State of the Nation: Can China’s brands reimagine a positive future?

At the beginning of 2022, people were experiencing “the darkest hour before dawn” - hoping for the pandemic to come to an end. Yet, even as we approach the end of the year now, dawn seems far off. The rigid and erratic policy of the pandemic has drained us of hope that things will get back to normal", but they're not the only reason.

Chinese consumers' pessimistic mood

Consumers are feeling the effects of the economic downturn. The situation is surprising; despite China's reopening in November, consumption levels remain gloomy. Streets around economic centres in many cities remain empty. Weak consumer confidence and trust issues with the government are among the additional things causing these melancholy conditions.

Chinese, who are already risk-averse, have become more concerned with saving their money than spending it, especially the younger generation. As shown in a survey conducted by the People’s Bank of China in 2022, the percentage of citizens who “consumed more” remained the same as last quarter, but the number who said they "saved more" rose by 3.7%.

Amidst this challenging environment, brand owners in China are compelled to be less ambitious and adopt a safer approach to strengthen their ability to maintain revenue. While brand owners are aware that there will be an upward trend in the future, they remain cautiously optimistic. In light of this circumstance, we at BBDO observed three key marketing challenges faced by most brands during our work with them:

1. Consumer: Consumption is being approached more cautiously. At the same time, China's demographic dividend is fading. In 2016, the working-age population in China was 907 million, accounting for 65.6% of the population [2]. That number dropped to 876 million in 2022, accounting for 62% of the population [3].

2. Channels: Offline traffic is still weak, while online traffic is overcrowded as more brands enter the online battlefield.

3. Business: Research and consulting firm Gartner reported that 53.85% of companies cut down on their marketing budgets in 2022 [4].

When faced with these challenges, every advertising action requires a strategic mindset. These challenges constantly ring a conundrum in marketers’ minds when developing strategies for advertising: with a limited marketing budget, how can we efficiently drive consumers to the brand using channels that are so crowded?

Here are four tricks we learned while accompanying clients through the journey of tough times in China. Whilst some of these trends are emerging transformations that brands are embracing, others are “true norths” that require persistent effort.

1. Transition from paid to earned

In the past, with a generous budget and a pool of highly engaged consumers, brands used to pay a substantial amount for traffic to increase brand or campaign awareness, using a ‘classic’ advertising model, IMC, which worked around one core themed message to be repeated across various touchpoints. As e-commerce and social media emerged, this pattern became even more pronounced.

However, today's tight marketing budgets make it challenging for companies to implement this classic model. It's also more challenging for brands to stand out in a crowded communications landscape. As a result, brands are now trying to enhance their approach by creating some PR value - not solely tied to a key message but instead centred around insights into the public’s social interest to make the brand a “platform” that drives proactive consumer discussions and engagement.

In today's advertising landscape, the format is getting increasingly flexible. Not necessarily a TVC or key visual, but something that originates from the brand itself.

2. Branding & brand communication are as critical as ever

Even with all brand owners eager to uplift sales, we observed that many brands still continue to invest in branding to win long-term and sustainable growth.

There is because during downturns, keeping the share of voice is critical for retaining market share. According to data from Kantar, companies that kept investing in branding during the downturn showed salient sales growth after surviving an economic crisis.

Also, with the declining demographic dividend, the only way to win consumers’ choice in an overcrowded market and with limited consumers is to build a memorable and distinct brand in consumers' minds.

3. Assuming more social responsibility and ‘good’ behaviours

In this turmoil period, Chinese consumers’ trust towards the government turned more fragile. Brands, as third-party entities, have an opportunity to take on greater social responsibilities, which can be an effective tool for gaining consumer affinity and resonance with consumers.

According to data from a new BBDO Voices study, 40% of Chinese consumers like brands that support the issues they care about. As such, more brands initiate to construct purposeful communication and brand actions geared towards the environment, female empowerment and so on.

4. Keeping pace with public sentiment

Continuous lockdowns, economic uncertainty, and rising unemployment rates have led to a depressive sentiment among the Chinese, especially among the young generation. Therefore, consumers sometimes reject preachy and overly patronizing messaging from brands. In contrast, only real resonance that shows an authentic and genuine understanding of their life can bring them comfort.

A negative example is BILIBILI’s 2021 annual TVC, which led to heated debate among young consumers since it presented them as an exciting generation with plenty of great opportunities. But, as we zoom into reality, the wonderful image falls apart. With insufficient opportunities and extremely high living expenses, they live in a tougher and more competitive situation than ever. Young people need strength to move forward but are more sensitive about ads presenting fake peace and hope.

Passing through these difficult years, brands in China are striving to survive with tight market budget. To attract consumers efficiently, brands need a flexible strategy on one hand. Yet, on the other hand, a long-term vision and patience are also critical in the darkest hour before dawn. However, by remaining innovative and resilient, brands can pull through any crisis regardless of the future.

Carol Gao is the associate planning director at BBDO Shanghai.