The Chinese dragon is starting to breathe fire down our client’s necks. Chinese companies that didn’t represent much of a threat a year ago are all of a sudden serious competitors.
The global economic downturn seems to be playing right into the hands of Chinese companies that want to take a stab at the international market. Chinese goods are cheaper, and when budgets are tight, everyone is looking twice at the price tag. For a long time, the quality argument has deterred many from buying ‘Made in China’, but these days Chinese quality is evidently good enough for a significant number of buyers.
But, apart from price and quality, what exercises the biggest influence on our purchasing decisions? Our beliefs and opinions about the company or product. Or, in marketing jargon, the brand. Advertising and PR are the primary tools for influencing opinions and beliefs, or ‘creating the brand’. And in this area, established western companies should have an edge over Chinese competitors.
In the business-to-consumer market, this is certainly true. Could a Chinese soft drink become a serious threat to Coke and Pepsi in just 12 months? It is unlikely, to say the least.
But in business-to-business, many companies have been rather reluctant to build their brand through advertising and PR. In my experience, that’s because they often define their market as the people who decide on the actual purchases. In some cases, that’s no more than a handful of C-level executives.
Following this rationale, advertising takes a backseat to sales-generating, face-to-face meetings. This is usually all the more pronounced during an economic downturn.
Indeed, a successful meeting has the potential to change purchasing behaviour in a tangible way. But the problem is that the sales person isn’t the brand. His or her job is to leverage the brand, while detailing the offer, in order to bring in the deal.
From the customer’s perspective, the brand is an important tool for distinguishing between the various offers on the market. Considered B2B purchases are not made on price only, but if you don’t give the customers any other reason to buy (ie. the brand) they will start basing their decisions on price. Enter the dragon.
Brand building is an effective defence against cheaper competitors. Companies that have neglected to build their brand have left their front line unmanned. But it’s not too late to start. In fact, though it might be politically difficult to increase marketing budgets in a downturn, advertising is even more effective when times are tough.
Micael Dahlén, professor at the Stockholm School of Economics, recently pointed out that, since so many companies are slashing their marketing budgets, those that do advertise get even better results. The field is open.
Dahlén also quoted research that showed that the customers a company acquires in a downturn are the most loyal. That should be good news for fast-growing Chinese companies, and a wake-up call for established corporate giants. Time to rethink?