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.

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.

In its target markets global brand expansion meets dynamic product categories, growing consumer demands, rising incomes and a clear trend towards “premiumization.” Consumers want to show as early as possible that they have “made it” and did not only achiev status, but also belong to the “global village”. They want to fulfill wishes more and more often instead of just satisfying needs. Millions of consumers between Shangai, Rio, Mexico City and Jakarta are therefore increasingly reaching for the shelves with products of the highest quality, prestige and elegance league, despite carrying middle-class wallets. Dr. Niklas Schaffmeister (Managing Partner Globeone) and Florian Haller (CEO Serviceplan Group) describe how brands can take advantage of this trend towards premiumization – all details can be found in their new Springer publication “Successful brand building in the large emerging markets” (written in german).

An international brand expansion targeting only the top segment of the income pyramid or exclusively the rapidly growing mid-range segment misses a good opportunity to tap additional purchasing power in the emerging markets. Buyers there are increasingly opting for more expensive premium products, which in the truest sense of the word leads to an appreciation of numerous product categories. Barilla, one of the market leaders in the international pasta industry, reports, for example, that the effect of premiumization is already responsible for the increase in demand for pasta in emerging markets. Premiumization is a general market phenomenon and by no means limited to the existing premium markets. According to various market researchers, it is now a common and nationwide phenomenon in many growth markets. There are two important factors in particular:

1. Political reforms and rising incomes reinforce the trend

The rapidly growing middle class is not the only driver of progressive premiumization. In China, ongoing economic reforms are aimed at increasing purchasing power in the inner provinces because in the future private consumption is supposed to take over the traditional locomotive function of exports and capital investment. This leads to a redistribution of wealth into smaller towns in the hinterland. The same can be observed in India and other international markets: premium products are no longer available to the rich alone. This trend is supported by reliable evidence. In China, for example, more than half of the sales growth in recent years has been achieved with fast-moving products such as biscuits, toothpaste, skin moisturizers or milk.
India is the latest example of premiumization in the frozen food market, which has been growing by around 20% a year for some time. The newspaper Hindu Business Line reported in November 2014, that the retail segment of the market generally consisted of frozen vegetables such as peas and sweet corn. But snacks such as chicken sausages, French fries and other potato products have long since become popular. Products that are considered “gourmet foods” in the country, such as pork and seafood, or delicatessen based on chicken meat, have been recording strong growth rates for years.

2. Food scandals and growing prestige awareness emphasize quality as a criterion

Whenever a rising number of consumers can afford to fulfill their wishes instead of just buying what satisfies basic needs, the importance of quality as a criterion increases. According to a survey by the Hong Kong Trade Commission among 1,600 middle-class consumers in eight Chinese cities, three out of four local consumers focus on quality when making a purchase decision. This is due to a series of appalling scandals in the milk and meat sectors and worrying reports of poisonous toys. A growing number of companies have successfully taken up this trend of putting quality above the criterion of cost savings and are doing well. Whether it´s about cars, jewelry, dairy products or diapers: The high quality of premium goods enables prestige-conscious and newly-wealthy consumers to show their peers and colleagues what status they have achieved. Gender also plays an increasing role. The growing proportion of well-trained women in the world´s work force is noticeably fostering premiumization.

Young growth markets are on the move. Income is rising, the retail trade is organizing itself, young entrepreneurs and skilled workers are demonstrating status and success. There are millions of new customers for virtually every product category. On the other hand, thousands of new brands are wooing for the attention of consumers. The battle for the “share of voice”, i.e. the percentage of target group contacts of a brand, is fiercely fought. Under these conditions, it is extremely difficult to build a brand and win customers to try the product for the first time. Therefore, opportunities for experience and activities must be cleverly developed in order to enter into a dialogue with potential customers and to change their consumer behavior. The challenge is to win consumers over to products and brands with which they are not yet familiar and in which they may not initially be interested. This is described in detail in our new Springer publication “Successful brand development in the major emerging markets” (written in German) by Dr. Niklas Schaffmeister (Managing Partner Globeone) and Florian Haller (CEO Serviceplan Group).

The basic idea of “Experiential Marketing” is that this approach is not primarily about selling something, but about showing how a brand can enrich the customer’s life. Generally speaking, it is a kind of customer-centered marketing activity in the form of staged, experience-oriented events and points of contact, through which a multi-sensual and emotional connection to the target group is established. Experience marketing has long been known in the developed markets of industrial nations. But the concept has a unique significance for emerging markets. This is not only true for premium markets, but for practically every market segment.

