Big Trouble in Not-So-Little China - A Closer Look
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Several months ago, I was able to score an interview with Tom Doctoroff, CEO of J. Walter Thompson Greater China. Our conversation was so good, we decided to make it the cover story for our March 1 issue, titled "Big Trouble in Not-So-Little China: Tom Doctoroff knows that reaching the Chinese customer is harder than you think."
Anyway, here's an excerpt from the interview, and a piece that didn't make it through the editing process. (Cut down, it was still over 2,000 words. Most of our features run -- at most -- 1,500 words!)
Q: Recently, China has been in the news a lot for manufacturing recalls. Do the same issues that affect American consumers when it comes to Chinese brands affect Chinese consumers as well?
A: Yes, but they always have. The Chinese have always been distrustful of the basic reliability of goods, which is a primary reason why international brands are actively preferred, which is very different from the Japanese.
The fact is, the primary role of a Chinese brand is to reassure customers that nothing will go wrong with its products, in terms of function or safety, and of the social payoffs of the product so you’re not alienated [by using the product]. Chinese consumers have always been sensitive to the fact that goods have been pumped out of state-owned factories, and that has given multinational marketers an opportunity to capitalize on the demand for quality.
That’s not to say local brands aren’t making progress. At JWT, we currently have almost 50% of our revenue coming from local brands, but it is a gradual process, and there still isn’t one local brand…that is actively preferred by Chinese consumers.
Q: I recently read that Chinese companies—Li Ning, for example—are starting to emphasize product quality. Do you see more companies going that route?
A: Of course. It’s not just Li Ning—it’s any local brand. They first have to establish a quality base. One of our clients, Anta, the nation’s largest shoe and apparel manufacturer, and what they’re doing in terms of quality testing is impressive. You see this in everything from computers to beer. In milk, you have elite milk from Illy with ads that talk about homogenization and purification, and they demand a price premium.
It’s a push for a mass premium level based on quality superiority. There’s a push away from the vortex of commoditization into the premium plane, and it’s important, for local brands that want to have a long-term viability. Over time, I’m sure they’ll continue to make progress, but right now they’re at a disadvantage when it comes to quality perception.
Scale impresses, and international success impresses even more. Brands like IBM and Microsoft, whereas in the West, they’re “Big Brother�-ish, here they’re actually cool. Quality drives are very important, but they always have been, so it’s just a question of local manufacturers keeping up with consumers.
Q: Do you see this blanket of distrust lifting anytime soon? What needs to change in order for it to do so?
A: The short answer to that question is no, I don’t see it lifting. It will become less acute, but part of the Chinese psychology says: “What I don’t know is unsafe.� This is not a civil society in the sense that people have trust in impartial institutions, like an FCC or FDA, to protect their interests, so people here view the outside world as more dangerous than the Western world sees it. They see it as an intricate, interconnected structure you have to tiptoe around to not upset anyone, and in the West, we know that ultimately, we’re safe.
This assumption of the need for protection is deeply rooted here, even when you go into the middle class, or people with much more disposable income. That protective impulse is there, but it morphs into a higher order of protection. People are not overly protective of their physical safety, but are more concerned about their long-term financial safety, their societal safety, and so on.
It’s never going to lift, and because of that, you’ll never see the same spending patterns as you do in the West.
A: Yes, but they always have. The Chinese have always been distrustful of the basic reliability of goods, which is a primary reason why international brands are actively preferred, which is very different from the Japanese.
The fact is, the primary role of a Chinese brand is to reassure customers that nothing will go wrong with its products, in terms of function or safety, and of the social payoffs of the product so you’re not alienated [by using the product]. Chinese consumers have always been sensitive to the fact that goods have been pumped out of state-owned factories, and that has given multinational marketers an opportunity to capitalize on the demand for quality.
That’s not to say local brands aren’t making progress. At JWT, we currently have almost 50% of our revenue coming from local brands, but it is a gradual process, and there still isn’t one local brand…that is actively preferred by Chinese consumers.
Q: I recently read that Chinese companies—Li Ning, for example—are starting to emphasize product quality. Do you see more companies going that route?
A: Of course. It’s not just Li Ning—it’s any local brand. They first have to establish a quality base. One of our clients, Anta, the nation’s largest shoe and apparel manufacturer, and what they’re doing in terms of quality testing is impressive. You see this in everything from computers to beer. In milk, you have elite milk from Illy with ads that talk about homogenization and purification, and they demand a price premium.
It’s a push for a mass premium level based on quality superiority. There’s a push away from the vortex of commoditization into the premium plane, and it’s important, for local brands that want to have a long-term viability. Over time, I’m sure they’ll continue to make progress, but right now they’re at a disadvantage when it comes to quality perception.
Scale impresses, and international success impresses even more. Brands like IBM and Microsoft, whereas in the West, they’re “Big Brother�-ish, here they’re actually cool. Quality drives are very important, but they always have been, so it’s just a question of local manufacturers keeping up with consumers.
Q: Do you see this blanket of distrust lifting anytime soon? What needs to change in order for it to do so?
A: The short answer to that question is no, I don’t see it lifting. It will become less acute, but part of the Chinese psychology says: “What I don’t know is unsafe.� This is not a civil society in the sense that people have trust in impartial institutions, like an FCC or FDA, to protect their interests, so people here view the outside world as more dangerous than the Western world sees it. They see it as an intricate, interconnected structure you have to tiptoe around to not upset anyone, and in the West, we know that ultimately, we’re safe.
This assumption of the need for protection is deeply rooted here, even when you go into the middle class, or people with much more disposable income. That protective impulse is there, but it morphs into a higher order of protection. People are not overly protective of their physical safety, but are more concerned about their long-term financial safety, their societal safety, and so on.
It’s never going to lift, and because of that, you’ll never see the same spending patterns as you do in the West.
