China Rising Through the Crisis | Adweek China Rising Through the Crisis | Adweek
Advertisement

China Rising Through the Crisis

Advertisement

Local Chinese brands -- even those professing to have overseas ambitions -- have long understood the importance of winning in the domestic market. A great example of this was the huge efforts made by iconic domestic brands such as Li Ning Sportswear, Tsingtao Beer, Bank of China and Haier Domestic Appliances at the Beijing Olympics. Even with a global audience watching, most local marketers believed the real value was the national stage and the opportunity for brand building with Chinese consumers. Local Chinese brands know the future is in their own backyard, and have maintained, and in some cases increased ad spending, even in the face of the downturn.

This is crucial for mid- to long-term growth prospects, as small increases in market share in downturns are proven to yield heightened returns in the recovery. A study from a private education service, New Oriental, found that, after the Japanese recession in the early '90s, companies that increased their marketing budgets by at least 10 percent gained 6.7 percent market share during the recession period -- and an average 3.8 percent post-recession. On the other hand, brands that cut their spending lost an average of over 4 percent market share in the recovery. To fully suggest that marketers leave their budgets intact would be to not fully understand the economic crisis; however, it's important for companies to make the right cuts and simultaneously, the right investments. Perhaps there is a case to be made for "de-coupling" marketing spending in scalable emerging markets such as China, even if the real economy is, increasingly, globally integrated?

The Chinese advertising world is complex and changing fast. It involves 300 million Internet users and well over 600 million mobile phone users, yet TV is still the medium of choice for many. Marketing services are extremely important here, especially in going beyond tier-one cities. Chinese consumers are increasingly open to international influences and brands, yet are truly proud to be Chinese and are increasingly confident in the quality of homegrown brands. It is a market in which the cultural heritage of China is highly valued, yet technology and foreign luxury goods are aspiring purchases for an upwardly mobile population.

While the government has taken proactive steps to combat the crisis, and local brands have remained committed to investing in their home market, it is no exaggeration to say this is crunch time for global brands. Whether we are at the bottom of a V-shaped recovery or yet to face greater uncertainty, one thing is clear: China's future as a consumer market looks bright. Are you ready?

Joseph Wang is chairman of Euro RSCG North Asia. He can be reached at joseph.wang@eurorscg.com.