By David Zhao
Managing Director
Hill & Knowlton Shanghai
“Brand-building in China requires more “harmony” with the state than most places. To help, PR firms are developing standards such as corporate social responsibility to help companies polish their images for Beijing 2008.”
The food and product safety crises that grabbed headlines around the world have increased scrutiny on ‘brand China’ and underlined the growing need for public relations in the China market. As Chinese businesses develop globally and multinational companies gain stronger footholds in this emerging economic powerhouse, the public relations industry is evolving concurrently to meet their needs.
While China’s public relations industry as a whole is thriving, certain sectors are exhibiting more impressive numbers than others. Dominating the public relations service market of 2006 were consumer goods, information technology, communications and medical care businesses. Finance, real estate and culture and physical education practices also show great potential for growth.
In addition to growth in these sectors, one event stands out as the driver for the exponential growth: The 2008 Beijing Olympics. As global interest shines a spotlight on China, the PR industry is taking advantage of the influx of media coverage and business opportunities.
Expansion
Although the modern public relations industry in China only began in 1984 when Hill & Knowlton became the first international PR agency to establish operations in China, the industry has quickly leapfrogged into a healthy and growing market.
The 2006 China International Public Relations Association annual review estimated that the industry showed turnover of US$1.1 billion in the past year and has an annual growth rate of 33%. Not only is the industry booming fiscally, PR companies are quickly flourishing across the nation, following their clients inland as companies look to second-tier cities as new engines of growth. While Beijing remains the center of PR activity in China, Shanghai and Chengdu have taken the lead as the fastest-growing regional markets annually. Guangzhou rounds out the top four markets, while developing cities such as Chongqing, Dalian and Shenzhen are beginning to grab part of the market share.
While international firms introduced modern PR in China, local firms are quickly evolving to compete. As international public relations firms move into China’s second-tier cities and expand through local acquisitions, domestic firms are looking to follow their clients by branching out globally. These developments are creating a new market structure in China.
Although international and domestic PR firms currently share the market, they are gradually developing their respective sector specialties. Consumer goods PR remains the domain of big international players, while domestic firms have cornered the market on investment and financial PR. The major players in China’s public relations industry have already established a dominant position, restricting the ability of new full-service agencies to enter the market. However, niche agencies that concentrate on small sectors can use their specialization to enter the market via their area of expertise.
Despite the marked growth in China’s public relations industry, challenging hurdles still block an easy route to success. Although a career in public relations is viewed favorably and is increasingly becoming an education choice, the PR industry in China faces a pressing talent shortage and a predominantly young workforce. An estimated 500,000 people are currently studying public relations in China, a dramatic expansion considering students only began informal study of the industry in the 1980s. Despite the growth of formal public relations education and the potential for future employees, agencies are currently finding a general lack of creativity and shortage of talent to be an obstacle in building successful campaigns.
As clients continue to expect more value from their campaigns, the PR industry in China must integrate communications to keep pace with the changing marketplace. Firms must be able to operate successfully in a global environment while also providing their clients with extensive local knowledge as campaigns pinpoint more precise key audiences. This not only entails using public relations, but also requires expanding into marketing, advertising and sales promotion industries. In order to maintain the level of growth that the PR industry has shown in past years, practitioners have to find a hook and integrate all communications to successfully brand their clients.
Sports marketing: going for the gold
Winning the Olympic bid capitalized on a turning point in sports culture in China and opened China’s door to an increase in major sporting events.
Not only has the Olympics frenzy been a catalyst for the existing public interest in sports, international sports have also started taking an enthusiastic interest in the China market. Ten years ago, China was not known for producing competitive athletes, but in recent years, China has turned out top-caliber athletes that compete internationally in world-class leagues. Additionally, the Chinese people have embraced international athletics, opening up consumer possibilities to brands and companies who invest in the sports market.
As interest in sports heats up in China, basketball has become the most remarkable example of this sports boom. Riding the wave of Yao Ming fever in China, basketball has discovered its second-largest market in China’s fervent fans. In fact, the number of people who play basketball in China is estimated to equal the total population of the United States. In the past few years, the NBA has capitalized on the potential of China’s basketball market by holding exhibition games in Beijing and Shanghai. In 2007, the NBA announced the creation of NBA China, marking the first time an American sports league has formed a subsidiary in China. These events have opened up a new world of possibilities for sports marketing in China’s PR industry.
