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ZTE and the Houston Rockets

10/7/2013

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The News:
http://finance.yahoo.com/news/zte-usa-announces-first-corporate-030600377.html

Our Thoughts:
Within negotiations that include at least one Chinese company, the term “win-win relationship” almost always emerges at some point during the conversation.  Though, while in most cases, reaching a true “win-win” agreement would be unlikely, the corporate partnership between ZTE and the Houston Rockets is no surprise and is one that will, more than likely, form into a long and sustainable transaction that truly benefits both organizations.

The partnership is a natural fit for the Rockets, of course, because they want to continue and build upon their status as one of the most popular NBA franchises in China – a country with a young and vibrant base of basketball fanatics, which happens to represent massive revenue for the franchise, both now and even more in the future.  ZTE undoubtedly plans to feature the team and its players on advertisement nationwide in China, as it attempts to build even more of a perception of legitimacy and status in its home market through new campaigns that can help give shape the brand attitude.  The resulting benefit for the Rockets is of course cheap or free exposure of their brand to a growing middle class of youth who are often more than willing to shell over US $100 for authentic NBA apparel, such as a Jeremy Lin jersey.  For the rockets, there are few if any foreseeable risks to such a partnership.

ZTE also captures exactly what the need in terms of exposure.  A relatively little known brand in the United States, ZTE needs to be focused on building Brand Awareness as a first and foremost step to gaining market share within the American mobile device market.  The exposure that is gained from the partnership will certainly help increase ZTE’s share of voice, but the main concern that now emerges is if a passive endorsement message will really send the right message to the masses.  Of course the ZTE logo will be plastered everywhere for the Rockets events, press conferences, etc., but what is ZTE’s value proposition?  Initial reports indicate that the first product launches after the announcement of the partnership will include outdated versions Android.  Granted, ZTE’s price point is typically lower than that of Apple’s and Samsung’s, but when an iPhone 5C can be purchased at Best Buy for a mere $50 – a product also produced in China, but that includes one of the most hyped and discussed operating systems on the market, how does ZTE expect to effectively leverage the advertising reach that is at its disposal as part of its partnership with the Rockets?  One can only hope that reports about mediocre product prove untrue, as any company essentially staging a brand launch should present a clear and cohesive brand promise that offers a differentiated and compelling offer to consumers.  

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PepsiCo's 2013 Chinese New Year Ad

2/2/2013

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PepsiCo has released another of it's distinctive, star-studded ads that could almost be mistaken for a short feature film! Though some aspects are no surprise, such as the use of celebrity endorsement and the crafting of a dramatic story-line, the company has made some adjustments compared to the previous year's brand building effort.  In 2012's Chinese New Year ad, the Pepsi soft-drink was actually quite prominent in its ads, as the company attempted to utilize the holiday to combat its rival Coca-Cola. 
The 2013 rendition, however, seems to reflect the notion that cola just doesn't resonate with consumers during the holiday season.  In a skillful pivot, 2013's ad shows a high understanding of cultural aspects that affect advertising success in the context of Chinese New Year.  Upon viewing the video, one notes that there are very few scenes where Pepsi is actually being consumed (though there are various logos placed throughout).  Rather than highlighting Pepsi as a beverage, the company as astutely focused on its orange juice and orange soft-drink flavored brands.  This year, PepsiCo has fully leveraged the symbolism and significant role that this fruit has during Chinese New Year - the Chinese words for orange and tangerine sound like "wealth" and "luck" in fact.  As a result, expect this year's brand building ads to have a more concentrated effect in the minds of consumers - one that may even result in a short-term spike in the company's orange juice and orange soft-drink sales.
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I am Vancl - Leading the charge in China's online apparel market

6/19/2012

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Vancl’s Multi-Faceted Attack:  While many global retailers are speculating about the “cooling” or “hard landing” of the Chinese economy, one domestic online retailer is on the attack and is gaining market share quickly.  Should international players have a higher sense of urgency?

Everywhere you look, bus stops, metro stops, TV and internet, one of China’s largest and most successful online retailers, Vancl, is executing a multi-faceted attack to capture more share of the Chinese apparel market and beyond.  Although most Chinese companies admittedly lack in marketing savvy, Vancl has demonstrated a mastery of integrated marketing communications.  With parallel objectives of raising awareness through brand building, as well as shaping brand attitude and facilitating a rise in purchase intention, the company has launched customized campaigns, which all work together to achieve higher market share. 