From fashion shows to adventure centers: how to address target groups

There are many different examples of how to enable the consumer to get to know and love a previously unknown product through unique experiences:

  • Brand experience centers (for example the BMW and MINI experience center at the EXPO in Shanghai)
  • A fashion show or an exclusive kick-off event (for example a Fendi fashion show at the Great Wall)
  • An exhibition in a shopping mall (where, for example, models who show a lot of skin pose in Calvin Klein jeans and ask customers to take photos)
  • Public test drives under supervision (e.g. a driver academy at the Land Rover Off-Road Experience Center)
  • Product tests in supermarkets (for example, an event with French wines in a Carrefour shopping center)
  • An advertising campaign in a well-known restaurant or nightclub (for example, advertising for Budweiser, in which hostesses in brand uniforms are involved)
  • Showrooms that allow people to experience the product directly (for example, designer furniture shops that allow customers to try out a bed or even sleep in the middle of the showroom)
  • Museums or brand academies (for example, a Mercedes-Benz museum)
  • Customer conferences, events and exhibitions that signal “strong leadership” and enable direct interaction with strategically relevant customer groups
  • Technology Days, which usually take place in the local branch or factory of an important customer in order to familiarize the engineers and management of the customer with the manufacturer’s latest solutions.

Example from cosmetics: how to modify consumer behavior

However, modifying behavior is sometimes easier said than done, as the example of L’Oréal shows. The world’s largest cosmetics company had to contend with fierce headwinds in Brazil. Customers traditionally buy skin cream and mascara from representatives at the front door. This type of distribution has a long tradition in Brazil. Around 2.5 million women earn their living through direct sales. But L’Oréal depends on quality shops to sell its products. To be successful in Brazil, L’Oréal must therefore encourage Brazilians to change their consumer behavior and buy beauty products on a larger scale from organized retailers.

This change has already begun. In recent years, pharmacies and drugstores have succeeded in gaining market share from direct sales. The growing demand is triggered by higher incomes and the growing middle class in the very young population. People under the age of 25 are among the main consumers of cosmetics. In order to make more sensory-emotional experiences possible and attract more customers, the cosmetics group introduced the concept of “personal beauty advisors” in the country’s department stores. These consultants bring customers into direct contact with L’Oréal products and offer them a personalized customer experience. A similar concept has also been implemented in pharmacies.

In emerging markets around the world, retail is usually not yet highly organized. The challenge for international brands is to introduce their products to potential customer groups in the face of rapidly increasing competition and to show them how the brand can enrich their lives. In a fiercely competitive market, experience marketing can be the decisive advantage over the competition.

In major growth markets, the mid-price market segments are growing at practically the same pace as incomes. In order to capture larger market shares in dynamically growing product categories, an increasing number of companies are relying on a strategy known as “category flooding”. They aim at several target groups at the same level of the income pyramid, but also address other levels of the income pyramid. By offering more than one brand in the same category, they can achieve greater market share. You know: who only uses one single brand cannot increase sales above a certain level. The main reason for this natural “cap effect” is that consumers have different psychological needs and expectations compared to their preferred brand. Since brands also have a kind of personality, there are correspondingly many people who do not want to commit themselves to a certain brand. Therefore, it is sometimes advisable to build up different brands that operate in the same market and serve the same functional needs, but have a range of brand personality profiles or different brand emphases. This strategy is used in particular in rapidly growing consumer goods markets where financially strong global champions such as Procter & Gamble, Unilever and Pepsi Foods are fighting for market leadership.

The flooding of categories should ultimately lead to such a dominant role in a specific market that consumers cannot evade the company’s brands. Even if they reject a particular brand, they are likely to buy a sister brand without knowing that it is manufactured by the same company. Of course, category flooding also takes place at different price levels. This enables companies to target more affluent consumers with a premium brand while offering consumers in the mid-market or mass market normal or cheap brands. Three methods are particularly popular to reach your goal. Dr. Niklas Schaffmeister (Managing Partner Globeone) and Florian Haller (CEO Serviceplan Group) describe in detail the category flooding in our new Springer publication “Successful brand development in the major emerging markets” (written in German).

Method 1: Tetra-Pack’s success with different package sizes

Coca-Cola markets Thums Up in India as a major local cola brand with a local flavor. Strategically, Thums Up focuses on traditional consumers, while Coca-Cola itself mostly appeals to younger and more modern consumers. In the more traditional and lower income groups, Coca-Cola also offers beverages such as Minute Maid with guava flavor, which can be enjoyed with
a “Made with Nature” promise and should promote a healthy lifestyle. To appeal to less affluent consumers, Minute Maid is available in a smaller Tetra-Pack format with less content. The small package is offered at a price of less than a quarter of the larger package. Minute Maid Guava was initially only available in selected cities in Punjab, Delhi, Uttar Pradesh and Kolkata (formerly Calcutta).

