Jason Spencer podcast transcript

The following transcription is taken from an interview with Foviance’s CEO, Paul Blunden and Jason Spencer  of Millward Brown

Speaker key:

PB: Paul Blunden
JS: Jason Spencer

PB: Good morning, and welcome to another Foviance podcast on customer experience. This morning I’m speaking to Jason Spencer, the managing director of Millward Brown Firefly, in Shanghai. Jason, thank you for joining me on the call. I wondered if you could just gPBe me a little bit of information about your background and the organisation you work for, and your current role.

JS: I’m currently in Shanghai, but obviously, from the accent, I hail from Brisbane in Australia. I’ve been over here in greater China I guess for the last 15 years, with a couple of years working in market research in Hong Kong, a few years doing the same thing in Taiwan, and since 2001 being based here in Shanghai. I guess Millward Brown, the major part of the work that we do here in China, is very much helping our clients with their brand and their communication strategies here in predominantly the mainland China market, but also seeing to the greater China market, including Hong Kong and Taiwan. So I’ve been with Millward Brown for about fPBe years and in greater China for the last 15 years.

PB: And when I did the introduction, I introduced it as Millward Brown Firefly. Is that correct? Or are you just Millward Brown?

JS: Just Millward Brown. And basically Millward Brown Firefly, they’re qualitatPBe units, so it falls under Millward Brown. I mean we’ve got Millward Brown Optimor and Millward Brown Firefly, but Millward Brown is just fine.

PB: Right. And obviously you’ve had quite a lot of exposure to the Asian or the wider Asian market in your career, what it’s like working out there now during the recession?

JS: I often characterise it as a bit of a safe haven at the moment, to be quite honest with you. Just watching the news about what’s going on in the rest of the world, I do feel very thankful that we are here in the China market particularly, but also to a certain extent in the Asian market. I think there’s been lots of talk about decoupling over the last 12 to 18 months, about how the world economy has decoupled. I don’t necessarily agree with that evaluation, I don’t think we’re decoupled by any stretch of the imagination, but I think there’s a certain critical mass that’s been built up in Asia, and specifically in mainland China, that’s somewhat protecting us from some of the worst case examples of what’s happening around the world at the moment. So quite lucky is how I would describe myself at the moment.

PB: That’s one of the interesting areas I wanted to explore: the safe haven concept. Obviously we’ve read about over here and you hear different stories about how the Asian economy is performing, the strengths of Asian businesses compared to the Western businesses and obviously there’s a lot of opportunity there, but there are also an awful lot of challenges that the Asian market is experiencing at the moment. I wondered if you could talk a little bit about some of the difficulties that it’s facing, and then I’d like to hear a little bit more about the positPBe side.

JS: I can really speak to all the consumer-facing businesses, because they are the bulk of the clients here in China, and I would answer that in two ways, I guess. I mean I think there’s still a difference between the way that multinational brands engage with consumers in China, and the way that local brands engage with consumers in China. I think local brands have taken what’s happened in the last six to eight months or so in their stride: a lot of their spending hasn’t really been affected by what’s gone on overseas, because obviously they’re not suffering from a credit crunch; they’ve still got money in the war chest; and they’re still continuing with some of the strategies that they had been persevering with over the last fPBe or six years in China, which is very much about focusing on distribution and getting the product or the brand out there with consumers, and backing that up with mass communication campaigns that focus on a lot of media spend without too much thinking about brand equity and the long-term future of the brand. So I think a lot of Chinese brands have actually been quite successful in the last eight months by keeping to that strategy, and also making good use of the fact that despite the Chinese consumers are not affected as consumers elsewhere they are still inexorably leaning more towards value items and lower price point items. So I think a lot of the Chinese brands are looking at this as an opportunity to further entrench themselves in the marketplace here.

I think some of the multinational brands have been doing a buffer, and I wouldn’t say in terms of sales. I don’t think their sales have been affected as perhaps their sales in other markets may have been affected. I think that some of the multinational brands may have suffered from (I wouldn’t quite characterise it as a knee-jerk reaction), but almost like an inevitable reaction that when the home office is facing crises of its own in many other geographies around the world: it tends to clamp up a little bit, and tighten up its spending. Whereas I think a lot of the multinational brands in China are turning around and saying: “hey! Our market’s still growing. We’re doing fine here; we need to continue investing.” And it’s actually quite difficult sometimes to make that argument to a home office who is contracting and whose purse strings are being tightened. So I think the multinational brands in terms of their spending power have been somewhat limited, but I don’t think it’s really hurt them so much in terms of building long-term brand equity and loyalty for consumers here in China.

PB: That’s interesting. I did read that retail sales are still growing quite healthily in China. I guess large brands, as you say, find it difficult to compartmentalise the way the business goes and invest. You mention there about the long-term and short-term brand equity. Do you think their strategies are correct, as they go into market at the moment?

