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Branding For Business(HKTDC Hong Kong Trade Services, Vol 01,2004)

Vol 1, 2004




Design, Marketing & Communications

Branding For Business

Clicking On To Greater China

Focusing On Flair

Helping SMEs Make The Most Of The Mainland

Hitting The Right Target

Branding For Business

Leading brands use logos, marketing slogans, jingles, packaging and an almost indefinable emotional relationship to help consumers remember their products

Brands have never been more important in today's crowded marketplace - especially for small and medium-sized enterprises (SMEs). Faced with a confusing array of products, customers are opting for names they know and trust.

But what is a brand and why do consumers relate so strongly to them? A brand is commonly defined as a proprietary visual, emotional, rational, and cultural image associated with a particular product or company. When most people think of a brand they visualise some of the world's leading and most valuable names, such as Coca-Cola and Nike.

But it's not just their distinctive products that stay in consumers' minds; it's their logos, marketing slogans, jingles, packaging and that almost indefinable emotional relationship that consumers have to the brand - those feel-good, positive associations created when using or remembering the product.

These brand associations are the attributes that leap to customers' minds when they use or even see the brand name. It is these qualities that companies must fully understand if they are to ensure the continued performance of their branded products.

Today, brands are no longer the sole property of larger companies. Indeed, they have become an integral part of business for numerous manufacturers and retailers, both big and small.

Many manufacturers have come to realise that having a retail brand brings a much higher gross profit margin than delivering pure OEM and ODM services - more than 30% in some cases.

Brands offer a solid market positioning to make a product stand out from the crowd - from the millions of other items available that offer a similar function. Brands provide distinctiveness and visibility, providing that vital competitive advantage.

Creating and maintaining a brand's distinct characteristics is an ongoing process and the people who can best define these qualities are your customers.

By asking customers what they look for, you can determine the key assets of your brand - those that make them choose your product over the myriad of others on offer.

These core attributes should comprise the essence of your key messages in all marketing, advertising, packaging, publicity, and external and internal communications, helping reinforce these characteristics and further consolidate your brand's image.

But creating a successful brand is never a one-stop process. Strategic branding requires continual re-evaluation of your brand's characteristics and attributes and how far these are meeting your customers' brand demands.

The following case study illustrates how a strategic branding consultancy analyses a local company's strengths and weaknesses and its target customer demands to arrive at a differentiating positioning to put the company and its brand back on track.

The customer knows best

Managing director Edmond Chan was worried: his once-thriving retail clothing business had failed to meet sales targets for the third quarter running and poor performance was putting additional strain on the company's cash flow.

Chan is a manufacturer and retailer of high-end ladies' fashion apparel. With over 20 years' experience in the OEM/ODM and export garment business, he leveraged his expertise to develop a retail garment brand 12 years ago that targets 25-35-year-old women.

Business went well until two years ago, when Chan began noticing a drop in sales and skyrocketing stock inventory. While he continued his sales and advertising drive and consulted his sales and marketing staff, he was unable to determine the cause of the slump or how to rectify his company's predicament.

Over the next few months business deteriorated further, despite the positive overall performance of the industry, his markets, and a number of his competitors.

Chan called Janet Cheang, managing director of brand consultancy CultureTainment Services Ltd, to help analyse his business and performance. She suggested it was high time to review the relevance of his brand's positioning and its product offerings to its target customers, and also suggested Chan consider exploring new opportunities in potential market segments where there was evidence of growing customer demand.

Cheang invited her partner, Selina Cheng, director and chief consulting officer of research specialists RSJ Consulting Services, to devise a research programme.

Cheng recommended a two-stage market research programme to collect input directly from customers to help establish better target directions and mitigate the risk of steering the brand towards uncharted waters.

She suggested Chan's company obtain the following key information to help set it back on track:

  • What are the brand's attributes and equity in the minds of its target customers?

  • What are the current attitudes, perceptions, motivations and purchasing criteria of the brand's target customers?

  • What gaps, if any, exist in the minds of the target customers on product benefits offered by the brand and those they truly desire?

  • Are there any unmet needs that the brand, or a sub-brand, can fulfil? And are customers receptive to new product concepts?

Cheng recommended strategic customer research, first commissioning a number of focus group interviews with customers and secondly a larger and wider customer sample using a quantitative survey approach. Using her industrial psychology training to conduct the research, she also assisted Cheang in analysing the results.

