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    Knowledge creation on China, from proven China experts.

  • Faculty & Research

    Knowledge creation on China, from proven China experts.

Wednesday, June 8, 2016

Downside to Being a Social-Media-Savvy Entrepreneur

By Assistant Professor of Marketing Chen Lin

In my column in The Economist, I look at how social media savvy entrepreneurs can give a boost to their companies. But there is a flip side.


Side Effect I: Doing more harm than good

It is not necessarily a good thing when the owner of a private company becomes synonymous with his business. Just ask Chinese gymnast Li Ning. In the run-up to the Beijing 2008 Olympic Games, Li-Ning Company Ltd, had noticed that its brand marketing strategy from the 1990s, which highlighted collectivism and the charisma of Li Ning the star, failed to live up to consumers’ expectations. The younger generation, who knew little about the gymnast, did not think gymnastics was very cool. Nike and Adidas, which by then had Chinese consumers spellbound, were making inroads into China. Li-Ning Company Ltd had to rebuild its brand by removing the imprint of Li Ning, the person.

At the opening ceremony of the Beijing 2008 Olympic Games, Li Ning, known as the “Prince of Gymnastics”, lit the torch. Outsiders sang praises of his comeback which had brought back memories of Li-Ning soaring into fame as the first Chinese brand during the Asian Games in 1990. Kept in the dark, however, Li-Ning Company’s executives were dumb-struck by Li Ning’s Olympics appearance. They were dismayed that Chinese consumers once again equated Li-Ning Company Ltd with the gymnastics star Li Ning as it undid all their efforts at transitioning away from that marketing strategy.  Their fears were legitimate and in the years that followed the company went on the skids.

Side Effect II: Bad impression of entrepreneur = bad brand?

For startups without well-established products or auxiliary facilities, excessive media exposure will likely ruffle the feathers of fans. As marketing plays a supporting role, only a remarkable business performance will enable startups to gain a solid foothold. For many startups, consumers know much about the social-media-savvy CEO, but they are ignorant about his company . Do you know what Ma Jiajia’s startup specializes in? (The answer is sex toys.) Do you have any idea about how Chinese recycling entrepreneur and philanthropist Cheng Guangbiao’s company actually fares? Some startup owners fail to be taken seriously within their industry, and excessive personal marketing is partly to blame . A business tycoon wonders, “I’m on the corporate treadmill every day. How do these startup owners have spare time to browse through Weibo (often referred to in the West as the Chinese version of Twitter) every day?”

As for listed companies, what the boss says and does has some direct bearing on enterprise value. After the Wenchuan Earthquake in 2008, Internet users argued that Vanke Group’s donation of two million yuan was chicken feed compared with its astronomical sales revenue. Company Chairman Wang Shi retorted in his blog, “The sum makes sense.” As a result, he was subjected to a torrent of verbal abuse. Although Vanke later raised the donation to a hundred million yuan, the brand’s reputation was irreparably sullied. According to a report from the World Brand Lab, the “donationgate” issue wiped 1,231 million yuan off Vanke’s brand value of the year before.

Social-media savvy entrepreneurs understand that Weibo entails no smaller risks than the stock market. On August 24, 2011, Chinese entrepreneur and software engineer Shi Yuzhu posted on his Weibo, “China Life Insurance, please don’t cast a greedy eye on China Minsheng Bank.” Though he soon deleted the post, China Minsheng Bank saw its stock price surge 6.47% the next day. Shanghai Jiante Biotechnology, in which Shi Yuzhu had controlling interests, held 739,078,500 A-shares in China Minsheng Bank, the face value of which grew to 230 million yuan.  Outsiders suspected Shi Yuzhu manipulated the stock price via Weibo. As a result, he was summoned by Beijing Securities Regulatory Bureau for talks, after which he reportedly said he would give up blogging about financial issues.

The Internet helps entrepreneurs get closer to small-and-medium-sized investors, but their remarks can also be exaggerated or even distorted on the Web. This is why it is so vital for entrepreneurs to manage their social media account in a discreet and professional manner. So how can they leverage social media while avoiding the accompanying minefields?

Worth a thousand words

For companies’ social media accounts, photos can generate more retweets and comments than texts. As shown in the photo below, Zhou Hongyi, Chairman of Qihoo 360, dozed off during China’s NPC and CPPCC meetings (the country’s most significant political gathering) this year, while Xiaomi Founder Lei Jun stared at him. Soon, the photo went viral online. After he woke up, Zhou Hongyi felt everything had changed.

The buck stops with you 

Social media savvy entrepreneurs tend to understand that they need to face up to negative comments about their company and, in particular, address the problems.

Unfortunately this is easier said than done and many entrepreneurs take exception to negative comments or, like U.S. presidential hopeful Hillary Clinton, they remain aloof from the public, merely mounting an online branding campaign. What today’s consumers detest is not the mistakes made by entrepreneurs but the evasion of responsibility . If an entrepreneur projects an online image as a responsible, open-minded company leader, a crisis will be a blessing in disguise.

As the world’s largest shipping company, Maersk faced a crisis when its ship accidentally killed a whale. Instead of sweeping the scandal under the rug, the company promptly posted relevant pictures on Facebook, and invited zoologists and marine biologists to figure out how to better protect marine animals. Maersk’s crisis intervention drew lavish praise. Presently, this B2B enterprise has attracted many more fans than world-renowned FMCG brands. Social media brought it a return on investment of up to 1,500%.

Entrepreneurs can benefit a lot by being active on professional social media sites when interacting with Internet users . According to research on CEO.com, entrepreneurs need to leverage sites such as LinkedIn, but they should steer away from giving away too much about their private lives. Chinese entrepreneurs have not followed this advice (see my piece in The Economist). Presenting a professional image (e.g., using industrial labels on Weibo), expanding the fan base (having big-name verified Weibo users, grassroots opinion leaders, and customers who provide feedback on company services), and maintaining the quality of content mark the first step for Chinese entrepreneurs to develop Internet leadership.

So, which of China’s entrepreneurs do you think are well-placed to become web celebrities ?

This article was first published by FORBES.