Taking the high road in China: marketers are finding new opportunities--and challenges--as they bring their brands into China.

Shelly Lazarus is chairman and CEO of Ogilvy & Mather Worldwide, one of the largest marketing communication networks in the world, and a major player in emerging markets in China. At IABC's International Conference in Vancouver, British Columbia, Lazarus spoke with CW Executive Editor Natasha Spring about the opportunities and challenges of building brands in China.

Q: What are some successful brands that have made inroads in the Chinese market, and why do you feel that they were successful?

A: There are lots of brands that have been successful. One of the greatest stories, I think, is Buick, which is a brand that doesn't have that much sex appeal or luster in the U.S. It was introduced in China as the car that high-powered executives drive, and it is remarkably successful there.

Another example is Procter & Gamble with Rejoice shampoo. P&G went in and took 50 percent market share in 12 months with the shampoo, at a time when economists worldwide were debating whether brands had any relevance in China because [the Chinese] were Communists--that is, would brands have any appeal in China because people are so used to making rational decisions based just on functions and features? So, as they were debating, P&G proved that the Chinese were as interested in brands as anybody.

Q: What are the primary issues to consider when conveying a brand to the Chinese? What are the opportunities, and what are the barriers to effective branding in China?

A: I think all the concerns that people had going in that the Chinese didn't grow up with brands so they don't understand brands--have all been proven to be untrue. The Chinese are as interested in consumer choice and status brands as anybody. Everyone was going in tentatively, thinking, We have to do things in different ways in China. Not true. You have to be culturally sensitive, but you have to be wherever you go--when you go to France you have to be culturally sensitive. I think what we've learned is that all the things that work in thinking about and building brands in every other country will probably work in China as well.

The real difference in China is the absolutely crucial role that government affairs play, because you've got to start with the government if you're a nonChinese company. How you find a partner in China and how you work with the partner to establish your brand are absolutely critical, and it has no parallel anywhere else. In China, public relations and public affairs are so critical that we have a huge operation there--Ogilvy has our third-largest public relations unit in the world in China [next to New York City and Washington, D.C.], with people who have become experts in helping clients navigate the ins and outs of the central government.

Q: How many people do you have working there?

A: We have 1,000 people working in six offices in China, which I find extraordinary. It just took off. We were the first Western agency to place a [print and TV] ad campaign in China. It was the late 1970s, for Rado watches. In 1991, we opened our first office in mainland China in Shanghai.

Q: Are most employees expatriates?

A: No, more than 90 percent of our employees are Chinese. If you ask me, to be successful in China, you have to have Chinese staff because they know the culture. So you've got to figure out a way to bring the Chinese into the heart of any organization.

Q: What is the difference as an employer in terms of recruitment and retention?

A: It's the hardest thing in the world. First of all, you're daunted by the fact that all of a sudden you need all these people. They have to be Chinese, and the talent pool of experienced workers and midlevel management is so small. But the good news is there are all these people who are really interested in learning about communication. So we have doctors, statisticians, people with Ph.D.s in sociology [working for us]. It's the most eclectic employee base that we have anywhere in the world.

Once you bring them in and train them, though, retaining them is really hard because once you've gotten them trained, the competition doubles their salary and just plucks them off. This is very frustrating. So you really have to pay attention to the people you've hired. You've got to give them development plans; you've got to make sure that they understand how they are going to grow in the organization. This is true anywhere in the world, but it's so crucial in China.

Q: If an organization has somewhat limited resources and it wants to make some inroads in the Chinese market, where would it put its priority in terms of applying the brand?

A: One of the really interesting things about China is that there is a long list of consumer goods that the Chinese are not really familiar with because they haven't grown up with them, so the need for on-the-ground retail marketing, product marketing, product demos and brand activation is more important in China than it is everywhere else. Of course, you can do television advertising and newspaper advertising, but in China you need to be on the ground helping people understand what it is that you're selling. We have done a deal with the China Youth League. It used to be the Communist Youth League, actually. And they have millions of members. We have a deal with them where they can turn up to a million people on the ground to demonstrate products and to stand at kiosks and describe services. We don't have anything like it anywhere else in the world. You just unleash this army of people who go out and [do demonstrations].

