China's technologically liberated consumers are ready for a digital commercial revolution. But manufacturers and their communications partners -- advertising agencies, both digital and traditional, as well as media companies -- are letting them down by not approaching the sector strategically.
Liberation for Everyman
It is difficult to overstate the impact China's launch into cyberspace has made for Middle Kingdom's Everyman. Today, the country boasts 500 million netizens, 150 million of whom have access to high-speed Internet; 200 million bloggers; 100 million micro-bloggers (Chinese "Twitterers") and 800 million mobile phone users. Digital technology has been secularized. No longer used only by young urbanized hipsters, the sea change epic. Shielded by on-line anonymity, free wheeling surfers broadcast accomplishments, weigh in on current events, download porn, hook up for sex, release rage through violent video games, criticize the government (gingerly), and plug into virtual communities. True, China's Great Digital Firewall extinguishes hints of collective protest. But Westerners overestimate the constrictive effect of 50,000 net nannies. Denizens of the People's Republic have more opportunities to explore the world and are freer to express views than any time in history. None of this would have been possible without the Internet.
For bargain-crazy consumers, the rise of e-tailers presages an era of commercial Nirvana. According to the China Internet Network Information Center (CNNIC), in 2010, 40 million Chinese booked hotel rooms, airline tickets and holiday tours on travel websites such as C-trip. On-line activity accounted for only an 2% of total 2009 retail spending, up from 1% in 2008; however, rates in coastal cities are already much higher. Alipay, e-commerce behemoth Alibaba's version of PayPal, has made skittish, reassurance-driven consumers more at ease conducting digital transactions. (China has historically been a "cash is king" society. But consumers are increasingly comfortable spending on-line as long as they can inspect merchandise before transactions are completed.) On-line emporiums such as Taobao have emboldened shoppers to ruthlessly compare prices, realigning the balance of power between buyer and seller.
For most brands, unfortunately, the digital revolution has not been harnessed. Few have exploited on-line tools to lift profit margins. Virtual consumerism is even more commoditized than in the bricks and mortar world. (Few smart phone users are willing to actually pay money for apps.) As a rule, cyberspace has been carpet bombed with promotional cheap fixes, with zero message consistency or insight into the emotional drivers of netizens. Yes, there are exceptions. PepsiCo's "Get on the Can" Challenge provided ego-driven youth a platform to shine, literally, by emblazoning faces on cola packages. In the process, the campaign generated 600 million hits. Ford's "21 Day Excitement" competition employed on-line canvassing to select ten "everyday superstars" to morph from "bland to bold," dramatizing its "Make Every Day Exciting" proposition. To promote the N-series range, Nokia's "Bruce Lee Reborn" viral and Ovi app campaign connected surfers to an icon of Chinese masculinity. Most of the time, however, China's digital landscape resembles a real world bazaar: noisy and clanging, promotion-happy, discount-driven, with the vast majority of on-line advertising slapped onto highly trafficked portals (e.g., Sina, Baidu, QQ) as banner ads.
Required: A New Brand Building Vision
The communications industry must lift its game to harness the energy released by China's digital big bang. To do that, we need a North Star.
The Brand Idea: Still Sacred. Without the unifying power of the Brand Idea, conceptual chaos erupts. For decades, advertisers' responsibility has been to forge brand ideas that evolve, but do not fundamentally change, over time. They are rooted in insight, the fundamental motivations of consumers. Through sports shoes, we buck against societal convention to Just Do It on the basketball court. Through engagement rings, we demonstrate enduring passion because "A (DeBeers) Diamond is Forever."
Brand engagement occurs over the airwaves, in the supermarket aisle via blue tooth, through the latest iPhone app, or an on-line loyalty program. And the brand idea, the long-term relationship between consumer and product, is at the center of it all. Apple's "Think Different," Kit Kat's "Have a Break," Axe's "Chick Magnet," Rejoice shampoo's "Confidence from Softness," or Pepsi's "New Generation Choice" is the unifying core, order's gravitational force. The industry must acknowledge new technological experiences are never, in and of themselves, ideas. Instead, they allow consumers to engage with ideas in new ways. True, marketers are often digitally "clever." Headlines such as "P&G turns virtual makeover app into Max Factor contest," "Budlime launch ties into Tudou's first drama series" and "Unilever links hot steam with warm wishes in Lipton contest" are common. But they rarely reinforce an enduring brand idea. New media titillation has led to digital promiscuity.