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Metro Ad
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Metro Ad
The most important step the company took, however, was before they even thought of advertising.  Prior to approaching their marketing communications strategy, Vancl carefully chose its target market segment – young and independent consumers who reject the ideas of carrying knock-off luxury products in a futile attempt to be perceived as part of the country’s rich elite.  Contrary to one segment of Chinese marketplace that aspires to be perceived as luxurious and rich enough to own premium brands, Vancl’s target segment is comprised of the masses of Chinese who have little interest in paying extra for brands that might “enhance their status” in society. Rather, Vancl was astute in identifying an under-served segment that just wants simple modern style at low prices, no frills.  This segment, filled with many of the country’s young, was a wise choice because of younger generations’ elevated usage the internet, even for common purchases like clothing. 

Though there are many online retail sales portals for apparel in China, most have a poor sense of fashion and many of them are mistrusted due to poor quality of clothing, wrong sizes being sent to customers, poor customer service, non-existent return policies, as well as outright scams.  Vancl knew that they could meet their segment’s demand for stylish and low cost clothing by leveraging e-commerce, but they also knew that the brand would have to overcome significant barriers to gain the trust of its segment.

Now comes the brilliance of their marketing communications strategy.  First, the company hired well-known, young, and at times almost counter-culture figures, such as Han Han 韩寒, a famous young writer, Li Yuchun 李宇春, a singer famous for winning the equivalent of “Idol” in 2005, and Huang Xiao Ming 黃曉明, an actor popular with younger generations (shown below) to be their brand ambassadors.  These young celebrities capture attention immediately, as they wear Vancl clothing in simple and crisp campaigns that raise brand awareness and mold its brand attitude.  Second, Vancl puts promotion heavy ads on websites and online applications like Skype’s partner Tom.com (used primarily by young professionals) to facilitate more visits to the e-commerce platform.  Third, in online ads, it includes a price for the clothing featured in the ad in order to convey the message that not only is it a quality apparel provider, but it’s cheap as well!  Finally, delivering on the brand promise, the company launched its own distribution network which allows customers to try purchased items and return them absolutely free if any aspect did not meet expectations – the in-house delivery person would simply return to the buyer's residence, pick up the products, and a refund would be issued.

Seeing examples of Chinese e-commerce companies employing marketing fundamentals as well as Vancl, while also supporting them with supply chain efficiencies and sound customer relationship management brings about the question, “Is it too late for global retailers to catch up?”  Vancl has found its sense of urgency and is investing heavily amidst speculation that the Chinese economy might fall on hard times.  But guess what, Vancl has emerged as a leader in a mid-margin, high volume, low overhead sector that will endure any movement the economy takes.  Vancl is here to stay.  So, the question becomes, “When will fashion retailers who have overlapping target customers begin to realize that they’re being left behind in the Chinese market?”  The likes of H&M, Forever 21, GAP Inc. and others may wish they would have focused more on online instead of sitting on the sidelines.

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McDonald's vs. KFC in China

4/7/2012

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As the battle continues between the American fast food juggernauts, McDonald's and KFC, some interesting strategies are being employed by each brand in hope for enhanced market share.  As the two giants have launched and counter-launched lunch time promotions that offer "lunch sets" or "combo meals" at 15 RMB (between the hours of 11AM and 3PM), the role of branding and the establishment of emotional and intangible perceptions about each brand is becoming more and more important.  Over the past few months, close observers can see that the companies have taken two clearly distinct paths toward attempted differentiation.  First, KFC has branded itself as not only the leader in high quality fast food chicken, but also a provider of tasty new meals & snacks that appear & rotate almost every quarter.  McDonald's on the other hand has decided to focus on its traditional offerings with only slight variations, while it has begun to rely more on advertising to support and enhance the claims of its trademark hamburgers: 
In the above, we first see an example of how McDonald's has specifically identified young males as the target audience for the Big Mac.  With sound marcom fundamentals, this comedic, well focused ad seems to have been well received in the marketplace so far.  On the other hand, KFC has become well known for diversity in their menu and always having something new to try.  Though not always long lasting, the new dishes provide a level of excitement to China's young consumers - a service aspect that McDonald's has not yet seemed to capture nor attempted to achieve.  It will remain to be seen how these strategic decisions play out, but for now the perception of KFC's superiority in terms of food quality, diversity, while maintaining equal or lower prices than McDonald's has allowed it to maintain its market leadership.
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Jack Daniel's in China - Can "Old No. 7" adapt to new markets?

