To get the full advantage of marketing in China, we need to adapt our brands for use there - and not ignore the growing number of Chinese visiting here, says Professor Ang

By Siah Hwee Ang*

It was not long ago that we see (strong) foreign brands performing well in China.

The rise of Chinese brands such as Lenovo, Huawei, Haier, ZTE and TCL in recent times has certainly reminded us of the Samsung of the past.

The equation of performance of brands becomes complex with rising income levels and increasing consumer sophistication.

Clearly, the jury is still out on the battle of foreign and local brands in China.

In recent years, evidence that compares with the performance of foreign brands with local brands in China has produced a mixed picture. With the rising middle-income group in China (and hence spending power) and the new generation of Chinese like to be seen as ‘modern and Westernised’, we are seeing many multinational brands located in China.

A related trend is also the fact that more and more Chinese are not keen to buy fake luxury goods - preferring to possess one of those authentic branded items that signals quality and status.

As a result, many of the foreign brands are generating a larger portion of their revenue from the China market than ever before.

Despite these, Western brands have not been clear winners in the battle of brands.

Status-conscious can be powerful. Just ask Starbucks and Nestlé.

Traditionally a tea-drinking country, China has seen remarkable growth in coffee consumption in the last few years.

While the average coffee consumption of Chinese is five cups over a year, some towns and cities in China are moving close to the average daily coffee consumption of 240 cups per person per year.

The statistics can be partly attributed to foreign brands that have done well in generating an image of coffee drinking as a luxury undertaking.

On that front, a growing market is always going to attract competition and we should expect Starbucks and Nestlé to encounter more foreign and local competition relatively quickly as the coffee-drinking culture thickens.

Many companies that are serious in the Chinese market have, in particular, paid lots of attention to the brand name as presented in that market.

Most involve some degree of adaptation.

For example, the pronunciation of Coca-Cola’s Chinese translation means "can be tasty and happy" while that of Nike is "endurance and conquer".

These translations make a lot of sense - relate the product well to the consumers and are easy to remember.

In fact, only about 10 percent of major multinationals are deemed to not have made some form of adaptation in the branding of their name in China.

It must be said that there will still be some time before Chinese brands are perceived as ‘good quality’ as their Western counterparts.

Many Chinese companies have mind-sets that are still attuned to the mass market and lack the mentality of the premiums that quality can bring.

This may be an explanation of why Chinese food and dairy companies continue to make mistakes as they rush to serve the large market, often at the expense of quality.

These mistakes will buy foreign brands more time to exploit the advantages they usually possess. Nonetheless, as uncertainty surrounds Chinese brands’ forays into foreign markets as they are feeling their way out there, a major part of their focus will continue to be about penetrating the Chinese domestic market. This will keep foreign brands constantly on their watch.

No surprise then that even strong international brands such as Procter and Gamble, Unilever and L’Oreal have committed to make significant investments in China in the coming years to hold on to their already dominant positions in China.

Of course the advantages of foreign brands are more likely to happen in the Chinese cities that have the spending power. Just an example, despite heavy competition in the smartphone market in China from the likes of Lenovo, Huawei, ZTE, Samsung and Xiaomi, Apple has done well in China with its 10 stores in the key cities in China - Shanghai, Beijing, Shenzhen, Hong Kong and the up-and-coming Chengdu from West China.

The brand name is strong enough to sell two million iPhone 5 handsets within three days of launching in China in December 2012.

Of course to hold on to this position, being innovative is important for Apple as competition continues to be stiff in this sector in China.

It looks like foreign brands will continue to have a place in the heart of Chinese consumers, though the window of opportunity will narrow.

For companies trying to compete in China or to stay competitive there, investment in branding is probably still the way to go.

As the Chinese language will continue to be the key medium of communication in China, it is also time to think about appropriate ways to reach out to the customers, such as choosing an easy-to-remember brand name using Chinese characters.

Being in New Zealand, I ask the question, do many New Zealand companies actually do that when they conduct business in China or do business with Chinese organisations?

Even if the answer is no to my question, maybe there is another way to strengthen the Kiwi brands.

Like the rest of the world, New Zealand will pick up more Chinese travellers in 2014 and beyond.

It may not be a bad idea to also think about how our incoming Chinese tourists can be exposed to our brands as they spend time here.

Surely every effort to pitch our product quality counts.

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Professor Siah Hwee Ang holds the BNZ Chair in Business in Asia at Victoria University. He writes a regular column here focused on understanding the challenges and opportunities for New Zealand in our trade with China. You can contact him here