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Anyone For A Bucksstar Coffee?

On his latest trip to China Mark Hedley discusses the impact of the brand names of the western world and how the growing market of copycat products is helping to reinforce these global brands.

On one wet and rainy Sunday afternoon in Beijing last month, I decided to go and try to pick up a local Chinese gifts for friends and family back in Britain. Unfamiliar with the best shopping locations in the city, my hotel concierge recommended I take a stroll down to the pearl market, located just a few blocks away from my hotel. The market was overwhelming – a five storey building the size of a multi-storey car-park, packed full of small stalls selling all manner of traditional Chinese ornaments, memorabilia, clothing, jewellery and so on. This was the kind of place where you could buy everything from Chinese teacups, to aviator shades, knock-off golf clubs and a laser telescope.

Anyone that has ever visited China will be familiar with the noisy and irritating cajoling from sales girls with a minimal grasp of English and pushy attitude. Feeling like I’d walked onto on the floor of the New York Stock Exchange, I hastily beat a retreat towards the exit, until I was stopped in my tracks by what seemed to be an I-pad (that most coveted of modern gadgets) being sold for a draw-dropping $150 (about 5 times cheaper than those in the UK). Fumbling for my wallet in hasty excitement, I suddenly noticed that I was not looking at a genuine bona-fide I-pad, but was actually something called an ‘A-Pad’…

What is an A-pad? Well, to briefly explain, over recent years, China remarkable economic expansion has led to the gradual opening up of the consumer economy to a whole host of global consumer brands, from Apple, and Microsoft, to designer brands like Burberry and Louis Vitton. This booming appetite for branded consumer goods has also been accompanied by the rise of ‘Shanzhai’ phenomenon. A fairly recent phenomenon, ‘Shanzhai’ can roughly be translated as ‘Mountain Stronghold’ or ‘Mountain Village’ refers to near copies of famous brands or products, but where the brand name or design has been slightly altered or modified slightly from the original brand. The easiest place to spot this Shanzhai phenomenon is in China’s countryside, where many of the products are produced and sold at prices far below the original brands.

Originally shanzhai was mainly used to refer to the cheap mobile phones and digital devices produced in and around the manufacturing hub of Shenzhen. However, over time the concept has developed to refer to anything that imitates or spoofs a famous brand, and often contains more than a dash of rebellious humour. Some of the more amusing examples of include a southern fried chicken chain store named ‘KFG’, the ‘Buckstars’ coffee chain, and a search engine with a vaguely familiar web address: ‘Goojje.com’. There have been Shanzhai versions of Hollywood movies, Shanzhai celebrities and a Shanzhai version of the 2008 Beijing Olympic opening ceremony.

Although the Shanzhai phenomenon no doubt terrifies the vast majority of Western corporations keen to protect their intellectual property rights in China, if nothing else it does serve as an ironic reminder of the power of the brand to penetrate even the most remote and insulated of markets without any real marketing. In actual fact, rather than diluting the power of the brand, the Shanzhai versions actually serve to help to reinforce these global brands by duplicating and popularizing them with a large group of potential future consumers.

Over the next few years we will see rising incomes in developing markets like China, with more and more people lifted into the middle classes, and this should result in a growing number of companies shifting from Shanzhai consumption towards mainstream consumer culture. Although part an ironic rebellion at the high cost of luxury brands to the majority of Chinese people, more importantly the shanzhai phenomenon expresses the deep aspiration for material wealth among the Chinese peasantry that will one day reap huge rewards for Western brands that can learn to position themselves correctly.

Posted in Branding, China, Mark Hedley, Thursday Night Insight |
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Buying a House

Mark Hedley this week realises that listening to and understanding customers’ needs is always key to making a successful sale.

The last few weeks of my life have been dominated by what has to be one of the most stress-inducing experiences one can have in life – buying a house. Having lived in rented accommodation for more than a decade, I had always dreamed of escaping my world of cheap decoration, shoddy furniture, broken boilers and dodgy landlords, and to finally have a place of my own to call home. Not only that, but with the housing market still in the doldrums, what better time for the astute first-time buyer to pick up a great house at a bargain basement price!

