Foreign firms aim global, merge local

Advertising enterprises entering the chinese market need alliances with local counterparts

Like most industries in China, the advertising business is becoming increasingly competitive and international. This trend will continue over the next few years with more international advertising agencies entering China, combined with the increasing competitiveness of Chinese advertising companies.

For foreign advertising firms entering or expanding across China, mergers with or acquisitions of local Chinese advertising companies offer the quickest and also the most sensible brand-building option. The benefits of the takeover route, however, will only be realized if extreme care and attention are given to the due-diligence work needed to assess the value and suitability of the takeover target, and swift and decisive post-acquisition integration is also conducted with great care.

It is still the case that the best-known foreign advertising companies offer potential Chinese clients far greater creativity and all-round professionalism than their local competitors. It is also still the case that Chinese consumers appreciate foreign advertising expertise. However, advertising remains one of the most culturally sensitive industries where crucial adaptation, even if it is just subtle, is often required. This is where takeovers or joint ventures with a local Chinese advertising agency can reap huge dividends.

Foreign advertising companies still fall into the "one size fits all" approach, failing to understand key differences in Chinese consumer culture and jumping to the assumption that the Chinese market is simply becoming more and more Western or American.

Some of the common advertising features that resonate uniquely with the Chinese public are as follows.

Celebrity endorsement: Chinese consumers value the appearance of a famous face in advertising. This is seen as a form of gaining face and adds considerably to the perceived brand image of the advertised product.

Color "fits" culture: Most are aware of the importance of red to the Chinese but gold is also seen as a symbol of wealth and success and black a symbol of power and status.

Slapstick humor and situation comedy: The Chinese public still do not value, or even understand, irony or sarcastic humor in advertising. Mr Bean-type comedy is highly valued.

Extended family environment: Younger Chinese generations are different but many still live with or very close to their parents after they marry and have a child. In fact, it is extremely common for a newborn child to be brought up by their grandparents. The advertising of many products needs to reflect this typically Chinese family environment.

Nostalgia and patriotism: Even those Chinese consumers born around 1980, after the start of China's reform and opening-up policy, as well as those born after 1990, remain fiercely proud of their national identity and deeply respect Chinese history, unlike typical Western consumers.

Therefore, Chinese companies that hire an international advertising agency that has been combined or merged with a local Chinese advertising firm are far more likely to find the key blend of professional end product and subtle market adaptation. Chinese companies should continue to work with international advertising firms, but treat them with caution and be more confident and insistent when explaining the uniqueness of Chinese consumer culture.

Chinese consumers' current adoration of Western brands and Western brand image should also be treated with caution. This could simply represent a wave in the development and emergence of Chinese consumer culture. Chinese consumers adore many Western brands only because of their brand heritage and professional brand building and investment. In the future, there is no reason why a Chinese brand association may not be perceived as inherently prestigious and elite. Advertising in China may well have to adapt to fit this trend in Chinese consumerism.

International advertising companies, while emphasizing their understanding of and commitment to the Chinese market by merging with a Chinese advertising firm, should also promote the fact that they are best placed to equip any Chinese client with its own international expansion plans. This is likely to become an increasingly important selling point for international advertising agencies competing in China.

The next wave of economic development across China has to be driven by Chinese firms' development, many of which need to emerge on the international stage. At present, few (if any) Chinese advertising firms have expanded internationally, leaving foreign advertising firms with a strong competitive advantage in China.

The future for foreign advertising firms in China is bright, but working with a local Chinese advertising agency is almost essential for long-term success.

The author is a researcher at Nottingham University's School of Contemporary Chinese Studies. The views do not necessarily reflect those of China Daily.

(China Daily 10/12/2012 page10)