
The Chinese consumer is on advertisers’ minds. Ad companies have their sights set on spenders, targeting them with more sophisticated methods of making people and their money part. Christine Huang investigates the ways that agencies are tapping into our billion-man marketplace.
Tom Doctoroff’s office, on the 25th floor of The Center looking out on the city’s decorated skyscrapers, is a perfect lens into this complex economy. It’s hard to escape the blinking lights and neon signage of Shanghai from these heights; a city fast becoming an ad-man’s dream. The designer offices of JWT, the world’s fourth largest advertising agency, could be easily mistaken for a Madison Avenue headquarters. But, as the CEO of JWT, Greater China (and Area Director for North East Asia) is quick to remind, “looks can be deceiving.” Multinational companies like JWT have been streaming into the market for more than a decade, but only in the last several years has the average consumer perceived the impact. “The few agencies today that are of scale – Ogilvy & Mather, JWT, McCann-Erickson, Saatchi & Saatchi… they all came of age at the same time, in the late 90s,” explains Doctoroff.
Behind JWT’s Western exterior lies a business heavily dependent on an understanding of a very diverse Chinese market. Doctoroff has been in Shanghai for nearly a decade and has witnessed the maturation of the industry in China – a dramatic, rocky journey. His recently published book, ‘Billions: Selling to the New Chinese Consumer’ (Palgrave Macmillan, 2005), uncovers the reality of this glittering, and to many, arcane market. While ads for Nike and McDonald’s are as ubiquitous as construction work and corner stores, the logic driving advertising strategy here is far from crystal clear.
A POLAR INDUSTRY
Less than 30 years ago, Ogilvy became the first foreign agency to publish an ad in China – in the Shanghai Wenhui Bao newspaper. Today, advertising spending in China is approaching ¥250 billion a year (243.9 billion was spent in 2005, according to AC Nielsen), and is expected to escalate at an increasingly fast rate. Investment bank Credit Suisse First Boston (CSFB) estimates that within a decade, the Chinese consumer will likely have displaced the US consumer as the primary engine of global economic growth – good news for China’s potential advertisers. “There’s been a great change, as advertising moves in line with the economy. When the market booms, so does the advertising industry. It’s synonymous with revenue, growth, and creativity,” beams Stephen Kong, Creative Director at Leo Burnett Shanghai Advertising Co.
IT’S ALL IN THE BRAND
Some of the biggest challenges companies face in the Chinese market is the ebb and flow of prestige and overproduction – but it is here that they can shine. “There are too many goods being produced and too few people wanting to buy them, which leads to, in many segments, downward prices and profits. The only way for brands to escape this cycle is to increase their prices, and the only way to [do that] is by developing brand equity,” Doctoroff explains. Indeed, according to a May 2006 study by AC Nielsen of Chinese consumers, designer brands like Chanel, Louis Vuitton, and Versace (the real McCoys, not the fakes) are the most highly regarded apparel brands, suggesting marketing campaigns for these luxury goods have successfully established their identities, and made them – despite their pricetags – highly sought after.“China is what we call, ultimately, a brand-building market. 15 years ago, most Chinese didn’t know what a brand was… Now everything is available, so consumers are confused. The only way for a consumer to make sense of this is with advertising and communication; they need consistent positioning,” says Doctoroff.

BRANDING IDEAS
In his article in the July 2006 issue of the China Economic Review, Doctoroff notes that reliability is high on the Chinese consumer’s list of reasons to buy brand name goods, but that their weight as status symbols also plays a heavy role. He points to the popularity of Pizza Hut and Starbucks as an example of how influential the ‘see-and-be-seen’ element is here, as consumers congregate in relatively expensive chain outlets in an expression of status.Eddie Wong, Executive Creative Director for Euro RSCG Greater China, agrees that the future of the prosperous advertising campaign in China lies in ideas, not just products: “China, like everybody else, has evolved into a multi-market. Marketers are learning that they need to spend money on concept-based advertising, rather than the traditional product-focused advertising.”
WHAT WORKS?
