The underlying drivers of the recession are different in China -- by global standards, growth remains robust here but the slowdown is pronounced -- versus Western countries. In the latter, times are toughest for low-end workers and entrepreneurs who have been hit by the slowdown of export industries. While aggregate savings rates in the PRC remain high - there is much cash stashed away under mattresses and in low-yielding bank accounts - confidence has been hit due to fear of losing a job sometime in the future. Consumers are looking right, then left, surveying the landscape for clues of when it will be safe again to wade back into the water. In the former, investors and home owners have been hit hardest due to a heavily indebted economic infrastructure and a steep drop in stock and home asset values. Economic arteries have dried up due to lack of cash and capital availability. In other words, in the PRC, most penders -- save migrant workers employed in the export sector -- are held back by anxiety, not means. In the West, we have a liquidity and cash flow problem.
Although barriers to recovery are different, the net outcome is the same: there are too many products chasing too little money. In the Middle Kingdom, consumers, unaccustomed to this macro-economic tsunami, are (quickly, admirably) reorienting themselves to confront a new ear of global uncertainty, despite faith in China's productive potential and central government stewardship. (Middle class confidence could be returning, however, given the surprising pick up in auto sales recorded in the past couple months.) Unfettered optimism, even boldness, has given way to mere cautious optimism and, for this generation, spending conservatism. In this environment, one that has only been exacerbated the PRC's historic production overcapacity and the lack of a reliable safety net, go-go consumers have segued from a "surging" to a "dwelling" modality. Relatively speaking, they are less forward looking and more focused on stabilizing the here and now.
Middle Class Projection Becomes Mass Market Protection
The Chinese have always been split between "projecting" status as a means of forward momentum in life and "protecting" existing wealth, between spending to impress and saving to ensure future stability. More specifically, the urban mass market, not having benefited as directly from economic reform, has always been conservative, less sure of material stability, fear-based. The middle class, on the other hand, has traditionally preferred "transformative" benefits, promises of professional or societal advancement. During this recession, optimism has temporarily softened. Trenchant ambition, at least for the time being, has been deferred. (Again, it will be back.) Job hoppers have been stopped in their tracks. The protective impulse, usually a dominant mass market and secondary middle class trait, has reasserted itself across all levels of society. Until long-term confidence is restored, the upscale set will become more like its poorer counterpart.
Marketers must recognize this shift and adjust message and promotion strategy. Products must be positioned to reflect a new conservative reality, without conveying a frozen-in-the-bunker fearfulness. Middle-class advertising should be "massified," while avoiding down-market tone and manner.
Establishing a New Price-Value Equation
So how is this done? No matter what, shoppers, regardless of whether they are psychologically gun shy or genuinely penny-pinched, require a reconfigured price-value equation. It is critical to manage the hat trick of reinforcing affordability without adulterating a brand's underlying equities - i.e., the emotional or functional associations built up over time that command a long-term price premium. Given this imperative, brands should reconsider not only their competitive advantages vis-à-vis competitors but assumptions regarding a product or brand's "role in life." Here are seven suggestions on how to do this.
Shift from style to substance. Brands, particularly in high-end categories, should highlight "inner substance." Rolex, for example, should move from abstract "status" or even "pursuit of perfection" claims to "permission to believe" rooted in a core functional message such as craftsmanship or precision. Nike must ensure its "just do it" spirit is grounded in sports authenticity. In China, Rejoice advertising now highlights "viscosity" to cue more nutrition and, therefore, more value. China Mobile is now refocusing on "superior coverage" rather than an conceptual "reach out and touch someone" rallying cry. And Smart car's advertising elegantly fuses "coolness" with intelligent fuel efficiency. (In the United States, Hyundai's Genesis has moved from sizzle to steak with marketing activities that focus on head-to-head price comparison versus other luxury sedans - i.e., 30% less than a BWM. During the recession's January trough, Hyundai was one of the only high-end name plates to register a notable increase in share. This approach would do gangbusters in China.)
Turn from "selling" to "helping." Face-conscious Chinese do not like to beg for low prices. But, now more than ever, they remain fiercely price conscious. Therefore, "discounts" must be positioned as "bargains," the fruit of clever resourcefulness, one of the most admired - and adaptive -- behavioral characteristics in Confucian society. Nanfu battery encourages users not to throw away old batteries and reuse them for less intensive applications. Crest advertising demonstrates how its tubes are packed with more toothpaste than competitors. Zhong Gong white spirits adopts a no-frills angle by selling wine without an expensive outer carton because "intelligent drinkers know they should pay for pleasure, not packaging." The internet, a medium that makes comparison pricing exponentially easier, can be very useful in enhancing consumers' bargaining power. Fast food marketers such as McDonald's offer online-only "super value" gift coupons and links to value products Taobao, China's leading auction site. Liba.com, a marriage and home improvement site, helps aggregate the collective buying power of individual customers to negotiate better deals through collective bargaining. Visits are through the roof.
