Brand Building and Marketing in Key Emerging Markets

Management for Professionals

Niklas Scha meister

Brand Building

and Marketing

in Key Emerging

Markets

A Practitioner’s Guide to Successful

Brand Growth in China, India, Russia

and Brazil

Management for Professionals

More information about this series at

http://www.springer.com/series/10101

Niklas Schaffmeister

Brand Building and

Marketing in Key

Emerging Markets

A Practitioner’s Guide to Successful

Brand Growth in China, India, Russia

and Brazil

Niklas Schaffmeister

globeone – Strategy • Brand • Communication GmbH

Cologne

Germany

ISSN 2192-8096 ISSN 2192-810X (electronic)

Management for Professionals

ISBN 978-3-319-19481-3 ISBN 978-3-319-19482-0 (eBook)

DOI 10.1007/978-3-319-19482-0

Library of Congress Control Number: 2015949817

Springer Cham Heidelberg New York Dordrecht London

# Springer International Publishing Switzerland 2015

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herein or for any errors or omissions that may have been made.

Printed on acid-free paper

Springer International Publishing AG Switzerland is part of Springer Science+Business Media

(www.springer.com)

This book is dedicated to Elmar Schaffmeister

(June 10, 1944–April 28, 2013)—a great

father and exceptional improvisational

saxophonist who left this planet far too early

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Foreword

Culture eats strategy for breakfast

Quote is attributed to the great Austrian-American economist Peter Drucker

The financial crisis of 2008–2009, the worst crisis since the Great Depression of

1929, and the ensuing global recession marked a turning point in the way people

viewed the world. While the “advanced economies” had dominated the global

economic production since the industrial revolution, and the so-called “emerging”

and “developing” economies had lagged behind, the financial crisis managed to

completely overturn this relationship. IMF analysis found that while the advanced

economies accounted for only 31 % of global GDP growth, the emerging and

developing economies accounted for 69 % of global growth from 2007 to 2014.

During the crisis, Western companies began seeking alternative sources of

growth. Many looked beyond the USA and Europe and doubled up on their efforts

in emerging markets. This drove demand for professional consulting on how to

implement a BRIC-oriented brand expansion strategy. Niklas Schaffmeister’s book

aims to enhance the reader’s understanding of successful marketing and brand￾building in the large transitional economies.

Today, some observers seem dubious about the future of certain BRICs; the “IC”

clearly is more powerful than the “BR.” While China’s economy is still delivering

robust growth, and India is getting ready for a major comeback, the prospects of the

Russian economy appear much less positive. While Russia was still one of the “hot

bets” in 2013, the military conflict with Ukraine has turned many observers critical

about the economic outlook of Russia. Yet Jim O’Neill, who coined the term

BRICs, remains positive about the overall prospects of the BRIC club. He told

German business and financial daily Handelsblatt in January 2015, “The trend

stays: That is the rise of these four nations relative to the rest of the world. Some

observers are simply confusing a trend with an economic cycle.” Overall, O’Neill

believes that Brazil, Russia, India, and China will jointly overtake the USA in

economic power within the next 2 years. India in particular seems to be on the right

track, with reforms initiated by its newly elected Prime Minister, Narendra Modi.

“[Reforms] together with the low oil price and its young population could enable

India to grow stronger than China in the future,” says O’Neill. However, he also

agrees that the relative importance of China and India is much bigger nowadays.

vii

Since 2010, China’s economy has grown almost 50 % and India’s about 30 %. In

Russia and Brazil, growth rates were just 10 % and 8 %, respectively, largely

because of the falling price of raw materials.

Still, most long-term trends remain intact. Urbanization, better education, youn￾ger labor forces, and rising consumption in Tier 2 and Tier 3 cities as well as the

vast rural hinterlands are setting up these continent-like countries for many more

years of growth. Significant room to grow in the dynamic middle-income segments

is only one reason to intensify international expansion with a focus on the BRICs.

The other key reason is the accelerated overseas expansion of a rising number of

new champions from countries like China or India, which have gone on a buying

spree in Europe and the USA. Western companies need to learn how to compete

with these new juggernauts on their home turfs, before being attacked in their own

premium markets only a few years down the road. Global consumer electronics

giants like Samsung and Sony are already feeling the pressure of Chinese brands

like Lenovo and Xiaomi, and the global automotive press has started to speculate

whether Jaguar (now owned by India’s Tata Motors) can challenge BMW.

This book is not intended to argue in favor of the BRICs or any other combina￾tion of smaller growth markets such as the MINT countries (Mexico, Indonesia,

Nigeria, and Turkey) as the economic cycles simply move too fast to predict

winners, and countries will always experience ups and downs. Rather, the aim of

this book is to promote understanding of transitional markets in general and to

illuminate the features that characterize them and the unique challenges that

marketers commonly encounter when planning and implementing brand develop￾ment strategies.