One great example is that the Chinese were not that familiar with motor oil and they didn't have that many cars. So for Castrol motor oil, we got thousands of people to actually drive to truck stops. They had a mobile product show. They would open their demonstration trailers, and they would talk to truckers who came to truck stops. They would offer coffee and refreshments. And while you were drinking your coffee, they would talk to you about motor oil. It was just such an amazing effort because it was massive. The impact was immediate. It was one-to-one.

Retail activation is really important, and here's where you have to understand the cultural differences. A senior executive at Motorola was explaining to us recently that outside of the major cities a cell phone is considered a huge purchase. He told such a charming story about how the person doing the purchasing for a family might come two or three times to the retail store before he makes a decision. Then when he is going to make the purchase, he usually shows up with the family and they get dressed up. It's an important event. You have to understand that because you have to market to that; the way you might think about setting up showrooms for automobiles in the U.S. is the way you have to think about setting up your retail space to sell cell phones in medium-size and smaller cities in China.

Q: If you were to offer three specific pieces of advice for an organization planning to do business in China, what would they be?

A: Well, I already mentioned the sensitivities to the government. You've got to be really attentive to how to go about that because they exercise enormous control. I think one of the reasons Ogilvy has been as successful as we have in China is that we had a great partner going in with a company called Shanghai Advertising. And I think because we were early and we were lucky, we hooked up with these great partners, but lots of people have not been as lucky You need a lot of advice going in on how to deal with the government.

The second thing is that you have to think about building your brand in China. You have to go in and refine what the overall brand positioning is, because you have to be culturally sensitive and you have to understand all the history of China and what their values are. But you don't have to re-create everything. You just sort of have to modify your brand and use it as a guide in the same way that you would in any other country or market. I notice a tendency [among companies] to throw out everything you know about a global brand when you're going into China, which is just wrong. It's an organizing principle for you in China as it is everywhere.

Third, you've got to pay attention to the people. You have to get the right people and you've got to keep them. You can't settle for a company of expats--it's not going to work. Because everything is moving so fast, it's very tempting to just place 35 of your best people to get it started. You've got to figure out how to become a Chinese company--even if you're a global company--if you're doing business in China.

Q: What do you see happening in the next five years? What potential changes do you see that would have an impact on how organizations do business in China?

A: Right now you have the top 20 percent of Chinese people accounting for 50 percent of the income and you've got the bottom 20 percent in abject poverty. What's going to happen is the middle 60 percent is going to start to become economically successful. That's where you are going to have this enormous increase in volume of demand. The growth in household income among the middle segment of Chinese is extraordinary right now. That will mean increasing demand for consumer goods.

I think you're also going to see the Chinese much more aggressively marketing their brands outside of China. We just did a survey where 61 percent of Chinese companies said that in the next five years they see themselves doing business outside of their own country's borders. You're going to have these huge competitors coming on the global scene.

You're also going to see growing expertise in all of the communication skills among the Chinese. Because all the media came together at one time in China, they didn't have years and years of television and newspaper as advertising media. Simultaneously, you have the more traditional media coming at the same time as the Internet, the mobile phone, and so there is going to be this great new mix of media. You're going to have programs that are integrated in ways that have not happened before because you're not adding on new media to traditional media. So for the Chinese, it's the most natural thing in the world to introduce something on the Internet. And I think the same thing is going to happen with mobile phones--it's going to become just a natural advertising medium for the Chinese. In some ways, they may actually get ahead of us.

We work across more different disciplines with more companies and more clients in China than anywhere else in the world. The Chinese work in an integrated way: They didn't know that there were public relations companies and Internet companies and event companies, and by the time they were ready to build brands they just needed it all, all at once. And because the professionals themselves, the people who were just coming into the world of marketing and communication, hadn't grown up with one discipline vs. another, they were just trying to build their brand for a company. They don't have any walls because they never knew about them.

reinvigorating the brand

When Motorola embarked on an ambitious plan to regain its lead in China's mobile phone market, it worked with Ogilvy & Mather's Beijing agency. The resulting campaign was bold, racy and aimed specifically at the young Chinese trendsetters who not only are most inclined to buy high-end phones but also to subscribe to lucrative non-voice services.

Although the ads appeared in Taiwan and Hong Kong as well, China is truly the target: With more than 330 million mobile phone subscribers, China is the single largest user market in the world.

about the author

Natasha Spring is executive editor of CW