ANALYSIS: Consumer Marketing in China - PR challenges abound as USbrands move into China - China may have finally opened its doors toworld trade, but those hoping to reap PR benefits will find many hurdlesgetting in their way

Two stories came out of China last month that should have grabbed the attention of anyone looking to do business there.

Two stories came out of China last month that should have grabbed the attention of anyone looking to do business there.

First - and funniest - was the report that the state-run Beijing Evening News had lifted an article from satirical American newspaper The Onion, and run it as a straightforward news piece. When told by an American reporter that the story - about members of Congress threatening to leave Washington if they weren't built a fancy new Capitol building complete with a retractable dome - was untrue, the editor of the Chinese paper, Yu Bin, got haughty: "How do you know whether or not we checked the source before we published the story? How can you prove it's not correct?"

Once the Evening News accepted its mistake, the editors blamed the American media. "Some small American newspapers frequently fabricate offbeat news to trick people into noticing them with the aim of making money, wrote China's largest-circulation paper. "This is what The Onion does."

Apparently, satire doesn't translate.

The second piece of news was that Ogilvy PR had purchased H-Line, a 130-employee, six-office Chinese PR firm that makes Ogilvy the largest American PR presence in the country - for now. With other firms signaling their intent to expand their operations, it's only a matter of time before Ogilvy's Chinese presence is overtaken.

Learning the differences

So, do American PR methods translate better than our humor? Not really, says Scott Kronick, MD of Ogilvy's China practice. At least not yet.

"How you communicate with people, how you interpret what happens here, how you shape messages, it's all different, he says. And even with his eight years in Beijing, he's still learning to navigate those differences.

Now that China has been accepted into the World Trade Organization (WTO), it's time for American marketers to learn those differences. American companies are eager to expand into China. Many see it as the last great frontier, a vast untapped marketplace offering millions of potential customers with few existing brand loyalties. And given the population's general ignorance of non-Chinese companies (save for the big multinational brands that you could only avoid by living under a Michael Jordan-proof rock), many brands have the chance to come to China and completely reinvent themselves, something that would take decades in more established Western markets.

The reasons to be optimistic about opportunities in China are as varied as they are valid. The country has an exploding middle class, currently estimated at 120 million, but expected to more than quadruple by 2010 to 500 million. And there is already a firmly established upper class that is eager to buy.

Foreign brands, particularly when it comes to big-ticket luxury items, are highly coveted. American fashions are a sign of high status. And a number of American brands have already carved a path - and not just the McDonald's and Coca-Colas. "If you go into downtown Beijing, the main shopping street, it looks like you're walking down Fifth Avenue. All the same shops are there for the most part, says Don Johnson, a former congressman and assistant trade representative to Hong Kong. Johnson signed on with FH/GPC as vice chairman June 1, and Hong Kong is now his client.

Then there are the obstacles. "I think that the first thing we have to understand is that acceptance into the WTO is not going to change the business environment in China overnight, warns Kronick. "So people who are just saying, 'WTO, WTO, WTO,' and think everything's going to get better, it's not the case."

Working against American brand development is a tendency among the Chinese to prefer local brands and locally made goods for their everyday purchases.

The Chinese are a very nationalistic people, what with their relatively closed borders and state-controlled media (Kronick calls it "the greatest PR machine in the world"), so don't expect to be running any government campaigns inside China. As Yu Bin's story reveals, foreign sources are often suspect before proven otherwise.

Chinese companies know this, and have already begun to take advantage.

As the much-regulated commerce system is gradually reformed in order to align itself with WTO standards, local companies have greatly increased their marketing activities in anticipation of the expected influx of foreign companies. Ad spending rose 47% between 2000 and 2001, and all the top spenders were local companies. By reminding people now of who was there first, these companies hope to crowd out multinational brands before they show up. And their efforts appear to be meeting with some success: In a 2000 Gallup poll, seven of the 10 most recognized brands in China were Chinese.

Blending in with local brands

A number of American brands have already begun to circumvent this problem by setting up in China and selling themselves as neighbors. Kronick points to Coca-Cola, which is currently running ads supporting the Chinese World Cup soccer team. "The companies that really succeed do a good job of making themselves very local, he says. "I think Coca-Cola is a great example.

Just watch the World Cup. Some people would argue that you would never know Coca-Cola is a US brand."

Matt Salmon, a three-term US Congressman and current candidate for Arizona governor with years of experience in China, believes American companies would be wise to team up with local brands to gain credibility with consumers.

"They're fascinated with the clothing and the style of the West, but they're also committed to strengthening companies that are China-based," he says.

"That shows how important it is to form strategic partnerships with local companies."

Salmon's solution could prove helpful in other areas as well. For example, the media in China is controlled by the government. How do you pitch a state-run newspaper? "Your chances of being able to do that are not good, Salmon ventures. "There's a real bias toward state-run companies or toward companies that are at least based in China." Partnering with locals is a great way to clear that hurdle, he believes.

Along with the Chinese sense of nationalism comes a greater sense of investment in the companies they do business with. They want to know that the companies they buy from are good corporate citizens - which can be as much a marketing opportunity as an obstacle.

The same is true when it comes to the companies they work for. In order to get the best workers, companies will have to let their people know where the money is going and who is in charge. Kronick believes this opens opportunities for agencies like his to provide internal communications to American companies settling into China.

It is important to note that PR has not been practiced for nearly as long in China as in the US. Both employees and clients tend to be timid or simply unaware of methods that seem commonplace to anyone practicing PR in the West. "It's a relatively new profession here, and so the staff that you get doesn't have the years of experience that they do in the Western world, Kronick cautions. "Clients don't have that experience either, and so (you have to do) a lot of education here in terms of coaching and bringing in people who have some industry experience."

But ultimately, it's just those types of opportunities - the chance to nurture an eager workforce and client base, the challenge of proving to a population that your company is worthy of their business, the shot at bringing your product into the lives of millions just as they enter a "middle class - that make China such a tantalizing prospect for Americans.

Its size and its isolation from the rest of the world will likely prove irresistible to any multinational looking for a place to sell. And wherever such companies go, the need for some good PR can never be far behind.

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