From Passive Consumption to Active Participation. The fundamental role of the brand will not change as a result of China's digital liberation. Indeed, as brand options multiply and media costs skyrocket, the need to minimize consumer disorientation is more urgent than ever. However, the one-to-one nature of digital expression provides opportunities to deepen and broaden involvement. "Creative ideas" can become "engagement ideas," transforming passive exposure into active participation. Advertising agencies should no longer produce work that "interrupts." Instead, we should "make things" - content -people want to spent time with. DeBeers "Love World," a microsite where young men express commitment by creating a virtual world of "omnipresent" love, is the shape of things to come. So is Nike Plus, a hi-tech manifestation of the "Just Do It" spirit that enables runners to compete with athletes anytime and anywhere on the planet. Axe's "sexy wake up call," an app that brings the product's "masculine irresistibility" into the bedroom, demonstrates technology's power to reinforce a core brand proposition.
Consumption of communications via digital devices - mobile phones, tablets, computers, etc. - is revolutionary because manufacturers no longer "broadcast" messages. Through a bewildering array of channels, engagement is one-to-one, between marketer and users or between users themselves. "Content" is played with, commented on, expanded upon, competed with and exchanged within "brand communities." Corporations need to accept their ability to "control" messaging - how a product is positioned, how brands are commented on publicly - will never be the same. (A caveat: broadcast media will never be eclipsed as the primary means of defining propositions. China, a country in which consumers have relatively limited inexperience in digesting brands, requires simplicity. The 30-second television commercial, passively received, is an irreplaceable, albeit expensive, weapon in forging conceptual order. This is why international agencies and media companies operating in the PRC still earn almost all revenue from "traditional" advertising.)
The Communications Industry: Change Required
The digital engagement imperative presents four fundamental, and interrelated, challenges.
Real Time Measurement. First, our industry must hone its ability to measure the effectiveness of digital engagement ideas. Advertising agencies will forfeit legitimacy unless we are able to track, in real time, effectiveness. Broadcast media efficiency is a question of reach and frequency; digital creative, on the other hand, is measured via "stickiness," "virality," "click through rates," "conversion to purchase," and return on investment (ROI). Any strategic planning department worth its salt must maintain a robust analytics practice.
Continuous Engagement. Second, creative agencies must move away from only executing "campaigns" - discrete television and print "bursts" that announce product news - towards "continuous engagement planning." In an era of technological liberation, there are infinite ways to connect consumers with brands and brand communities. We need to restructure operations to facilitate rapid creative response to real and virtual world developments. We must recruit "story managers" to produce "idea amplifiers," "or "bite-sized idea sustainers" that maximize the buzz of a given engagement idea. Agencies should operate as "newsrooms," focused on the big story but flexible enough to cut and thrust as consumer react to creative stimulus. As engagement ideas are manifested in ever-expanding forms, we must plug into a broader array of talent. From bloggers to videographers and on-line performance artists to app developers, we have no choice but to fling open windows and connect with cutting-edge creators. We will never have a monopoly on talent. Employees must survey the Brave New World and forge strategic partnerships with innovators. We must reach into the market for new alliances. We need to embrace expertise wherever it exists, lest we fade to irrelevance.
Digital Mainstreaming. Third, it is time to "mainstream" digital creative. Digital is not a "department" or "specialization," and not a discrete profit center. It is a new media, incredibly potent, just as television was in the 1950s. And creativity remains at the center of the digital ecosystem. Global agencies must integrate digital savvy - genuine technological experimentation -- into each account and creative group. Yes, in the interest of a healthy bottom line, certain disciplines - e.g., analytics, technology optimization, digital production, and project management - must reside within a centralized "experience" department. But digital adventurism must permeate the entire organization. Organizational structure must reflect a commitment to media neutrality.
