The movie ‘Red Cliff’ directed by John Woo is a modern classic of Chinese cinema.
It’s set at the end of the Han dynasty, just before the era of the Three Kingdoms. It depicts the epic battle at Red Cliff between the huge military forces of Cao Cao (曹操) and his arch-rivals Liu Bei and Sun Quan with their much smaller armies.
Sun Quan’s younger sister, Lady Sun (孫仁), is sent secretly into Cao Cao’s army camp. There, she collects valuable information about the enemy which ultimately sees Cao Cao’s far mightier army defeated.
This is an inspiring, heroic story, but what has it to do with marketing and branding for Chinese SMEs (small & medium size) companies in Europe?
Quite a lot. So let’s explain.
Companies sell. Customers buy. Many Chinese companies believe this is enough to succeed in Europe. It isn’t. This simple ‘sell-buy’ picture is far from complete.
What happens in between the selling and buying process, between the company and the customer? What connects the seller to the buyer, and motivates customers to buy your product?
The answer is: marketing, branding, and communication.
In fact, best practice dictates that marketing and branding should start before selling your product or service. Chinese companies increase their chances of success – higher sales volumes, higher prices, more customers – when they fully understand who their target customers are, and how to reach them, before pouring money into sales activities.
The starting point on this journey to success is market, competitor, and brand research. Approximately 60% of Chinese companies underperform in their European business ventures because they don’t bother to research their markets and customers.
At its most basic level, market and brand research is used to find out how you and your product can win the hearts and minds of customers – really knowing what they want and will buy – so that ultimately you can win the battle for customer ‘share of wallet’ against your competitors. Leading Chinese brands such as Huawei, Haier, and Lenovo understand this very well. But it applies just as much to Chinese SMEs.
Together with the misconception that marketing is only about ‘buying and selling’, many Chinese companies entering Europe are led to believe it is ‘one’ market. Europe is not one, unified, seamless, market. Europe is 27 countries and cultures with highly fragmented consumer segments in each country.
With this market complexity, research is a critical weapon in succeeding against the competition.
Frequently we find Chinese companies resist market research and strategy development because they think them expensive. What they don’t realize is that the initial investment is very small compared to the long-term, profitable, financial returns that a research-based marketing strategy brings to their business.
Take, for example, the story of a medium-size Chinese company manufacturing car dashboard mounts for satnav devices. This company originally sold each mount at an OEM unit price of €0.30 cents. Subsequently they researched the market, developed their own marketing and brand strategy, and used different marketing and sales channels. They succeeded in selling each mount at a retail price of €21. This Chinese company has now moved up the brand value chain: from an OEM supplier they’ve become an OBM (original brand manufacturer). They are highly profitable in Western countries. They are an example of what most Chinese SMEs aspire to be.
They are successful because they accept that marketing, branding, and communication has value along with the need to conduct research.
So, let’s go back to where we started : the Battle of Red Cliff.
When she infiltrated the enemy camp, the courageous Lady Sun was gathering information that would enable her side to win a decisive battle against Cao Cao’s mighty army. Lady Sun was simply doing her research to gain a competitive advantage.
What Lady Sun did is an example of what Chinese SMEs must do to grow, succeed, and prosper in Europe. Basic selling and buying is not enough. Marketing, branding and communication will make the difference between business failure and success.
Unfortunately, only the smartest Chinese companies will apply the lessons learnt from the story of Red Cliff. But they will be the ones to survive and succeed in Europe.
- Phil Mead
Publishing history: This post is based on an article I wrote originally for ‘China Times’ in 2011 and which I used in a MasterClass presentation to Chinese companies hosted by Invest Utrecht. The moral of the story is beginning to filter through to Chinese brands. But like every morality tale the world over, and not just China, fools don’t read and only the wise take heed.