companies are beginning to focus on being accountable to shareholders. China’s macro economic fundamentals support that 45% of the country’s revenues emanate from local companies. Business leaders are starting to also understand the power of the brand, and recognize how vital it is that they invest in the long-term brand equity. (And legacy agencies with brand ideas are becoming a stronger center of gravity.)
In acknowledging some of the challenges of China, Doctoroff talks of how there are significant barriers for any ad agency. The competition is vicious. China now has nearly 50,000 ad agencies. Many are local and offer low-priced services without a legacy of experience. The typical local agency may understand the value of a brand, but they haven’t yet worked to build long-term, sustainable brand equity. Not only does this make for a market of commoditization, but it becomes difficult to cultivate a long-term client relationship when a partnership mentality rarely exists.
Given the current corporate structure and departmental hierarchy of Chinese companies, the sales division generally controls marketing and media budgets. This often means a primary emphasis on immediate sales gains, rather a drive to create brand equity and, ultimately, greater shareholder value. In addition, the vast and ever-changing, ever-growing media landscape can be daunting, especially to multinationals familiar with more defined markets. For example, the actual value of total advertising expenditure in Chinese media is difficult to ascertain given the kind of discounting that occurs.

The issue of talent is also significant for the advertising industry, and a number of the challenges are culturally-rooted. Communications in general is viewed as an abstract discipline. As a rule, a job function that is tangible, controllable, reliable and quantifiable-- usually with a sales end, is considered a respected career route. Traditional Chinese education emphasizes the concrete and measurable. It does not yet encourage leadership with vision and conviction. Persuading people or employees to trust in that which cannot be immediately proven can mean a big leap of faith.
According to Tom Doctoroff, “Chinese consumers may be the most brand-friendly people on earth. It is also a place where brands are used as tools — not simply for superficial status projection, but with an acknowledgement of moving forward. Foreign brands are still the strongest vessels of contemporary culture, particularly when they are wrapped in Chinese aspirations within consistent global brand architecture.”
“More western brands are taking the bumpy but steady journey to the top of the mountain. China is evolving to a legitimate ‘brandscape.’ Not for the faint-hearted, it takes perseverance. But it is also a market that matters…. And one that is constantly evolving.”

Contact: tom.doctoroff@jwt.com

Tom Doctoroff was born, raised and educated in America’s heartland, but somehow took a detour to Hong Kong in 1994 and never quite made it back to the States. Since then, he has become one of Asia’s most respected advertising minds and a leading expert in the cross-border management of brand architecture and brand building. Some of his clients in China include: Unilever, the Diamond Trading Company (formerly DeBeers), HSBC, Inbev, Ford, Lenovo computers, Konka mobile phones and China Unicom.