3/10/2012

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Jack Daniel’s, the famed American whisky brand, has taken steps to establish itself in many emerging markets of late.  In China, as wages rise and the middle class finds itself with more disposable income, going out and having high-end drinks at bars and nightclubs becomes more and more possible.  Just last week, in fact, I observed one of Jack Daniel’s latest advertising campaigns in action while exiting a metro station at one of the most popular shopping and bar districts in Shenzhen.   The Shopping Park (or Gou Wu Gong Yuan) metro stop was plastered with advertisements telling the brand story, stating “For over 145 years, it is still world renowned.  This is classic American.  This is Jack Daniel’s.”  
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From a marketing communications standpoint, it appears Jack Daniel’s is positioning itself with a superlative message – no other whisky brand represents America like Jack Daniels – a logical choice of message indeed.  As foreign products in China are naturally regarded as higher quality products that can demand a price premium, the strength of the company’s brand story is an enormous asset.  As the beverage is still at the onset of establishing a foothold in China, such brand awareness campaigns are certainly critical while gaining share of voice, top of mind and eventually enhanced market share within the category.  

Observing the placement of such ads within the metro system, however, leads one to wonder if the company put the cart before the horse in terms of its marketing strategy. Is Jack Daniel’s really targeting the masses who ride the metro system to work every day?  Are these workers who on average earn less than US$670 per month (Shenzhen Statistics Bureau) really those that the brand expects to become loyal customers? Early on in planning, the ideal consumer segment might have been more carefully identified and targeted, so that the core message of the brand awareness campaigns could reach consumers who are most likely to be receptive and responsive to it.  It seems instead, the company was advised to appeal to the masses – after all, a small percentage of sales from a large pool of consumers is good right?

In China Brand Consulting’s opinion, this ad’s message was right on the mark, but the placement within public transport is incongruent with a highly targeted integrated marketing communications strategy for a premium brand. While most riders of the Shenzhen metro system are undoubtedly impressed by the classy design of the advertising, few are anywhere near the point where they could become repeat brand loyalists. Faced with the choice of dedicate a full 6% of their monthly income to buy a bottle of alcohol at the nearest corner store is a habit that is extremely unlikely to develop, especially when the lower middle class can simply grab a decent tasting one-liter bottle of Tsingtao beer for a mere 4.5 RMB (US$ 0.71) at the same store.  In truth, the part of the “middle class” that Jack Daniel’s seeks is not made up of those who use public transport, rather those who own cars.  If only these ad dollars were spent on billboards along roadways in the bar area!  If it were this campaign would have reached the correct target audience – achieving high percentages of top of mind that would have translated into more sustainable market share.

Also, speaking of corner stores, Jack Daniel’s indeed is available at a good number of them, though they often have a bit of dust formed on the bottle.  Of course, having as many sales outlets as possible allows for convenient purchase of the product.  However, again, brand managers launching products in the Chinese marketplace must understand who will be purchasing their product.  The demographic that would be susceptible to the purchase of higher-end whisky is that of the upper middle class – a group that drives to large supermarkets like Carrefour, Jusco and Walmart for their frequent purchases of quality food & drink.  This group also seeks out specialty stores for purchases related holidays and business. 

With a perfect opportunity to position itself as the premier American whisky, it could be suggested that Jack Daniel’s is in the process of diluting its natural placement as a premium whisky in a young marketplace that inherently values American products.  China Brand Consulting would caution the company and suggest that it seriously reconsider the placement of their brand awareness campaigns to ensure that they are meant for a specific target segment of consumers.  While the whiskey market is still relatively young in China, it is recommended that an intense focus toward the affluent and upper middle-class consumers be maintained.  In this fashion, the brand can remain highly profitable with strong brand equity as it nears the critical early majority stage of the diffusion curve.

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Pepsi & Frito Lay's Holiday Branding Campaign in China

2/8/2012

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_To kick off the new year, we're going to feature a really unique advertisement that Pepsi/Frito Lay launched just prior to Chinese New Year. The first time I saw this I was riding the metro in Shenzhen and I was amazed to see how it captivated fellow metro riders.
_ With an objective of convincing consumers that Pepsi and Frito Lay products should become a part of how they show care for their loved ones during the holidays, this "brand attitude" campaign conveys a memorable message by combining both celebrity endorsements (passive) and emotional appeal (drama). Matched with a hybrid execution style (slice-of-life/fantasy/musical/personality symbol), this mini movie made a big splash early on in 2012!
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