We’re calling it the Serviceplan Group Middle East Diary: Every week, one of our team members will be sharing what’s currently going on in her or his life at Serviceplan Middle East.
Value creation is destroyed by communication. Admittedly, this is a bold suggestion. Especially as it comes from the pen of a representative of the communications industry. But while it might sound daring at first, the idea can easily be explained.
I do not want to bother with the superficially obvious examples of communication between companies and customers. We all know that this can sometimes backfire, simply because someone neglects to master their tools, or forgets to give the customer their glasses. Camel’s bungled brand management or Nestlé’s Kitkat PR disaster are just a couple of examples.
Instead, I want to focus on three different kinds of communication that are much less well known. And they also have a significant – but greatly underestimated – impact on a company’s value creation power.
1. When two parties meet and communicate with each other
First, let us consider the interpersonal level, communication between two people. This might at first seem banal. But it is not! Thanks to ideas such as Schulz von Thun’s “four-sides model” of communication (the quality of communication is influenced by factual information, self-revelation, relationship and appeal) and Paul Watzlawick’s “constructed reality” (we perceive the world like a picture puzzle), we know that interpersonal communication is a highly complex process. A complex process that often goes wrong – and destroys value creation on a grand scale.
Steven R. Covey recognised this connection in the 1980s in his best-selling “7 Habits of Highly Effective People” and therefore attached great importance to interpersonal communication: three of his seven effectiveness habits are dedicated to it. For example, rule # 5 reads: “Seek first to understand, then to be understood”.
We talk more, but communicate less
Active listening as part of an effective interpersonal communication strategy is becoming harder for us collectively. Although we are constantly talking and posting online, we are rarely able to truly communicate meaningfully.
And so it is not surprising that many New Work approaches aim to add value to interpersonal communication in the VUCA age. To name just two examples: the Tactical Meeting format is a highly efficient way to run weekly team jour fixes. And the retrospective (part of the Scrum rules) aims to identify factors which limit value creation in the process and to counteract them accordingly in the team.
Smart corporate leaders are understanding the importance of ensuring that the level of interpersonal communication skills is high throughout their organisations. And they inspire the entire team to look critically at their meeting formats to eliminate factors which destroy value creation early on.
2. When two parties meet and communicate with each other
That’s right, this title is the same as in point 1. Because it might seem that everything stays the same when you add the “organisation” dimension. But this is far from the truth.
Now new forces come into play, and their effectiveness is underestimated, since they are invisible at first glance. This realisation is only very slowly gaining traction in top-level management. Niklas Luhmann’s systems theory offers a helpful explanatory model: a social system is a closed system with a life of its own that exerts influence on the individual people in the system (in systems theory they are considered environmental). Thus, an organisation consists of people only at first glance. In the system-theoretical sense, it is actually based on communication.
A popular metaphor for illustrating Luhmann’s systems theory is the board game. Without the players (i.e. co-workers) the game cannot be played, but the players follow the rules of the game, which means the game (for which read: the organisation) makes the rules. The organisation’s rules of the game include the many explicit, and the even more numerous implicit rules, cultural norms, and beliefs that have accumulated since the company’s founding. They are the guardrails within which the possible is reduced to the probable.
Employees come and go, but the influential system remains
And now comes the really exciting part, because it shows the effectiveness of this explanatory model: If you lose one employee and replace them with a new one, I could almost guarantee that in virtually every case you will observe similar patterns of behaviour as before, and the bigger the company, the more likely this is. This is quite simply because only the environment has been changed, and not the influencing system.
When it comes to adding value, the system-theoretical approach helps by allowing a differentiated view of cause and effect. And it reminds us that there is little point in attempting to treat the symptoms (that is, the behaviour of employees). Rather, it is better to work out the causes (the rules of the game that produce the symptoms). This means working ON the system instead of IN the system.
Work ON the system – and not IN the system
If you ignore these interconnections, you can talk all you like, initiate every change programme you can think of, or change up all the central managers, you still won’t get the change you want. And you must have noticed the recent trend for “letters of admonition”, in which board members, for example, publicly blame the employees for behaviours that destroy value creation. This practice really achieves nothing (what it damages is another matter). Instead of trying to find choice phrases to describe alleged causes, this time and energy would be better spent exploring the cause behind the cause.
