Chapter 4.11: Brand Management and Publicity


Li Yong, Deputy Secretary General, China Association of International Trade

Brand management

Local brand vs foreign brand

Among many other things to consider in a venture investment in China, one key issue in the area of marketing is the branding of the product(s) that the venture will produce. In an equity joint venture with a Chinese partner, there is always a trade-off in terms of whose brand should be used in the marketing of the products. There are usually the following options:

Local brand
'Local brand' here refers to the brand(s) that have been used by the Chinese partner for marketing in China. In many cases the brand owned by the Chinese partner would be sold to the foreign partner as equity. Apart from the bargaining process, one key point of consideration would be whether a local brand has an advantage over other options such as the brand name owned by the foreign partner, or the creation of a new brand. The local brand may have the following attributes to attract it to the foreign partner:

  • brand image already established;

  • brand awareness, easy recognition and ready acceptance among customers/consumers;

  • existing distribution network and market share.

However, a foreign partner may also have the following concerns about the pitfalls of using a local brand. These could include:

  • poor brand image associated with poor quality products/services;

  • w level of awareness, recognition and acceptance by customers/consumers;

  • poor distribution and small market share.

It is a complicated process to find out whether or not a local brand has the necessary value. Careful market research is essential in determining whether a local brand should be adopted before commitment is made. Some joint ventures use a local brand to cash in on its expanded marketing efforts and improved product/ service attributes. Some adopt local brands as part of their multi-branding strategy. All of these will have to be weighed against the cost and benefits of using a local brand.

Foreign brand
'Foreign brand' here refers to a brand that the foreign partner of a joint venture already owns and wants to introduce into the local market by way of investment. As a part of globalization, the introduction of foreign brands “ particularly those that have been marketed internationally and gained worldwide recognition “ is the preferred way of branding joint venture products. Using foreign brands is often perceived as a symbol of market presence and penetration.

However, promoting foreign brands in order to increase awareness and build a quality image will be a long- term engagement, resembling similar patterns of development as in the home country and entailing a strong financial commitment. The general perception by consumers in China that a foreign branded or a joint venture product is a synonym for good quality has encouraged many foreign companies entering into joint ventures in China to use their own brands. Chinese partners also welcome foreign brands for the conventional belief that a foreign brand will increase the marketability of the products. Increasingly, however, Chinese partners have learned from experience that there is a danger of losing their own established brand when they adopt a foreign brand from their foreign partner. Two examples are the microwave oven manufacturer and the colour film manufacturer who have refused a number of joint venture proposals because of the use of foreign brands.

Although some foreign manufacturers have been successful in using their own brands in China, others have experienced difficulties in keeping the quality image of the products and services that their brands represent. Factors associated with the brand image need to be considered and evaluated before a decision can be made to use your own brand. Among others, the following factors are considered to be critical:

  • Product quality.     When managing the brand in China, the brand owner will have be sure that the quality associated with the brand will be guaranteed in terms of raw materials and production. At the same time, the manufacturer's quality will have to be adapted to meet the standards set by local government. Otherwise, there may be quality problems subjecting the brand image to question;

  • Quality of services.     Service is an important part of the brand image. The brand owner will have to be sure that services will be provided to the consumer/ customer in such a way that they satisfy the expectations of the brand. If quality services can not be guaranteed, it will threaten the brand image;

  • Effectiveness of distribution.     The effectiveness of the joint venture's distribution network will have to be assessed. If the distribution is such that the foreign branded products cannot reach the consumers/customers in time and there is little that can be done to improve it in the short term, the strengths that the brand may have will only be a theoretical advantage.

The solution to these problems hinges on how much control the brand owner could have over the joint venture operations. This control is not just a matter of majority holding but it can be achieved through good contract negotiation. If the Chinese management shares the same marketing concepts as the foreign partners, the above disadvantages can be transformed into strengths. However, things do not always happen as expected. When the owner of a foreign brand cannot be sure whether the operations will be such that the chances of damaging the brand image as well as the corporate image are minimized, it might be safer to create a new brand.

New brand
A new brand can be the result of compromises from both sides of the joint venture, or similarities in strategic thinking. Whatever it might appear to be, a new brand is the product of the union between the Chinese and foreign partners. The advantages of having a completely new brand are that agreement between both sides can be easily reached and there will be a common objective in promoting the brand. The shared interests in the brand will provide incentives for both sides to cooperate. The disadvantages could be that there may not be ready recognition if part of the production is intended for export markets. If export is an essential part of the joint venture agreement, a separate brand arrangement might be necessary.

Joint branding
Another compromise, or a strategy to circumvent the deadlock of branding, is joint branding, where the identities of both partners can be maintained and reflected in the brand. In fact, this is not a bad strategy for foreign firms to adopt at the early stage of joint venturing, avoiding risking their own brand image if product quality and related services are unstable. A joint brand gives consumers/customers a clear message that the product is made by a joint venture, whose quality is generally believed to be higher than that of local products.

The advantages of such exercise are:

  • None of the partners of the joint venture need worry about losing their own brand identities;

  • Promotion of the joint brand will increase awareness of both brands;

  • Resources committed to promoting the joint brand will reflect the fair-deal principle;

  • The image of foreign brands can be maintained as a separate brand;

  • It is easy to create recognition in both domestic and overseas markets.