The offbeat ad is on the rise. Electronics, media, and fashion are all markets in which the odd or counter-cultural has proved alluring, but even big-name companies, like Coca-Cola and Reebok, have found this to be a lucrative approach. This shift towards riskier ads is easily identifiable in the mainstream – like in the highly publicized McDonald’s Quarter Pounder clip (created by Leo Burnett). These print ads and television spots include taglines that stress the “thicker” and “juicier” nature of the burger, and encourages consumers to “inject protein and vitamins into your trendy body.” Kong says of his agency’s motivation, “You want something that appeals to the senses. A sexy woman eating a quarter pounder works as long as you’re vague in your suggestions.” But, as Doctoroff explains, using these tactics can be a challenge in a censored, guarded marketplace. “There are few formal rules, but the basic thing is, don’t violate the Confucian hierarchy – don’t show the kid sassing the parent, don’t show any disrespect of the hierarchy. Consumers don’t like that either – they are relatively conservative and they don’t like to have their values violated.”The failsafe approach in China, then, like the rest of the world, seems to lie in celebrities and simplicity. Coca-cola uses spokespeople like super girl Li Yuchun and track star Liu Xiang, while McDonald’s sports Yao Ming as their global ambassador. Kong stresses, “Celebrities are still a favorite, especially for children. And for the older generation, straightforward messages work better.”
MAINSTREAM MEDIUMS
An ad that is perfectly constructed for the consumer, though, can still get lost in the medium. In China, though television and print spots still reign supreme, big opportunities are being seen in the great outdoors. “Research shows that more people spend time outside the home. This is good news for outdoor advertising, which can reach consumers at the heart of their lives – when they go to work, go shopping, or socialize with friends,” says Xavier Dupre, Managing Director of One Stop Shop, a subsidiary of JC Decaux, a leading outdoor media company. According to CSM, a joint venture between CTR Market Research and UK based TNS Group, marketers are spending about $2.5 billion a year (about 10% of the total adspend) on out-of-home advertising in China. China has more than 60,000 outdoor media companies, and though the combined market share of the top five companies is still below 30%, both local and foreign players are gaining recognition in the industry for forging ahead in this lucrative sector.Clear Media (a division of Clear Channel Communications in the US) is China’s largest outdoor advertiser and plans on extending itself even further with the 2008 Beijing Olympic Games. Having formed a joint venture with Outdoor Media China, a local company founded by ad guru Han Zi Jing, Clear Media now has a network covering 30 Chinese cities, including Beijing, where it acquired 634 bus panels in June (and hopes to control over 6,000 panels by 2008). But lately, it seems that all eyes have been on Focus Media – and its ubiquitous flat-screen advertisements. The key idea behind Focus Media is simple yet ingenious: advertise to people where they’re most bored and can’t escape – in lobbies waiting for elevators, or in taxi cabs and subway cars. Jason Jiang came up with the idea for his company while waiting for a lift himself in 2002; a year later, his company was installing flat-screen monitors in offices and upscale residential buildings throughout Beijing, Shenzhen, and Guangzhou. Focus has since expanded to smaller cities and put its monitors in several different types of spaces, including supermarkets and gyms.
THE FUTURE?
However the message may evolve and whatever the dominant medium may be in the future, a deep understanding of the local market and clientele – and their vast differences with their foreign counterparts – is key. “It is crucial for foreign companies to find local partners with a deep local knowledge of the market,” says Dupre, whose French company signed a 30-year-joint venture with Gehua Cultural Development Group, a Beijing- government-owned enterprise. According to Doctoroff, a mixed portfolio that includes both local and multinational clients is one sign of a viable agency. He also points to size – larger core advertising teams usually denote stronger presence in the industry – as another important factor. Agencies that can tout both large advertising teams and a diverse portfolio are better positioned to reach a fuller range of clients and consumers.
He points out, though, that a fully thriving and stable market is still in formation, and to succeed in this industry in China, patience is a pre-requisite: “A large advertising agency will generate $10 million in revenue in a Chinese city, whereas in the UK it would generate over $80 million, and in the US over $200 million. So we are still in the early stages of growth. And that growth is not easy.”