3. When two parties meet within myself and communicate with each other
Yes, you read that right. We shall now turn to the intrapersonal level: communication with ourselves. Do not be alarmed: this is not an esoteric approach, but a true value creation factor.
The question “Who Am I? And If So, How Many?” is not only a best-selling book by the philosopher Richard David Precht, but also very strikingly describes the concept of multiplicity of personality: In addition to a leading ‘self’ we also contain – often unconsciously – various different personalities within ourselves, whose feelings, beliefs and memories are firmly anchored in our brains.
Even if these different personalities are not (yet) known to us, they are constantly at work within us, busily engaging in dialogue with one another and sometimes, depending on external circumstances, they get the upper hand. We have all had the experience of witnessing a generally meek and quiet person suddenly exploding in rage. This was not the person we thought we knew as an adult, but the injured inner child or the inner rebel who briefly took the reigns, because an external impulse challenged that part of their personality.
Managing these different aspects of inner personalities is important
Another example: our internal movie gets hijacked by some destructive part of our brain and starts playing negative thoughts and painful memories on a continuous loop, over which we seem to have no control. This has profound negative consequences for our own energy levels and how we choose to act. It also has a significant effect on our personal contribution to value creation within the company.
The successful management of these inner personalities, including awareness and professional handling of them, is hugely important for value creation. I would even say: due to its leveraging effect, it is one of the most significant factors in value creation, because it significantly influences all three previously mentioned communication levels.
And in the age of VUCA and NEW WORK – when the traditional corset of familiar routines and standards as well as the guardrails of pre-existing chains of command are being eliminated, our inner personalities are challenged more than ever. The result is that even this level of communication will increasingly enjoy more attention from top-level management, simply due to a vested interest in a robust “bottom line”.
Let us return to the initial thesis: is communication fundamentally destructive for value creation, or is it a significant leverage factor in value creation – that is the question here. The answer depends largely on factors such as the level of self-reflection of all corporate stakeholders, and what significance the four levels of communication have in the top levels of management.
Enlightened business leaders have long since recognised the relationships described and used them for their own competitive advantage. Outstanding value creation has been the reward for their courage.
Media Planners are the specialits to bring advertising into the media by choosing exactly the right format and media to make the biggest impact possible. Get to know our our colleagues Kai Löser and Kerstin Weiß from Mediaplus in part six of our Jobtitles Bingo series.
In the series The inside story x 3, experts from the Plan.Net group regularly explain a current topic from the digital world from different perspectives. What does it mean for Granny, and for an agency colleague? And what does the customer – in other words, a company – get out of it?
What will we remember in a few years’ time when we look back on the internet of the late 2010s? Snapchat should be one of the first things that comes to mind. The quirky messaging app with the cute ghost, the user-friendliness of an ordinary SAP installation and the innovative augmented-reality lenses, which have convinced millions of adults that selfies with dog and cat faces are socially acceptable, even for those in their mid twenties.
However, the true legacy of Snapchat will surely be the invention of the story function. Stories, the sequences of photos and short video snippets with funny stickers, location information or drawings, have proven themselves an unparalleled online triumph. Stories are now common features on Facebook and Instagram, while Google has YouTube and now even an online search function for stories.
Granny’s holiday stories: The digital slideshow
For users, stories, on Facebook or Instagram for example, are an excellent way to share everyday experiences in a creative way with family, friends and acquaintances. Instead of the postcard and the obligatory slideshow evening afterwards, my Granny can post her images online while on holiday. Another nice feature is that stories can be deleted automatically after 24 hours, especially for snapshots that you do not want to share forever on your profile.
Creative minds have many possibilities. Through the simple combination of videos, photos, stickers, drawings and music, even technically inexperienced users can create and share appealing content in a short time.
Google’s integration of stories into search results is an exciting step. Standardising the format as a further development of the Accelerated Mobile Pages (AMP) project allows users to quickly and easily access news stories and visual content related to their desired search term or topic.
Stories as a media environment: Unlimited motion picture inventory
In addition to Snapchat, Instagram and YouTube, after several months of testing, Facebook is now also providing the complete story inventory as an advertising environment for moving images. Adverts appear between individual story elements or between two different stories. However, one should not be dazzled by the potentially high range; for various reasons, the advertising environment is only relatively comparable with other InStream placements such as broadcaster media libraries or the classic YouTube.