1. Focus group interviews

Four groups of eight target customers participated in a two-hour discussion session facilitated by Cheng. Two of the groups comprised existing customers of the brand while the other two were customers of competitive brands. The discussion followed a pre-set guideline, with cue cards used to help stimulate responses.

2. Quantitative survey

A 400-person quantitative survey later validated the hypotheses generated from the discussions and ensured that the information collected from the focus group discussions was representative of the market.

The findings from this research highlighted important strategic directions the company should take for the successful future of the brand, such as:

  • The brand's existing customers had matured with the brand. Now in their mid 30s-40s, the apparel fittings no longer met the needs of their more mature body shapes, so they were purchasing much less although they still liked the styles

  • Today's 25-35 year olds knew the brand well and were impressed by its quality, but were not attracted to styles or a brand image they perceived as passé

Working with the brand consultants, Chan translated these research findings into actionable strategies, immediately fine tuning the collection fittings to meet the needs of his existing clientele and adjusting the brand's positioning and key message angles to reflect their aspirational needs.

Chan made sure that his marketing campaign highlighted the core message of the 'Perfect Fit' in addition to the brand's existing focus on style and quality.

Just three months after the launch of the brand's new collection, supported by relevant marketing efforts, Chan's brand was back on a growth momentum.

Meanwhile, he leveraged his retail experience and expertise in design and manufacturing to capture new business opportunities by working with his management team on a feasibility study for a separate label, targeting 25-35 year olds, that he plans to launch within 18 months if the study confirms potential demand.

Chan's example is a classic case of a company successfully utilising strategic market research to move out of its slump and into profitable and potentially broader business.

Objective evaluation of customer feedback helped Chan identify the company's problems and provided important pointers to put in place more appropriate strategies for moving his business forward.

But Chan should not stop there: Cheng recommends companies stay on target by seeking simple customer tracking studies every three months with a full brand check-up each year before the start of the annual planning cycle.

Focus group research can be conducted for around HK$25,000 per group, depending on size, and branding consulting fees range from around HK$8,000 per day, with package arrangements available on a project basis.


Clicking On To Greater China

All the fun of the fair: hkenterprise.com
is featured at 150-plus trade shows a year

Surfing the Internet has become a daily routine for millions of people around the globe during the past decade, while business websites are now almost as common as telephone lines.

The immense business potential inherent in the Internet was soon recognised by the Hong Kong Trade Development Council (TDC), which launched a pioneering online guide to Hong Kong products and services in 1996.

Six years later a new, improved sourcing guide - hkenterprise.com - emerged as a core element of the TDC's award-winning trade portal, tdctrade.com, and proved an instant success with businesses and buyers alike.

The hkenterprise.com formula of offering specific marketing, sourcing and partnering services to existing and potential customers worldwide currently draws an average of 1.8 million hits a day.

A new and exciting dimension will be added to hkenterprise.com from April 21, when visitors will be able to search for potential suppliers in the whole of the Greater China region as well as Hong Kong.

"The look and feel will be the same as the current hkenterprise.com, but under the search box will be a new navigation bar, called 'browse by regions'," explains TDC senior publications manager Henry Ng.

The new navigation bar will allow a buyer looking for toys, for example, to search for toy makers by market -Hong Kong, the Chinese mainland, Taiwan or Macau - or by region. Type in a product name or keyword and a list of Greater China suppliers and their details will appear on-screen. "We have more than 3,000 categories to cover all products," adds Ng.

The decision to expand the pool of suppliers to include Greater China manufacturers was made in response to a perceived demand from buyers. A 2002 survey conducted by AC Neilson found an overwhelming interest in sourcing products from the Chinese mainland, especially in the electronics sector.

"We saw there was a need to provide a one-stop sourcing platform for Greater China and Hong Kong and to provide more choice for viewers," says Ng. "To increase the site's strength, we needed to be more comprehensive so viewers will stay longer on the site - and revisit it - because it is a one-stop solution for the Greater China region."

Ng likens hkenterprise.com to a "virtual trade fair". "In the early days, TDC trade fairs used to have participation only from Hong Kong companies, but that was expanded to include other countries and has become a huge success," he says.

