Advertising
Ad Agencies in China Must Turn Away Prospective Clients
Big name ad agencies in China, reversing the practice of their home countries, have so many prospective clients they must turn some away. Sophisticated ad companies are in short supply in China, and so foreign companies looking for knowledgeable help in the Chinese market must battle to hire the agencies, which often only accept firms if they are big enough. One ad agency head said that he expected China's advertising spending to hit $24 billion in 2000, a hundred-fold increase over 1990 . The ad market in China has been growing at nearly 40% a year. Such growth is attribute to a number of factors: more foreign investors are coming to China; marketing operations are being transferred from Hong Kong to the mainland; and local Chinese companies are beginning to see the value of advertising themselves. Although local ad firms cannot compete with the multinationals, locally-trained ad talent is growing, and domestic Chinese companies are beginning to see advertising as a worthwhile medium- and long-term investment. Multinational firms are trimming expensive expat staff in order to increase profits and remain competitive.
South China Morning Post (HK), 12/12/96
Ad Business Booming in Beijing
The ad industry in Beijing is growing by nearly 50% annually, with over 3200 ad firms now doing business in the capital. Their combined business volume is close to $720 million, and is increasing by nearly 66% annually. The industry has grown from 714 firms with combined revenue of $66 million in 1991. Sources report advertising is the fastest growing industry in Beijing.
China Economic Information (PRC), 12/14/96
Fashion Consciousness in China Stronger Than U.S.
According to a recent consumer research report, Chinese from big cities are more fashion conscious than their U.S. counterparts, leading them to pay 50 percent more for clothes. The survey reveals that air conditioners, personal computers and laser disk players were on top of the purchasing list for upper middle class households in China in 1996, according to Leo Burnet, an international advertising agency. Ted Kamp, the company's U.S. research development manager, said opportunities were available for new foreign players in the Chinese consumer market. Television and friends are the two major means by which Chinese learnt about current fashion as opposed to TV and magazines in the U.S.
South China Morning Post (Hong Kong), 01/31/97
China's Educational TV Draws Big Audience
In recent years, Chinese have more options to choose from on the television but the channels which feature programs on how to use computers or that give tips on high school entrance exams are doing well in the ratings. Shanghai Education Television now has a 17 percent market share of the Shanghai TV audience in the late evening, according to A.C. Nielson SRG data. That is a pretty hefty sum in a city whose population is 13 million and has a television penetration of more than 90 percent. In China, educational channels are free to run commercials and fund themselves so these ratings are a big attraction for multinational advertisers like Pepsi's KFC restaurant chain. But why the big allure? People are saying it is because they learn a lot, from computers to English. Media researchers say that China's appetite for information helps them adapt to change. Industry analysts say that being attached to educational programming in China, whether an advertiser or programmer, is a wise political choice.
The Asian Wall Street Journal (U.S.), 02/04/97
Home Shopping Networks Thrive in China
Despite the blatantly Western influences of the home shopping network concept, Chinese authorities do not appear to be discouraging this retailing trend. The home shopping idea can bring big business to China and it is a good tool for smaller Western companies looking for a way into China. "We want to develop proprietary brand names, which is good for small and medium sized manufacturing companies who don't have the resources to market their own brands," says William Schereck, president of the TV Shopping Network. Starting from last July, TVSN has been broadcasting a live service via satellite and pulled down since December in China. Most of the viewers are expatriates who can own dishes under China's strict media laws. This year it hopes to distribute through some cable channels. The cable operators will get a five percent commission for the product's net value, minus shipping and tax. "We will become a contributor to China's development as so we get cooperations from the government," Schereck says. It will be difficult to establish the infrastructure that allows consumers to instantly obtain the items that flash across their TV screens as well as provide after sales service. Some have begun to build warehouses but the road and rail system remains inadequate. China has a long way to go still because although there is 250 million TV owners in China with a 97 percent penetration in Beijing, according to Survey Research Group, there is still a low ownership rate of telephones. Asia Market Intelligence estimates there are only 2.6 million telephones in Beijing; 3 million in Shanghai and 5.5 million in Guangzhou, which is the highest penetration of any region of China. Mobile phones bring the number a little higher but not much. Home shopping services are hurt by these statistics. Switchboards also don't have the capacity for so many calls at once. Asian switchboards fall way short of those in developed markets. Even Hong Kong doesn't have the infrastructure for this. Payment is also a difficult issue in China where credit card usage is minimal. However, in spite of these problems. The attraction of millions of households will have appeal to many shopping networks. "Sheer demand may help to develop the infrastructure significantly," says Wick Smith, managing director of advertising agency BBDO in Hong Kong.