Stories have a clear mobile format, and the content is used vertically. Therefore, it does not make sense to use classic TV adverts in 16:9 format as interruptive advertising. The usage situation is also subject to mobile rules: en route during situations involving waiting, with a high distraction potential and not reliant on headphone use. Ads for the story feed should therefore be adapted to these conditions; in this case, the same rules apply as for social feeds in general. Subtitles, short (five rather than fifteen seconds) and to the point with an obvious sender, instead of lengthy told stories with suspense and a final resolution. Unfortunately, there have not been many investigations into the advertising impact of ads in stories, but the effect is likely to be comparable to ads in the Facebook News Feed.
Brand stories: The perfect field for experimentation
Stories on Instagram, Facebook and other social platforms are an excellent field of experimentation for brand communication. There are diverse creative possibilities, from adverts in story format (such as for the new BMW 8 Series) to behind-the-scenes videos from events (such as Media Markt at Gamescom), Q&A formats and polls – stories make it possible for companies to stage their brand content in the style of the respective platform and to integrate organically into the user’s content experience.
Nevertheless, it is important to consider a few basic rules. Obviously, yet still often overlooked is the fact that if the content is not relevant, users will quickly move on. A high rate of scene changes and generally short stories fit better with smartphone usage, which means it goes without saying that 16:9 TV assets should not simply be recycled in a vertical video format. If you follow these rules, stories can also achieve good results: a survey commissioned by Facebook of just under 10,000 regular users of stories on Instagram in the UK, USA, Brazil and Indonesia showed that for 39 percent of users brand/product interest was increased through exposure to brands and products in stories.
And for those who uphold the sacred CI branding guidelines, there is perhaps a reassuring message: the same research has shown that users of stories expect authentic, playful and unfiltered images. As a brand, you do not have to demonstrate the same perfectionism in your creation as in print advertisements for news magazines.
About the author: Alex Turtschan has been a passionate nerd since childhood and has been working in the Serviceplan Group for more than ten years on consumer, market and technology trends and their effects on digital marketing. Currently Director Digital Strategy at Plan.Net Media.
Digital “shitstorms” threaten brands all over the world if they hurt religious feelings, offend minorities or break political taboos through negligence. In some growth markets around the world, this risk is significantly higher than in Europe or the US because of greater cultural and religious diversity and countless local sensitivities, so that the number of stumbling blocks is greater from the outset. According to the Duden, a “shitstorm” is a “storm of indignation in a medium of communication on the Internet, sometimes accompanied by insulting statements”. Niklas Schaffmeister (Managing Partner Globeone) and Florian Haller (CEO Serviceplan Group) explain why crisis preparation should be part of the brand strategy in in international brand building – all details on that can be found in our new Springer publication “Successful brand building in the large emerging markets” (written in german).
One of the most spectacular storms of indignation of its kind was the public destruction of a Maserati Quattroporte in the eastern Chinese coastal city of Qingdao. The owner destroyed his luxury vehicle during a car show directly in front of the exhibition halls. The reason, in his opinion, was the poor customer service provided by the local dealer. The Qingdao Morning Post reported that the owner of the sports car was so angry because damage to one of the doors had not been properly repaired and the car dealer’s employees had left scratches on the luxury car. Maserati published a statement on Sina Weibo in which the customer’s decision to destroy a copy of this world-famous car brand “out of sensationalism” was described as “regrettable”.
A quick response is paramount – in case of need the CEO needs to step in
In May 2013, General Motors had to withdraw a global TV advertising campaign because of disrespectful references to China. The commercial was produced for the Chevrolet Trax SUV, one of the then newest models of the US car manufacturer. The lines went like this: “In the land of Fu Manchu, the girls all now do the Suzie-Q, clap their hands in the center of the floor, saying ching-ching, chop suey, swing some more.” When General Motors learned of this, the company reacted immediately and replaced the commercial with a new version without the insulting verses.
In March 2013, Chinese state television CCTV picked out the IT giant Apple and the German car manufacturer Volkswagen in its annual program on corporate misconduct. CCTV claimed that Apple did not offer the same services to Chinese customers as in other markets. VW was accused of using clutch transmissions in some vehicle types that occasionally lead to uncontrolled acceleration or braking. VW had to recall 384,000 vehicles. The company suffered a loss of reputation in its largest national market. The TV report also led to a comparable setback at Apple. Apple CEO Tim Cook personally apologized to Chinese consumers for the poor communication regarding the company’s warranty policy. Incidents of this kind show how important it is for foreign brands to be able to observe the social space closely and react quickly. Campaigns against foreign brands can cause serious damage, at least in the short term.
