Marketing in China can be tricky. Consumers there are eager to learn about Western brands, but that interest can quickly turn to outrage if people feel that companies have been misleading.

Here are three recent stories of brands that 'lost face' in China and how others can avoid the same fate.

Last August, Econsultancy warned brands advertising in China to become familiar with new advertising legislation in the country.

In particular, they needed to know that the Chinese State Administration for Industry and Commerce is looking for exaggerations and falsehoods in ads, especially for companies that sell health-related or financial products.

Brands in China should also be aware of the TV show known as '315' which names and shames firms on national television for stretching the truth, including large brands such as Apple and Volkswagen in previous years.

Here are the stories of three companies that fell foul of the examiners in March of this year and what other brands can do to avoid the same thing happening to them.

1. Blackmores (Australia)

Blackmores is a manufacturer and distributer of vitamins, minerals, and nutritional supplements. It has also had enormous success in China with double-digit growth over the past two years and sales of over A$100m in 2016.

One overview of the brand's strategy in the country says that Blackmores has been successful in China because of its strategy on China's biggest social chat platform, WeChat.

Yet it seems that WeChat was also the cause of the brand's recent shaming.

According to the Shanghai Administration for Industry and Commerce, the company's advertising on WeChat claimed that its products could 'prevent and cure cardiovascular and cerebrovascular diseases and arthritis'. Additionally, the bureau noted that Blackmores made an unsupported claim to be "the No 1 Australian nutritious product brand." 

As a result of violating the new advertising laws, the firm was fined RMB346,600 (around US$50,000) and consumers were entitled to claim three times the price they paid for comparative products as compensation.

If the brand or its agency had reviewed the law before advertising, it would have read that Article 6 bans the advertisement of medical treatments unless it has been examined by the 'advertising examination authority'.

While the law does not indicate how to seek approval, brands should learn from this incident and seek legal advice before advertising products with health benefits or medical treatments and ensure they are not violating current legislation.

2. Nike (USA)

Like in the rest of the world, Nike is a very popular footwear brand in China and more that 10% of the brand's global sales are in the country.

Recently, though, the TV show '315' (so named because March 15th is World Consumer Rights Day) found that 300 of its Hyperdunk sneakers were advertised as having 'Zoom Air' airbags. Yet when the shoes were cut open, no 'airbags' were found. 315 proceeded to name and shame Nike on its most recent programme.

According to industry experts, it's unlikely that there will be any legal implications due to this error. Nike has, however, admitted fault and "will fully cooperate with the government regulators regarding their inquiries." When asked about the gravity of the incident, the CEO of H+K Strategies in China said that "the damage is more to [Nike's] public image."

So what can brands do to avoid a similar situation?

While it is highly unlikely that a brand the size of Nike's could ever ensure that 100% of its products were absolutely to the advertised standard, other brands can still learn from the experience.

First off, marketers should note how far '315' will go in order to challenge a claim made in an ad and so they should be careful about making grandiose statements.

Other brands should also learn from how Nike handled this issue. It was clear that Nike had a PR response ready to go and did not dig the brand in deeper by hesitating or trying to explain it away. The truth may hurt, but it's best to suffer it quickly rather than letting it get out of hand.

3. Muji (Japan)

Muji, the Japanese household items, stationery, and apparel brand, was also shamed on the most recent broadcast of the consumer watch show '315'. The company was accused of importing food into China from an area of Tokyo where high levels of radiation were detected in 2015.

Unlike Nike, Muji's parent company Ryohin Keikaku quickly announced that the firm was not selling products in China from any areas affected by radiation. This claim was subsequently confirmed by the Financial Times who backed up the claim that the address in question was the food company's headquarters, not where the food was grown.

Again, there is little that Muji could have done to avoid the accusation as memories of nuclear contamination from the Fukushima disaster are still very clear in consumers' minds. 

The lesson from this episode is that Chinese consumers are very sensitive to food safety issues. There are numerous cultural reasons for this but another important factor is that, in 2008, six infants died from infant formula which was intentionally tampered with and at least another 50,000 were hospitalized.  

After such a scare, it is unsurprising that food safety is still of great concern in the country and so any brand that sells food in any capacity needs to be extra careful about the quality and safety of their product.

Muji will probably suffer unnecessarily from the accusations but, again, it was smart to address the issue head on through rapid crisis response.

So...

China and its billion or so consumers are a tempting target for many Western brands. In order to become and remain successful, though, companies need to understand the many quirks of the markets and to be prepared to manage the fallout if they make a mistake. 

For most brands, this will mean working with a local partner who will ensure that the company doesn't commit any egregious mistakes but brand marketers should also become familiar with the law and institutions such as the '315' TV programme as well.

Doing so will hopefully keep their company from 'losing face' in the country and a subsequent humiliation, and expensive, retreat.

Jeff Rajeck

Published 13 April, 2017 by Jeff Rajeck

Jeff Rajeck is the APAC Research Analyst for Econsultancy . You can follow him on Twitter or connect via LinkedIn.  

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