The Economic Times
China ga-ga over Western-style ads
REUTERS
HONG KONG: Haier who?
The name may not be a household word in the West, but Haier Group, one of China's top home appliance makers, was the talk of the advertising world last month when it chose a high-powered international ad agency to handle its national needs.
The firm, Grey Global Group, is now setting up an office in Haier's hometown of Qingdao, reflecting an increasing coziness between international agencies and Chinese firms discovering the wonders of slick, Western-style advertising.
In the past year alone, dozens of up-and-coming Chinese firms have signed on with Western ad firms to sell wares ranging from appliances to cars to computers.
The trend, which has Chinese companies shelling out millions of dollars a year in agency fees, can be traced to China's entry into the World Trade Organisation just over a year ago.
"The central government has really delivered the message after WTO that everyone needs to compete with the big successful multinational companies," said TB Song, chairman of greater China for Ogilvy & Mather, one of about a half-dozen Western agencies active in China.
Many firms are also thinking ahead to the day when they sell their goods overseas to audiences unfamiliar with well-known Chinese names like Legend Computer and Li-Ning sportswear, said Richard Pinder, regional managing director at agency Leo Burnett.
"Who had heard of Toyota in the 1960s? I think you're going to see a similar explosion of China brands over the next 10 years. They have this huge home market to power this business."
Building brands
One recent ad begins with a shot of basketball hoop silhouetted against the sky. It switches to a solitary player setting up for a shot, focusses on his shoe as it kicks up a cloud of dust and then shows the player readying for a slam dunk.
It may sound like a Nike or Reebok ad, but the spot was for Li-Ning, one of the country's largest sportswear firms. The company's tagline is "Anything is possible" and its logo bears an uncanny resemblance to Nike's classic swoosh.
Slicker ads are now seen more often on Chinese TV, replacing an older generation of spots with mundane themes like children dancing around a product with music-box tunes in the background.
But the new campaigns don't come cheap. A deal last August between Leo Burnett and China Auto-Leasing Co was estimated to be worth more than $2 million in annual billings. Burnett's deal with Li Ning last April was said to be worth about $3 million.
Those agency fees typically account for five to 10 per cent of a company's total ad budget, meaning a firm like Li-Ning may be spending $60 million a year, according to industry experts.
Those numbers are still relatively small compared with what similar major Western firms might spend, Pinder said. But the growth potential is large, he added, with Leo Burnett's China revenues increasing by 25 per cent in 2002 alone.
"We may not see 25 per cent a year growth every year, but certainly we'll see strong double-digit growth over the next five to 10 years," he said.
One point Chinese firms were slow to embrace was the concept of brand building - sending a consistent message over the long term to consumers about what a brand represents, said Viveca Chan, Grey Global's chief executive for Hong Kong and China.
"They thought, 'Maybe I can do the same thing, learn it from you and try to do it with a local company'," she said.
Song of Ogilvy & Mather said the herd mentality also plays a role, with firms from the same industry tending to follow suit after one of their own signs on with an international agency.
"Some home appliance makers started to deal with the foreign agencies a few years ago. Now all the big brands use international agencies."
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