China Circa
Branding Tips for Chinese Traditional Companies
Vintage brands have been on the rise in the west for the past 5 years – and the trend is still continuing: brands famous in the ‘80s that had been long forgotten have been rejuvenated to see new days of glory. Converse All Stars, to name one well known example, have come back into style after years of hibernation.
China has numerous vintage and traditional brands, known as “l?o zì hào”; but not many people know they exist and even less recognize the equity that still lies within them.
[For a detailed history of China’s vintage/heritage brands check the “A Look At History” at the end of the article]
Unfortunately many of these brands have developed negative identities during the past decades. This is because they have not kept up with the demands of today’s consumers, causing the younger generation to see these products as out of date and as something their parents would buy. In addition, before the official protection of the l?o zì hào brands in 1991, many small companies created low-quality copies which damaged the reputation of the l?o zì hào and decreased their market share.
Yet, despite the oftentimes negative perception of these brands, l?o zì hào brands possess several qualities that make their abandonment not an optimal choice for Chinese traditional companies.
For one, many of the l?o zì hào brands still have enormous followings among older market segments. As older people talk about the reliability and the family tradition of using certain l?o zì hào brands, firms benefit from word-of-mouth marketing. Not wanting to change their habits, the older generation would be unwilling to abandon l?o zì hào products without a good reason, allowing the l?o zì hào to maintain their presence in certain segments of the market.
Although some l?o zì hào products have lost their reputation, other Chinese traditional products have managed to maintain theirs. For example, as mentioned in a previous Labbrand article “Chinese Luxury Brands on the Move,” Chinese liquor firms máotái and w?liángyè benefit from having no competitors producing similar liquor. New market entrants are unable to establish the same reputation these traditional firms achieved over centuries in a short period of time. For traditional products, the Chinese believe the firm with the longest history must have the highest quality due to their continued production of the same product.
Additionally, the l?o zì hào brands receive strong government support to protect and promote their brands. In 2005, the Ministry of Commerce put laws into place for new l?o zì hào designations, thereby providing bureaucratic and marketing support for the original l?o zì hào to fight off potential misuse by smaller firms. Traditional Chinese firms may also be able to receive government financial support if needed to invest more in branding and ongoing operations.
Several branding measures can be taken by l?o zì hào firms to revitalize the traditional brands in the market and reverse their declining economic fortunes.
First, the l?o zì hào brands can be promoted through cooperation with other industries, for example, the tourism industry. Traveling to historical locations is a big theme in Chinese tourism, and by stressing their local heritages, the l?o zì hào brands can be marketed to travelers as “local specialties” by offering their products at the historical locations. As tourism in a locality flourishes, the “local specialty” will benefit, allowing the associated l?o zì hào to prosper both at the location and then through nationwide retail.
Another possibility is cooperation with the media. Historical drama series are a staple of Chinese television and presenting l?o zì hào both directly and indirectly in the drama can increase their brand visibility. An outstanding example is l?ngnányàoxiá, a drama series on the life stories of wángl?ojí, the founder of wángl?ojí liángchá, a Guangdong-based l?o zì hào and manufacturer of herbal tea. The firm used the opportunity to introduce a new canned version of the herbal tea made famous by the drama series. The canned herbal tea was able to gain a strong foothold in beverage market, greatly increasing the revenues for the firm.
Above and beyond these tactical considerations, perhaps the single most important branding strategy that needs to be implemented by the l?o zì hào is a clear redefinition of their positioning in the market. While many l?o zì hào products were simply sold to everyone in the past, today’s increasingly complex divisions of consumer groups will force them to target specific audiences in order to avoid unnecessary competition and raise brand value. Specifically, there are three ways for a niche to be generated:
- Redefine the l?o zì hào as both a domestic and international luxury brand by attracting foreign and new Chinese elites who are interested in the exotic nature of the Chinese tradition. The l?o zì hào must establish a sense of product superiority through unique design, high quality materials, and an emphasis on usage by imperial and/or other prominent families in the past. The Chinese l?o zì hào can learn from foreign-owned Shanghai Tang, a luxury brand founded in 1994 successful in marketing traditional Chinese style apparel to wealthy foreign Sinophiles through small boutique shops.
