Points-of-sale, Points to Ponder

Last week I was asked what would be the best store entry strategy in China for a particular new luxury skincare brand. It was a very specific request because the brand is already in China, albeit with little to no awareness of it's presence, plus they had a very real offer to operate a 2 week trial space in the promotional area of a Shanghai department store. If they perform well during the 2 week trial period, they will secure a permanent space in the store but if they don't then...that's it, out! So a very critical 2 weeks to say the least.

Anyone with even a half-baked understanding of the Chinese consumer market will be able to tell you that point-of-sale activities are one of THE most effective ways to spend your limited marketing dollars. Of course, the usual sexy ATL stuff, PR and new media should also be part of your toolbox but POS activities (or BTL, the larger category to which POS activities belongs to), are so closely linked to sales results that it should constitute a key part of any marketing plan, and does not deserve relegation to it's sometimes poor Cinderella status. True, it may not seem as strategic as ATL or as glamorous as PR but when handled properly, it not only drives brand awareness, helps educate consumers about your brand story and gives customers real value, but also keeps you in the department stores' good books and not least, brings out shining sales results without breaking the bank.

Why are POS activities so effective? The 2 main reasons are the spontaneous nature of purchase decisions (back in the day, working in a large FMCG company, we estimated that in the region of 70% of purchase decisions in China were made in-store); and secondly, POS activities are very targeted and hence helps cut through the clutter ie. you capture the right audience, at the right place, with the right message. And the cherry on the cake - the costs are low and the results are easily measurable. In the current climate, that's surely enough reason to give it some serious thought.

More in a later post on what constitutes good POS activity.

Celebrity Branding: For Better or Worse

Something happened last year in the world of Asian celebrities: the normally publicly well-behaved bunch suddenly turned bad, very bad. Everything from Edison Chan filming his escapades with his many girlfriends to Zhang Ziyi sunbathing 'gasp' topless and cavorting with her billionaire boyfriend. In the western world, such scandals have existed as long as the invention of celebrities themselves and go hand-in-hand. So what's all the fuss about?

The fuss is of course that in China, celebrity fever is rife, especially amongst the young and easily influenced. This tendency to get star struck and idolise public figures means celebrity power is particularly effective and a popular 'short-cut' for brands wanting to gain awareness and project associated values. That is why so many brands are fronted by a celebrity face. The discussion then follows, if celebrities are misbehaving, isn't it then too risky to use them to represent a brand and project the wrong image to consumers? Yes and no. The risk has always been there. Every human being is prone to tripping up somewhere. The key is how people react to the trip up and how strongly they associate the celebrity with the brand.

In short, the better a job you have done in making the celebrity an integral part of your brand and your brand values, the higher the risk you face if they trip up. Take Dior as an example, Sharon Stone's negative comments about the Sichuan Earthquake being retribution for China's handling of the Tibetans had, contrary to popular opinion, very little impact on the brand's performance in China. It continues to be the #1 best selling makeup brand in China, with just over 90 department store counters in operation. This is a reflection of how little consumers truly linked Dior with Ms Stone herself, obviously some knew she was the face of their aging skincare line but she was not seen as an integral part of the brand and hence people did not let it deter them from continuing to buy.

Further evidence that the risk may be less than what common thinking leads to is the case of celebrity fragrances. Naomi Campbell, the first black model to appear on the cover of Vogue and Time Magazine has had her fair share of public critique of her behaviour, but whether it was throwing a mobile phone at her assistant, or fighting with a flight attendant, every time such news was released, sales of her perfume tended to go up or at least did not go down. This is a classic case of no news is bad news. The news brings the celebrity top of mind again and becomes a current point of discussion. Those who disliked her continued to do so and those who liked her found ways to sympathise and forgive - just as you do a good friend. This is the power of celebrity.

So in conclusion, the risk of using famous faces will always be there but as long as the general population keep star-gazing and the media keeps feeding this curiosity, celebrity branding will always be a fact of life.

As for how to best select and leverage a celebrity for your brand...that deserves a post of it's own.