Whether you believe that Russia will recover from its current crisis, or that

Brazil will benefit from the Olympic Games in 2016, this book has much to offer.

The 25 strategies outlined in Part III form the heart of successful marketing in

transitional markets. Many of the impact factors and resulting implications are not

unique to the BRICs; they are worth considering in any other growth market. This is

especially true for the first five chapters of the strategy section, which outline the

most important steps in defining your growth strategy and related market position￾ing. They work in any context where brands cross borders.

This book will also help to enrich understanding of, and sensitivity to, cultural

traits and related motivations for consumption. We firmly believe that “culture eats

strategy for breakfast,” as we have seen way too many misguided international

marketing efforts which made the dangerous assumption that a single global

approach would work in every market and that consumers would eventually get

used to the offering. This might be true occasionally, but it goes awry more often

than not.

It might be reasonable to ignore local needs formed on the basis of traditional

culture—but only if your target markets are of marginal relevance. However, when

brands like Volkswagen sell every third vehicle in China and earn about 50 % of

their profits there, it would be extremely dangerous to not to be sensitive to local

tastes and preferences. As a senior executive of Omnicom Group, one of the world’s

viii Foreword

leading advertising and communication groups, I can say that our agencies passion￾ately believe and are experts in the power of locally relevant communication. The

best joke is pointless, if it is lost in translation...

Do brands even matter in emerging markets? We firmly believe they do. Unlike

technology or products that can be reverse-engineered and copied, a premium brand

is one of those rare competitive advantages that cannot be easily copied. It just takes

time and investment to establish a brand in the hearts and minds of new target

groups.

This book—the first such analysis of the BRIC countries from a brand and

marketing point of view—is based on 15 years of hands-on strategy and marketing

consulting experience in various industries. The strategies, frameworks, and

principles outlined here will allow you to think more strategically about building

your brand where it matters most. The Country Profile chapters on China, India,

Brazil, and Russia will familiarize you with the main aspects of local socio￾economics, income segments, cultural backgrounds, media environments, and

purchasing motifs—the “software” needed to thrive in each specific market.

Reading these chapters conveys the necessary background needed to reprogram

your brands and to optimize their performance abroad—without contradicting their

basic global values.

The chapter on Commonalities and Differences highlights the fact that beyond

all the cultural complexities, there are actually many similarities among the big

emerging markets. The section on The New Paradigm explains the key principles

and steps toward a growth market-centered “one world strategy” for brand expan￾sion. It also highlights the immense importance of the country-of-origin (COO)

factor in marketing to a completely new set of aspiring and status-hungry

consumers (who are willing to pay a premium for quality and emotional benefits).

The comprehensive Strategy Chapter, the main part of the book, describes 25 key

approaches that help you, not only gain significant market share, but also win

customers who stay loyal to “their” brands even as they migrate to yours.

Key considerations are analyzed and solutions offered with dozens of specific

answers to tough questions, such as: What are the best strategies for entering BRIC

markets and positioning international brands to appeal to diverse cultures? Which

are the growth drivers and consumption patterns of the new members of the

emerging middle class? What does a market-driven strategy that combines the

global brand positioning with clever local adjustments look like? The book is filled

with examples of successful strategies and is an indispensable guide for every

executive responsible for making far-sighted marketing and branding decisions in

the world’s most exciting markets.

New York, NY Serge Dumont

March 2015

Foreword ix

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Preface

There is a rising interest among Western corporations in the large emerging markets

due to their growing economic prominence and consumer purchasing power.

However, despite this rising importance and the acknowledgement of the high

cultural, social, and economic complexity of these markets, there is only very

limited literature that takes a systematic view at the similarities and differences of

these markets from a marketing and communications point of view. Therefore, this

book significantly contributes to filling this gap, as it combines 15 years of experi￾ence in brand building and marketing strategy development in the BRICs.

It will give a detailed outline of each of the four original BRIC markets,

including the overall historical and cultural roots, economic developments, demo￾graphic segments, and geographic specifics, and most importantly it should help to

develop sensitivities regarding the predominant cultural values. On this basis, some

of the major paradigm shifts that are taking place are explained, such as the

development of “one world strategies” with emerging markets at the center or the

increasing acknowledgement of local specifics and tastes versus the globally

standardized approach that was favored in the 1980s and 1990s. All this leads to

increasing “glocalization” and smart adjustment strategies for brands in many

segments. In a most extreme case, this can even lead to a modularization of brands

below the level of the globally uniform corporate brand umbrella.

