Advertising in a Changing China

Diplomarbeit von Frank Bittner

Abstract:

The transition from a command economy to a market based economy has been remarkably successful in China. The economic reform implemented in China during the last two decades has significantly improved the living standards of the Mainland Chinese.

The rapid pace of economic development has brought about an increasing purchasing power of the Chinese population who is more willing to spend. Until the economic reform, the Chinese Mainlanders had largely been isolated from foreign goods and services. However, changing from a socialist economy to a planned economy supplemented by market forces, China as a huge potential consumer market is flooded with a tremendous number of foreign imported goods for consumers to choose from.

Following its admission to the World Trade Organization in December 2001 after 15 years of negotiation, marketers around the world are also increasingly attracted to the promise of China as an emerging and profitable market. The outlook for continued growth in China is good and if current performance continues, annual income per capita should exceed US$6,500 by 2020. Kenichi Ohmae remarked that „it took the Asian tigers more than fifteen years to build their economies as symbols of new development…it is taking China only a few years to supplant them“.

As the market becomes competitive, it is essential for companies to be able to quickly create product awareness among the potential consumers in order to secure a share-of-the-mind of the consumers and subsequently influence their choice decision among competing brands. Advertising is one of the marketing elements and possibly, an effective one that can assist companies to make their brands known to the market.

However, whilst it is evident that there is a dramatic impact of economic reform and drive for modernization over the past two decades, the Chinese market has many special characteristics that present several challenges and opportunities for multinational businesses, particularly in the field of advertising. For instance, advertisers and marketers cannot take for granted that a standardized model of advertising can automatically be applied to the Chinese market.

Past history and experiences have already shown that foreign companies have encountered cultural difficulties in the use of advertising theme and execution in the Chinese market. These difficulties stem largely from their lack of understanding of how to market their products and services directly to consumers in a rooted collectivistic, authoritative, masculine, risk-averse, tradition-bound and rational Eastern culture like China.

Advertising is seen as the most culture-bound element in the marketing management mix. Schutte and Ciarlante point out “…because advertising message consists of language and other communication instruments that are themselves very deeply rooted in a given culture of a society”. Even within the same language, word connotations can vary extensively from culture to culture.“ Hong et al. also reveal that the influence of cultural differences on advertising is all encompassing since advertising, as a form of social communication, is particularly reflective of culture and its norms. In fact, the ability of advertising to create favorable attitudes towards a product may often depend on consumers’ attitudes towards the advertisement itself.

Today corporations have spent enormous budgets every year on advertising to promote their products and persuade customers’ purchase decision. They will require an entirely new understanding of the purpose of advertising, especially as China has undergone rapid economic changes, cultural changes seem inevitable. In order to improve the promotional effectiveness, advertisers and marketers need to apply relevant advertising creative appeals that reflect the cultural value of the market.

China’s transition into a more open society and a more dynamic economy is having a profound effect on its advertising industry. Profound changes are taking place in response to market-driven actions. Even the government is adjusting its role. The media are not (yet) free but their actions are increasingly market oriented. For instance, government media control had already started to become more flexible to allow for certain economic and societal changes.

As per the Business China and East Asian Executive Reports official attitude towards foreign advertisers and to a lesser extent, foreign media, has become more accommodating in some respects. At the same time, inconsistency for China's policies existed in form of different rules e.g. for Hong Kong and foreigners and policy changes that were pretty much uncoordinated. All these developments have a direct bearing on the role of mass media as the most potent vehicle for advertising messages. This in turn has major implications for advertisers, media and advertising agencies, both foreign and local, operating in China. They all need to remain fully informed of this media transition and adjust their strategies accordingly.

Access to reliable data about China is essential in developing an accurate picture of the market and the operating context. Such information is a prerequisite for strategy development and implementation. However, gathering suitable data on a still restricted society with an evolving market structure is an ongoing challenge. As per East Asian Executive Reports, reliable statistics are the hardest to obtain. Until very recently, „most of the available studies conducted, tended to deal with analyses concerning (macro) advertising expenditure, advertising content and survey results on general opinions of business or consumer audiences“.

Currently, more specific data on, for instance, media audiences, is being released to the public, usually by private sources. However, such data remains in limited supply while their accuracy is often unknown or questionable.

Many questions arise concerning this rapidly expanding, evolving and culturally complex market. What is the current advertising context in China i.e. constraints, cultural features, etc.? What lessons must foreign firms seeking to enter the market or already operating in China be cognizant with about advertising strategies?

Based on the foregoing, this thesis aims to:

Identify key challenges that are affecting advertising in a changing China as well as focus on important contextual factors that are easily overlooked by international marketers that are not intimately familiar with the business environment in China.

Highlight the implications of these challenges and discuss some potential strategies and practices that could be used by foreign firms seeking to enter the market or already in the market to counter the challenges identified.

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