Protection: good relations and internal preparation are a good guard
As growth markets develop rapidly and become less and less dependent on foreign investment and technology, there is a growing likelihood that larger foreign companies will be targeted, partly through the use of social networks and micro blogger platforms. The best way to arm oneself against such campaigns is to build good relations with important authorities and associations, but also to build credibility as a friend of the target country by assuming social responsibility as a company. It is also important to keep an eye on weaknesses and prepare for PR crises through internal training and action plans. For the known reasons the focus must be on social media.
Think Mobile: The “great migration” from traditional PCs to mobile devices has created a completely new universe. The numbers are breathtaking. In mid-2017, China officially had 1.36 billion mobile Internet subscribers, which was more than one device for every adult. Smartphones are widely used to interact with brands. Over 500 million Chinese made purchases online with their smartphones last year. In India, one in four consumers is already making online purchases. With 480 million smartphone users, mobile consumption has already become the biggest driver in e-commerce. This is described in detail in our new Springer publication “Successful brand building in the large emerging markets” (written in german) by Dr. Niklas Schaffmeister (Managing Partner Globeone) and Florian Haller (CEO Serviceplan Group).
The television as “First Screen” has been replaced
Although growth rates on the Internet and in mobile communication are already declining on a global average, they remain high in the major growth markets thanks to the still expanding middle class and new consumer groups in the rural hinterland with its megacities. The consequences of the boom in mobile devices are far-reaching. In the young markets of the world, smartphones have replaced the traditional television (and thus the programs running there) as “first screen”.
Mobile consumption forces a new way of customer communication
This has an enormous impact on purchasing behavior, pricing and the way brands need to communicate with their customers. According to the analysis specialist FICO, China and India are already among the leading countries with the highest percentage of consumers using mobile devices. France and the US have the lowest rates in this area. The figures contain a clear message for brands. If you want to benefit from the purchasing power of major emerging markets, you can achieve astonishing growth rates if you consider the mobile communication channels and customer experiences to drive up sales.
Large Western companies such as Unilever and BMW have been implementing extensive marketing initiatives in the mobile sector for some time to exploit the extraordinary growth of mobile communications in these new markets. There is no doubt that mobile devices have become a central means for brands and companies to connect and interact with their customers. Today, a state-of-the-art mobile website with a well-functioning e-commerce integration is more important than a traditional website.
Rural regions can now be developed much better
The ever-expanding mobile universe provides marketers and brand companies with a powerful additional tool for tapping into massive customer groups in rural areas that were previously difficult to reach at reasonable cost. Booming domestic Internet giants such as Alibaba and Tencent have helped to build up dense distribution networks that can reach even the remotest corners of continent-sized markets and deliver goods virtually anywhere in two days at the latest. Many marketers have now begun to turn to the mobile sector, which they had previously often obstinately neglected. In the face of fierce competition between domestic online retail giants, the situation is currently improving rapidly.
Mobile presence has become indispensable
Against this background, there is a clear need for companies to become active in the mobile sector. The Chinese online auction house Alibaba, whose huge C2C platform is using the “Singles Day” on 11 November for a “Shopfest” campaign, shows how this can be achieved. Alibaba transformed “Singles Day” into the Chinese equivalent of Valentine’s Day. At the “11.11 Shopping Festival 2017” Alibaba set a new daily record for online consumption with 25.3 billion dollars. There is no better way to illustrate the purchasing power of mobile consumers in the major growth markets. Almost 43% of sales at the latest “Shopfest” were generated with customers using mobile devices.
When Western chambers of commerce in China describe their local market environment in annual reports, terms such as “regulatory environment”, “reforms” and “fair competition” are often included. These words reflect the fact that even after four decades of market-oriented reforms, the state still largely controls the economy. India, Russia and Mexico are hardly any different. Two-thirds of A-Share companies on China’s stock exchanges are either purely state-owned or state-controlled companies. And even private companies in China often have strong unofficial ties to the government. The government still plays a key role at all levels and has the final say in many strategic industries, from pricing and regulation to investment planning. There is practically no way around the Chinese government. Niklas Schaffmeister (Managing Partner Globeone) and Florian Haller (CEO Serviceplan Group) therefore describe why good relations with politics can be important for international brand development – all details in our new Springer publication “Successful brand building in the large emerging markets” (written in German).