This book analyzes the common patterns across these large emerging markets

while acknowledging the plethora of differences at various levels. However, it does

not stop at a just descriptive analysis of specific cases. The strategy chapter provides

an outline of 25 major approaches and strategies frequently spotted in emerging

markets as answers to general challenges that marketers and brand managers are

facing there. Based on the observations in the country chapters, strategies that are

applicable across the BRICs in many contexts will be developed. Specific process

knowledge will be given regarding how to decide on a more foreign versus a more

localized positioning. And most prominently, the development of truly “market￾driven positioning” will be pushed forward, as this is the key to sustainable success

in many contexts. Within the process of market-driven positioning, systematic

adjustment of the brand positioning, as well as the product and service offering of

a corporation, should be developed in a way that market acceptance and sales

xi

potential are optimized without weakening the global brand promise. All this

knowledge is based on real business observations, professional insights, and scien￾tific data rather than on a purely theoretical perspective. It will help to guide

marketing and communications managers to think strategically beyond the needs,

wants, and rules of those markets they are most familiar with.

This book was supported greatly by many people and in many ways. A project of

this scope is impossible to complete without having great friends and supporters.

First of all, I want to thank my wife, Zhe, who always helped me with her usual

joyfulness and serenity.

My team of colleagues at globeone also contributed greatly to this project,

particularly by giving me the time needed to work on the contents without extreme

delays. Carina Hauswald, my co-managing director, helped a great deal by assum￾ing management responsibilities and thus creating enough flexibility for me to write

this book on top of our fully loaded consulting agendas. In China, my colleagues

Tatjana Martens-Pearce, Na Tang, and Philipp Dittes provided thoughts and

insights, as did Ana-Helena Szasz-Barone for Brazil and Tina-Marie Monelyon

for India. I also need to thank Markus Ga¨rtner, who provided helpful support in the

final editing of the manuscript.

I wish to thank Serge Dumont, Vice Chairman of Omnicom Group, for giving

helpful advice and contributing the foreword to this book. I must also sincerely

thank Dr. Evemarie Wolf for the encouragement to conclude this project, as well as

Hedda Schaffmeister for accepting the painful assignment of reviewing and for￾matting the notes and citations of all chapters. At Springer publishing,

Dr. Prashanth Mahagaonkar, Dhayanidhi Karunanidhi and Venkatachalam Anand

proved to be very experienced and supportive advisors on this project.

Among the many other people who have contributed, I want to thank the

following: Florian Haller, Christiane Wolff, Markus Noder, and Julia Becker at

Serviceplan Group. They were very helpful in developing ideas for this book and

generously providing content for many of the case studies. I am also grateful to the

BMW Group and Volkswagen Group, as well as Georg Warga from Goodstein

Partners and Carsten Greiner from INTERONE Beijing, for their support and the

opportunity to refer to compelling projects such as BMW’s 7 Series Brand Heritage

Campaign and the Volkswagen People’s Car Project. At the specialty chemicals

Group LANXESS, I need to thank Christiane Mu¨ller and Terri Fitzpatrick for their

trustful cooperation and the contribution of a cross-BRIC case study.

Lastly, a special thanks to Jan Runau and Sabrina Cheung (Adidas Group),

Oliver Wolter (Volkswagen Group China), Alexei Orlov (RAPP), Jochen Goller

(MINI), Petra Schwaiger, Sabine Russ and Justin Dee (BMW Group), Kristin

Harder (FAW-Audi), Steffen Kuschel (Volkswagen AG), Susan Krambo

(Armacell), Claudia Woelfle and Kay Koester (Creative Agency Yeswecando),

Christine Zierott (Porsche), Rene Co (Procter & Gamble), Lars Zeppenfeld

(Mercedes-Benz), Dayna Hart (General Motors China), Bernd Haack (Lada), Kim

Palmer (Land Rover), Wang Feng, Anna Lu & Alex Qi (Linglong Tire), Kathi

Guethoff & Roger Strack (Serviceplan China), Tzekiat Tan (BBDO), Marc

xii Preface

Trautmann (Trautmann Photography & CGI), Oliver Sebel (FAZ) Frederic Bourcy

(Metro), as well as Sabrina Wu¨rth, Sarah Rauch, Ariane Sketcher, Liying Zeng,

Sebastian Hepp, Kristin Werner, Hanna Rohloff, Lena Ink, Denise Zhang, Sarah￾Lena Hu¨ll, Sarah Ulcyfer, Deanna Burke-Courage and Julia Neumann (all at

globeone).

Cologne, Germany

March 2015

Niklas Schaffmeister

Preface xiii

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