A source of light

An introductory note from the author:  Firstly, ladies and gentlemen, it should be made clear that everything in this post is discussed within the scope of the Chinese marketplace, and that the opinions expressed herein are mine personally.

Think with foot. GWEAT

Brand is an interesting thing. Brand is many things, including the personification of a product or service.  Brand is like the name or nickname of a person for the product or service.

Branding gives others something to remember and address this very person by, especially when he has done something great and expect others to be grateful.  Thus the fundamental purpose of brand marketing is to make consumers remember it, consume it, and continue to consume it.  This should be very easy in theory.  Just expend your effort build something really fantastic, and go around shouting “hey guys, please be aware that this piece of work is proudly brought to you by [insert your brand here], and we will do even better in the future!”  But in the China marketplace, things always have some tendency to go wrong, especially in a market where everyone speaks a language very much different from most other languages available.

One such occasion is when one company has too many brands. In a recent market research project for an Illuminant client, I was surprised to learn that most consumers we interacted with did not know that Gatorade is a Pepsi brand. This isn’t necessarily bad, but in China, attaching a small brand to a globally respected name could have even better effect.

Or on other occasions when there are so many brands involved, it’s rather hard to maintain one single brand from the hellish brand warfare.  An example would be the computer industry in China.  In early 1990s, when Great Wall was the dominant PC brand, everyone was referring to computers as “386” and “486” (as in 80X86).  Manufacturers such as Great Wall and Compaq were so easily overshadowed by the processor maker. Things didn’t go better until, according to my observation, the coming of Lenovo (then named Legend: they changed their name years later when sued). Even “Intel” and “Pentium” went lost in the initial communication where the new processor brand was simply called “586” for habit’s sake. The problem was later solved by Intel’s carpet-bombing campaign of “Intel Inside” advertisements. And that’s good.

Things get even more confusing as time goes by and global collaboration becomes commonplace. Still taking our power-eating buddies for example, smart phones are the big thing right now. Currently there are brands for RAM, processors, OS providers, OSes themselves, phone manufacturers, cellular carriers. Putting them together, the a given handset’s brand profile could get really chaotic.

Take Android phones. The OS is called Android, and the maker goes by the name of Google. The ground-breaking phone manufacturer is HTC, and HTC’s phones are sold under a wide range of carrier brands such as T-Mobile (America), TIM (Italy), MTN (South Africa), and HTC itself. Product model names could also vary such as the first generation is called “T-Mobile G1” and “HTC Dream”, the second “T-Mobile MyTouch” and “HTC Magic”, while the latest two generations are simply “HTC Hero” and “HTC Tatoo”.  The chaos redoubles when it officially gets into China under HTC’s sub-brand Dopod. Consumers can now buy a Dopod A6188 (in other sense “HTC Dream”) and Dopod A6288 (in other words “HTC Hero”).  Arguably, the problems are: A) Too many brand names blind people. The brand-blind could be very serious when there are multiple mega-names among them. B) Language barrier. Chinese consumers are not so sensitive to English words or letters.

In many countries this shouldn’t be much of a problem since most people only care about their local version. But this is China, where local release, especially for phones, tends to be an expensive undertaking with newness equating to premium pricing, while consumers simultaneously have wide access to a black market. The brand war turns out to have an interesting effect. Here people always address all phones that works upon Android platform as “Google Phones”, and HTC’s great works are named in an unintended fashion as G1 (HTC Dream), G2 (HTC Magic), G3 (HTC Hero), G4 (HTC Tatoo). With HTC announcing or leaking new plans, I’m already expecting the wide usage of G5, G6, and probably G7. Gadget collectors are talking about the difference between “T-Mobile G1”, “TIM G1”, “MTN G1”, oh, and “HTC G1” only when they don’t know how this particular phone should be categorized. Poor HTC becomes the invisible man, and everyone is feverishly thanking Google for the hardware as well as software. This isn’t so great, by my standard, when HTC is selling phones under its own name and the Dopod alterna-brand.

