As we review the findings of Prophet’s 2018 Brand Relevance IndexTM (BRI) survey for China, the only index designed to measure the importance of brands in consumers’ lives, we see in several ways that conclusions point towards more sophisticated Chinese shoppers with more faith in Chinese brands.
- Local Brands Rise. Local brands now constitute the majority of the BRI’s Top 50, with the additions of several new local brands across various categories.
- Innovation Spreads. For the first time, innovation— not basic price/value reassurance, is propelling the momentum of local brands. MNC brands’ lead on “pervasive innovation” evaporates. This being said, local brands still score significantly lower on “distinctive inspiration”, indicating a lack of long-term brand purpose.
- Bling Fades, Confidence Rises. The appeal of in-your-face bling amongst first-tier city consumers may be wearing thin. Huawei mobile phones are more relevant than Apple in first-tier cities. Aspirational MNC brands across hospitality and auto industries rank in the top fifty, but only in tier-three cities.
- Pragmatism Rules. Chinese consumers remain fundamentally practical. Of the four BRI principles— pervasive innovation, customer obsession, distinctive inspiration and ruthless pragmatism, the last pulls the most weight, reflecting the fact that the Chinese want brands that will help them advance in life; products that are a means to a practical end.
5 Actions Marketers Must Take to Maximize Relevance
When examining which brands penetrate the BRI’s top fifty, five strategic imperatives emerge:
1. Introduce Meaningful Innovation
Scale and speed have always, and will continue to, underpin trust in China. Nevertheless, home-grown innovation plays an increasingly important role in establishing brand affinity. The definition of “leadership” is now multidimensional, particularly amongst the emerging affluent. In some cases, local brands outpace MNC competitors on the innovation front. For example, Huawei and Haier are, for the first time, regarded as more innovative than Apple and Philips, respectively. WeChat (#3) launched Mini Programs in 2017 to seamlessly connect businesses and consumers.
Innovation is easy to claim, yet difficult to deliver. Successfully cutting through the clutter requires meaningful and tangible innovation based on in-depth consumer insights, rather than scatter-shot innovation for the sake of itself. A question: Do you know what drives the behavior and purchase preferences of your consumers?
2. Liberate Lifestyle through Connectivity
The speed of connectivity innovation in 2018 has passed an inflection point. The Chinese are no longer happily surprised at the lifestyle enrichment that platforms offer; they demand them.
First, every aspect of daily life is integrated in one-stop apps that offer unprecedented seamlessness. Meituan (#8), once a food delivery and restaurant review app, merged with Dianping and acquired Mobike, therefore broadening its offerings to include everything from ticket booking to travel arrangements.
Second, technology liberates by connecting like-minded subtribes who share similar passions. Meitu (#39), once a photo-beautification app, has morphed into a “social photo” platform for aficionados to follow similar, often offbeat, trends.
Third, online and offline retail worlds are increasingly connected, further reinforcing seamlessness. JD.com (#35) introduced a “full service” luxury platform, Toplife, offering high-end experiences from customized online stores to deliveries at home. Hema Fresh (#43), owned by Alibaba, has been such a hit that property prices near its supermarkets have risen.
3. Enrich Experience through Curated Content
Consumers crave identity-affirming “social consumption”. They seek emotional connection and self-expression through content. The most relevant brands curate content with an understanding of what makes consumer tick, and commercialize affiliative desire by forging communities of like-minded brand advocates.
IQiy (#49), a streaming service, produced “Rap of China” which introduced “hip-hop lifestyle” as a platform for self-expression. Its other hit show, “Idol Producer”, generated strong ties between performers and viewers by linking contestant success to viewers’ real-time feedback. Taobao.com (#6) established lifestyle verticals based on shared passion points with the “Taobao Maker Festival,” designed to showcase individuals’ creativity.
Multinational brands recognize the power of curated content as well. Estee Lauder (#22) has repositioned itself as a relevant brand for the youth through skillful deployment of celebrity influencers, such as Yang Mi. Its online commerce site encourages fans to share their “beauty secrets,” while also sharing buzz-worthy tips curated by the brand itself.
4. Foster a Happier and Healthier Home
There are now more than 200 million middle class households, and home ownership is on the rise across all city tiers. Previously a site of safety prone to extreme price sensitivity, the home is becoming a new center of gravity in life. It is blossoming into the following: an oasis of self-expression and a bulwark of family protection reinforced by advanced technology.
- Haier (#21) rolled out “smart home solutions” in 2018, which allows consumers to control all appliances at their fingertips.
- Midea’s (#33) smart kitchen appliances enable recipe preparation based on food already in the refrigerator.
- Xiaomi (#15) has diversified its product offerings away from mobile phones to become a “lifestyle ecosystem”.
- Philips (#24) has partnered with Xiaomi to develop connected lighting offers to create the right mood during dayparts and social occasions.
Inside the home, the Chinese are willing to pay a premium for products, graced with artificial intelligence, to enhance family well-being and happiness.
5. Empower Chinese Citizens of the World
In 2018, 140 million Chinese will take trips abroad, up 15% from 2017. Travel has blossomed from a unidimensional badge of status (“I’ve been to Paris.”) to a portal of multidimensional experience and cultural discovery. Frequent Independent Travelers (FITs) want to eat like locals, get around town like locals, and live where locals live.
That said, China’s FITs are globe-trotting newbies. They fear the unexpected and seek solutions that resolve a tension between desire for exploration and safety of the familiar. Brands that do both touch the heart of first-generation jet-setters.
Qunar.com (#12) invented a local immersion platform (“当地人”) that enables travelers to discover authentic “WeChat-able” destinations and experiences. Alipay (#1) is no longer just a virtual payment system. It offers “reassurance” services including insurance, tax refunds, shopping loans and Wi-Fi packages. UnionPay (#23), has made an aggressive push to become the credit card for overseas travelers, with 90 million cards accepted in 200 countries by 23 million merchants. The brand has also forged alliances with mobile payments systems including Huawei Pay and Apple Pay to add depth to its long-term positioning, “Union Pay, Your Way”.
Chinese consumers are rapidly evolving across city tiers. Technology fuels lifestyle liberation. Local brands are creating stronger bonds with mainlanders, driven by a new spirit of innovation within Chinese corporations. Yes, protective pragmatism still rules, and traditional corporate structural barrier still preclude genuine breakthrough— but the sophistication and demands of China’s middle class and emerging affluent consumers is apparent in Prophet’s 2018 Brand Relevance Index results.
Brand relevance is the backbone of loyalty. To earn the loyalty of Chinese consumers, marketers must abide by the five strategic imperatives outlined above.
Learn more about connecting with Chinese customers in Prophet’s 2018 Brand Relevance Index.