How can a company like Starbucks sell coffee to a nation of tea drinkers? What should Western marketers do when the mention of “office supplies” generates blank stares abroad? And how can firms tap into the purchasing power and desires of a huge, growing youth population? These were among the challenges discussed at a recent conference held in New York City titled, “Branding in China and India: The Reality and Future.” Jointly hosted by the Centers for International Business Education and Research at Columbia University, the University of Pennsylvania and the University of California at Los Angeles, the event featured panelists from well-known global enterprises who shared their advice for successfully taking brands across national borders.
“Multinationals adapt locally all the time,” says Wharton management professor Mauro Guillen, who moderated a panel on branding trends and issues in China. “The problem is that it may complicate logistics. So it needs to be managed, but it is both a necessity [for growth] and a way of making money.”
Creating a Latte Culture
What does the world’s most famous coffee retailer bring to the table in a land where green tea is the beverage of choice? “Our core strategy is to achieve presence in China through the ubiquity of our stores,” said Mark Aoki-Fordham, director and corporate counsel at Starbucks Coffee Company. Since homes in China tend to be small, Starbucks positioned its cafes as an attractive place to spend time between home and work, becoming a “critical meeting place and social nexus,” he said. In addition, the company focuses very heavily on customer service in China and offers a variety of green tea-based beverages as well as food and other products. Even the buildings themselves give a nod to their environment: “Architecturally we make sure our locations are integrated into their surroundings,” said Aoki-Fordham.
Nonetheless, getting consumers to crave a cappuccino fix hasn’t been easy. “We are still trying to educate Chinese customers about why our coffee is a good beverage to drink at all times of day — and we’ve found that they are not the most loyal,” Aoki-Fordham noted. “They love our brand; they’ll come in and buy a cup of coffee, and they’ll keep the cup with our logo facing forward as they walk, but they’ll refill it throughout the day with other brands of coffee!”
To increase brand visibility and foster more loyalty, Starbucks has engaged in a number of marketing programs in the country, even remaining true to its U.S. image as an advocate of sustainable practices. “As corporate social responsibility is a cornerstone of our brand, we engage in relevant community-based programs, even though such activities are not so big in China,” Aoki-Fordham said. The company also does local integrated marketing. “We have innovative online contests and allow people to design cards and send them to friends; we even have a soap-opera episode campaign on video screens in Shanghai subways,” he said.
But are the Chinese really inherently less loyal to brands than other consumers? Panelist Roger McDonald, outgoing executive director for global accounts at Xerox Corporation, offered an explanation: “Where are they going to go for information? They have no references — their parents didn’t have those brands. They have to try the brands out themselves. So the question for the marketer is: Are you getting your message out, and is the client experience a good one? Remember that there is no history [in China] of elders or peers to [recommend] brands as there might be elsewhere.”
Jessica Zoob, senior vice president at American Express, had some advice for how brands could help boost their purchase potential in the Chinese market. She noted that the brand a customer ultimately chooses can depend heavily on what happens inside a retail location. “Loyalty scores in China tend to be bigger for stuff that lasts than for fast-moving consumer goods. [Consumers] are particularly interested in domestic brands, and the relationship between a retailer and the consumer is very transactional.” She added that customers often go into a store intending to buy a particular brand and end up purchasing something entirely different. “In China, the salesperson at the point of purchase has tremendous influence over products, so it’s important to control what’s happening because of this last-minute switching.”
Zoob also emphasized the need to promote a product’s functional attributes over emotional ones. “Explain the ‘what’ and ‘why’ of a product. Customers might not know what some products are, like dandruff shampoo.” She added that it is important to “be Chinese” — to pay attention to what works in that marketplace, like endorsements by personalities like Yao Ming (used by Visa) or Henry Kissinger (used by American Express). Western marketers also need to think “in [terms of] dynasties,” she said. “Everything in China is long term — that’s how the government thinks, and you have to have a different mindset.” In other words, brand building in China takes time, and clout in the marketplace isn’t achieved overnight.
In India, the big story is the country’s exploding youth population, said panelists in an afternoon discussion on trends and issues in the subcontinent. Fernando Machado, global brand development director for Unilever’s Vaseline product line, said that television was still the medium of choice to reach the company’s target consumers in India, but mobile, print, radio and Internet were also useful. “Wall painting — the equivalent of billboards — is important as well, as is doing road shows in rural areas,” Machado noted. Half the sales of the Vaseline brand in India are from mini-size units, and small sachets are also a top seller, so understanding how consumers purchase the product and adapting unit sizes accordingly is very helpful, too. Machado cautioned that while it is important to make brands relevant to the next generation — for instance, by using new media and other communication channels — “you don’t want to alienate the existing base, either.”
Sharad Devarajan, CEO of Liquid Comics, which creates comic properties involving both well-known Western and original Indian superheroes and other characters, noted that for his products, it was important to engage the local culture very directly. Spider Man, for instance, was reinvented as “Pavitr Prabhakar.” “Instead of being a nerdy bookworm like Peter Parker — because that wouldn’t be looked down on in Indian culture — we gave him a village background,” explained Devarajan. He noted that although there is still a bit of a cachet attached to Western brands in India, there is more national pride now, so “you can’t force-feed [Indian consumers] the West anymore.” Still, when an Indian product does well overseas, it validates it and makes it more popular and acceptable in India, said Devarajan.
“Foreign brands have glamour, but they can also be perceived as not adapted to local needs,” Guillen says. Tweaking a brand slightly to adapt it to different countries is something that office supply retailer Staples is very familiar with, according to Lukas Ruecker, the company’s vice president for emerging economies. Ruecker presented a case illustration demonstrating how the company branded itself in both China and India. Instead of trying to stick to the exact product offering they have in other markets, Staples has altered its mix to suit each culture.
To market their offerings in China, the company uses catalogs, direct marketing, billboards and other outdoor ads. Staples also tapped into the growing desire for credit among Chinese consumers. “In China, office products generally had to be paid cash-on-delivery. So we made a credit card available to customers, which was huge. We were the office products supplier that provided a credit card — that was our differentiator,” Ruecker said. A large part of Staples’ China business, however, is in the furniture category, with an added furnishings service. “We offer furniture and design services for offices, including for the Chinese government, for events such as the Beijing Olympics, etc.”
In India, because of regulations limiting foreign direct investment in the retail sector, Staples operates in a joint venture with the retail arm of Future Group and focuses on laptop computers (including Apple Computer products), digital cameras and other electronics. “The office product category was largely unknown in India,” noted Ruecker. “So was the value proposition of reliable service, proper billing and fixed prices. Also, our name — ‘Staples’ — had a different meaning [in India]: People thought it meant flour, rice, etc. So we had to overcome that, as well as lack of customer knowledge of retail events such as ‘Back to School’ sales.”
To better explain the Staples brand, the company used massive ad campaigns in large newspapers like the Times of India. Staples also added a special tagline (“Everything in technology and stationery”) and icons to its logo, depicting a chair, a laptop, printer, etc., to clearly express what consumers would find there. What Staples did have as an advantage was its size and reputation among customers who knew it in the U.S. and U.K. The company found that the wares that small businesses bought from local office products stores in India were unreliable — for instance, a package of paper would claim to have 500 sheets, but in reality there could sometimes be fewer.
What’s not clear, however, is whether Staples’ “big-box” retail model — or any other large multinationals entering these markets — will engender a backlash from communities decrying the demise of local “mom-and-pop” stores. “This is happening in both China and India, but we still don’t know the effects,” Guillen says. “I think it will take 10 or 20 more years to see a true crowding out of small shops.”