PR practitioners are jumping on the sports bandwagon and creating new marketing channels into the growing middle class that is driving China’s consumer boom. Sponsorship of major tournaments and famous athletes in China has grown significantly in past years. Companies have found that sponsoring luxury sports such as tennis and golf provides an excellent way to access China’s burgeoning middle class. Meanwhile, sports popular with the youth population, like basketball and soccer, are also receiving additional attention as companies try to reach out to this attractive demographic. By sponsoring and creating tournaments like the HSBC Champions, the China Open and the Women’s World Cup and linking their brand to the Olympics, businesses are seeing sports as a new channel to increase brand recognition, boost a company’s image and reach affluent audiences.
CSR: The new business standard
Although the Chinese government still stringently regulates coverage of political issues, media covering other beats enjoy freedom comparable to their Western counterparts. Due to this relaxed new media landscape; journalists are increasingly competitive and are less agreeable to overtly commercial PR placements.
Most Chinese media remain patriotic and thus partial to stories that tie-in with the national agenda and are related to the advancement of China as a global power. As the speed of China’s development brings global concern about its environmental practices, the Chinese government has prioritized cleaning up China’s image and ecosystem. On the heels of the 17th CCP People’s Congress, where the government reiterated its commitment to sustainability and spotlighted green initiatives, corporate “contributions beyond capital” have been picked up as popular topics in the media as the role of corporations expands into social and environmental concerns.
Developing and promoting Corporate Social Responsibility (CSR) and green initiatives correspond with the media agenda and echo government priorities. This scenario allows CSR to create very effective channels that support a corporation’s key messages, emphasize their branding agenda and connect to target audiences.
As CSR becomes a more visible aspect of the media agenda, Chinese consumers are increasingly scrutinizing the actions of both foreign and domestic companies. A recent survey by Tandberg showed that Chinese shoppers are the world’s most environmentally conscious. Seven out of 10 Chinese consumers are more inclined to buy products from environmentally-conscious companies. Stakeholders of companies are also encouraging their companies to facilitate CSR as a way to increase their competitiveness in China’s corporate world.
In a country that is becoming more focused on brand reputation, promotion of CSR initiatives has become an essential aspect of a business’s plan for growth in China. A survey of Chinese business leaders by Hill & Knowlton China revealed that almost 90% of CEOs believed that CSR had a tangible business value. More than 80% of the CEOs also noted that the most important achievement of their CSR campaigns were the effects on brand-building.
While CSR initiatives can focus on a number of issues from labor standards to fair trade practices, China’s CSR situation is dominated by environmental regulations encouraged by the State. PR campaigns are aimed at promoting a business’s attempts to diminish their carbon footprint and advance sustainable development. By proving to the Chinese people that they care about China’s long-term goals and environmental concerns, businesses are able to brand themselves as responsible, trustworthy corporations, increase customer and employee loyalty and boost their competitive advantage.
New media, new communications
The influence of new media is creating a formidable new communications structure. With an estimated 137 million internet users, nearly half of whom are actively on message boards and a quarter who are blogging, China is a uniquely plugged-in nation ripe for public relations firms building their Digital Communications practices.
Companies in China are already moving to increase their presence online, spending upwards of 30% of their marketing budget on online advertising as they seek to expand their brand throughout the vast landscape of China via the virtual world.
Although China is set to surpass the United States as the largest internet population in the world in the next two years, the amount of blogging and Bulletin Board System (BBS) activity in China already outstrips that of Western countries. These communications fuel online brand word-of-mouth and reveal an increasingly active and engaged population. Many corporations in China are taking the first step by reaching out to engage with their consumers through corporate blogs to better gauge consumer opinion about leadership, marketing efforts and more.
Blogs and BBS forums are powerful new platforms for both consumer opinion and consumer activism in China. Blog posts and BBS activity have spearheaded criticisms of many companies that have affected real change. When Volkswagen was criticized on BBS forums for its Polo advertisements on subways that BBS users felt derided subway riders, it immediately picked up on the discontent and pulled the offensive ads. A Starbucks shop in the Forbidden City closed down after bloggers stirred up a patriotic debate that spread into mainstream media about the establishment of a Starbucks inside a cultural landmark. Due to the rapid nature of communication on the internet, online criticisms can swiftly snowball, increasing the need for timely crisis communications and broader media monitoring on the part of PR agencies.
As the new communications structure continues its rapid evolution, new public relations service products will develop to help lay the groundwork for the industry’s continued growth as brands look to capitalize on new media.
Conclusion
Although a recent industry survey reported overwhelming optimism about the growth of China’s public relations industry, many wonder if it will continue its ascent following the boom of the Olympics. While the industry still faces challenges, the way ahead is rich with opportunities. Following the Olympics, the world’s attention will once again be drawn to China for the 2010 World Expo in Shanghai. This global event will bring one of the largest showcases for country destination marketing to China, giving PR agencies the chance to build upon the open public relations groundwork laid by the Olympics and setting the stage for the new direction of the PR industry in China.