4.4 Introduction of a Foreign Brand into the Chinese Market

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Selling to Chinese Consumers

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The Chinese University of Hong Kong

Selling to Chinese Consumers

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Cours 1 sur 4 dans Specialization Doing Business in China

This course is designed to help learners sell their products, goods and services to Chinese consumers. To achieve this goal, the course will use evidence-based research in psychology, economics, legal studies and marketing to help learners understand the historical, economic and legal contexts of doing business in China and the behavioral characteristics of Chinese consumers. The course will cover topics in Chinese and global marketing, Chinese consumers, institutional and cultural influence on consumer motivation and behaviors in Chinese markets, and brand management in China.

À partir de la leçon

Self-Brand Connection, and How to Build a Strong Brand in China

Consumers are becoming increasingly likely to see products from traditional and modern cultures at the same time, and products from different cultures in the same space. Experiencing two or more cultures simultaneously can elicit different responses from consumers. Recognizing the increasing importance of branding in China, this module highlights how you can successfully project the personalities and values that your brand represents without eliciting negative sentiments in your target consumer population.

4.1 How Do Chinese Consumers Understand Branding?5:15

4.2 How to Build a Strong Brand in China5:35

4.3 Dialogue with Scholar: Professor Dongmei Li6:25

4.4 Introduction of a Foreign Brand into the Chinese Market9:59

4.5 Dialogue with Scholar: Professor Carlos Torelli20:12

Rencontrer les enseignants

Prof. Letty Kwan
Assistant Professor
Department of Psychology

In the first two segments, you learned

that branding is becoming important

in China, and why that is the case.

You have learned how to build

a strong brand in China.

For example, you understand when

it is a good idea to associate cultural

values with a brand and when it is not.

You have also learnt from Prof. Dongmei Li,

an expert in brand building in China.

She has shared with you how her

research can provide important

implications for branding in China.

In this section, you will learn how

Chinese consumers react to the entry

of a foreign brand into China.

When a foreign business enters China,

they can capture a large market share

by psychologically connecting its brand

with the local culture.

A good example is KFC.

Today, KFC is a very successful

business in China.

It has more stores in China than in the US.

As of 2015, there were around 5,000 outlets

in China occupying a significant portion

of market shares by brand.

There are many factors that contributes

to KFC’s success in China.

A critical one is KFC’s success in

making Chinese consumers feel that

it is Chinese people’s KFC.

They adapted their products to the

Chinese’s taste buds, offer the KFC

versions of traditional Chinese food,

and positioned themselves as

Chinese people’s restaurant.

Another strategy to enter the

Chinese market is to acquire or

co-brand with a famous local brand.

An example would be L’Oreal.

In 2003, to move quickly into the

Chinese skincare market, L’Oreal

acquired a local Chinese brand -

Mininurse, which was then one of the three

skincare brands in China

with 5% market share.

Another strategy is to create novel,

hybrid brands or products by

integrating elements from Chinese

and foreign cultures.

An example would be the Haagen-Dazs

ice-cream mooncake,

which is a novel product created by

combining a popular Western dessert

with a famous traditional

Chinese confection.

These strategies have

something in common.

All of them involve the integration of

local and foreign cultural elements.

They bring together local and foreign

cultural elements and present these

elements to the consumers simultaneously.

As a result, consumers’ attention may be

drawn to the cultural significance of

their consumer choice, and make

culturally-motivated purchase decisions.

In this lesson, we shall refer to these

strategies as cross-cultural strategies

and discuss how Chinese consumers

respond to them.

Globalization has resulted in the

compression of time and space.

Consumers are more likely than before

to see products from traditional and

modern cultures at the same time,

and products from different cultures

in the same space.

Joint presentation of two or more cultures,

can elicit different responses

from consumers.

Depending on several contextual

variables, consumers’ responses to

cross-cultural marketing strategies

can range from very favorable

to very negative.

Let’s take a look at the following example.

Starbucks opened its first store in 1999.

When its business started to take off

in 2007, one of their stores in Beijing

became the target of online criticisms

and closed down eventually.

This is the Starbucks in

Forbidden City or the

Imperial Palace Museum.

This is a 597-year-old

cultural heritage site.

Why did the Starbucks, despite highly

localized store-front, attract severe

cultural criticisms in China?

We will come back to this later.

Let’s take another example.

The moon festival in mid-autumn

is a traditional Chinese festival.

To celebrate this festival,

many Chinese consume mooncakes

in family gatherings.

A mooncake is a traditional confection

that looks like this.

It is a nicely baked pastry cake

with lotus paste and egg yolks inside.