In addition to precise market knowledge, exact positioning and a good marketing strategy, anyone wishing to gain a foothold in these markets needs a fourth important ingredient for a successful mix: good relations with politicians and authorities, whose agenda should be known in both political and economic matters. Maintaining good relations with those in government and deciding on regulations and provisions is of paramount importance. However, successful networking, both privately and professionally, is a major challenge in these markets, not only because of the size of many target countries, but also because the government apparatus and authorities are usually not transparent and because intermediaries often still operate between local institutions and Western companies. Both their influence and their own careers are often subject to frequent changes.
The right wire: Identifying and addressing the responsible regulators
Good relations with important authorities and government contacts can be vital at a decisive moment. In the automotive industry in China, for example, there is no alternative to them at all because foreign investors are forced to enter into joint ventures with local competitors. And most of them are state-owned enterprises. One of the key challenges is to identify the relevant regulators and to keep in constant touch with them. Investors need to make sure that the people they talk to are who they claim to be. There are countless “braggarts” and fraudulent advisors who claim to have “excellent” relations with the government, often turning out later to be cunning fraudsters and storytellers. The deeper one penetrates the less developed hinterland of the large target markets, the greater the danger of encountering such charlatans.
Reinsurance: Multiple sources provide more reliable information
But even in the more developed economic centers, all connections are ultimately at the local level. The business environment in China is as diverse, multi-faceted and regionally diverse as Chinese cuisine. It may be helpful to ask various sources to make sure you have successfully networked with the right people. Many experienced businesspeople in growth markets confirm that it is more difficult than ever to maintain the right contacts in view of the multitude of political changes and structural reforms in government. And the more foreign companies expand into the hinterland in the large countries, the more they will have to deal with local officials who lack experience with foreign investors. For Western brands, this means that marketing campaigns must be well informed about current policies and reforms.
Silo mentality in the administration often blocks the flow of information
Efforts to build good relations with government or public authorities can be made more difficult by the fact that officials in growth markets are usually hardly motivated to share information with other authorities. For foreign companies, this means they have to hold several meetings on the same subject in the same authority. But there is also good news: government representatives or civil servants can also be motivated from the outside by sharing some degree of know-how with them giving them industry insights, or by adapting the topics of the meeting to the official’s own priorities and goals in order to move forward.
Compared to Western “network citizens”, Internet users in emerging countries are usually younger, more active and have a high degree of confidence in product ratings from friends and family. For most of them, the digital world is an escape from crowded family homes and an affordable way to explore the world. For many companies in growth markets, social media have replaced television as the most important communication channel for marketing. In many cases, social media have become the biggest sales drivers. The availability of different social channels enables cross-media campaigns that greatly improve direct interaction between brands and their customers. This is described in detail in our new Springer publication “Successful brand building in the large emerging markets” (written in german) by Dr. Niklas Schaffmeister (Managing Partner Globeone) and Florian Haller (CEO Serviceplan Group).
The power of co-design
One of the most successful integrated national marketing campaigns, no longer developed by a global headquarters but in the target market, was VW’s People’s Car Project (PCP) in China. It included an open innovation platform that enabled consumers to communicate with the brand to design their vehicle and then share the results with peers and friends through social media channels. Volkswagen was thus able to take up the ideas of followers and car enthusiasts. The best ideas were taken up by the product developers. VW started the project in 2011 to improve its brand perception, optimize innovations through precise market knowledge and increase brand value. It became a multimedia campaign to design “the first automobile for and by the people”. VW China improved its digital commitment and brand image in key dimensions. The campaign attracted 14 million visitors. VW was seen as the “Digital Performance Leader” and the car brand that is best integrated in society. VW China was awarded the Golden Lion in Cannes.
Not every brand has to fight for a leading position in the digital world and there is no silver bullet. But whatever digital leadership means for the different brands, there are four important principles that every marketer should consider when building or changing the digital presence of his brand.