- Combining traditional status with modern technology to compete internationally on equal basis with other domestic and foreign manufacturers. L?o zì hào’s over-emphasis on preservation of tradition should not eclipse marketing of cutting-edge functions and features of the product. Shanghai Watch, while not an officially designated l?o zì hào, has achieved some revival by stressing both historical heritage and quality watch components. They are positioning themselves as a high-end fashion or luxury brand similar to Rolex.
- Target the growing market for vintage goods. Many young people, especially in the West, are turning to older styles, even antiques, for everyday use as fashion statements. One example is the circa-1960s designs used by athletic shoes of Chinese manufacturers Warrior, Feiyue, and Double Star. Again, even though none are official l?o zì hào, their shoes using the same designs for decades have recently been sold for high prices at fashionable stores in the West (such as Galeries Lafayette) among youngsters seeking a “vintage” style.
All in all, the key for the revival of the l?o zì hào is a clear understanding of the modern marketplace. While it is clear that the old people who grew up with the brands from childhood are becoming fewer and fewer, the l?o zì hào can still retain past glory through innovative branding measures. By knowing exactly who to target and how to modify the brands to attract the target markets, the l?o zì hào can raise their brand value and continue to grow in the new market as they have in the past centuries.A look at history
While nationalization policies in the early days of PRC and prevailing ideologies of the Cultural Revolution led to the disappearance and destruction of many traditional Chinese brands with centuries of operations, there are still close to 2000 Chinese traditional firms that survive today.
In 1991, the former Ministry of Internal Commerce officially designated around 1600 brands across China as China Time-Honored Brand. The brands designated had the common characteristic of “prominent Chinese traditional cultural backgrounds supported by practices passed down the generation.” The l?o zì hào were generally only bestowed upon firms established during Ming and Qing Dynasties as well as pre-PRC Republican China.
Yet, despite official proclamations, the economic situations of Chinese heritage brands are generally dire. Of the some 1600 brands declared l?o zì hào, only roughly 30% of their parent firms are still in continuous operation. The remaining firms are on the verge of bankruptcy due to large operational losses and heavy debt despite being in possession of government-designated l?o zì hào brand names.
Much of the economic problems Chinese heritage brands have been experiencing in the latest year is directly due to the competition they’re have been facing from both foreign and domestic brands since China’s market opening.
In fact, many have not kept up with the changing taste of the new generations. They continued to produce products for which demands have waned as technology and economic status have developed. For example a Shanghai-based manufacturer once famous throughout China and Southeast Asia for home-use sewing machines, did not revamp product designs and functions accordingly to different modern clothing styles and thus quickly lost market share to up-and-coming manufacturers in the late 1980s and early 1990s.
Whereas the surviving heritage brands are part of Chinese older generation’s life, the younger generation does not welcome their conservative nature. Young people do not like using the same or similar products used by their parents and grandparents. Without accommodating more progressive mindsets, heritage brands can never gain a foothold in the increasing large base of “new” consumers who have not grown up using the l?o zì hào brands.
Furthermore, Chinese heritage brands have not been able to compensate for lost domestic markets through foreign expansion. The sense of tradition attached to them has little resonance for foreign consumers have knows little about the history of the l?o zì hào and their status in the eyes of the older Chinese. At the same time, many l?o zì hào are disadvantaged in foreign branding as their traditional yet auspicious-sounding Chinese brand names (exemplified by Shanghai restaurant “old righteous prosperity”) completely loses their meaning with foreign translations.
Despite these obstacles, some small merchants attempted to capitalize on the past glory of the l?o zì hào. Before the effective official protection of the l?o zì hào brands in 1991, the brands were registered by companies in many different industries to take advantage of the fame of the original l?o zì hào. As many of the small firms could not guarantee quality in their products, their marketing greatly damaged the reputation of the original l?o zì hào and thereby further shrank the market share of the original companies.
As this article demonstrates, although the l?o zì hào brands have had a shaky past, there is still hope for their future.
About the Author
Vladimir Djurovic is the founder and Managing Director of Labbrand, a Shanghai based innovative brand agency specialized in brand research, strategic and creative services. Labbrand website at: http://labbrand.com/ is also the portal to Labbrand branding blog: http://labbrand.com/english/news_and_articles.php/
and reviews of branding related hot topics, with a special focus on China.
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