JS: Very good question. I think there’s a debate and an argument, and observations being made in China here at this stage, and I always fall on the side of I think long-term brand equity is a worthwhile pursuit. I think that’s been proven historically. I think it’s certainly been proven in shorter term history and more recent history that that’s the way to go. I mean we all understand and we take for Gospel, but a strong brand is a brand that is able to engage with consumers; it’s able to build brand loyalty; and brand loyalty will see a brand through a particular storm or a crisis in the short-term. I would say therefore that is a correct strategy to be adopted in higher markets, especially if it’s a multinational brand, whereas Chinese consumers have an expectation that a multinational brand should have something extra to offer. It’s not being seen just as a commodity, and therefore there should be some intangible benefit that comes from that brand, whether it’s in its equity and it’s manifested in terms of its brand imagery, or the way they emotionally relate to that brand. But there needs to be something extra for them, because there’s an expectation that a multinational brand should possess that something extra.

With the Chinese brands I certainly wouldn’t say that they’re adopting the wrong strategy; I think they’re being very, very astute in the way that they are going about their business. As I said before, I mentioned that they’ll tend to chuck a lot of money behind mass communication and really just getting some advertising out there, and not worrying too much about what’s going in terms of building brand equity, and measuring the success based on what sort of short-term sales uplift they’re seeing from that.

Now, by describing it as such, you would think that that’s not a way to go. But as I said before, I think they’re being fairly astute, because that’s the way that they’re starting out with their brands, and as they get market share, and as we might argue and say that it’s because their price point is much lower and their distribution is much greater, nonetheless they are generating market share, and I’ve seen quite a few Chinese brands in the past few years drawing a line in the sand and saying, all right, that’s the strategy we’ve adopted thus far; now we need to change up and pick up our game a little bit and adopt a more equity-centric approach to the way that we market our brands. And I think in brands like High-R, the White goods manufacturer; brands like Chang Dao Beer here in China; brands like Lenovo, have been doing that very, very successfully. So it’s one thing to look at them and say: “oh, pooh, pooh; you’re not building equity, and you’re just building a commodity-based market”. But I think that’s been a very important first step for a lot of Chinese brands, so I think they’re being very astute. They’re walking before they know how to run, and then at an appropriate stage they’re taking up a bit of a canter, and then they’ll be breaking into a sprint fPBe years down the track.

PB: So perhaps the international brands can expect maybe more competition on some of the value-adding points in a few years’ time. I’m interested to know how digital plays a role in Asia, and whether brands are very aware of it, use a lot of it. I’ve heard differing stories: everybody in Asia uses mobile; nobody uses computers; and all sorts of crazy ideas. I just would really like to understand what your take is on it as somebody who lPBes and works in the region.

JS: I can really only answer for China, because it’s very different. I mean if you look at a country like Japan and Korea, they themselves are very different to each other, let alone comparing it to a country China. I think technology adoption in China has picked up and accelerated phenomenally in the last ten years or so. I don’t want to quote all these figures; I’m sure we see enough of them in the press about the largest Internet population in the world, and the largest mobile phone usage rates in the world and things like that. But the things that I think are different about the China market in terms of digital adoption are people, when they go online here, their major actPBity is to go onto the Boards and Board here for BBSs.

Now, this is something that exists elsewhere in the world, but a BBS is something that I remember from 15, 20 years ago, when I had my first 300 EPS modem and I’d dial up and get onto Boards and Board and things like that. I think Boards and Board in China are very, very big. It’s not so much Blogging that’s big here, not so much Twittering that’s big here, and it’s not so much social networking in the sense that Facebook is a social network forum. It’s really about Boards and Board, and I think the reason why this is so big in China is that’s culturally and socially made for people in China using the Internet. So you can get on there anonymously and have your say and air your complaints and talk about the Japanese Prime Minister’s decision to visit a controversial Shinto shrine. And really get out and participate in a dialogue with other Netizens, something which they’re not able to do in real life. So for Chinese consumers to be able to do that, the Boards and Board system is the best outlet for them to be able to do that.

And it has an impact in terms of consumer goods and talking about brands in the Internet space as well, because it’s very, very easy for a brand to make a small mistake and then have that mistake magnified by the level of discussion and furore that goes on in the online forums. There have been countless examples of brands that have just really underestimated the importance of these parts of forums, and much to their chagrin and their long-term regret I guess. The examples I can think of off the top of my head, I think Mercedes Benz about eight years ago had an issue with one of its customers. A dealership apparently didn’t want to take the car back and this guy just thought he would take matters into his own hands, so he set up some cameras and took some photos of himself taking a sledgehammer and bashing his Mercedes Benz into smithereens, and then published that online. And then other people started talking about the issues they’d had with Mercedes Benz, especially the after-sales service, and Mercedes Benz, to their credit, really responded quickly about this, and staunched the level of discontent that was being displayed on the Internet. I think Ford have had some issues with its Ford Focus. They had an oil pump issue with one of the cars that they had made here in China, and it was only after Ford themselves were trawling and scanning what was going online that they were able to identify this as a fairly significant issue and then address it. So I think for China, digitally, what is really different and strikes me as something quite unique is the way that Boards and Board are used, and how that affects brands and most of our clients here in China.

