BRANDS ACT LOCAL TO WOO A BILLION CHINESE CONSUMERS

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By John Quelch
Monday, August 18, 2008
  

  
In
preparing to host the Olympic Games, the Chinese have had to embrace western standards to meet the promises made to the International Olympic Committee. Many factories have now been shuttered to reduce pollution and improve air quality in Beijing. Legions of Chinese soldiers have cleared infestations of algae from the coastal locations of yachting races. Beijing taxi drivers have been ordered, in deference to visiting tourists, not to spit.

The deadline of the Games gave government officials an action-forcing event to accelerate the modernisation of Chinese society. World class architectural design and construction standards have guided the building of Olympic venues. Airports, highways and other infrastructure have been upgraded, not only in Beijing but also in all the cities where Olympic events will be held. The Olympics have long been seen as China's global coming-out party. Chinese pride and ambition demand that they be the best ever, no matter what the cost, and that Chinese athletes win more medals than those from any other country.

Three months ago, China's investment looked to be at risk. The litany of criticisms and pratfalls seemed endless: Chinese government policy toward Tibet and Darfur; human rights concerns, from restrictions on journalists to arbitrary land expropriations; lead paint in Mattel toys; and rampant corruption despite the occasional execution. The word “boycott” was in the air, and the Olympic torch was attacked repeatedly, from Paris to San Francisco, on its progress round the globe.

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All that is now a distant memory, as it should be. The IOC remained stalwart. The sponsors, from Coca-Cola to Adidas, hung tough. And, once the torch arrived in China, there was no more nonsense. Because it is and should be all about the athletes. So what if the Chinese government wants to show off how far the country has come in 30 years? It is, to say the least, one of the greatest economic turnrounds in human history.

But when the athletes have gone home and the polluting power plants come back on line, what will remain beyond the memories and good impressions? The answer is: brands. The year 2008 will not merely be the year of the Olympics. It will be the year of brands. Not only “Brand China” is being promoted on the world stage but also the commercial brands that are Olympic sponsors are driving home their advantage in the domestic Chinese market.

The Chinese are already in love with brands. How can you stand out in a nation of 1.3bn with high population mobility? Young Chinese are known by the brands they can afford and the brands they display. Via fashion accessories, mobile phones and now cars, brand choices are stratifying a hitherto communist society. The billions of daily purchases of trusted brand names are an increasing part of the social glue that holds Chinese society together.

From Coca-Cola to McDonald's, from Visa to Samsung, a record 63 companies have paid the IOC more money than ever for their category exclusive sponsorship rights. And given the size and growth of the Chinese economy, plus the undercurrent of concern about China in the west, these sponsors have allocated more of their global Olympics budgets than ever to marketing their brands in the host nation. The Chinese are being subjected to a deluge of advertising by western multinationals seeking to expand their geographic reach beyond the big cities to the outlying provinces. Olympics-related advertising by these companies could exceed $6bn. Most of this advertising is not directly promoting brand features and attributes. Rather, it aims to wrap the western brand in the cloak of Chinese nationalism.

From Volkswagen's “honk for China” campaign to Pepsi's limited edition of red-coloured cans accompanying the slogan “Go red for China”, western brands are taking the “act local” mantra to a new extreme. Few of them are implementing a unified global campaign for this Olympics. Instead, they are typically running two campaigns – one for China and another for the rest of the world.

The same applies to Chinese companies such as Lenovo and Haier, which are seeking to make the most of their Olympics sponsorship to enhance their global stature.

Lenovo, which acquired IBM's personal computer business three years ago, has invested about $100m as the first Chinese company to become a global sponsor of the Olympics. Through doing so, Lenovo expects to increase its brand reputation and market share in China as much as in the rest of the world.

But where will this vast consumption of brands lead? Choice is good. Engaging with brands is fun. Media diversity, fuelled by advertising, is welcome. But one cannot help wondering whether too many Chinese are consumers first and citizens second. The passion for consumption, enjoying the material fruits of a growing economy, risks becoming the convenient narcotic that postpones rather than advances political freedom.

The writer is senior associate dean at Harvard Business School and co-author of Greater Good: How Good Marketing Makes for Better Democracy