Expanding the scope of the website was the logical next step. "We are encouraging companies in places such as the Chinese mainland to use Hong Kong as a platform from which to promote themselves," Ng explains.

"We need to open the Internet platform to other countries and attract more visitors - if we don't the site could become less attractive in future."

Most overseas visitors to hkenterprise.com are from North America (28%), Europe (27%) and Asia (32%), with the rest split between the Middle East, Central and South America, Australia and Africa. Some 26% of visitors are importers, 16% are wholesalers/retailers and 18% are manufacturers.

They all rank the user-friendliness of hkenterprise.com very highly, according to TDC feedback. "The website is easy and navigable, user-friendly and it is very useful, especially for those who are in business," says a spokesman for Worldwide Travel and Tours.

Blue Sky Marketing managing director Hatim Ali Dawood agrees. "It is a good site from which to do business with Hong Kong," he says. According to Arshad Al-Saleh of Al-habbara Trading and Contracting Co, hkenterprise.com is also "a wonderful site to explore products of interest".

A pre-launch email newsletter alerting buyers across various industries to the website's new regional focus has met with an encouraging response from buyers who want more information about Greater China suppliers. "We are very happy sourcing our products through the TDC and the information provided is very useful to us," says Tiya Kapur of Tiya's Linen.

Initial reaction from Greater China advertisers has also been supportive. "We have already recruited more than 200 advertisers from the Chinese mainland (79%) and Taiwan (21%) in just two months," reveals Ng.

One of the keen advantages of hkenterprise.com is its pricing: it costs US$3,800-5,000 a year to advertise on the website. "For small and medium-sized enterprises and overseas buyers, hkenterprise.com offers large exposure at a very competitive price compared with similar websites," points out Ng.

Brand recognition of the TDC is also high on the Chinese mainland, and companies there trust its name. "Since the TDC is a quasi-government body, people know it is a reliable organisation," adds Ng.

Being part of a TDC product means an automatic presence at 150-plus trade fairs a year, the promotion support of 43 TDC offices worldwide, and mentions in trade specific e-newsletters. "The strength of the TDC is its global presence, which in turn translates into increased business opportunities," Ng maintains.

And with the world becoming a global village, having a global presence through a respected website makes perfect sense for both multinational companies and small and medium-sized enterprises alike.

A global presence

There are several key advantages to advertising on hkenterprise.com that make it indispensable for small and medium-sized enterprises including:

  • cost - US$3,800-5,000 a year

  • comprehensive product coverage - more than 3,000 categories
  • high profile - the TDC is a highly recognised and trusted name on the Chinese mainland
  • wide exposure - 24-hour international exposure at a very competitive price
  • added benefits - an automatic presence at 150-plus trade fairs a year, the promotion support of 43 TDC offices worldwide, and mentions in trade specific e-newsletters
  • proven success - hkenterprise.com draws an average of 1.8 million hits a da

Weaving a successful web

Listing on hkenterprise.com has been an added bonus for electronics gifts and premiums manufacturer Lee Handerson HK Ltd, which, like many other local companies, maintains its own corporate website.

"It (hkenterprise.com) has been helpful in getting a lot of foreign customers since they look for products through the TDC, says managing director Homer Lee. "If a customer is looking for clocks, for example, they look at hkenterprise.com and they find us."

Being part of hkenterprise.com has seen a boost in business, as new divisions of existing big name customers in Japan and Europe discover Lee Handerson's manufacturing capabilities through hkenterprise.com. "It is good for us to know that not only existing people in the company use us, but that we are reaching new divisions of these companies through other means," adds Lee.

Features like hkenterprise.com's video link have proved invaluable. §Some customers don't know if a company is a manufacturer or a trader," Lee notes. "They prefer to deal direct with manufacturers, so the video shows them the different divisions involved in our production."

Another advantage is the DIY photo function. "It is easy for us to change the product photos ourselves and put the most up-to-date products on the site," Lee says. "It is even faster than our own website, because we have to go through our web designer to make changes and that takes time."

The direct enquiry service has also lead to new contracts. "Our success rate is much higher when we have a direct enquiry " they will place a small order at first and then in time they become large customers," says Lee.