However, the Starbucks mooncake

is just a mooncake on the outside.

Beneath its skin, you will find coffee

chocolate fudge filling instead of

lotus paste and egg yolks.

Now, many American and European

pastry and dessert shops like

Starbucks and Haagen-Dazs in China

carry mooncakes that are infused

with Western ingredients.

Let’s compare these two examples.

Both of the examples we mentioned

earlier involve Starbucks,

but the Chinese consumers only like the

Starbucks Coffee Mooncakes

and not the Starbucks

in the Forbidden City.

Why is this the case?

This is what Professor Carlos Torelli,

a Professor in the University of Illinois

at Urbana-Champaign,

tried to explain in his research.

Precisely, when do Chinese consumers

embrace the mixing of cultures

in a business and when do they reject it?

One of his findings was:

When consumers feel that cultural mixing

threatens purity of their cultural

heritage, they will resist cultural mixing.

In the example of Starbucks in the

Forbidden City, this Starbucks is seen as

an American cultural symbol that

contaminated the Forbidden City,

a sacred space that symbolizes

the Chinese cultural heritage.

Chinese consumers cannot tolerate the

presence of the coffee shop in the

Imperial Palace Museum.

This is the especially the case for

Chinese consumers who strongly

identify with the Chinese culture.

An experiment carried out by

Yang and colleagues in Beijing,

supported this idea.

Almost all Chinese consider

the Great Wall to be a symbol of

Chinese cultural heritage.

When the researchers told the Beijing

consumers that McDonald’s planned to

open a store in the Great Wall,

the Chinese consumers rejected the store

after having seen an ad in which the logo

of McDonald’s was superimposed on the

image of the Great Wall,

although they were perfectly ok with the

business plan when the logo of McDonald’s

was placed next to the picture

of the Great Wall.

Distracting the consumers’ attention to

McDonald’s American symbol,

by presenting McDonald’s as a

restaurant also helped to lower Chinese

consumers’ rejection of the business plan.

However, the Chinese consumers accept

the Starbucks Coffee Mooncake.

Although mooncakes are a symbol of

Chinese culture, it is not considered

a sacred food symbol.

Therefore, including Western

ingredients in a mooncake is acceptable.

Imagine, however, if non-halal

ingredients (pork, alcohol) are included

in a halal meal, devout Muslims will find

such cultural mixing unacceptable.

This is because halal is a sacred dietary

culture in Islam.

In my own research, I also found that

Chinese consumers become more critical

of cross-cultural marketing strategies

when they feel that a foreign brand

is a threat to their local brands.

Let’s review what we have learned from

the two Starbucks cultural mixing examples.

Cross-cultural strategies can help foreign

business connect to local consumers.

However, these strategies can also lead

to consumer rejections.

The reasons for consumer rejections are:

High identification with Chinese culture;

and the perception of cultural mixing

as a cultural threat.

Can consumer rejections to foreign or

culturally mixed brands be reduced?

The answer is yes,

according to our research.

For example, in an experiment,

we randomly assigned consumers to

one of the two groups.

Both groups read the same

business case of cross-border acquisition.

They learned from the case that a

foreign brand attempts to acquire a local

brand that is an icon of the local culture.

To one group of consumers,

we highlighted the cultural symbolism of

the local brand, reminding them that

the brand is an icon of their culture.

To the second group of consumers,

we highlighted the economic benefits

of the acquisition.

Based on what you have learned so far,

you would expect that the first group of

consumers to resent the acquisition

and the second group of the consumers

to like the acquisition.

That was exactly what

we found in the experiment.

More importantly, the result showed

that you can change consumer reactions

to foreign acquisitions of a successful,

iconic local brand by focusing consumers

on the economic benefits of the

acquisition and downplaying the

cultural significance of the local brand.

In summary, cross-cultural strategies

can be used to create a new brand

and to increase market share by

connecting to the Chinese consumers

culturally and psychologically.

However, to use these strategies

effectively, you need to know

your consumers.

For example, you need to know

how strongly they identify

with Chinese culture.

This is very important given the rise of

new nationalism in China.

The Chinese government has started

the China dream campaign.

A major theme in this campaign is

to “make my country great again.”

This campaign can lead to a surge of

nationalism in China,

rendering the cultural significance of

consumption more important than before.

In this connection, you will need to

assess how likely Chinese consumers

would expect cultural mixing to have

erosive effects on the Chinese heritage

and work on your marketing communication

to ensure that your marketing activities

will not trigger culturally motivated

rejection of your brand.

Now, let’s hear from

Professor Carlos Torelli.

He is an expert in global branding,

and he can tell you how his research work

sheds light on global branding.

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