|
International brands
take heed: while classic marketing strategies may win consumers
elsewhere in the world, they may not necessarily lead to market
share growth in China, a country with the largest consumer
population and a unique retail universe.
ACNielsen recently completed a study into the marketing strategies
of selected foreign and local brands in China by examining
each element of the marketing mix: product, placement, promotion
and price.
“In recent years we have witnessed local brands in certain
packaged goods categories making phenomenal gains in market
share in China. The study aimed to explore what was behind
this local brands’ growing importance,” says Alistair
Watts, managing director of ACNielsen China.
“The study told us a great deal about marketing in China.
In a market – really a jigsaw of different markets –
as fragmented and varied as this, it seems that the age-old
marketing strategies may fail to deliver sustained brand success.
In some cases, international brands that concentrate on strong
advertising to grow consumer preferences, have found their
share shrinking in a market experiencing double digital growth.
At the same time, most local brands appear to be gaining ground
by carving out a more tailored strategy focussed on effective
distribution, in-store presence and promotions.”
Over the last three years or more, some brands owned or marketed
by foreign or joint venture companies in China have been losing
share to their local brand rivals in a number of packaged
goods categories. ACNielsen’s previous research of 2002
vs 2001 sales volume reported non-local brands losing ground
to locals in 13 out of 22 major FMCG categories.
“In the past, the growing strength of local brands has
been anecdotally attributed to the lower price at which these
brands are offered”, observed Watts.
“While they are cheaper in general, our study of foreign
vs local brands indicates that a lower price was NOT the sole
preserve of local companies and price may NOT be the overriding
determinant of success in the China market.”
Shampoo is a classic example of the fierce battle between
local and foreign brands in China [See Chart A]. In 2001,
the shampoo industry experienced a YOY growth of some 16%
on volume and 10% in value. 16% of the sales were in the four
key cities (Beijing, Shanghai, Guangzhou and Chengdu), 24%
in the capital cities, 41% in secondary cities and 20% in
towns. There was an observed trend of local brands –
La Fang and Slek to name two – experiencing healthy
growth in market share, while international brands were losing
share, although individually they were still growing in terms
of sales.
ACNielsen looked into the marketing strategies of the top
shampoo brands to try and shed light onto the causes for this.
“What we saw was that although each brand had their
own strategies, by and large the international brands tended
to take the ‘conventional’ marketing approach
by focusing on high brand preference and strong advertising
support”, said Watts.
“Their advertising expenditure at brand level was consistently
amongst the highest in the category, and they placed a strong
emphasis on building brand preference. In reality these brands
ARE enjoying a high preference rate among consumers, individually
their sales are still growing steadily, and they still dominate
the market in key cities”.
“However, despite the high levels of advertising spend
and preference rate, the growth of these brands was below
the market average nationally, which means from a total country
point of view they are actually losing market share.”
By reviewing the marketing mix of the local brands, ACNielsen
found local brands to be employing an interesting strategy
to penetrate the market.
In terms of advertising, local brands such as La Fang were
increasing their expenditure, yet ACNielsen’s figure
showed the ratio of sales:advertising expenditure to be relatively
low compared to international brands. As a result, local brands
were often found to have a low level of consumer preference.
However, a winning formula was found in the used of distribution
and in-store promotions. La Fang, for example, has dramatically
increased its distribution on a national basis to establish
a key presence in the hypermarket and supermarket segment,
particularly outside the main cities [See Chart B]. Consequently
it has achieved rapid market penetration in the less attractive
geographies and is emerging as a fast growing brand in China.
Slek, on the other hand, showed strong in-store promotional
activity and high presence on the shelves. Priced at about
the same level as the top international shampoo brands, Slek
could be considered a premium brand. Spending a lot less than
average on advertising, it is not the most preferred brand
according to the ACNielsen study. However, Slek far outperforms
its rivals on temporary signage, temporary promotion displays
and in-store promoters. A good strategy in a market where
consumers shop often, and the chance of being exposed to in-store
activity is high. Consequently, despite a premium price positioning,
low levels of claimed consumer preference and relatively low
above the line advertising expenditure, Slek’s sales
are growing faster than the market average.
“Two salient points arose out of our study,” observed
Watts. “Low prices aren’t necessary to achieve
high growth overall. And sometimes you don’t need high
consumer preference to achieve high growth.”
But if consumer preference and price aren’t always essential,
what is?
“China is unique in terms of retail universe and shopping
behaviour, and a different marketing mix appears to be more
effective. Our study indicated a winning mix to be one of
competitive price plus extensive advertising with a rapid
expansion of in-store presence, or strong in-store promotion
plus strong in-store presence”.
In-store support and promotions may be far more important
elements of the marketing mix in China than they are elsewhere.
And a focus on different geographies in this huge and heavily
populated country allows for differentiated tactics, depending
on the stage of retail development and consumer sophistication
in each geography.
|