Exposure on hkenterprise.com is broad, notes Lee, since the TDC has a solid reputation as a source for finding Hong Kong products and services. "With our own website we have to do a lot of promotion, but with hkenterprise.com potential customers find us instead of us looking for them," he maintains. "Instead of us having to do our own advertising and marketing for our website, the TDC does it for us, making our life easier so that we can concentrate on manufacturing."


Focusing On Flair

Fun times: the whimsical Kung Fu range of desktop items is one of the latest products to emerge from the Designext studios

Hong Kong's cosmopolitan character gives it a competitive advantage as a regional design centre where designers recognise the needs of consumers in both the Asia-Pacific region and major markets worldwide.

"Whether it's conceptual work or tweaking existing products, Hong Kong designers are increasingly providing the competitive edge for old and new products," claims Patrick Hui, founder and managing director of Designext Int'l Ltd. "We're seeing designers incorporating functionality and ease of use to create an experience for the customer, rather than a mere product."

This is the leading edge of design in Europe and the US and one which Hong Kong designers and companies are increasingly adopting in order to move from traditional manufacturing to producing branded and original design manufacturing (ODM) goods. "Designers are refining, honing and building on trends we've seen emerge in recent times that redefine form and function," Hui says.

Recent examples of this ongoing evolution can be seen among the winners of the 2003 Industrial Design Excellence Awards, presented by the Industrial Designers Society of America.

Local winners included a collection of windsurfing sails by Hong Kong-based Neil Pryde International, described by the judges as an ambitious attempt to capture the spirit of the sport. There was also an innovative paper shredder from Michael Graves & Associates and Memcorp in Hong Kong that combines a pencil sharpener and a waste paper collection unit.

Hui believes that quality design such as this plays an important role in branding, presentation, product development and promotion, while also increasing profitability. "Hong Kong's industrial product design expertise adds value to products," insists the 20-year-plus industry veteran, who employs 10 design professionals in Hong Kong and five in Designext's Shanghai office.

He believes that Hong Kong's design industry benefits from a special East-meets-West cultural background. "Hong Kong has a long track record of designing for multinational companies with a manufacturing base in Asia, and for Asian companies who are manufacturing products for the global market," Hui explains.

This unique melding of sensibilities allows local designers to integrate Asian aesthetics into global design concepts, making the finished product richer in expression. "It can also help us to understand each other's design concepts better," Hui adds.

He notes that many products designed in Asia or made for Asia quickly become global best sellers, and says this trend will continue provided manufacturers pay close attention to the changing lifestyles, tastes and attitudes of their customers.

"As the design hub of the region, Hong Kong's role will become increasingly important as we move up the value chain to offer higher value design activities in collaboration with our manufacturing counterparts on the southern Chinese mainland," Hui predicts.

The implementation of the Closer Economic Partnership Arrangement (CEPA) between Hong Kong and the mainland will provide a further boost to design development as cross-border cooperation is expected to soar, particularly in the Pearl River Delta (PRD) region.

This in turn will help Hong Kong retain its competitive edge and minimise the risk of concentrating on low-cost, superficial treatments that focus narrowly on "cosmetic design".

Hong Kong is home to more than 1,500 design companies, which account for almost 4% of employment and nearly 2% of GDP and form a small but significant section of the city's service sector.

Many services are already provided in Hong Kong for a growing number of PRD companies and multinationals which carry out manufacturing on the mainland.

According to Hui, these can include the more creative, conceptual phases of design and product development. "This is a platform that needs to be consolidated and expanded to ensure that Hong Kong's creative force continues to provide a strategic advantage," he says. "In addition to opportunities within Hong Kong and the PRD, there is also enormous potential in the regional context."

It should never be forgotten that Hong Kong enjoys a track record as a dynamic competitor in international markets with a strong capacity for change, flexibility and adaptation. "Because of the emphasis on developments on the mainland, opportunities are often overlooked in the Southeast Asian region and further afield," says Hui.

A number of other top Hong Kong designers and influential outside observers share Hui's belief that a broader and deeper understanding of the role of design could enable Hong Kong to become a mini-Milan, where art and design fuse with industrial backing to create a hub for product design and innovation.

Professor David Heskett, author of a report on shaping the future of Hong Kong's design industry, agrees wholeheartedly. "Hong Kong is well placed to develop the same reputation for design excellence as the northern Italian city of Milan, the home of fashion icon Giorgio Armani and Pirelli tyres," says Professor Heskett, who is based at the Illinois Institute of Design in the US. "The PRD represents a huge opportunity for Hong Kong's design industry."

