19
Mar
2013

Brand building in the new Chinese luxury market

2013 opened a new chapter for Chinese luxury. After the challenges of 2012, many no doubt will have hoped unrealistically that the market would bounce back and things would operate as they had before, but with lower growth levels. I am confident that the tipping point in 2012 created a new market with some of the old characteristics, but many new ones.

Luxury brands operating in China now know that they need to differentiate themselves in the eyes of better-educated and experienced consumers, and must demonstrate their luxury status and high prices through stronger customer engagement and true luxury service. Those outside of China have realized the spending power of the Chinese and are now seeking ways to both attract them, and engage with them during the purchase process in a more localized fashion.

We know from talking with staff in luxury brands and the traditional print media that at least for the moment, annual commitments to advertising have been cut or abandoned and that a more selective approach has been adopted as a means to try and gain a better ROI. Big events have also been reduced in number and size or slashed completely, as marketing staff consider how to effectively and creatively engage directly with existing and new customers.

So what options do brands have with smaller budgets in order to continue to maintain or grow brand recognition and perception and get ‘up close and personal’ with their target customers? On one hand they need to be seen by the masses, on the other, they must show specific customers that they are valued, recognized and different from others.

Our recommendation is firstly to plan smaller events that are exquisitely executed in terms of detail and content, which are educational and informative, and make those in attendance really engage with the brand. These events are not about selling, but delivering lifestyle advice, imparting information on a very personal basis. Those attending will not only feel special, but they will look at the brand differently, expressing those unique feeling to their network of friends, and so the engagement widens. At large events by comparison, individuals are not recognized, and it is almost impossible to impart any form of knowledge or deliver a meaningful experience.

In terms of brand building to a wider audience, luxury and sector magazines are still one of the better options, but because of the larger marketing budgets of previous years, these costs an be significant, especially if there is no negotiation on an annual basis. One alternative is TV, both in traditional terrestrial or Internet based formats. The former still reaches a broad demographic of consumers; the latter is predominantly the younger consumer group. A recent dictate by the newly appointed leadership banned advertising that promoted products as luxury gifts, so for any brand they will need to consider how best to work with TV, whether through traditional advertising in the breaks, show sponsorship or product placement.

The changing luxury market requires new approaches and creative strategies, across existing and new platforms. There is no getting away from the continuing need to build and maintain brand awareness, the greatest challenge perhaps is how to genuinely engage with the rapidly changing consumer attitudes and experiences.

 

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