 
Little did I know what lay ahead of me as my wife and I drove to our first viewing on one sunny Saturday morning back in May. Having made half a dozen appointments with eager estate agents the previous day, I was sure that we’d have found the house of our dreams that very afternoon and be home in time for Final Score. With so many properties on the market, I was convinced that we’d find a fantastic property in no time and that the vendors would all be on their knees begging us to take it off their hands.

The first house we went to visit set the tone for the day. On entering the house I was overcome by a strange and powerful smell emanating from the kitchen that I couldn’t quite place. When we entered the kitchen all became clear as we saw the dripping ceiling and column of mould running from the ceiling down to the sink below. The polite gentleman showing us round the house assured us that, although the house ‘needed a bit of work’, it had ‘real potential’. Suddenly, I had entered a world of oblique euphemisms that would need decoding to know what a house was really like. Over the next few weeks I would quickly learn that houses advertised using certain phrases were best avoided, such as:

 
The next four viewings that day were almost as disheartening. Even when the house was relatively well furnished, there was usually something that let it down in our eyes. Either the rooms were too small, the location was wrong, there was no garden or the ‘newly fitted’ kitchen seemed to have been teleported from the mid 70s.

Our disappointment that day was to be repeated several times over the next few weeks, as we traipsed around weekend after weekend searching for properties that met our needs and budget limitations. By the time we finally decided on a house, we must have already viewed at least 30 or 40 different properties and inched that little bit closer to that mid-life nervous collapse. Having said that, the tedious process of house-hunting undoubtedly helped us to better refine and crystallise what type of house we were looking for, and forced us to think more carefully about what our real underlying needs were. For example, before starting hunting I had no idea that the thing I most desperately lacked in life was a fitted dishwasher rather than a slimline, and that I may well contemplate suicide if I am to go another day without a chrome-effect heated towel rail.

The whole experience also caused me to realise that fully understanding customers’ underlying needs is critical to success in any market, and especially one that is crowded with competitors and very little differentiation between suppliers. The estate agents that had now taken to harassing me on a daily basis to go and view this or that ‘fantastic little property’ seemed completely indistinguishable from one another, and despite their hard efforts none of them seemed to have properly grasped the type of property that we were looking for.

In markets where brand awareness is low and competition is fierce, fully understanding and meeting customer needs is paramount to success. In the case of buying a house, buyers do not particularly care about brand and are purely motivated by a house’s specific features and its price. Most estate agents had failed to properly appreciate our underlying requirements and had simply shown us around the houses that fell into the price range we had mentioned to begin with. Had these agents focused more on their level of service (i.e. in terms of fully understanding our needs), this would have distinguished them from the competition and would have been more likely to lead to a sale.

The house we finally decided to buy was well above our initial budget. The estate agent that eventually got the sale had only introduced us to a total of two properties. By listening to our comments when we looked around this first house and by asking the right questions, he had realised that our true needs did not revolve solely around price, and that we might be prepared to pay a slight premium for a property that satisfied our principle underlying needs. The agent had also shrewdly realised which property features we would be willing to sacrifice and what were the ‘must haves’. For example, while we were happy to forgo a garage or an open fireplace, the agent had picked up on the fact that modern decoration, proximity to public transport and a private garden were features that we couldn’t go without.

The need to properly assess and satisfy underlying customer needs runs strong in all markets, and companies should always beware of assuming that price is the only factor informing purchasing behaviour. In fact, consumer decision-making often relies on a myriad of different considerations, from product features, speed of delivery and return-on-investment through to after-sales support and customer service. For myself, although price had acted as the starting point, in the end it was the specific features of the house (such as decoration and location) that proved to be more important when making the final decision. Well, those things and that chrome-effect heated towel rail.

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The Lessons to be Learned from Eyjafjallajökull

In his first Thursday Night Insight, Mark Hedley recalls his recent volcanic ash predicament, explaining how companies can very easily turn difficult situations to their long-term advantage.

It would be no exaggeration to say that I have appalling luck when it comes to air travel. Along with thousands of others, I recently saw my life turned upside down by the sudden eruption of Iceland’s tongue-twisting volcano. Having already spent more than a week in China and very much keen to get back to my loved ones, the prospect of being trapped in Beijing for another month didn’t exactly fill me with excitement. Unlike travellers stranded in continental Europe, many of whom were able to find their ways home by land or by sea, those of us stranded further afield were effectively frozen in a state of travel paralysis. In the end, after a week spent idling away the hours in my Beijing hotel room, the clouds of ash above Europe were finally to dissipate and I was eventually able to make it back to the UK with a massive sense of relief and an equally large mini-bar bill.

