Why Do Some Luxury Brands Do Bad Business In China?

To date, many luxury brands still underestimate the complexity of the Asian market.

For example, they still adopt a "one size fits all" approach to China's marketing content, and are still questioning why they are not impressed by Chinese consumers.

Luxury brands, including some of the world's most successful brands, have yet to develop their potential in China and other parts of Asia.

Recently, Prada blamed the economic slowdown on China's economic slowdown, but for me, it sounds like an excuse to hide the weakness of brand implementation.

The real reason for the poor performance of the Chinese market is usually the lack of accurate and timely consumer insight and dialogue with them in a sincere tone.

Let's start with insight, which is not yet collected by most companies before they start their business in China.

For example, a famous European luxury fashion company wants to analyze why their performance in Asia is not satisfactory: first, most of the consumers of luxury brands are still 45 and over, and for some reason they can not enter the huge Chinese Millennial and Z generation market.

Secondly, customers who buy the most representative and traditional product lines of the brand are even older, while younger customers purchase less entry-level brands and lower brand loyalty.

In other words, the top customers of the brand are already very old and are slowly disappearing. Another important observation is that consumers who spend the most time (buying more than $10 thousand each time) are leaving the brand, while the newly acquired consumers spend less than 30 thousand dollars on average.

Therefore, some basic mathematics can tell us that with the death of old customers, the brand's profitability will decline.

Finally, because of China's high operating costs, many stores are losing money.

Strangely, these trends are in sharp contrast to what the brand has experienced in the European and American markets.

To get the real answer, the brand needs to use real-time consumer data to understand what has happened.

There is no doubt that this is a challenging task in China.

But when we use advanced social media to listen to brand related discussions, we will soon be able to understand why the brand performs poorly in China:

1. brand positioning has nothing to do with Asian consumers.

First, brand information does not resonate with Chinese consumers.

Brand positioning exists in the brain of the brand Handbook and brand leadership team. Consumers do not understand the brand correctly, and even describe the brand in a completely different way.

This is one of the most typical findings in our work: the mismatch between management team and consumer cognition.

This is more common in China.

I can't say that Chinese consumers are different from Western consumers in terms of brand recognition: they first buy brands and then buy their products.

But if the brand is not clearly defined, consumers have no reason to buy it.

In the luxury fashion case I described, the brand positioning is too vague, which we can accurately identify by artificial intelligence social media measurement, for example, if there is no specific information displayed, then there is no specific dialogue about the brand.

The hard data collected online helps managers understand this and make it easier for them to change their strategic approach.

2. communication content is irrelevant.

Through the use of digital data query tools, we can confirm that most brand marketing efforts in China have not produced results.

Their information is irrelevant, content does not resonate, consumers never participate in it, nor do they build communities around brands.

We propose to adopt a completely different communication mode without changing the brand positioning to convey brand information to local consumers in a clearer, more understandable and authentic way.

I often explain to the brand that they do not need to build different brands, but need different expressions of original brand positioning.

If it is global positioning, we will work with our headquarters to strengthen global brands before localization.

If the content of the company is not important in China, any communication on this basis means that the brand is wasting money instead of strengthening the brand.

That's why clear content is so important in every market.

3. competitors communicate with target consumers in a better way.

Many brands only focus on their own stories and do not want to see their brands in the competition.

In the increasingly competitive era, it is difficult for companies to determine when and how to hijack their consumers.

The only way to know is to use AI based consumer analysis and machine learning functions to remind your company when things happen.

Real time monitoring of competitors enables companies to accurately identify when consumers are inclined to or away from brands.

These findings give us an important message that taking action before understanding the root cause of the problem does not solve any problem, it only consumes time and money, and it also hinder your team and bring advantages to competition.

In the worst case, brand equity will deteriorate sharply, and the company may cease to operate in a market.

But collecting all relevant information through AI can help brands form a precise and effective Luxury Strategy for the Chinese market or any other new market.

Author: Daniel Langer