The point here is, it’s necessary to have a brand identity, but it’s also important to make sure the brand is put into proper usage. You’ve got to pay attention to how people are talking about your stuff. Not only comments, but also how they recognize it. Advertising and other above-the-line marketing is one way to sort that out, however effective management of media exposure and other below-the-line techniques are of high importance. A failure media management program could result in something like this:

iPhone. This is the name that completely changed the smartphone business. Even before it’s much belated release in China, there were already around one million smuggled units running on the GSM networks of various carriers here. For traditional lack of creativity and marketing-oriented thinking, both China Mobile and China Unicom now are busy developing their home-grown (although technically on Android) smart phone OSes called “OPhone” and “UPhone” respectively in order to catch up with the trend begun by Apple. Intended unimaginative branding caused a brand avalanche. Since there are “iPhone”, “OPhone” and “UPhone” already, Chinese journalists begin to automatically re-brand every other player in the field on their own accord. In this fashion, Microsoft, who so proudly announced its “Windows Phone” campaign not so long ago, is now called “WPhones”. And Android is now commonly addressed as “GPhone”. Multiple tech portal websites (Chinese) have worked out thrilling big headlines going like “FIVE [X]Phones fight to be king of the hill in China!”

Although every bit true in OPhone’s and UPhone’s cases, this isn’t so good for Microsoft or Google (well, and HTC, Motorola, Sony Ericsson, Samsung, LG, etc passively represented by these two giants) because such unofficial branding renders them instantly, in the minds of millions of consumers as little more than iPhone copycats. You will see this concern stands when you see so frequently Chinese netizens commenting like “to hell with WPhones and GPhones. Our iPhone is the first and best!” A fundamental rule to market competition is, if you want to do better than iPhone, you first declare very clearly “we are definitely not an iPhone, and we don’t want to be”. Things will look much better if vendors are more serious about their media work, and spend 5 more minutes talking to the journalists which can simultaneously influence public opinion and help clarify these muddy waters.

Another solution to achieving brand integrity in China includes defining a real Chinese brand name that makes some vague sense rather than being plain transliteration. Then, and the most important, ensure that brand name is correctly used. Contributing all your good reputation to a partner is bad, but making yourself look like a no-brainer is worse.

So, behold, BlackBerry and Palm. You guys are talking with China Telecom for China entry right the moment. Do not make yourself into “BPhone” (or “BBPhone”) and “PPhone” by doing nothing! This is China, where many things could go wrong at the least unlikely point. Know what you are dealing with. Keep yourself known in a preferable way. And make sure the message is delivered correctly through the whole process.

Authored by Illuminant’s Head of Research, Kane Gao

SARFT.Headquarters, via Flickr

Last year China’s State Administration of Radio Film and Television (SARFT) caused a great deal of panic among the mainland’s video sharing websites by threatening to kick any operator without an online broadcasting license off the intertubes. Eventually, every video sharing website had a license granted, and the initial climate of panic tapered off and quietly died.

Yesterday, SARFT again unleashed its power, announcing a new set of regulations to further govern China’s online video sharing sector. Under the new rules, all films, TV series, cartoons and documentaries must obtain offline broadcasting licenses before being transmitted via internet media (and yes, mobile networks are included), even if the broadcaster has already licensed necessary copyrights from distributors. For the full story please refer to this helpful overview from Pacific Epoch, who we beleive scooped the story.

The new regulations instantly caused another panic amongst China’s netizens. Unlike YouTube, which relies on short video clips and user-generated content, its many Chinese clone-sites mainly live on (pirated) films and TV series. Obtaining an offline license for every single film would take more time than is left until the heat-death of the universe. Needless to say, offline licenses are based on the correct licensing of copyrights, which in many parts of the Chinese web do not outweigh the low cost/huge profit charms of piracy. If SARFT is really serious about this, then the whole business seems to be pretty much terminated.

But from my perception, we don’t have to be too serious about SARFT’s latest moves. Parallel with the new regulations, there is something called the “haven principle” in the whole Chinese internet sector (including video sharing). The principle works like this: an online broadcaster does not have any responsibility if any user-uploaded content causes trouble (such as violation of intellectual property rights). So long as the offending content is simply removed from the website, on notification, every problem is solved in a civilized and harmonious way.

This “uploaded-protested-notified-removed” principle has saved many Chinese video sharing websites from lawsuits they absolutely could not afford to defend.

