Janet Hull OBE looks at the lessons learned from our recent trade mission on how the UK ad industry can 'break' China.
"By 2050 China's GDP will be 80 per cent more than America's… If you’re at all international in your outlook, make Asia part of your plans."
The message from The Economist’s Daniel Franklin at a recent IPA Conference couldn’t be clearer. But while China’s economic rise is irrefutable, what does this mean, specifically, for UK ad agencies?
President Xi has talked about the need for China to invest in soft power – and that’s where our industry can help, according to Feref’s Chief Executive Graham Hawkey-Smith whose agency has been successfully operating in China for the last two years. “China is an economic superpower but it doesn’t yet have the volume of global brands or entertainment franchises to reinforce its economic power with a soft power that introduces its culture to the rest of the world.”
So, how can we, the UK ad agency business, be a part of this success? Can we break into China? Should we – is the appetite there? Can we help China brands come here? What do we need to know before we start this journey? And crucially, where do we begin?
Having recently returned from an IPA agency trade mission to China, with the Department for International Trade (DIT), I can say unequivocally that yes, the appetite and, most importantly, the opportunity for the UK and China ad industry to work together is there.
As outlined to the audience of the China International Advertising Festival (CIAF), taking China brands global is no longer a pipe dream for them. It is in fact part of Government (PRC) strategy in China. Three years ago, they instituted a China Brand day of 10 May. Its slogan, roughly translated is ‘Transform China product to China brand. Convert China brand to world brand.’ And they have set an aspiration for 50% of brand sales by company to come from overseas.
China is proud to quote that China brands are now in the top 500 Global BrandZ league table but deplores the fact there are still only 38. It aims for more, and forges a comparison with the 129 Chinese companies in the Fortune 500 manufacturing league table. So, there is much room for growth.
The key word to keep front of mind to achieve success, according to Feref is bilateral. According to CEO Graham Hawkey-Smith, while the world’s businesses have been vying to sell to China’s 1.4bn people for a long time, China doesn’t want to simply throw open its borders for the rest of the world to exploit its population’s growing wealth. "The UK needs to make sure it approaches China in a balanced way that is as much about helping China’s global ambitions as it is about making money in China. A bilateral approach is the only long-term way of truly working together."
A bilateral approach to entertainment means Feref will spend as much time helping China export its films and TV shows as it does helping US and European film and TV studios market to Chinese audiences. A bilateral approach to education means using film and TV to teach English language and culture in China and Mandarin and Chinese culture in the UK.
A bi-lateral approach has also reaped rewards for VCCP and The Specialist Works.
Having started creating work to run in China three years ago, making the 'Together we Triumph' campaign for the lingerie brand, Triumph, VCCP has since acquired multiple clients they work for in China, including Cathay Pacific, Shell and Hisense. Similarly, the Specialist Works has been established in Beijing since early 2017, and from an initial conversation with a gaming company realised that there was huge appetite for Chinese online brands to break into the US and Europe. That gaming company was Elex and the game Clash of Kings and that UK campaign spawned many more including work for Alibaba, Tencent, Bytedance, Netease and FunPlus.
As an interesting aside, this desire for brands to succeed through advertising is made all the greater for the fact that M&As - the first model for going global - have not necessarily worked. One speaker at the Conference claimed M&As peaked in 2015, and 70% of them have failed. China aspires to more. Staying in Asia and Africa is only a halfway house for them. It aspires to be the best of the best when it comes to brands going global and this means going from East to West and competing on quality as well as price.
While there is appetite and opportunity, there are of course many differences and similarities between the ways in which the UK and China ad industries work.
As the IPA outlined on stage at CIAF, for China brands using the UK as a gateway to the west the significant market similarities include a trend to mobile first, a strong digital marketing ecosystem and a consumer franchise who are early adopters of new technology. However, there are significant challenges too: the three Cs of Competition, Context and Culture. Brand leaders in China need to adopt a 'challenger' mind-set when they enter Western markets. The regulatory and media marketplace is different, including social and tech platforms. Consumer behaviours and attitudes are also different.
Equally, we, in the UK, must better understand the China market when operating there, something that Feref, The Specialist Works and VCCP have experienced first-hand.
