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Rationalism Trumps Nationalism When Chinese Consumers Choose a Brand
A New BCG Study Finds That Chinese Consumers Are More Practical Than Patriotic When It Comes to Choosing Between Foreign and Local Brands; And Thanks to Strategies That Companies Have Borrowed From Chameleons and Hermit Crabs, Some Foreign Brands Do a Good Job of Appearing to Be Local
| Source: The Boston Consulting Group
BOSTON, MA--(Marketwire - June 17, 2008) - As the competition between multinational and
local brands in China intensifies during the months leading up to the
Olympic Games and after, some brand analysts have concluded that Chinese
consumers will increasingly favor local brands, largely for reasons of
national allegiance.
Although the Chinese often claim to prefer local brands -- and patriotism
is undoubtedly a factor in that preference -- nationalism plays a
relatively small role in actual purchases, according to "Foreign or Local
Brands in China? Rationalism Trumps Nationalism," a new report from The
Boston Consulting Group (BCG). Brand choice in China is, in fact, much more
complex. What might appear to be a nationalistic preference for local
brands is actually a preference for reasonably priced products with
reliable quality.
"That's a wake-up call for marketers to stay with the basics," said Hubert
Hsu, leader of the firm's Consumer practice in Asia and a co-author of the
report. "The appeal to national pride alone is usually not a sufficient
reason for most Chinese to favor one brand over another when it comes to
opening their wallets. Companies would do well to focus on the practical
values that consumers seek in their products, as well as product
availability, price, and promotions."
The report presents the results of a large-scale survey in 13 Chinese
cities conducted by BCG's Center for Consumer Insight in Asia. The survey
included approximately 4,000 Chinese consumers representing a range of
household incomes and regional characteristics. That effort was
supplemented by in-depth qualitative research consisting of focus groups,
home visits, and "shop-alongs."
"One complicating factor in determining brand choice in China," co-author
Carol Liao noted, "is that consumers don't always know a brand's true
country of origin. Another is that brand preferences depend more on
demographics and category characteristics than on national pride alone.
And, adding to the confusion, claimed preferences don't always align with
actual purchases."
That discovery came about when the authors of the report visited Chinese
consumers in their homes, expecting to find the local brands they had
claimed to prefer. Instead, the authors were surprised to discover
Safeguard and Lux soaps, Pantene shampoo, and Olay and Avon cosmetics. The
consumers' explanations were strikingly similar: they had always assumed
that those products were, in fact, local.
Welcome to the world of "chameleon brands." Much like a chameleon blends
into its surroundings, some foreign brands can appear to be Chinese, even
to a native. Although most local brands were identified correctly as
Chinese, consumers in the survey were mistaken about the origin of foreign
brands as much as 80 percent of the time.
Chameleons and Crabs
The report notes that the confusion about the provenance of brands in China
isn't always by accident. Foreign companies often try to make their
products look Chinese to appeal to consumers who might prefer local
products. Some brands adopt a Chinese name; others use Chinese actors in
commercials and local motifs in advertisements. Another tactic is to borrow
a Chinese "shell" (in hermit-crab fashion) by purchasing a license to
market and produce the local brand. That allows the foreign company to
enter the market at the low end of the segment or in a category in which
"local" knowledge is valued by consumers, and then, with additional
investment in R&D, marketing, and distribution, to launch new products
under its "local" brand.
What did the consumers say when the authors pointed out the true origins of
the brands on their shelves? Their initial response was surprise, but it
was quickly followed by the admission that it really didn't matter, because
they were more interested in price and quality. Despite their expressed
biases toward local products, none of these consumers were willing to
switch from their foreign brands to local ones. "The appeal of patriotism
doesn't stand a chance against practical product benefits," co-author Matt
Anestis concluded.
In targeting their products for Chinese consumers, it is important for
marketers to understand that a general bias in favor of local or foreign
products can be overridden by specific demographic characteristics and
category requirements, including the desire to trade up. Beyond those
factors, there is an additional set of activities having to do with brand
identification, product availability, price, and promotions that marketers
can implement to influence brand preference. Those factors can be points of
leverage for marketers in influencing consumers' predisposition to purchase
either a foreign or a local brand.
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