This backlit poster was everywhere in the airport at HongKong, where many international travelers make the connection to Chengdu.
This week I am in Chengdu, China, teaching at Southwestern University for Finance and Economics. Chengdu, not a name well known in the US or the UK, is a very large city in southwestern China, capital of Sichuan and home to the Panda Research Center. More important for me on this trip, Chengdu is the new “Silicon Valley,” all high tech and entrepreneurs. There are also a significant number of major multinationals with offices here, many of them in the technology industry, as the airport posters boast.
During my first day here I taught, as I have for the past two years, on the Goldman Sachs 10,000 Women program here. The class was quite a bit larger this time and very enthusiastic. The topic was branding, something very important for a production-oriented economy like China to learn, but often difficult for entrepreneurs to accept.
Yet is really crucial for the Chinese to learn to develop their own brands, rather than merely manufacturing products that are exported and sold under foreign names for profits that go to companies in other countries. Increasingly, what differentiates the developed economies is their relatively greater holdings of intangible assets, which includes technological IP, such as patents, but just as often marketing IP, such as brands.
This graph shows the trend toward ownership of intangible assets--things like patents and brands--over the past thirty years. Using this slide and others, I tried to convince the class that branding was a serious business consideration--not just a flashy expenditure.
Technological properties are very important. However, physical product feature advantages become obsolete quickly, changing often in most product lines. So, having a respected brand name helps stabilize value, even in industries where technology is still changing a lot or where design is very fluid (as in fashion). In mature product categories–for instance, packaged goods of all sort–brand names provide an umbrella that can protect the core line, while also creating a platform for extensions into other categories. So, far from being a trivial consideration or wasteful expenditure, branding activities are important to value protection and growth.
The teaching cases my colleagues and I have developed for this course try to demonstrate the functions and benefits of establishing brands in the context of local, women-owned businesses familiar to the class. These branding functions include supporting a stable price, protecting innovation, providing a platform for expansion, and so on. All good reasons to invest in a brand.
I must have posed for a thousand pictures, so at the end of class I asked them to return the favor and all come pose with me. As you can see, it was quite a crowd. I am in the middle--it's a bit like finding Waldo.
It is often difficult for people in the early stages of business-building–anywhere in the world–to think of branding as something they should consider doing. At the same time, there is every evidence in the ways these women conduct their businesses that they are capable of building brands, perhaps very intriguing ones. And, the need for branding is most evident in the very industries where they are operating: food service, agriculture, garment manufacture, and the like.
A visual "look" and a recognizable, meaningful symbol are basic building blocks for a brand.
Tea, for instance, is a major crop and export, as well as a frequent purchase among Chinese consumers (who have much knowledge about tea and distinctive preferences). As with any agricultural crop, however, branding is needed to mitigate against the propensity for wild commodity price changes. And, for growers, the only chance of escaping the price-squeezing anonymity of the supply chain is to develop a recognizable preference among tea purchases. One lady at the course this week produces beautifully packaged tea, with a distinctive drawing of a panda on the label. The panda is an emblem of the region, but is usually represented in a cartoonlike way, as in the airport poster at the top of this blog. Hers is much more artistic and dignified. I can’t tell about the writing, of course. The packaging is lovely–typical of Chinese gift packaging. But I think you can tell that there is the potential for an exquisite brand here.
I was told the large blue bead above the tassel was more than 100 years old. I shot the picture on the coffee table in my hotel room. This background wouldn't have been my first choice, but actually I think the effect is nice. Presentation and story would be the next basic building blocks for branding.
Another woman on the course produces simple craft jewelry. She told me that the large blue bead in the photograph on the left is over 100 years old. My Chinese colleague standing nearby said, “Wow, if that is true, you should probably take good care of that.” This is the whole point of branding–differentiating your product from “ordinary” versions of the same thing. So, this is not some ordinary bead–it’s 100 years old! Admittedly, this is the kind of thing that street sellers all over Asia (and Europe) will tell you to get a higher price for trinkets. A lot of the time it works (ask Jim about the coffee table we bought in India). This impulse to differentiate is at the heart of branding practice. Just because street sellers do it doesn’t mean framing a product with a story or an image isn’t important, on a larger scale, for other kinds of businesses.
I remember one summer my daughter Caitlin started a nice little business out of her dorm room in Philadelphia. She bought cheap objects of various sorts in “Chinatown,” then she gave them names, wrote stories about them–and sold them on ebay for a big markup.
I used to joke that Cait’s business was “pure J. Peterman” stuff. Do you know/remember J. Peterman (he was also a character and part of the story on Seinfeld)? Basically, all you ever see of the J. Peterman products in their catalogues is a little sketch like the one below. But then there is an intriguingly suggestive fragment of a narrative for each one. I am embarrassed to say how many clothes I have bought from them just for the stories. Here is a fragment from “The Eccentricity Dress,” now available online: