WHAT THE CHINESE WANT / INTERVIEW / TOM DOCTOROFF

What recommendations would you make for brand management in China?

To thrive, multinational brands must have both margin and scale. Consumers are drawn to the cachet and quality of international products so respectable margins are fairly commonplace. Becoming 'big,' on the other hand, is a challenge, even for companies who have been on the mainland for years. Operationally, companies must transform inefficient, multi-layered sales and distribution channels into more centralised, cost-effective networks that reduce kickbacks, lower intermediary fees and monitory inventory flows. But the most important factor in avoiding 'niche status' -- that is, being desired but unaffordable -- is a product portfolio with different items targeted to different market segments.

China's middle class is penny pinched, unwilling to invest in most products with high out-of-pocket cost, particularly if they do not deliver status. To overcome the affordability hurdle, marketers usually employ one of two strategies. First, they 'sub-tier', or extend brands downward by: a) lowering cost of goods, reducing price and simplifying benefit structures and b) leveraging the most premium variants to reinforce an innovative image and cool cachet. Over the past five years or so, packaged goods companies such as Colgate, Unilever and Procter & Gamble, have become skilled in this area.

Second, companies extend -- or 'stretch' -- brands outwards to broaden the product portfolio across several categories, leveraging lower priced items to draw cash-strapped consumers into the franchise. Luxury goods marketers, for example, focus much more on accessories in China than they do in developed markets.

What are the key changes you have noticed in the evolution of Chinese consumers over recent years?

As Chinese consumers become wealthier, they become more modern and international. But, digital liberation notwithstanding, they are not becoming Western. The Chinese worldview remains anti-individualistic, if we define 'individualism' as societal encouragement of individuals to define themselves independent of external expectations. China remains a Confucian society: it is driven by a complex code of obligations, centered on twin pillars of family and nation. At its core, Chinese society is characterised by tension between ambition and regimentation, the urge to advance while conforming to imperatives imposed by the 'system'. Egos are huge -- success is impossible without 'face' -- but outright rebellion is forbidden.

The motivations that fuel the most dynamic categories remain profoundly Chinese. And brands are always tools of advancement and benefits are always externalised. Sports cars will always be niche because their benefits -- 'zoom, zoom,' the thrill of motion -- are largely 'internalised'. 'Power' must morph into status projection because autos, like practically all brands, are weapons of professional advancement on the business battlefield. Chinese tourists are more interested in purchasing luxury goods or 'collecting' destinations to show off back home, rather than experiencing other cultures. Of course, as consumers become more sophisticated, positioning strategies must become more artful, less one-dimensional. The man on top demonstrates mastery or connoisseurship, not his bank account. But, young or old, rich or poor, all benefits are means to an end -- that is, climbing a hierarchy of success. Brands should, directly or indirectly, enhance social standing. Budweiser's What's Up campaign, a celebration of male bonding, would never work. In China, premium beer lubricates trust between guys who want to make money.

One of the chapters in your book covers Young Digital Lives - what were some of the key traits you identified and why are they important to marketers?

There are two striking (and related) characteristics of China's digital landscape. First, it is the freest, most unfettered platform of information. Media are controlled by the government; censorship rules conform to Party imperatives and the comfort zones of conservative society. People don't trust the accuracy of the printed word, much of which is also shaped by pay-to-play corrupt PR practices. As a result, 'world of mouth' (or 'buzz') drives sales even more in China than other markets. Marketers should be harnessing, and measuring, the power of on-line opinion leaders to deepen brand loyalty. Any consumer goods manufacturer without a robust social media program is missing the boat.

Second, in terms of self-expression, the Internet is almost revolutionary. The off-line world is filled with omnipresent restrictions. The tension between projection of ego and alienation avoidance -- contemporary game changers versus timeless cultural imperatives -- is a powerful dilemma for most Chinese. It results in a paradoxical coexistence of infectious optimism and strict limitations on free thought. Given this conflict, digital 'release' is manna from heaven, despite the snooping of 50,000 net police and government efforts to make users register their real identities with the authorities before assuming online pen names. The anonymity of new media is a blank canvas of self-expression. In the digital world, anything goes. Shielded by anonymity, the repressed-yet-ambitious new generation casts an idealised image of itself into cyberspace. Given the inherently social nature of digital, the draw of on-line acknowledgement for "being special" is difficult to overstate. The internet is both a platform for emotional liberation and a platform to shine, and explains the massive on-line success of Pepsi's Get on the Can campaign, Pringles' My Own Word Record, Nokia's Who Has the Best (Dance) Moves? and Colgate's Star Search.

It is important to note 'traditional' or 'broadcast' advertising -- unfortunately, a very expensive proposition -- is still critical in generating awareness. Digital campaigns are effective in deepening loyalty and engagement, but television (or online video) and print remain invaluable in forging conceptual order from chaos. Investment is usually required, even if geographic coverage is limited. There is no short cut.

What do you think are the most important things China can learn from the West?

China has strengths that we do not: an ability to mobilise resources for critical strategic undertakings at the national level (i.e. 'managing scale); the ability to study other cultures' competitive advantages while adjusting them to suit domestic circumstances; and an impulse to incrementally progress towards rational, pre-defined objectives.

But it's misleading to think we can cut and paste China's strengths and apply them, say, in the United States. Our cultures are complementary. They spring from distinct worldviews. Rather than emulating China, we should focus on sharpening our own competitive advantages including bottom-up innovation, dynamic capital markets, and a free-market ethos that draws talented immigrants from around the world.

China will not become like us, nor do they want to. This is perhaps the most important thing to learn. The unipolar world of the twentieth century is history. We must, as individuals and societies, appreciate that cultures are relative. Given the rebalancing of economic power between East and West, leaders should embrace multiculturalism. The West is not in decline. But there will be more than one tiger on the mountain. We need to come to terms -- psychologically and industrially -- with this reality before we can achieve synergies. This momentous journey has barely begun. And it can be exciting.

Tom Doctoroff's What the Chinese Want is published by Palgrave Macmillan