China Trade Report (Hong Kong), 02/01/97
Service Sector Barriers Block Market Entry
According to the EIU's recently published report, Multinational Companies in China: Winners and Losers, the services sector is protected by the Chinese government more closely than any other. Major regulatory constraints face multinational corporations in accounting, advertising, banking, insurance and law. Accounting firms must be fifty-fifty cooperative joint ventures. These will soon be replaced by "membership firms" but international firms complain that creating local Chinese partnerships will cost an unusual amount of money for training and support. The Ministry of Finance has compromised by allowing up to 33 percent direct holdings by international accounting firms for the first five years of the Chinese member firms' operation. In advertising, only joint ventures are allowed to do direct media buying. Other foreign firms must go through a media broker. The dual advertising rates for foreign and local companies is gradually being replaced by a single-tier system. In the banking sector, foreign banks may not take deposits in Chinese currency. Only in very limited "experimental" locations can banks take these deposits. In the insurance industry the government takes a general protectionist line. Only Shanghai and Guangzhou were open to foreign insurance companies at the end of 1996. Foreign law firms may not advise or interpret laws or represent clients in Chinese courts. Chinese lawyers hired by foreign law firms have their practice certificate suspended. They also are not allowed to form joint ventures to try to avoid the above constraints.
EIU Electronic (U.K.), 03/05/97
Organization Claims China's TV Ads Are Sexist
A series of articles published by the All Women's Federation says that television advertising is sexist and demeaning and reflects a widespread gender bias in Chinese society. One third of China broadcast advertising "presents stereotypical images of women and plays down their contributions to society," says Federations researcher Li Boheng. Of 1,200 commonly seen advertisements women were portrayed as sex objects, housewives and secretaries.
UPI (U.S.), 03/06/97
Market Researchers Try to Understand Chinese Habits
Lists of what Chinese people earn and what they own is not enough anymore for marketers and ad agencies wanting to sell in China. As consumers become more sophisticated, researchers are pouring into China to discover what really drives the people there. "You can read a million articles and sift through reams of data. But until you get into their homes, you'll never understand the passion and the knowledge they have for what is happening to them (as consumers)," says Mark Pacchini, vice president and world-wide account director with advertising agency Foote, Cone & Belding. Grey Advertising is giving disposable cameras to children to take pictures of what they like and don't like about their lives rather than using words to explain it to a stranger. For years, foreign companies were too dependent on quantitative data and simplistic marketing myths about Chinese consumers. Now marketers are focusing on the emotions of customers and hopefully do away with myths that came about ten years ago. People are spending less freely these days, the marketers say. About 15 years ago Chinese spent about 80 percent of their income on discressionary items, but now than spending has been cut by more than half, says Bruce Paul, senior consultant with Sofres Consulting Asia Pacific Ltd. "The dollar signs that Western companies had in their eyes when they first came to China are beginning to fade," says Paul. "In reality, Chinese consumers are still very poor. They have about one-twentieth the spending power of people in Hong Kong." The need for a better understanding of consumers is apparent.
The Asian Wall Street Journal (U.S.), 03/24/97
Buying Advertising Time in China
Multinationals selling their products to China smell opportunity when they hear figures such as 83.4 percent of China's population watches television. Advertising agencies also stand to gain as the television industry has become big business in China. "I think all of the sudden the Chinese government and certainly people like CCTV have woken up to the fact that there is a great deal of money to be made out of advertising and its a significant hard cash earner," says Martin Dufty, the Hong Kong based media director for buying operations at Zenith Media China. Compared to the West media advertising is still relatively cheap (on a cost-per-thousand basis). However, it is still difficult to know how to use in a marketplace with 700 TV stations (an increase from only 32 stations in 1978) and 2,000 channels). It is still hard to tell when the ad agency books the time if the TV station will actually air the commercial at the right time or whether it will air it at all. This makes monitoring the ads virtually impossible. Many markets will accept your booking without telling you when it will air. So you can't get you money back if you don't know when it will air. Many times it is merely a logistics problem, especially in small cities when phones and faxes don't work. It is also often the case that stations don't care if they sell to you or not, even if you pay premium. The commercial venture concept still hasn't taken hold in many cases. Many people at the stations take home 1,000 renminbi a month whether they sell or not. So how do advertising companies know which station is best for their clients? Since there isn't any research it is pretty difficult to determine. Some companies have tried to fill this market research need like Sofres Media China. They are offering meters which will tabulate viewers habits in at least one Chinese city by year's end. Neilson SRG also has a ratings system set up in Shanghai. Some interesting trends are beginning to surface. "There is a cable revolution in the Chinese media, and we will see evidence of this made concrete from Sofres' rating data," says Dufty. He also estimates that ad spending on cable TV will increase by 100 percent over last year. The number is expected to be 80 million by 2000, which would make China the biggest market for cable TV in the world.
China Trade Report (Hong Kong), 04/01/97