How relevant and consistent is your brand?

photo credit: yahlen

It's amazing what information you pick up if you keep your ears open while about town, especially in a jam packed Shanghai metro during rush hour. A young ambitious couple were talking about franchises. They were fed up of being small cogs in the wheel of a large organisation and were considering spending their life savings on buying a food franchise business to run (which to me would only mean they are only slightly bigger cogs in an even bigger organisation).

The discussion was between KFC and Tea Storm (茶风暴). Hmmm I hear you say, what on earth is Tea Storm. Well if you think coffee and sandwiches for Starbucks then think cold milk tea and sweet rice balls for Tea Storm! And of course they require minimal real estate since they are just kind of hole-in-the-wall set ups. The difference in franchise cost was also huge, 5millionRMB (ca.730,000USD) versus 100,000RMB (ca.15,000USD).

But the interesting point I think is not that KFC costs so much more, that is kind of obvious, but that Tea Storm, a seemingly naff brand in my eyes can actually command even 100,000RMB for their business model. Putting personal taste aside, the lesson really is, that building any brand is about being relevant to your customers and being consistent, in everything from the images and colours you use to the quality of your products and the tonality of your communication; consistency to the point that you can package it all up into a structure that you can franchise off and leverage x-fold. KFC has proved it's relevancy in the China market by outperforming McDonalds 2 to 1 in number of outlets. Not only is fried chicken more appealing to Chinese tastebuds than hamburgers but they also have a product localisation program and offer even chicken congee! Tea Storm has based it's brand on being the best cold pearl milk tea (珍珠奶茶) around, which appears to be rather relevant to the Chinese consumer. Not only that, it has chosen a market so specific that it can be the best at what it does.

And here is an interesting link, if you are wondering how KFC can command such franchise fees. Quick summary: each restaurant in China brings in an average revenue of 1million USD and 20% profit.

Department Store or Fashion Museum?

photo credit: dubbie

Rumours in the industry today that the high end retailer from HK, Lane Crawford, is struggling in Beijing and could close down soon. That would be another embarrassing and expensive flop in China after the failure of Lane Crawford Shanghai and Hangzhou in previous years.

So is there any truth to the rumour? Well, having walked through the beautiful airy store, with it's glimmering mirrors and shiny counters it really seems to be the model of what a fashion and beauty sanctum should look like. Described as a 'fusion of fashion, art and architecture', it's new edgy, artsy communication is also very refreshing BUT BUT...despite seemingly having done everything right, the biggest let down has to be it's location. It's out of the way, in a part of town not frequented by shoppers, it's not convenient, it has no residential area close by, it has no thriving eateries and restaurants in the vicinity (a very important factor driving store traffic in China). The place has the grandeur and emptiness of an impressive museum during closing hours.

However, it would be a shame if it did close, after all it houses 600 high-end fashion and beauty brands, many of which are new to China, like Alexander McQueen in fashion and Ole Henrikson in beauty but somehow I can't imagine Lane Crawford letting a $38million investment go down the drain like that in what has only been just over a year. Let's see.

Year of the Ox starts off bullish

Photo credit: 24carat

So there we have it...the Chinese Ministry of Commerce announced that retail sales over the week long CNY period were up 13.8% vs last year! Of course, I do recall a country paralysed by the snow storms last year but nevertheless, that's pretty good news. The winners were brands offering smart promotions and real value / gift-sets ie, big elaborate boxes to gain the giver lots of face. Walk into a Carrefour and alongside your expected chocolate and fruit gift baskets, you see everything ranging from gift sets of Huggies nappies, Quaker rolled-oats and even Centrum vitamins. The importance of the gifting market cannot be underestimated, infact more than 50% of fragrance sales are for gifting purposes - let that be a guide for your marketing & sales strategies.

Local house-hold appliance brands also benefited this season, helped by government subsidies to farmers of up to 13% of the price. In China although favourite brands are rapidly becoming Nokia, Nike and Apple, homes are still filled with Midea, Haier and Skyworth. After all, household appliances do not really lend themselves well to ostentation.

To top all of that everyone is definitely still spending on communications - with 18 billion text messages sent in the holiday week!