Whenever I have had flights delayed or cancelled, the biggest irritant has been the lack of clear and timely information from the airline about the situation. During the volcano crisis, for example, I was astounded to find that my airline had completely closed down its customer service hotline – not to be resurrected again until the after the crisis had ended! Given the extent of the chaos and disruption caused by the blanket shutdown of European airspace, it did seem a tad bizarre that the major airlines were allocating fewer rather than more resources to deal with customer enquiries and complaints. Vainly hoping to hear a friendly and reassuring voice at the end of my airline’s customer service hotline, I was disappointed to find myself repeatedly listening to a recorded message urging me to visit the airline’s website for more information (obviously, the thought of checking the website hadn’t occurred to me…!). In the end, the most useful sources of information turned out to be online blogs, social networking sites and satellite TV stations. The only pearl of wisdom to be found on my airline’s website ran: ALL FLIGHTS CANCELLED DUE TO ERUPTION OF VOLCANO IN ICELAND. WE APOLOGISE FOR ANY INCONVENIENCE TO CUSTOMERS THIS MAY HAVE CAUSED.

The whole volcanic ash crisis is estimated to have cost the airline industry over a billion Euros, and with a new of plume of ash from Eyjafjallajokull currently threatening European air space, the final cost to the sector is likely to be unknown for some time to come. Not only that, but the possibility of a second, larger volcano erupting sometime in the next few years means that frequent flight delays and cancellations could blight our lives for years to come. However, beyond the pure financial losses incurred by the airline industry, the volcano crisis may have inflicted even deeper scars in terms of its effect on long-term customer loyalty.

According to research, the airline industry benefits more from positive word-of-mouth recommendations than almost any other industry, which makes the poor customer service experienced by myself and others during the volcanic-ash debacle all the more baffling. Although you may not have been directly affected by the crisis, it’s almost certain that you know someone who was. Whether it be a friend, family member or colleague, I’m sure you have been forced to listen at length to someone you know vent spleen at the poor airline customer service they received during the crisis. Although you may not be consciously aware of it, such tales of woe are highly likely to affect your purchasing behaviour the next time you come to buy an airline ticket.

In both consumer and business-to-business markets, customer loyalty is as much about quality of products and services as it is about the ability of a supplier to go that extra mile (or even inch) to keep its customers happy. Customer loyalty is often driven by smaller, often inconsequential-seeming things, which may be hard to measure but can be vital to retaining customers over the longer term. The airline industry is perhaps unique in the impact that poor service can have on a customer’s personal and professional lives, and bad experience is therefore more likely to influence long-term loyalty than for other types of product or service. Consequently, when poor customer service leads directly to stress and anxiety for the customer (as in my case), these negative emotions will be internalised and will persist in a person’s psyche long after the ash has settled in continental Europe.

Although times of crises such as these present a real danger of losing customer allegiance, they also represent an excellent opportunity to gain customers’ trust and loyalty. With a few minor changes to its approach, my airline could have turned an overwhelmingly difficult situation for passengers into a positive customer service experience, resulting in increased long-term customer loyalty. For example, the airline could have dedicated more resources to keeping customers up-to-date on the unfolding situation, whether through a 24-hour customer hotline or by proactively calling, or using texts or emails, to keep customers informed. It seems absurd in an age where most of us are wired up to the teeth with mobile phones, laptops, I-phones, pods and pads that airline operators shouldn’t be able to use these technologies to keep customers up-to-date with the information they need most urgently. Such measures would have gone a long way to alleviating customer anxieties and would have concreted a positive image of the airlines in the minds of their customers.

In fact, most customers tend to show a higher level of understanding towards suppliers in times of short-supply or under challenging market circumstances. During such times, the simple act of keeping customers updated may be sufficient to meet customers’ basic needs and be the only thing that distinguishes a company from its competitors. Not only could this simple act help to secure customer loyalty in the long term, a failure to do so may have the opposite effect. Ultimately, as the airlines are slowly beginning to find out, a company’s ability to offer that extra level of customer service may well be crucial to securing long-term customer loyalty and enabling it to stand out over the competition.

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