Method 2: With the multi-segment strategy to market leadership

The flooding of whole categories can also be observed with toilet soaps. Unilever offers Liril and Dove in the premium segment, LUX as a mid-range brand and Lifebuoy in the low-price segment. This strategy helped Unilever to become the market leader in this category in India and to achieve similar success in the detergent category.

Method 3: Expand the portfolio with acquisitions of local competitors

In the categories of household applications and appliances, the acquisition of local competitors – and their integration into the existing portfolio – is a widespread strategy in large emerging markets such as Brazil. Two major groups, US-based Whirlpool and Mexico´s Mabe, control more than 60% of the national market in Brazil. Whirlpool acquired the local brands Brastemp (market leader in household and kitchen appliances since 1973) and Consul, the first Brazilian refrigerator manufacturer. Both domestic companies merged to form Multibras in the early 1990s. Under the leadership of Whirlpool, Brastemp and Consul fundamentally changed their corporate culture. They strengthened their consumer orientation and became more innovative. Today they are an integral part of the worldwide Whirlpool Group. In the Brazilian market, where competition is becoming increasingly fierce, companies such as Bosch, Elektrolux and General Electric have also taken over local manufacturers. Consul and Brastemp enabled Whirlpool to flood the category “white goods” – i.e. household appliances of all kinds – and to be successful even in a weakened economy. Consul is the brand for the mid-market segment, while Brastemp was positioned as a premium brand. Brastemp is mainly marketed with quality and innovation as its most important features, while Consul is advertised for simply being part of the household. The advertising messages refer mainly to the functionality and simplicity of the products.

The flooding of categories can appeal to very different groups with different consumer motives. Two of the most important groups in the major growth markets are almost always in the target radar of marketing departments. One is a rather young, career-conscious group with a good education and rising incomes. It has a tendency towards a more prestigious consumption because it aims for a higher social status. This target group clearly prefers well-known foreign quality brands. The other important group is older, less brand-oriented and less demanding buyers.

In recent years, offering very different product categories under one brand umbrella has become increasingly popular. Xerox expanded its core brand from copiers to computers. General Electric also sells financial services. We can book rooms in luxury Versace hotels, or surf the Internet with Ferrari notebooks. We can even wear shoes or watches from Caterpillar, Porsche or Jeep.

This horizontal brand expansion, i.e. the expansion of a brand into what at first glance appear to be untypical product fields, is also a popular strategy in emerging countries. The reason is simple: it not only helps to accelerate market access and reduce costs, it also uses the leverage of well-known brands in rapidly growing new product categories. One of the most important drivers for the expansion of a single brand into other categories or even industries is the fact that building brands and their distribution channels in large countries such as China or India is very costly. Companies often shy away from making additional investments in a second brand if this is not supported by strong strategic considerations.

Dr. Niklas Schaffmeister (Managing Partner Globeone) and Florian Haller (CEO Serviceplan Group) explain in our new Springer publication “Successful brand development in the major emerging markets” (written in German) what is important for horizontal brand expansion.

More confidence in manufacturers with several brands

There is also scientific evidence for this behavior. Research shows that Chinese consumers generally trust better-known brands more than others. First and foremost, because the brand helps to convey greater confidence in product quality and product safety. More than one in three consumers in China believe that companies active in many product categories are more trustworthy than those that are limited to only one or two product segments. This confidence is twice as high as in the US (18%).

This attitude on the part of many consumers in major growth markets gives companies the opportunity to expand their brands in these markets to a very large extent. Perhaps that’s why Coca-Cola presented a casual clothing collection for young and fashionable consumers during Fashion Week in Rio de Janeiro. The beverage company wanted to strengthen its position as the world’s most valuable brand and called on Brazilian designer Thais Rossiter to create a mix of retro, sporty and urban design full of pictorial and floral prints from various sources. The collection ranged from glamorous evening gowns to nylon shorts – all bearing the Coca-Cola trademark.

Haier: First refrigerators, then also electric kettles and computers

China’s largest household appliance manufacturer Haier also extended its core brand, refrigerators, to televisions, kettles, mobile phones and even computers. However, this horizontal brand stretching was also used as an example of overstretching. But this does not seem to have had too negative an effect on Haier, as the company is still the world’s number 1 manufacturer of white goods.

Horizontal brand expansion has particularly good prerequisites in the major growth markets, because consumers here are not yet so strongly committed to certain brands and as they are keen to experiment. In addition, companies active in several product categories between Rio, Shanghai, Mexico City and Mumbai usually become more trusted.