1. The role and objective of digital marketing must be precisely defined
First, marketers need to define what they want to achieve for their brand in the digital world. Do they want sales to increase significantly, simply create a brand experience, or raise awareness? Companies often fail to formulate a clear goal of their digital strategy. Second, marketers need to recognize the natural digital suitability and willingness of their brand and understand how complex and advanced the competition is. Unfortunately, this important aspect is all too easily overlooked.
2. Knowledge of the digital behavior of the target group
A brand also needs to understand the specific digital behavior of its target group. It is also crucial to address the differences in digital behavior between target groups. Some may focus more on social media, while others are more interested in normal homepages. Only if one understands when, where and how the target groups are active on the Internet can the strategy selected to exert influence and the media mix be balanced. A holistic and consistent online and offline strategy is without doubt the key to success. Achieving the ideal balance is a challenge, as the search for information in growth markets varies greatly according to age. While many people still visit a shop first and then buy over the Internet, the number of those who first look for information on the Internet before making their purchase in a shop is growing.
3. Creating relevant, authentic and activating content
In a world where consumers struggle with an ever-increasing flood of information, content quality is crucial for digital success. In the digital world, customers decide when and where they want to take action; they can easily ignore or hide subjectively imposed information. Three criteria should be taken into account for quality assurance of the content: Firstly, content must be relevant to customers and convey important aspects about the brand; secondly, communication about the brand must be authentic, which can be achieved through repetitive messaging, for example; and thirdly, communication should encourage consumers to engage with the brand.
4. Measurement and tracking of digital performance
One of the biggest challenges remains measuring the digital performance and efficiency with which the mass of data generated at each digital contact point is used. Marketers must use these valuable information streams to derive brand knowledge and consumer understanding and develop new opportunities for their digital communication strategy. Monitoring and measuring the performance of integrated marketing campaigns is crucial in assessing the success of the necessary investments and determining whether the campaign has achieved its goals. Brand managers need to define the key performance metrics that are identified in connection with their business activities, as well as clear performance indicators (KPIs) that can be translated into strategic digital goals.
People in international growth markets usually tweet, like, upload and share information much more intensively than consumers in Europe or the US. In the digital sphere, where most of them were socialized, they communicate not only about their personal lives, but also about products, brands and companies. Digital media have a great influence on how they act, communicate and make purchasing decisions. This is not only due to digital socialization, but also has political reasons, for example the limited freedom of print media in China. China and India have become real epicenters of the explosive growth of the digital world. The biggest growth opportunities in e-commerce, the most widely used apps and the world’s leading social platforms – including extensive brand information – can be found there. This is described in detail in our new Springer publication “Successful brand building in the large emerging markets” (written in german) by Dr. Niklas Schaffmeister (Managing Partner Globeone) and Florian Haller (CEO Serviceplan Group).
Digital media are advertising and consumer drivers
According to the industry magazine Campaign Asia, more than half of media consumption in Asia is already in the digital sphere. In view of the extreme price increases for advertising in traditional media, it is obvious that Internet advertising is growing at double-digit annual growth rates. Growth will focus primarily on mobile communications. China’s mobile advertising market is already larger than the entire Latin American advertising market. The People’s Republic has long been one of those countries where spending on digital advertising exceeds spending on television advertising. In its BRIC Branding Survey, Globeone has shown that Internet search engines, social media and company websites are among the most important tools for obtaining information about foreign brands in the major growth markets. Chinese online retailing accounted for 13% of total retail sales in 2016, compared with 8.1% in the US. According to the latest estimates, about 40% of e-commerce consumption in China is additional consumption. Internet retailing enables hundreds of thousands of Chinese to purchase products to which they previously had little or no access.
Digital channels significantly reduce costs
The use and exploitation of e-commerce relieves local and international brands in large countries such as China and India considerably, as opening new stores in the hinterland can be costly there. The US manufacturer of high quality handbags, Coach, ran stores in 47 cities in China when the company began to open a Chinese e-commerce site. Just a few months later, Coach shipped its products to more than 110 cities in the country. In recent years, many Western brands such as Puma and Hugo Boss have set up e-commerce sites in China.
Precise target group determination: making the marketing messages work
In major growth countries, the digital middle class is as diverse as the population overall. Therefore, the target groups must be precisely defined. Otherwise the marketing messages will not have the desired effect. Careful market positioning results in different age groups and income segments that can be considered as target groups. At the center of attention for digital campaigns is the growing segment of wealthy, younger Internet users, for brands across the consumer spectrum, from accessories to food and beverages to hair care and skin care products.
