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Business Advice

Buying into branding

Asian firms focus on products and neglect customer experience: Marketing guru
The Straits Times - December 14, 2011
By: Jessica Lim
| More
Buying into branding

MARKETING guru Bernd Schmitt is spearheading an effort to ensure that Singapore becomes the go-to centre for businesses looking to engage with Asian consumers.

Amid the soaring spending power of the region's consumers, Asian brands must guard against being edged out of the huge market by Western ones, he warns.

Professor Schmitt, 54, recognises that this is a major challenge. He believes effective branding is sorely lacking at many Singapore and regional companies.

But he hopes to help change all that as he takes up his post as director of the newly created Institute on Asian Consumer Insight (ACI). In July, he signed a two-year contract to head the institute, based at Nanyang Technological University's (NTU) business school.

The research centre - funded jointly by the Economic Development Board and NTU to the tune of $77 million over five years - was set up to pinpoint what drives Asian consumers and how their unique tastes and cultures affect their buying decisions.

Prof Schmitt is passionate about branding. Indeed, he describes himself as a living illustration of a brand.

His personality, image and reputation are delivered not only through what he says, but how he says it - his animated hand gestures, the way he dresses and the contagiously enthusiastic way he communicates.

While speaking to The Straits Times from his studio apartment at The Sail @ Marina Bay, he sports an industry standard grey suit with unconventional pink shoes and striped socks.

The image he has fine-tuned over the years, he says, is one of a nutty professor of sorts: A business-minded, innovative and accomplished researcher with a dose of quirkiness.

It has been working well for him so far, he says, adding that it has given him a competitive advantage in the business world and within the academic community. His keynote speeches, for instance, are well known to be entertaining. He loves delivering them, he says, because it is like putting on a show.

'It is important to have a clear presence. People know me as someone who doesn't just preach, but lives it,' he says.

But many Singapore companies have failed to develop effective branding, says the director of the Centre on Global Brand Leadership at Columbia Business School in New York.

The affable visiting professor, who lives here, reckons the time is ripe for local businesses, as well as for those in the region, to get serious about branding.

The German-born marketing guru, who has lived in Hong Kong, China and South Korea, says a shift is on the horizon in global consumer terms.

The current reality is that consumerism is centred in the United States. Americans became the leading consumers in the world after World War II - when production fuelled the growth of the middle class and economic expansion - and they still hold that position.

They are the prime target of every global company, and what happens in the US in terms of marketing campaigns becomes the reference point globally, he says.

He predicts that a paradigm shift will happen this century as Asia grows in economic strength and the purchasing power of consumers in immense regions such as China and India continues to increase.

This viewpoint is fast becoming accepted as an immutable fact.

The Organisation for Economic Cooperation and Development, in a report in January last year called The Emerging Class in Developing Countries, estimates the region will drive 80 per cent of global middle-class spending growth, which is projected to rise from US$21 trillion (S$27 trillion) in 2009 to US$56 trillion in 2030.

Local and regional companies should position themselves to capture a good chunk of the market - or risk being edged out by Western brands, says Prof Schmitt.

That is already happening, he says, listing numerous foreign labels, including Aeropostale, H&M, Banana Republic and Gap (and soon, Abercrombie & Fitch) - that have set up shop here recently to overwhelming consumer response.

He notes that Asian companies tend to have a more 'engineering orientation' towards sales: They invest in technology to develop a good product that is expected to sell automatically. Marketing and branding is an afterthought.

At first glance, this would seem like a workable model, but it is not in today's marketing world.

Many products are in the 'mature stages of their life cycles' and are very much identical, he says: 'What matters now are the designs, the marketing communications around it. That is all branding, a major thing most Singaporean companies neglect.'

In his view, branding is all about creating experiences for customers.

He points to local company TWG Tea, which leverages on consumers' association of a French image with luxury.

'It is no longer about selling tea, but selling the entire environment, a lifestyle,' he says, holding Singapore Airlines and Starbucks up as other examples of successful marketing.

The other problem is that local companies - and Singaporeans in general - are too risk-averse.

It is a chicken-and-egg situation: Asian consumers shy away from trying new things and businesses err on the side of caution for fear of alienating them.

In broad strokes, he says, studies have shown that Asians tend to have a 'collectivist mindset' with similar attitudes and views on certain things in the world. In turn, communication messages tend to be 'less offensive, less taboo, not too crazy'.

Apart from setting up the institute, he has spent days along Orchard Road, as well as in lesser-known shopping areas in the heartland, armed with a video camera and observing Singaporeans shop.

At the Versace collection for H&M sale last month, for instance, he recorded consumers peering through the glass windows and noting down what others were buying. They later bought the same things.

'No one dresses in an interesting way here. It is all uniform, all bland with few bright colours, few wild designs, and men don't wear boots,' he says. 'It points to Singaporeans being a bit more conservative, not taking risks.'

Marketing and management here also end up less risque.'

He recounts ordering a cup of tea at a restaurant last week. The waitress insisted on repeating his order. 'One tea,' she said, looking to him for approval.

That, he says, is a classic example of blindly following standard operation procedures.

Businesses should take a leap of faith, he urges.

In the past four months, he has met the managers of 40 consumer goods companies, including banks, and aims to create 'a community of businesses and researchers interested in Asian consumer insight'.

A handful have signed up for ACI's research projects to help them innovate their brands, products and services to meet the needs of consumers in the region. Regular forums, seminars and workshops - which chief executives and managers attend for a fee - will also be held.

The institute's 20 researchers will also fan out across the region to gather qualitative and quantitative data on Asian consumers. This could include, for instance, research on how often villagers in China wash their hair and what they think makes a good hair product.

There is a reason, he says, why the institute cannot simply come up with a magic formula for companies to adopt wholesale - each business is unique.

Successful labels such as Abercrombie & Fitch and luxury brands like Gucci should not adjust their brand image across regions, he says, adding that Abercrombie & Fitch targets the clubbing crowd that exists in any society.

Brands such as these create a world that is not the real world. Adjusting would just drag the brand down to real life, he says.

However, most other brands - like Nestle, Procter & Gamble and Unilever - need to tailor their products to particular markets.

'These companies need to segment the Asian market and require lots of details of the lifestyles of particular consumers, how they define beauty, what they consider taking a break to be,' he says, adding that is where ACI comes in.

Most current research, he says, differentiates only between the Asian and the Western consumer.

Asian women are typically viewed as fashionistas who love branded goods. Asian men are 'techies', for instance.

The institute aims to look beyond such generalities.

Throughout the hour-long interview, the professor speaks openly about his knowledge about branding.

He paces excitedly around the room and even offers to prostrate himself for a photoshoot.

But when asked about his personal life, he clams up. The only information he offers: He is a big opera fan and likes to go to the Esplanade.

'I don't want to tell you about my personal life, I don't want to be known as the family guy,' he says.

Just as well. It probably clashes with the Schmitt brand anyway.

Marketing whiz and author

PROFESSOR Bernd Schmitt, 54, is the executive director of Nanyang Technological University's new Institute on Asian Consumer Insight.

The visiting professor still holds his post as a professor at Columbia Business School in New York, where he heads the Centre on Global Brand Leadership.

He completed his PhD in psychology at Cornell University. His research - which focuses on experiential marketing, brand management and international business - has been published in leading marketing and psychology journals.

The American, who also holds a German passport, has been researching and teaching in Asia for 20 years.

He has authored or co-authored seven books, which have been translated into 20 languages, including Experiential Marketing (1999), Customer Experience Management (2003) and Big Think Strategy (2007). He just completed his eighth book on customer happiness, Happy Customers Everywhere. It will be published next year.



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