Media Innovation. Finally, the "revenue war" between media companies and advertising agencies must end. Media shops will always excel in negotiating low rates with vendors based on volume. They also boast the administrative prowess to plan media across time and geography. But let's call a spade a spade: the process-driven culture of traditional media companies is incompatible with idea-centric creativity. As the digital universe expands, "ideas" must increasingly "live through" media. In the post-broadcast era, ideas and how consumers experience them are inseparable. If this truth is ignored, investment will evaporate as binary clutter. Advertising agencies need the freedom to establish partnerships with, and derive revenue from, digital media owners. Development of innovative digital solutions must be a strategic imperative of all communications experts, including creative shops.
Chinese Enterprises: Vast Opportunity, Structural Limitations
The PRC, brand-obsessed and Internet-crazy, is ripe for a digital Great Leap Forward. The Chinese are passionate about social media, highly- developed technology platforms most brands have barely begun to exploit. Through on-line car clubs, digital baby-care communities and a hundred million micro-blogs, Middle Kingdom denizens have embraced social networks on a scale Westerns find difficult to fathom. But these burgeoning on-line communities only tangentially intersect with brands. By leveraging brand ideas, manufacturers can enlist the support of on-line opinion leaders. China is reassurance-driven market in which the importance of personal recommendations is difficult to overstate. It is time to: a) establish common cause with digital influencers to transform on-line communities into virtual brand villages, b) translate SNS affiliation into sustained dialog with individuals, c) monetize one-on-one interaction via on-line loyalty and customer relationship management (CRM) programs and d) elevate the long-term profit contribution of discrete customers.
Yes, the opportunity is vast. But the road to digital Utopia will be long and winding. Digital development in the PRC is constipated.
Primitive Suppliers. Suppliers are, by and large, unsophisticated. The only large "digital agencies" in China are on-line media agents; the majority place low-end banner ads and television commercials on "mass reach" websites or portals. These companies, many corrupted by rampant kickbacks, treat creative as an add-on "design service." Revenue is based page views, not click-through. "Depth of engagement" - e.g., time spent with a digital idea - is still an abstruse concept. While investment in analytic tools has grown, few are sophisticated enough to measure or track ROI.
Limited Talent. Digital conceptual craftsmanship - the expression of brand ideas through digital media - is undeveloped. Most creative leaders remain tethered to the safety of "traditional" broadcast advertising. Senior digital talent is largely "imported" from abroad. The challenge of inculcating a passion for new technology while remaining faithful to brand building fundamentals is immense. This is particularly true in conservative China, a country that prizes concrete predictability and shies away from the untested - i.e., anything that does not guarantee fixed return.
Chronic Short-Termism. Even more critically, Chinese enterprises, like their agency brethren, are not structured to embrace the potential of digital brand building. Digital spending accounts for only 7% of total media activity. Television is still king. To boot, e-commerce is immature given the prevalence of on-line shopping. According to a recent study by Aquarius Asia, approximately one-third, or 142 million, of Chinese Internet users shop on-line. But most companies do not cater to the on-line market. Indeed, per Aquarius' report, "The top 100 manufacturers of consumer goods are giving away a large share of their online potential. Three out of four major companies do not efficiently use sustainable tools like SEM (search engine marketing) or SEO (search engine optimization) to reach their target groups."
China is a market that reveres scale and volume. Its largest companies are structured, and managed, to drive low-margin sales. Some enterprises, particularly within "strategic" industries, have made progress climbing up value ladders. But few have embraced "brand equity" as the lynchpin of sustainable price premiums. Shoddy corporate governance precludes CEOs from maximizing long-term shareholder return. Panicky marketing executives defer to omnipotent sales barons who enforce short-term promotional pushes; only the most enlightened leaders reject the belief that low price is a competitive weapon. The reign of independent fiefdoms - departmental warlordism - militates against trans-category collaboration for data collection, data base management and cross selling. Customer Relationship Management (CRM) - i.e., maximizing individual customer profit contribution over time - is still an alien concept. The Middle Kingdom's business culture, therefore, remains antithetical to bold experimentation across digital domains.
In conclusion, Chinese consumers outpace Chinese corporations and agencies in exploring the new digital ecosystem. There are fundamental structural and cultural barriers that impede idea-centric, media-neutral advertising. Given the potential for digital engagement to redefine the relationship between consumers and brands, new media will transform the commercial and communications landscape. But, as always, progress will be agonizingly incremental.