As Feref realised early on, a key first step for them was to acknowledge that they knew nothing about China. Before they could offer useful advice or begin trading, they needed to understand the market. The first thing they did was to arrange a "rising stars" exchange programme with Shanghai Media Group (SMG), trading an employee each to spend a month at one another’s agencies and to take this learning back with them.
The Specialist Works have found that brands tend to appoint agencies project by project, as opposed to long-term contracts. However, that doesn’t mean to say they don’t invest in long-term relationships, once you have their trust.
As The Specialist Works’ MD Sharon Browne told me, "If you’re known for delivering brilliant work, brands are attracted to you." Equally, if you are a member of an internationally-recognised Chartered Institute like the IPA and have a reputation for excellence in professional development and/or awards wins, this will count in your favour.
The Specialist Works have found that their Chinese clients expect turnarounds at lightning-speed. However, something Sharon wishes she’d realised sooner is that it’s ok to push back: "It takes time to produce and execute effective media and creative strategies. The campaigns where we’ve been given the chance to pause have been our most successful."
Agencies with a reputation for working in a different way with international clients that they admire have more room for manoeuvre.
As VCCP’s Vice Chairman Julian Douglas confided: "Strategy and creative quality are important, but it’s all about the results."
The big difference between the UK and China according to VCCP’s Douglas is the speed, scale and diversity of China: "China is not one single thing."
As Feref’s Hawkey-Smith, noticed, there is real rivalry between Beijing and Shanghai, with one city "enjoying talking politics while the other only talks business. It’s key to remember that China has 37 cities bigger than Birmingham and these are spread across 34 separate administrative divisions."
"What’s your advantage?" is the most commonly asked question to Feref’s Hawkey-Smith: "They accept that we are good at our jobs – but what they really want to know – in one sentence – is 'what is the advantage that your company has over everyone else in your sector – and how does that help my business?'. If you’re going to do business in China – make sure you’ve got a snappy answer for that one!"
Even if you think you know something about China – still use every resource available to you – from your personal contacts, to the DIT to the IPA - before you head out there, advises Hawkey-Smith: "It’s important to think long-term and to build relationships with individuals who have real influence and a strong network of connections. The Chinese call this Guanxi."
It is this last point, regarding Contacts and relationships, where the IPA can help.
In October of this year at the CIAF, the IPA signed a Memorandum of Understanding with the host organisers the China Advertising Association (CAA) to steer CAA/IPA co-operation in helping:
This is the first MOU the CAA - who represent indigenous Chinese brands including Huawei, Tencent, Haier, SAIC, iQIY, Xaomi as well as indigenous agencies - has signed with a Western country and provides the IPA and the UK with first mover advantage. The MOU is symbolic of a wider acceptance that the IPA and the UK can be a trusted partner in helping Chinese brands internationalise.
In addition, we will be hosting annual delegations of Chinese brands seeking to go global, as well as continuing to take UK delegations of agencies – in partnership with DIT - to China, which we have been running since 2010. This is something that our UK agencies have reaped great rewards from, as Graham says: “A small, independent agency like Feref benefits enormously from the prestige of being part of an IPA mission. It gives us a platform to reach a wider audience beyond our heartland of entertainment. But the main thing is benefitting from the company we keep on an IPA mission. UK Creativity is held in the highest regard in China – so being part of that collective voice is an immensely important opportunity and undoubtedly adds to our brand.”
On our most recent IPA-led, DIT-supported, trade mission we took 18 different advertising and marketing service companies to Shanghai, the lead City in China for advertising that has been designated as the entry and exit City for international brand trade. It spends the equivalent of a £18 billion on advertising each year and is growing at 28% year-on-year. Off the back of the mission, all 18 companies raised their profiles in China, 11 reported new business leads and three of them are now opening offices out there.
We are now recruiting for our 2020 Shanghai Mission (2-7 March) as part of the UK Advertising Export Group (UAEG) initiative.If you’d like to be a part of this activity, please contact Janet Hull
It’s a two-way street. For those agencies seeking to open up in China, and/or service Chinese brands seeking to internationalise, it is an introduction service that carries weight in China.