Laura Ries wrote an excellent article after having come back with Al from a trip to Beijing…go check it out.
Some excellent points are made in her court…and I’m on her side for most product/service categories. I once thought heavily extended store brands might prove to be an exception. Costco’s Kirkland Signature brand sells extremely well (although that’s a special story of its own), in addition to Target and IKEA’s brands. But in the end, if retail shoppers are willing to purchase items where price & economy are not strong purchasing influencers…they’ll often choose the items with the unique brand name and packaging.
But back to China. I think Theory A is vastly superior and just plain more exciting from a buyer’s point of view, especially in the realm of FMCG (fast-moving consumer goods). I think electronics however, is a unique category where the normal rules don’t easily apply; buyers want to trust a brand they’re forking out more money to. Would you like a Sylvania or a Samsung?
Time will tell what will happen in China. I can’t make any educated guesses yet, but I’ll toss in some change after I finish reading China Inc. by Ted Fishman (highly recommended!).
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{ 4 comments… read them below or add one }
The article makes a good point, companies have much greater chances to sustain success and profits by building brands compared to competing on price. Though I’m not sure about the plan A and J theory, since there are many companies here is the US with broad and shallow focus and I’ll give GE as an example same as there are many Japanese companies that have a deep and narrow focus such as Toyota…
Note: Jalal (aka Jay) is a friend and although I spoke to him over the weekend, I will reiterate the main points of our conversation.
Generalizations are just that; there is no one size fits all. A heavily extended brand name doesn’t limit financial success. Mitsubishi is in many ways like GE in Japan, with operations widely spanning electrical engineering and even a capital investment arm. Siemens is much the same, world renowned for its quality engineering in many different areas but especially in the fields of medical imaging.
But what happens when the same brand name extends into categories where the company isn’t traditionally thought to be strong? Sure, the name still stands for “quality” and that’s great. But it’s also a weak conservative tactic because it isn’t unique and will never hold a strong position in the mind for that category. Some examples include for mobile phones: Nokia v. Siemens v. Sony-Ericsson. Although there are some exceptions, the Bottom line is: New categories deserve new names.
I believe most of China’s homegrown future brands are going to flourish regionally and not nationally. The country is so big, there’s so much opportunity, and the distribution networks and infrastructure (outside port towns and superhighways) aren’t that great. Building a strong regional brand first is not only cheaper, but it’s also more relevant to the target audience.
Mario:
Your readers might be interested in James McGregor’s “One Billion Customers”. It talks about Chinese culture, which ultimately is a very powerful ally if you understand it (or try to). Last year I met Shelly Lazarus, from Ogilvy & Mather, the agency that got China first. I also blogged about China and piracy by relating a conversation with Dr. James Chan — which goes back to understanding culture and, yes, working on developing a very strong quality brand message. Here’s the link http://conversationagent.typepad.com/conversation_agent/2007/05/piracy_an_inter.html
Your point to regional and relevancy is well taken.
I remember that conversation you posted from Dr. Chan. One would think that it might seem quite difficult to build a brand with hypercompetition and copying going on everywhere. However, this condition gives greater importance then on Guanxi, and the power of forming relationships with retail buyers.