He adds that Hong Kong is one of the world's truly cosmopolitan cities and a melting pot of Eastern and Western cultures, and as such has all the right ingredients to excel and meet the design industry's changing needs.

A Hong Kong Design Task Force comprised of design professionals and academics that was set up in 2002 echoes Professor Heskett's views on the increased importance of design to Hong Kong's continuing business success.

The comprehensive review of Hong Kong's present and future design needs says Hong Kong's current advantages represent powerful opportunities that offer the potential to be developed further.

The Hong Kong Trade Development Council has taken this message to heart, making the promotion of Hong Kong's strengths in design services one of its eight key services promotion themes in coming years.

With so many positive developments taking place, Hong Kong's design industry looks well positioned to continue providing valuable services to both regional and global manufacturers for many years to come.

WRITTEN BY CHRIS DAVIS

Designing for the future

Helping local manufacturers make the transition from traditional manufacturing to becoming producers of branded products has become a passion for a growing number of Hong Kong design companies such as Designext Int'l Ltd.

Like many similar companies Designext was relaunched in 1997 to take advantage of changing industry trends, having originally set up in 1991 as a design consultancy.

"As Hong Kong became increasingly dependent on its service sectors and manufacturing competition increased on the mainland, we recognised that many Hong Kong companies were turning from original equipment manufacturing (OEM) to original design manufacturing (ODM)," explains Designext founder and managing director Patrick Hui.

The firm's work now ranges from industrial product design and finishing for household, audio and electronic products to the exploration and design of new product concepts such as houseware and premium and gift ideas.

Designext's latest collection of premium and gift ideas includes a range of East-meets-West white figurines in kung fu poses mounted on wood that serve as CD-ROM, menu and name-card holders. "We are trying hard to put Oriental elements into our designs," says Hui. "In global markets it's still a big trend."

He maintains that Designext has been able to strengthen the services it offers its clients and capitalise on existing and emerging channels, both domestic and global, by utilising its product design expertise to take advantage of cultural trends.

The wisdom of this approach is born out by the firm's client roster, which include multinationals such as National, Olympus, Sanyo, RadioShack, Kenwood, Amstrad and Siemens as well as a large number of household brand names and Hong Kong-based manufacturers.

Two years ago Designext opened an office in Shanghai to expand its services on the mainland to serve a growing number of local and mainland-based clients. "As mainland companies continue to offer more added-value and quality products to the global market, I see opportunities for companies such as ourselves to participate in the design revolution," Hui predicts.


Helping SMEs Make The Most Of The Mainland

The China Business Advisory Service offers SMEs useful advice on all aspects of doing business on the mainland

The questions come thick and fast: "Our mainland factory only has an export licence; what do we need to do to sell to mainland markets?" " As the Hong Kong subsidiary of a foreign company, what type of office should we open on the mainland"
"How does value-added tax work on the mainland?"

These are typical of the questions answered regularly by the China Business Advisory Service (CBAS) of the Hong Kong Trade Development Council (TDC), which has experienced "a big jump" in enquiries since the signing of the Closer Economic Partnership Arrangement (CEPA) in 2003.

"CBAS was established when we acquired more space in 1998," explains Wong Yik Man, senior customer service manager at the TDC Customer Service Centre (CSS) that houses the CBAS.

"We wanted to help small and medium-sized enterprises (SMEs), but rather than people coming to look up the information themselves, we wanted to offer them a face-to-face advisory service." The concept proved to be very popular, especially when it came to the mainland business environment. "The TDC has a lot of experience regarding doing business on the mainland and we also decided to invite outside experts, such as lawyers and bankers, to give advice as well," Wong explains.

"Over time we have enlarged the scope of the facility, creating the CSS and the specialist Chinese mainland service to cater for SMEs who have urgent problems or issues they wish to resolve."

Wong explains that in order to cope with very detailed enquiries, the CSS has developed close contacts with government departments on the mainland. "We have agreements with the China Ministry of Commerce (CMC) and the Guangdong Department of Foreign Trade and Co-operation (GDFTC)," he says. "Representatives from both departments are now
based in the CSS in Hong Kong."

