China once seemed a land of endless opportunity for multinational organizations. But over the past few years, Chinese consumers are increasingly favoring local brands.

For years, major studies, including the Prophet Brand Relevance Index™ (BRI), have been predicting a stronger consumer sentiment towards local Chinese companies. But in this year’s BRI, which measures relevance around four key attributes— Customer Obsessed, Ruthlessly Pragmatic, Distinctively Inspired and Pervasively Innovative— local brands outperformed their multinational company (MNC) competitors.

Chinese companies now have more brands in the top 50 than multinational companies. And over the past 3 years, the number of local brands in the top 50 has increased year over year; from 18 in 2016 to 20 in 2017, this led to an impressive 30 brands ranking in 2018.

Yet even with this shift, many multinational companies are still taking a global approach to China. Instead, they should be asking themselves— “what are local companies doing that I’m not?”.

What Caused This Change in Brand Relevance?

Looking at the 50 most relevant brands in China, local companies outperform MNCs on key attributes such as “available when and where I need it” and “connects with me emotionally”. Not surprisingly, digitally-native Alibaba leads the way with their diverse offerings that meet the needs of consumers in their daily lives.

In 2018, for the first time, innovation, which used to be a territory owned by MNCs, also propelled local brands. Huawei (#4) and Xiaomi (#15) outperformed Apple (#11) in smartphones. The Huawei P20 Pro is the first phone in the world that carries a triple rear camera, and its recently launched Huawei Mate 20 Pro introduced a disruptive wireless reverse-charging technology that amazed the tech world. Xiaomi’s Mi Mix had the world’s first bezel-less design long before the iPhone X did.

In home appliances, companies Haier and Midea are also increasing in brand relevance as Sony and Samsung saw big declines. Their successes also lie in innovation. Haier rolled out its smart home solution, allowing consumers to control all of their appliances on their smartphones. Midea guided consumers through menus based on food availability in their refrigerators and suggested personalized recipes through advanced sensor technology. These home appliance brands quickly built up digital competencies to deliver consumer experiences that “make life easier” and compete with MNCs beyond products and price-points.

3 Considerations to Guide Your Brand Localization Strategy in China

Success in China requires a new mindset: a local mindset. Global organizations can no longer take their global strategies, global products and global culture and assume Chinese consumers will come. Localization is critical for success.

To ultimately decide where to localize and meet the needs of Chinese consumers you must answer three key questions:

1. Which Consumers Am I Trying to Reach & What Do They Need?

With 1.4 billion people in China, there is no way to categorize Chinese consumers as an entire population. Location, affluence, education and many other factors impact the needs and desires of Chinese consumers. Understanding which segment of the market you are trying to reach has never been more important.

Take automotive companies, for example. In this year’s BRI, BMW and Audi have much higher relevance in tier 3 cities (#34 and #35 respectively) vs. tier 1 cities (#95 and #80 respectively). Why? Tier 3 Chinese residents still aspire to international companies to show their status to others. Tier 1 consumers have become more confident and now opt for more rational choices like hybrid vehicles, which enable them to explore the world in an eco-friendly way.

With very different needs, brands must decide who they’re trying to reach. And they must know where in China those consumers are. This is the first step in deciding how to go to market and how to localize your brand.

2. What Elements of My Brand Should I Localize Versus Keep Consistent?

Brand equity is critical to consider when undertaking any localization effort. Take Heineken as an example. To cater to the growing anti-drunk driving movement in China, Heineken introduced a zero-Alcohol beer, Heineken 0.0, in 2017. However, the product was not well received. Why? Over the past few years, Heineken anchored its brand in China on its global promise of “opening your world to live life to the fullest.”  In the minds of Chinese consumers, this was in conflict to the introduction of this new product. On the back-end of this product launch, Heineken dropped 42 places in the BRI ranking to #144 in 2018.

As brands strive to localize and appeal to the needs of local consumers, they need to make sure they also stay true to who they are. Authenticity is king and when consumers see your brand behaving in an inauthentic way, your brand and its relevance will suffer.

3. Where Do I Focus My Localization Efforts to Get The Most “Bang For My Buck”?

There are so many ways brands can localize that it’s often hard to know where to start. But identifying key areas of focus for localization is critical to getting started.

Take Airbnb, for example. While they got off to a rocky start in China, developing a Chinese name that locals said sounded like a foreigner trying to speak Chinese, they’ve had a lot of success over the past year. By focusing its localization efforts on the brand experience and payments, Airbnb rose from #45 in 2017 to #19 in 2018 in our BRI ranking. Key changes included enhancing its Experience Program, introducing authentic ways of exploring Chinese cities like Shanghai, Beijing and Chengdu while localizing payment methods via partnerships with Alipay and WeChat.

By focusing localization efforts on what mattered most to consumers, Airbnb is now one of the most relevant brands in China.

Final Thoughts

Over the last 10 years, Chinese consumers and Chinese companies have changed rapidly and that pace of change will not slow anytime soon. To be relevant in China today, you have to understand the Chinese consumer and the digital ecosystem that is driving China’s economy. There is still an enormous opportunity in China. However, global companies who do not localize their global strategies and approaches will struggle to drive relevance in the minds of Chinese consumers. Localization is more critical than ever to winning in China.

Learn more about how top brands in China are utilizing localization in the 2018 Brand Relevance Index.

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