Often a problem: physical distribution of online goods
However, building up an Internet presence does not only offer opportunities. Western retailers often underestimate how complex and costly it can be to transport goods within countries such as Brazil, India or China. India may still be several years behind China, but it is catching up quickly. Internet grocery stores and the idea of having fruit, vegetables, rice or sugar delivered to their homes has long been beyond the imagination of most Indian consumers. But online trading has been growing at an explosive rate for years. Almost one in seven Indian consumers shops over the Internet once a week. And almost one in five spends more than half of the disposable income on the Internet. Banks have long been attached to online business. The strong expansion of the digital sphere also offers major advantages for international brands in procurement and distribution. Thanks to online channels they are now able to bypass the often dominant physical networks in the target markets. They are only one click away from their customers.
These figures and developments have transformed the international markets into a strong Internet market for brands. This has created immense opportunities for foreign brands – given that they are aware of local characteristics and that they flexible enough to adapt to local rules of the game.
The more international brands invest in the target countries of their expansion and are perceived as local producers, the more difficult it becomes for them to communicate their origins clearly. German car manufacturers, for example, have become heavily involved in China. Do Chinese consumers still see Germany as the brand’s home market? Is it high-tech “Made in China” or high-tech “Made in Germany”? Dr. Niklas Schaffmeister (Managing Partner Globeone) and Florian Haller (CEO Serviceplan Group) explain how brands can respond to this schizophrenia problem. All details can be found in our new Springer publication “Successful brand building in the large emerging markets” (written in german).
Brand schizophrenia can confuse consumers in local target markets. As a result, the brand value weakens and the brand image loses its contours. For consumers, however, it is still extremely important whether a vehicle was imported or manufactured locally. For consumers, the non-domestic origin of trademarks is usually indicated by a reference to the country of origin. Sometimes the country of origin is further differentiated into the country of manufacture and the country in which the product was developed (country of design). In principle, the country of origin is the country in which the Group headquarters that markets the product or brand is located. However, the product does not necessarily have to be manufactured there. In the discussion about possible brand schizophrenia, three response strategies have emerged so far.
1. Purity strategy: strict commitment of a brand to its country of origin
According to the so-called purity strategy, brands should decide against producing all or most of their premium products outside the developed markets such as the US, Japan or Germany. Strictly linking the brand and its design and manufacturing base to a particular country of origin helps to protect the brand’s image from damage and to prevent a reduction of its pricing potential. Italian sports car manufacturers, French perfume developers or Swiss watch manufacturers are therefore generally well advised to leave their production base in their brand’s home country. As soon as a company decides to transfer significant parts of its manufacturing or research and development capacities to an emerging market, the situation becomes increasingly complex.
2. Obfuscation tactics: do not communicate local production
The use of disguise tactics avoids communication about local production in emerging markets. Instead, the country of origin of the brand is strongly emphasized through a variety of references (for example “Made in Downtown L. A.” or “Designed in California” etc.). In this approach, the companies try to make it clear that all research, development, design, concept and quality standards are at the level of the actual country of origin and are completely separate from the local market. This also applies if production takes place in the local market itself. The advantage: the price premium can still be skimmed off at cheaper production costs. The risk: The credibility of the company can suffer considerably, especially when it comes to labor law standards, which may be much lower in the country of production than in the country of origin.
3. Balance strategy: emphasize local production and foreign origin equally
A third, the “balance strategy”, provides for local production to be communicated in a balanced manner together with the brand’s foreign origin. This approach is usually chosen when a brand is very active and already firmly established in a local market, so that it is hardly possible to conceal the largely local character. In some countries, this approach is also used when there is a need to respond to government demands to take greater responsibility on the ground. When a brand is perceived as too “foreign” and appears only interested in generating sales in the local market, local governments often urge the company to engage and integrate through local R&D or by expanding procurement. In parallel with the implementation of the equilibrium strategy, the foreign company will significantly strengthen the references to the foreign origin of its brand and the fact that the quality standards of the home market apply in full to local production. The latter in particular serves to counteract the perception that the brand has become too “local”. In the German car industry this mantra is expressed as follows: “German quality remains German quality, regardless of where in the world the vehicle was manufactured”. So far this strategy has worked quite well.