By Dominique Turpin

China is moving into a new, and more mature, phase in its plan for long-term economic growth. The “stack it high and sell it cheap” approach that has played to the strengths of China’s abundant cheap labour for decades, turning it into the world’s factory, is no longer a recipe for guaranteed returns. Increasingly, China’s economic future appears to be focused less on volume, and more on value.

To create new and reliable sources of value, it is imperative that China can differentiate itself from its competitors. Having a lower price point is one way to differentiate, but it is becoming increasingly difficult to do as China’s labour costs rise. Ultimately, keeping such costs artificially low to stay competitive may hurt China’s long-term prospects as much as help them.

As such, it is imperative that China nurtures brands that can reliably appeal to its bourgeoning domestic consumer market as well as to a global audience. Why? Because brands are the ultimate differentiation factor.

The brand factor: Telling a compelling story

What is the difference between a brand and a product? A product is a functional thing – “made in a factory” – a means to an end. A brand, however, has both functional and emotional value – it is nurtured in the mind of the customer. A successful brand is, at its core, a story of trust that the customer absorbs, understands, and ultimately buys into.

This kind of story is the difference between a t-shirt that is made and sold in a market for $10 and another premium branded Nike t-shirt that is sold in a flagship store for $100. To put it another way, you may buy shampoo to satisfy the functional need of washing your hair, but you buy L’Oréal shampoo because “You’re Worth It” – thus satisfying both your practical and emotional needs at once.

As one senior marketing executive once told me: “Today, in an increasingly interconnected and fast-paced global business landscape, it is more important to own markets than it is to own factories. And the only way to own markets is to own market-dominant brands”. Accordingly, China must be able to compete with the world’s biggest and best-known brands if it is to successfully differentiate itself from the competition in more meaningful ways than just price positioning.

How can Chinese companies build global brands?

While building a brand with global appeal is usually a long, complex and expensive process, the strategy can be broken down into five key elements:

1. Establish a clear, meaningful and differentiated (top-of-mind) identity: Chinese companies looking to become global household names must move beyond a purely functional, commodity-based approach and create stories that will forge an emotional link with their customers. A laser-focus on a few key benefits is more likely to yield success than trying to be “all things to all people.”
2. Innovate proactively on every possible dimension of the business model: Brands must aim to routinely surprise their customers, remaining flexible in the face of quickly evolving consumer trends.
3. Build a strong emotional link with customers: Simple storytelling is the way to win a dedicated following. Global brands give their products an iconic feel by infusing them with emotion(s) relevant to the story they wish to tell their target audience.
4. Communicate a consistent message over time: Simplicity and consistency remain key, as consumers are bombarded with messaging at every turn, diminishing their ability to buy into complex or ever-changing brand narratives.
5. Keep in touch with customers, remain humble and avoid complacency: While Chinese companies may set out to build their brand a certain way, they must remember that ultimately their customers will decide what the brand means to them. Maintaining open communications with customers will help fledgling Chinese brands understand their audience’s perception of them, keeping their message (and appeal) consistent but not complacent.

Singapore Airlines: A model example of an iconic global brand

Maintaining a successful airline brand is challenging. For one, a commercial flight is essentially a functional service (getting from A to B) that is easily replicated and price is always a core concern. In spite of this, however, Singapore Airlines has frequently been lauded as among the best airline operators in the world. It is also a prime example of how to build a successful global brand, hitting each of the five points above.

Singapore Airlines’ brand story is simple yet compelling, and its customers readily identify with its promise of providing them with “A Great Way to Fly.” It consistently innovates, introducing the latest advancements in aircraft technology and in-flight customer services and amenities. It always maintains an attitude of “What’s next?”, as it looks for new ways to delight and surprise its customers. Finally, its brand messaging is reliably consistent, while it welcomes customer dialogue across all channels to stay attuned to what really matters when would-be passengers weigh up their flight options.

Havaianas: From plummeting sales to ‘A Class’ endorsements and aspirational emotions

If the customers decide what the brand really means to them, then how effective can the owning company’s efforts at storytelling, innovating, etc. really be? If a company already has an established product range with a brand image that’s unhelpful for global audiences, then must they start again from scratch? Fortunately, no – there is always room for a brand to evolve.

Chinese companies can and should learn from the example of Havaianas, a Brazilian brand of footwear. Starting off in 1962 with a solid value proposition of offering pairs of cheap (the equivalent of roughly US$3) and simply designed and manufactured sandals, Havaianas rapidly secured a dominant low-end market position in Brazil. However, after 30 years, plummeting sales told the story of a brand that had fallen into a classic commodity trap, where its poor distribution strategy reinforced customers’ perception of Havaianas as cheap, while the company’s limited efforts to innovate were doing nothing to alter its worrying fortunes.

However, Havaianas managed to pull off a remarkable brand repositioning act, starting with solid product innovation. New colours, innovative packaging and point-of-sale (POS) displays, and a commitment to simple, effective storytelling all combined to shape a brand strategy focused on the product’s emotional value and aspirational benefits.

Shaking off the past feeling of being “purely low-end,” Havaianas launched its footwear into the fashion world with runway appearances, celebrity endorsements, effective guerrilla marketing and limited-edition models. This secured the brand some much-needed ‘A Class’ endorsement while still catering to general consumers and, crucially, making those consumers feel aspirational rather than denigrated.

Ultimately, if Chinese companies can learn from the cases of Havaianas, Singapore Airlines, and other truly iconic global brands, they can build their own brands and compete on a level playing field. The first step is having a great story to tell, and the will to tell it.

Dominique Turpin is President (European) and Professor of Marketing at CEIBS. For more on his teaching and research interests, please visit his faculty profile here.