Selecting a good brand name

A good brand name may add value to the good quality and services associated with the brand. A bad brand name may already have given the consumer/customer an unpleasant impression , which may even have prevented them from trying the product. Goldlion, a brand for men's clothes and accessories, used to experience sluggish sales in Hong Kong, because the pronunciation of the literal translation of the brand in Cantonese was associated with the meaning 'willing loss', or 'lose always'. The Chinese translation was later changed to mean 'gold profit comes'; sales increased substantially and it has become a prestigious brand.

There are no hard and fast rules for picking a good brand name. When creating a new brand name or giving a foreign brand an appropriate Chinese name, it is advisable to consider the following principles:

  • The brand name should use words that are within the vocabulary of most of the consumers. Unusual or difficult to pronounce words, or words that have more than one pronunciation should be avoided.

  • The pronunciation of the brand name should not carry any possible negative implications. The name of the beer brand 'Yunhu'(meaning cloud lake) also sounds like the words for 'dizzy' and 'muddleheaded' in Chinese.

  • The brand name should be short and easy to read, pronounce and remember. Most of the brand names in China are two or three words. Some, such as Coca- Cola and Pepsi-Cola, have four. There is hardly any brand that has five Chinese words.

  • The brand name should carry positive implications with regard to the product's function, uses and features. Tylenol cold drug has a Chinese name “ Tai Nuo “ meaning 'safe' or 'peaceful' promise. The Chinese name of Signal toothpaste, Jie Nuo, means 'clean promise'.

  • Of course, a brand name should not have the potential to cause legal problems.

A good name might result from a brainstorming session among the marketing people of a company. In order to eliminate possible negative connotations , references or associations, however, it will be safer to test the name or names among consumers/customers. China is a country of multiple dialects and so testing should be carried out in different places with different dialects. In practice, Beijing, Shanghai and Guangzhou are chosen to test brand names in order to make sure that the selected name does not have negative elements when pronounced in different dialects.

Brand protection

China has promulgated a series of laws and regulations to protect the rights of the owners of intellectual property. These are covered in more detail elsewhere in this book.

The government attaches great importance to its counter-faking efforts and several campaigns are waged each year to fight against counterfeits. China's crack- down on counterfeits checks illegal activities from both the production and distribution sides. The production of counterfeits is illegal and sales of counterfeits are also illegal. If retailers are found to be selling counterfeits, they are subject to penalties and the buyer of the counterfeits is compensated at twice the price at which the counterfeits are sold. Apart from government efforts, there are also non-governmental organisations and individuals engaged in the crackdown on counterfeits. All these have enhanced consumer awareness to reject and fight against counterfeit products.

Brand owners should properly register the brand with relevant authorities in China in order to protect the brand from the legal point of view. The Great Hall of the People, the place where national conferences are held, has registered its name, 'Ren Min Da Hui Tang' , with the State Administration of Industry and Commerce for 288 varieties in 22 categories. This was intended to prevent manufacturers from taking advantage of the trust that people have in the name. Wahaha Group, a manufacturer of baby health food, has registered not only the brand name 'Wahaha', but also other similar names, such as Hahawa, Wahawa, Hawaha and Hawawa. While a brand can be protected from the legal perspective, manufacturers can also take measures to prevent their products from being copied . One of these measures is to affix anti-fake labels to the products or the packages, or to use counter-faking devices. Some manufacturers have designed their distribution in such a way that the distributors take on some of the counterfeit monitoring in each of the regional markets. There are also manufacturers who publicly offer cash or material awards for those who report and help obtain evidence on counterfeit production.

Towards brand loyalty

Brand loyalty is considered to be the most desirable objective of marketing. China has moved from a shortage economy into an economy of relative abundance . Many consumer products are in excessive supply. Increased consumerism and ' buyers ' markets' will make brand management a delicate job. While most Chinese enterprises are still using mass marketing techniques in an attempt to maintain their market shares, some, particularly joint ventures, have started to study marketing alternatives in order to establish brand loyalty.

It is important for brand managers as well as marketing managers to realize that a brand will not be as much of an asset or equity as in the past or present if there is no loyalty from consumers/customers. Brand loyalty is the core target of brand management and marketing. When a product is adopted or accepted, trust can be established by meeting consumer/customer expectations and providing satisfaction. However, trust will have to be reinforced to gain loyalty. Building brand loyalty involves a process that can go far beyond the products' physical attributes and their invisible merits. Brand loyalty is more of a psychological reinforcement process than a process of persuasion by different means of promotion. This is particular true in China, where the legacy of 5,000 years of civilization governs a unique system of value judgement. When the marketing people are trying to formulate a strategy for brand loyalty marketing, Chinese cultural traits (see Chapters 4.1 and 4.2) should be exploited. To give consumers 'face' may result in consumer/customer loyalty. An appropriate use of the principle of reciprocity in personal relationships may create obligations/gratitude from the consumer/customer. Harmonious consumer/customer relations can be established by abiding by cultural codes.




Doing Business with China
Doing Business with China
ISBN: 1905050089
EAN: 2147483647
Year: 2003
Pages: 648
Authors: Lord Brittan

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