CMC is responsible for development of policy and regulations concerning international trade, while GDFTC can offer specific advice on doing business in Guangdong Province, which has long been a favourite area for investment by Hong Kong firms and is now developing into a major market for goods and services in its own right.

Other specialists available to offer advice on specific areas include China Legal Service (HK) Ltd, China Patent Agent (HK) Ltd, China Inspection Co Ltd, China Bidding Ltd, The Law Society of Hong Kong, Design Protection Centre of the Federation of Hong Kong Industries, Moores Rowland (for tax issues) and China Insurance HK (Holdings) Co Ltd.

"CBAS is held in high regard by both the Hong Kong government and SMEs," Wong believes. "Our records show a 98% satisfaction rate among companies that have used the servic"

He notes that CBAS is positioned as a free service to help enterprises obtain basic information on the mainland market. "However, if people have specific problems that need to be taken further, we can point them in the right direction," Wong adds. "If they wish, they can come to an agreement with one of our service providers or they can appoint their own service provider."

He adds that the scope of issues affecting SMEs is very wide, particularly when it comes to overcoming the complications of establishing a company on the mainland.

"For example, they need to submit a proposal on their business, and while we cannot write it or submit it for them we can guide them through the necessary steps," Wong explains.

"We can also offer advice on other matters such as factory location, hiring workers, regulations for wholesale trade, selling to mainland markets and legal disputes with partners."

Enquiries have increased "15-20%" since the signing of CEPA, especially from companies that want to operate as an individual business on the mainland and not as a partnership.

"People are aware of CEPA, but they want to know how it relates to their industry," Wong says. "We have had a lot of enquiries about how companies can obtain the zero-tariff rate on their goods and services." A number of recent enquiries have come from cosmetics and skincare companies, who see potential on the mainland as the population becomes more affluent. "We have also been seeing a lot of requests from advertising agencies, forwarding companies and IT companies," he adds.
Wong adds that there has been an increase in foreign companies using the service since the CEPA announcement. "They want to set up here and use Hong Kong as a gateway to the mainland."

The mainland market has been experiencing double-digit growth for the past 10 years and has good prospects for the foreseeable future, so business opportunities can only increase.

The CBAS is, therefore, expected to go from strength to strength and field even more enquiries from local and overseas enterprises keen to enjoy a share of a vast market with more than 1.2 billion consumers.

WRITTEN BY ANN WILLIAMS

Helping teachers learn

Hong Kong-based English language education and training provider Ready to Learn (RTL) had a couple of problems when it came to franchising its learning system onto the Chinese mainland.

RTL, which produces its own proprietary syllabus and instructional methods and generates all its own teaching materials for use by pupils from preschoolers up to adults, was uneasy about two key points.

"We were particularly concerned about IT protection, which is a big issue for us, and education laws," recalls RTL head of corporate training division Travis Howells.

RTL turned to the China Business Advisory Service of the TDC in an effort to obtain a clearer picture of the specific difficulties the firm faced. "We first emailed for help and we received a prompt reply advising us to contact China business advisor Terence Tam," Howells explains. "Within three days we had an appointment."

Howells says Tam was enormously helpful. "Where he couldn't give us the information himself he was willing to dig deeper to find it," he notes. "That process took about a week."

RTL found that some of the most relevant laws have not been translated into English, but Tam referred the company to a firm of solicitors on the mainland.

"As a result we are now closer to determining our strategy," Howells maintains. "I believe we have a unique product to offer and there is enormous potential on the mainland for us."


Hitting The Right Target

A key point: an advertiser must define his target audience through thorough analysis

How should Hong Kong companies wishing to maximise their opportunities on the Chinese mainland spend their marketing budgets?

More and more small and medium-sized enterprises (SMEs) are grappling with this vexing question as they seek to use advertising to fuel growth and maximise market share in a buoyant mainland economy.

However, there is a vast world of difference between the two market scenarios that should be borne in mind by even the most experienced local SMEs and their advertising agencies.

Hong Kong has a well-developed advertising, PR and marketing industry; a very focused media; and an easily reachable population. The mainland situation is much more complicated, with more than one billion people; vast cities; sharply contrasting cultures within the country; and a profusion of media.

"Analysis, strategy and planning need to be well thought out first," says Arnold Ng, managing director of Citigate Window Creative, a full service advertising agency active in both Hong Kong and on the mainland.