From our perspective, it seems pretty obvious that in pursuit of almighty page-view, a large number of “helpful users” who upload tons of  stuff on daily basis are actually website editors in disguise, taking advantage of the haven principle to dodge ethical, legal and moral responsibilities. Personally I’ve formerly worked for a market-leading WAP site whose main business is was to “share” pirated (dumped, cracked, regged) mobile phone games totally free of charge, much like video sharing websites. An eye-catching disclaimer was placed on every download page saying “all content is uploaded by users, thus the provider has no responsibility for violation of intellectual property”. But guess what? They didn’t even have a user upload interface. All editors worked on a 8 hours/6 days schedule to collect, upload, and organize pirated games. The WAP site even established different servers and purchased different domain names for file storage to enhance the impression that all those games were located by its fictional “super advanced game search engine”. Gaming, indeed.

Sorry for spinning off topic.

Back to China’s haven principle. Under the user-upload umbrella, China’s video sharing websites do not have to pay anything for violating SARFT’s new regulations. On the other hand, SARFT has to manually monitor every single video on each website to check if there’s any illegal broadcasting activity. In a country of 243 million broadband users, this is a monstrous job. And considering the normal slow speed for takedown notices to be generated, there will be enough time for users to have their fun and for websites to gain almighty page-view between the video’s upload and a demanded removal (if it ever gets found and put on notice).  Of course, even if an offending video upload is terminated, another “helpful user” will upload the video again under a different URL.

Some observers believe that SARFT should be extra-careful in the implementation of its new regulations. Practically all YouTube clones in China are launched, nurtured and generate page-view via pirated content. An overdose of administration may easily snuff the whole business out, and we don’t beleive that China would want to deliver this unto the nascent sector (which employs thousands) given the current condition of the world economy.

Disbelieving?  If you’re feeling in an IPR-violating mood, you might enjoy the 213th episode of popular Japanese cartoon Bleach, uploaded on April 1st 2009, which does absolutely not have an offline broadcasting license. Thanks, Tudou.com, for sharing!

NB: Imagethief’s view, well worth reading, is here.

Kane Gao, Head of Research, Illuminant Partners

FAKE, originally uploaded by Illuminant Partners.

The protection of Intellectual Property Rights (IPR) was a major chapter during China’s negotiations with the World Trade Organization (WTO) prior to its accession in 2001. Since then many reforms and improvements have been made and the Chinese government heavily promotes its achievements in the fight against product piracy. But according to the latest OECD survey, still 4 out of 10 counterfeited goods on the global market are “made in China”.

Interestingly to know, that not only the big names, such as Apple, Gucci, Nike or Universal, fall victim to product piracy and counterfeit – also small and medium sized companies lose immense amounts of money, because their innovative products get imitated in some Chinese backyard and are than sold at dumping prices. Repeatedly companies were made aware of IPR violations just because an angry customer called up the headquarters and complained about the poor quality of the product or asked for after-sales services.

C’est la vie en Chine?! Is product piracy merely one of the side effects one has to simply accept, when doing business in China? Not at all! Although one has to be aware that even the best strategies might fail on the Chinese market, there are 3 simple ways to reduce the potential risks for your company significantly.

1. Know the market!

Knowing the current market environment for your industry is the key for a successful performance on the Chinese market. IPR violations may happen in any industry, but the better you understand how your industry functions on the Chinese market, who your (Chinese) competitors are and what previous cases of counterfeit in the industry took place, the better you can prepare and protect your company against it.

If your company does not have the resources to get all the necessary information, you may be well advised on hiring a skilled local marketing or PR firm that is specialized in market research and truly understands the Chinese market.

2. Know the law

Since its accession to the WTO in 2001, the Chinese legal system improved significantly, although the actual implementation is far from perfect. On paper the Chinese IPR regulations do meet international standards, but most companies, when getting involved in counterfeit issues, do face a frankly unmanageable number of barriers, such as the Chinese language, the complexity of Chinese bureaucracy and the overall costs of a time-consuming lawsuit. Nevertheless, the best advice in case of an IPR violation still is to take legal action, instead of capitulating and depreciating the loss.

Be aware that the costs for an average lawsuit on IPR violations may be between USD250,000 (international law firm) and USD10,000 (local law firm). Therefore it is important to do some research and compare the actual cost-performance ratio beforehand.

3. Know your allies

Most national governments do offer some sort of investment protection for companies that are expanding their business to China. These agencies generally offer legal advice in case of IPR violations as well as financial support during a lawsuit.

Get in touch with the Chinese representatives of your home country’s chamber of commerce or the business section of your embassy for further information, or speak to Illuminant Partners for an obligation-free consultation.

Article by Anja Knass, Illuminant’s corporate affairs manager.