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Jun
2015

Big country demands big perceptions

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Being seen as ‘big’ carries great weight

Where is the line between mass market and luxury status in terms of the size and reach of a brand? In the more developed world luxury markets the expansiveness of a brand can create a perception of product or services that can be found anywhere by anyone, and its luxury status can be diminished. And in fact in China last year there was increased ‘burn out’ among luxury consumers of brands that appeared to be available everywhere. Expansion plans were reduced by many brands in favour of consolidation of the existing business, part in response to consumer feeling and part due to declining sales revenues. Other brands that were later to the market, still continued to expand geographically in order to establish a foothold in key cities and provinces.

This balance between over expansion and appropriate reach is further confused by the big country phenomena in China. Big is always seen as the best in China, no matter which industry you work in. The perception amongst the public, the government, and other business owners and leaders here is that if you are seen as big you have a naturally higher status than those who are not. Having a large office and a large number of staff would mean that you are more financially stable and trustworthy. The quality of your work or your product is assumed to be good, and of course this may not be the case in reality.

As with many things in China cultural rules and practices are often opposite to those of Europe and the US.

Demonstrating ‘big’ stature

So how do brands demonstrate that they are large and stable, yet retain their exclusive and luxury status? The terms ‘big’ and ‘famous’ can have a similar perception in China in the eyes of the consumer. If a brand has 100 stores it is seen as big and financially secure, so how can smaller brands leverage the concept of big in China?
Demonstrations of being big or famous in China do not necessarily need to be linked to store numbers or in some respects to advertising coverage. A brand that can bring a famous and recognised person to China will be seen as big and by association ‘famous’. The belief is that the brand must be financially strong enough to do this, or have the status internationally to make this happen. Designer brands obviously have an advantage in this case, assuming the designer is known in China. Vivian Westwood and Marc Jacobs being two that are, and of course if a fashion brand has David Beckham on the payroll, they are ‘big and famous’.

Big verses longevity and heritage

In previous issues of Luxury Insights China, we have written of the increased emphasis among the Chinese luxury consumers to see and understand the heritage and brand DNA of the products they are investing in, and this has caused many brands to introduce new and innovative ways to help consumers bond with the brand. Exhibitions and more personal product introductions being utilised by the more well established brands with large marketing budgets.

These experiences can help reinforce the ‘big’ status of a brand because the cost of running them will be recognised as significant, but they are never big in the true sense of the word because they shouldn’t be. Treating your exclusive clients as mass-market consumers just isn’t going to work, so for a niche brand with a relatively small client base, does this matter?

In reality, the answer is probably no, provided the brand has established its position in the market and within the social and business circle of those who are the principal purchasers. The challenge becomes more difficult where the brand is competing in a relatively broad sector with other brands that could be seen as offering the same or similar value. Watches for example, is a very busy category where there are naturally consumers who know enough about their brand choices to make up their own mind what to buy. But the majority of buyers are ‘followers’ of others or general consumer trends, they listen to what others say and make a decision based on these facts.

This is why being seen as big in China’s luxury sector is important, because the followers will be safe with big, and big is what has the greatest influence on the middle classes and the social groups above them. Brands that have established their fame in China do have an advantage but many are, as has already been pointed out relatively small in size and happy to remain so. This naturally raises the question as to how they reinforce their big status, and they can do this by association with others or through their own actions. The first option is often an unacceptable choice, as many brands will not be seen in the company of others, even if the other is not within their category. The latter is about creating an engaging experience that enables luxury consumers to bond with the brand and connect to its values. Unfortunately more often than not, these events are well organised but flat in terms of the experience they deliver, and therefore do not satisfy their objective.

For those brands that belong to a group such as Richemont or Kering, can they leverage the big status of the family whilst retaining their individuality? This is possible, but even within a luxury family group there can be a distrust about working with your brothers and sisters, so does this concept really work?

The VW Sports Car Championship Festival: a case study

The weekend of 26th October saw brand family members of the VW group come together at the Shanghai International Circuit for the second year running. The reality was that this was a gathering of the richer members of the family and not everyone. Bugatti, Bentley, Porsche, Lamborghini, Audi, Ducati and a couple of the top VW models were there however, Skoda wasn’t invited to party and even Audi only showed off a handful of its top saloon models, so it wasn’t an open house. As an experience event, consumers were split between those who could access a public area (with a ticket) and those VIP’s who could access the pits, the garages and well presented lounges. Thankfully with the help of my friends, I was able to see both.

The first interesting fact about this family gathering was that the family name was not used to describe or name it. It wasn’t the VW brands event, but was entitled the Sports Car Championship Festival. I understand that the VW brands present refused to be associated directly with the parent as it wasn’t good for their image. They are all naturally very protective of their heritage and status and in their view, and as the name clearly states, VW makes product for the mass market and not for the affluent or luxury consumer. I also understand that many of the brands initially refused to be involved because of the associations with their family members with a lower social status, but like all awkward teenagers, daddy got his own way in the end and dragged them along to the party.

The sales of all cars, and in particular luxury cars have declined in China in the past 12 months, yet the automotive sector has always spent a great deal on promotional activities, and this was not a low budget exercise. Each brand paid 4 Million RMB to the group towards the overall costs, so about 25 Million RMB in total, and possibly more if the parent added to the funds. As the Director of Marketing at Porsche, you might argue that your investment might be used in a more targeted manner for your brand, that might have greater impact, but perhaps the value of the whole was greater than the sum of the parts.

What this group has that others selling watches and fashion do not, and that is a real positive is a great means of interaction; the car, the motorbike, and in fact motor racing. So over the weekend visitors on either side of the track could watch the Lamborghini cup, the Audi R8 LMS series, the Porsche Carrera Cup and the Sirocco Cup, all of which reinforced the street credibility of their own and the VW brand.

So how did the brand activate the event, because consumers of all levels want to get up close and personal with the product. Well speaking personally, the VIP lounge was very well organised and had a club feel to it. Cold buffet food and hot food cooked to order, ice creams, coffee, soft drinks and other snacks all available whilst overlooking the pit lane and the ‘common people’ on the opposite side of the track in the main stand. Big screens feeding images of the days races into the comfort of the lounge so even the wives and girlfriends who had little interest in cars could sit there and relax in style.

Venturing outside, VIP’s could enter the garage area and see the cars being prepared for racing and then walk into the pit lane to watch cars for the next race line up ready to race. Within the paddock area there were displays of Porsche and Bugatti cars, but the level of engagement in this area was minimal and actually unimpressive. Moving into the public area, the scene was more of that of a carnival, although entry was via ticket with zero face value. Here the displays were large and more meaningful, Bentley had the current Continental in saloon and drop top versions either side of a 1930’s model, reinforcing their heritage.

Porsche had on display a series of cars demonstrating the brands development over 50 years, again telling their own story, and VW the parent presented a subdued picture of itself principally demonstrating that the Scirroco was around more than 30 years ago, and that the brand had heritage. Of course for most international brands showing evolution is much simpler than that for a Chinese automotive brand, but this carnival did more than just reinforce the brand as trustworthy, it came across as fun. There was a large stage set up ready for a band to play, there were games for children and a passport that could be stamped at each station so that a completed one could win a prize. Yes, the brand sells cars for all budgets, but it came across as entertaining and approachable, and of course ‘big’.

The group told the right story on both sides of the track. If you are wealthy and have one of our top brands we treat you as special and as an individual, whereas if your new to the brand or even to buying a car, we are a fun brand, yet we offer you progression from high quality entry level products all the way to the brands you aspire of such as Bentley or Lamborghini. We are big, we are famous and you should take notice of us.

 


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