Repurpose from "want" to "need." Elevation of brands onto "life impact" platforms enhance perceived value. Marketers can underscore essentiality in a couple ways, bearing in mind the omnipresent Chinese urge to succeed. First, focus on external payoffs rather than internal satisfaction or "release." In a back-to-basics environment, celebrating indulgence is risky. Concrete benefits conquer. Premium yogurt should focus on "delicious digestion that gets you going" rather than pure taste satisfaction. Snow, a leading Chinese beer with national distribution, promotes stress busting, easing anxiety associated with mortgages, car payments and work. Social lubrication, a common benefit during good times, is reinforced only through end-of-day group consumption shots. Ikea has shifted focus from aesthetic expression to the more utilitarian aspects of the product range. Broadcast advertising highlights affordability of smaller items, although not as the primary message.
Second, advertising should dramatize the consequences of not using the brand. Panadol shows nasal discomfort disrupting an audition, neatly linking the product with career advancement. Tempo tissue, a leading player in price-sensitive category, underscores the danger of not carrying a pack by associating sneezing with social embarrassment. With "Raindrops Keep Falling on my Head" plucking in the background, Lipton tea draws attention to the advantages of mood enhancement during office hours. Wang Lao Ji, a leading local soft drink, steers clear of "everyday joy" Coke territory by highlighting elimination of inner heat during "minutes that matter."
Refocus the portfolio. Multinational products have historically been priced too high to penetrate price-conscious consumer segments, rending most foreign brands "aspirational" but "inaccessible." In the past few years, however, many MNCs have "extended brands downward" to lower price tiers, increasing total share dramatically. Both Crest and Colgate, for example, have expensive "complete oral care" variants that generate single-digit share and lower cost-of-goods versions with higher sales and lower cost. During recessions, wary shoppers need to justify any premium and will gravitate to affordable options. Therefore, all companies should examine the depth and breadth of their portfolios to ensure maximum coverage across economic strata. Importantly, however, care should be taken to avoid degradation of brand equity; to avoid "trade-down humiliation," benefits should be "simplified" - e.g., "complete oral care" versus "stronger teeth" or "herbal freshness" - rather than debased Furthermore, payoffs should shift from "projective" (status, professional advancement, wealth) to more "protective" (financial security, safety, prevention) without conveying any hint of fearful immobilization. (Chinese, unless physical survival is in question, want to progress up the hierarchy. The "urge to surge" is irrepressible.)
Reinforce corporate trust. In uncertain times, corporate trust is an invaluable asset as consumers flock towards safety. In China, the government, particularly the central government, is trusted much more than business (79% versus 54%, according to the Edelman Trust Barometer), particularly after the 2008 melamine dairy mega-scandal. (This debacle, in which thousands of infants developed kidney stones, was due to a combination of corruption and lax manufacturing standards.) First, companies can reinforce the "reliability" of their product by highlighting corporate scale. In China, bigger is always better. Benevolence is the privilege of power. Companies must perceived to be "big enough to care." China Mobile, for example, has begun airing old copy that highlights coverage. A voice over intones, "During critical moments, when precious life is at stake, lean on the world's most extensive network." Bank of China deftly leverages its "ubiquity" - i.e., "almost a branch on every corner" to reinforce "life-long partnership, through good times and bad."
Second, and related, efforts must be made to demonstrate sufficient means to invest in consumers' well-being. Cisco's on- and off-line "Help the Children" campaign and Johnson & Johnson's small-town network of neo-natal and pediatric clinics reassure, not to mention inspire, Chinese masses.
Bring the family back together. In Confucian society, the clan, not the individual, is the basic unit of society and ultimate bulwark against instability. This is particularly true during economic trial so family cohesion is a critical in buttressing peace of mind. Products that forge domestic harmony will be embraced. Ajinomoto, a Japanese food manufacturer that sells seasoning in China, now positions its spices as a "family magnet" that draws loved ones together. The company has moved away from its quintessentially-Japanese "taste of refinement." Gold Wine has adopted a "gifting" strategy, encouraging robust ties between extended family members. Even China Mobile has changed the focus of its businessman-targeted "Go Tone" sub-brand from "weapon on the business battlefield" to long-distance bonding with kids.
Promote confidence. The Chinese really do see "opportunity in crisis." The PRC's strength relative to developed nations' during the Great Recession - growth rates will not drop below 6% largely due to massive government investment in social welfare and infrastructure - further predisposes a look toward the bright side. While the benefits of such a broad emotive approach are difficult to link with sales, brands should encourage a chin up mentality to reinforce long-term equity. Anta sports shoe's "from perseverance to glory" proposition, originally launched after 2008's Sichuan earthquake and anti-Tibet protests, continues to strengthen "bonding." Diaopai, China's leading local detergent gracefully fuses empathy for the unemployed with hope while, at the same time, incorporating a "more washes for less money" claim.
China's recessionary environment has yielded a new conservatism that will not dissipate until vigorous growth is restored. Marketers should adopt a "back to basics" approach, maximizing any product's role in stability and protection against uncertainty while avoiding pessimistic overtones. Specifically, they should: a) shift from style to inner-substance, b) pivot from selling to helping, particularly by present discounts as the fruit of smart shopping, c) repurpose from satisfying wants to addressing needs, d) refocus the portfolio to emphasize affordable options, albeit without debasing a premium image, e) strengthen corporate trust, f) bring the family back together and g) promote confidence in a better tomorrow.