In order to increase sales, many international companies are building up a differentiated brand portfolio in the major growth markets, consisting of a brand for the upper market and separate brands for medium and lower segments. This strategy, which is based on many brands, is mainly found in the consumer goods sector and has proven to be very effective if properly implemented. In countries such as China, where regulations often require joint ventures in the development of domestic brands, companies are occasionally forced to develop additional brands for political reasons.

In contrast to the vertical brand expansion described in our previous section, which deals with the development of the middle-income segments through the expansion of a premium brand, this is a broad positioning for several or all important consumer segments, including the entry-level segment of a rapidly developing middle class. This strategy is appropriate if several or all important segments in an emerging market show strong growth and consumers are switching dynamically to higher segments due to their income situation. This is described in detail in our new Springer publication “Successful brand development in the major emerging markets” (written in German) by Niklas Schaffmeister (Managing Partner Globeone) and Florian Haller (CEO Serviceplan Group).

Nothing works without the important entry-level segment

In January 2013, Volkswagen’s Head of Development Ulrich Hackenberg reported that the Wolfsburg-based company was planning its first low-cost vehicle in China as a separate brand together with one of its two Chinese joint venture partners. In March 2013, the joint venture partners BMW and Brilliance confirmed reports of the establishment of a joint sub-brand with the Chinese name “Zhi Nuo”, which can be translated as “The Promise”. For BMW, the new brand was part of an expansion plan into local markets and a further step towards obtaining approval for a second joint venture production plant in Shenyang.

Utilizing the first mover advantage and developing additional dynamics

The Unilever Group in Brazil wants to benefit from the opportunities in the mid-market segment in the detergent products segment by positioning itself with OMO as a premium brand, but also with ALA as a brand that has been specially developed for the lower and middle-income groups. In the case of Brazil, these groups live mainly in the north-east of the country. Unilever’s internal campaign name for this region-specific brand extension was “Project Everyman”. Product customization for ALA aimed to better meet the needs of consumers with lower incomes. These included smaller plastic bags instead of the normal three-kilogram pack from OMO, but also different scents such as lavender, which promises happiness in the local culture and is said to attract men, as well as an easily recognizable packaging due to the low literacy prevalence in the region. In the ten years before 2007 Unilever had succeeded in achieving 81% market share in Brazil in the detergent powder sector.

The company developed a portfolio that covered virtually all major segments of the market from the premium brand OMO to Minera (washing powder and household soaps) and down to Campeiro (the cheapest washing powder brand). Before Unilever began to expand into the north-east of the country, it carefully studied local demographic conditions. There are 48 million low-income consumers living in the country’s North-East, or 28% of Brazilians. The usage behavior was relatively easy to determine: Clothes were washed more frequently because people had fewer clothes per person. They mostly used launderettes or even water basins where they could meet and talk to their friends while washing. The entry into this rural market offered the opportunity to develop additional dynamism, benefit from the first mover advantage and become a market leader in consumer marketing for low-income people.

Realizing the full sales potential

Consumer goods giant Procter & Gamble (P&G) pursued a similar strategy of portfolio expansion in the Chinese detergent market in order to realize its full sales potential. The brands Ariel and Tide are available for this purpose. P&G’s flagship detergent brand Ariel is positioned in the premium segment, while Tide is focused on the mass market. In order to achieve a clear differentiation between the two brands, P&G relied on two brand ambassadors who could not be more different. The company was able to win the famous Taiwanese singer, actress and TV presenter Xu Xidi for Ariel. It is considered very quick-witted and somewhat snappish and thus appeals to modern urban Chinese consumers. In Ariel’s TV commercials, Xu Xidi often appears with a playful and funny undertone and shows off her humor to its best advantage. Slogans such as “five-star purity” further underline the premium positioning of the brand.

Tide, on the other hand, is advertised by Chinese TV star Hai Qing. She is known as Everybody’s Darling and is famous for her numerous roles in Chinese soap operas. Through the cooperation with Hai Qing, Tide reaches the rather conservative mass market. As brand ambassador for Tide, she organizes cooking lessons and gives household tips at events or in the social media. The advertising campaigns often show them in a traditional environment together with mothers and children. P&G’s product policy reflects the positioning of both brands. Ariel’s packaging sizes are significantly smaller than Tide’s when defining the segments along approximately the same price level. This makes Ariel the ideal product for Chinese consumers who find large packaging uncomfortable and are more focused on quality, while Tide is the preferred choice of more price-oriented consumers.

In order to exploit the entire sales potential in the major growth markets, separate brands are required for separate markets. The brands must be clearly distinguishable and their respective merits should be communicated in the language and with clear reference to the respective income groups.