Citigate Window Creative has until now managed its mainland business from Hong Kong, but this is set to change as the company is joining forces with a Shanghai-based advertising agency.

"Local knowledge and expertise is essential for any business thinking of setting up on the mainland - including advertising agencies," says Ng. "We decided the fastest and most effective way of doing this was to work in conjunction with a local agency. We're planning to do this on selected projects over the coming months with a view to making the relationship more permanent if things go well."

Ng believes the mainland is no longer remote and out of touch. "The advertising industry has a very professional attitude and creatively they are certainly competitive with Hong Kong," he believes. "That goes for the local agencies as well as the regional arms of global advertising networks."

Ng maintains the main strength of local agencies is, quite simply, that they know their markets, know the people and know the culture much better than the international agencies - something he sees as fundamental for effective communication on the mainland.

He believes many international agencies prefer to focus on well-established brands and shy away from developing local brands. "This is a wasted opportunity, as home-grown brands offer huge potential in a country the size of the mainland," Ng adds.

A global network working with a local agency is not a ground-breaking initiative but is set to become more common on the mainland as confidence in mainland markets grow.

"Branding is where the international agencies really have the advantage," Ng notes. "They have years of brand-building experience, something which is relatively new to the mainland, and can help local agencies to foster local brands and launch them across the country as well as into the wider world."

Traditionally brands have thrown themselves into advertising and promotion on the mainland without much thought, in the hope that somehow this will magically build a brand.

"A branding strategy requires a thorough understanding of the market, understanding of the product and an understanding of the target audience," says Ng. "This is where international brand expertise is needed, leaving the execution and implementation to those who know the local market."

Companies of all sizes must start thinking about long term-planning for tomorrow as well as today - and they must also be prepared to commit the necessary budget.

International agencies will demand international fees, but if the strategy is well planned and executed, then the investment will be more than recouped by the value they can add to a brand over a longer period.

This type of financial commitment can be daunting for many SMEs, Ng admits, but if they have the confidence to invest in the future then they will reap the rewards.

Whatever the size of the advertising spend, one thing remains constant: an advertiser must define his target audience through thorough analysis then decide on the most effective media to reach them.

This might involve public relations, advertising, direct marketing, or possibly a combination of all three elements. "I wouldn't recommend attempting to build a brand using above-the-line advertising until a company can comfortably afford to do so," Ng advises.

"For example, one of our clients - a mainland watch manufacturer -targets buyers successfully through an ongoing series of direct mail campaigns. One-to-one communication can be extremely effective in the right circumstances and lends itself well to the B2B [business to business] sector on the mainland."

The Internet is also increasingly becoming a media to contend with on the mainland, even if online communication channels have a relatively negative reputation in Hong Kong.

"You can reach a quality audience online on the mainland, where people are hungry for information and look to the Internet to find it," Ng observes.

"Online communications are a cheap and effective supporting medium. Several of my clients have successfully used email marketing and online advertising with considerable success. And the beauty of it is you can measure results easily."

Good media buying is equally integral to a campaign's success, and extremely complicated compared to the relatively concentrated and focused media market in Hong Kong.

When it comes to consumer advertising, for example, Hong Kong boasts less than a dozen Chinese language daily newspapers, two English language papers and two terrestrial TV stations; all with very clearly defined audiences.

On the mainland it's a very different story. "Take Shanghai as an example - this single city has a population of around 13 million and a prolific number of local newspapers and magazines, along with all the national ones," Ng says.

"None of them dominate the market and so it is much harder for planners to identify the right media.

"It's the same story for TV. This makes defining your target groups and choosing the right media even more essential to ensure budgets are used effectively."

Choice of media buying network is therefore very important. In a country the size of the mainland, being effective in one province doesn't mean that an SME will be equally effective in another.

"Cultures, tastes and habits change from city to city, and from the south to the north," Ng adds. "You have to ensure that the network you choose offers local presence and understanding in each city or province."

WRITTEN BY SIMON SAUNDERS

Five key questions for SMEs

There are five questions every SME should ask before appointing an advertising agency:

  • Does the agency have access to local expertise?
  • Does the agency have global brand-building experience?
  • Do I know the target audience for my products or services?
  • Do I know how I am going to reach them?
  • How much can my company seriously afford to spend on an advertising campaign?
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