In terms of how our clients might be utilising digital, I think many of our clients are in the last two years we’ve started to see this grow beyond an embryonic stage. A lot of our clients two or three years ago were talking about advertising on search portals, and measuring click-through, and just getting to grips with some of the jargon that was being used. And I think it’s only now we’re going to see them really utilise the online space and design their digital campaigns, so that it fits in with the normal digital lifestyle of consumers, rather than just relying on search portals and things like that. A good example I think here has been Biagio’s Johnny Walker label. I think last year they had a campaign based on the Keep Walking premise that they’ve been using successfully for many years, where they produced fPBe mini films, and some of them were 30 second spots that they put on TV in order to generate some mass recognition. And then they moved I think three of the fPBe chapters online so that people were forced to go online to get the full-length story of this advertising campaign for Johnny Walker. I can’t really think of any other examples off the top of my head.

But I think most of our clients still devote single digit percentage of their communications budgets towards the digital space. I’m expecting in the next two to three years to actually grow exponentially, especially as the price of advertising in China will just become exorbitant, really. So I think a lot of clients are being forced into a situation where they would like to look at digital as a more cost-effectPBe platform, and then once people are forced to be using that platform a little bit more, that’s when I think you’ll see the creatPBity and real maturity start to develop.

PB: I was going to ask. I presume the advertising opportunities exist primarily around the bulletin boards, do they?

JS: Yes. And I mean a lot of the most popular Boards and Board are the ones that these portals like lasana.net as an example of one of the major portals here -it’s an enormous amount of traffic – and then they siphon people off into different Boards and Board by the content of the Boards and Board and things like that. So, yes, there’s a lot of power being held in the hands of the portal providers. I think there’s also an Internet site in China called Yocool, which is basically a YouTube equPBalent for Chinese videos and the like. I think the Google equPBalent of China is something Bidool. And, again, any portal that can attract a larger enough flow of traffic is going to stand to make a lot of money and become very useful in the future for digital campaigns.

PB: Is e-commerce playing much a role in China? Are retail exploiting the opportunity?

JS: IndPBidual retailers perhaps, not as much as you might see, for example, in the US or in Europe. I think there’s a company here called Taubau, which started off as a B to B forum that allowed people to go on there and source different goods. So early on it was people looking for components for machinery or manufacturing and things like that. And that took off quite successfully. And then recently they have moved much more towards the business to consumer model. So as a portal that puts people into contact with other suppliers or goods or services that has taken off quite well, and Taubau is enormously successful example of that. One of the nice things I like about it is that when people here buy their houses, and many people are buying new houses these days and engaging in renovations. So what you do when you buy a house or an apartment in China, you basically buy an empty concrete box, and then it’s up to you to go out and renovate that and put in all the toilet fixtures and the kitchen fixtures and all that sort of stuff. What a lot of people here will do is join these websites that Taubau also has this option, but some of the other websites do as well, and they engage in what they call group buying. So you go on there, and it’s a bulletin board set up, and you say, this is what I’m looking for; I want to buy, for example, 300 half inch self-tapping screws, and then you wait for anybody else that might want to do the same thing, and then you all get together on this third party website and then you go and bulk-buy from a particular supplier to get a better deal, and then you dPBide up the goods when you recePBe them at the end of the day. That sort of thing is very successful here. I don’t think there’s many retailers that independently tried to, or been very successful, in capitalising on e-commerce in China. I think Taubau’s been very successful at it. PG has recently dipped their toe in the water with doing an online virtual store, where you can order from them. But I can’t think of any indPBidual retailer that really capitalised on it, to be honest.

PB: When you were talking about brand earlier on and long-term brand equity, we think a lot about customer experience in terms of being a measure a bit about brand equity at the point where the brand interacts with the indPBidual, and obviously in stores that’s a fairly easy concept, but when online is the way you describe it, I wonder whether brands have the opportunity to differentiate at all with customer touch points, or customer experience. Do you see any of that in China?

JS: I think yes, occasionally. I don’t see it too often. I think Rexona utilised an online campaign fairly successful. I mean deodorant in China is still a fairly strange product to most Chinese consumers. I’m not commenting on whether this is true or not, but in a lot of the research that we do, Chinese consumers feel that they don’t need body deodorant and that it’s only hairy foreigners that actually have that body odour. Nonetheless, it is a strange and it’s a novel concept to Chinese consumers, and I think Rexona use the Internet very well to educate consumers about its product and its usefulness. I think Johnson Baby [sic] has done very well in China, as they’ve done elsewhere in the world, using the Internet to grow and to enrich the customer experience, so having a chat forum as a source of information about raising babies and putting people in touch with paediatricians and doctors’ advice and things like that; that’s certainly done a lot to enrich the experience that consumers have with Johnson’s Baby as a brand.

PB: And do the brands think of customer experience as part of their vocabulary, or is it something more likely to come from people like yourselves?

JS: No, I think the concept that customer experience is part of the client’s vocabulary. I just think when you’re in a market that doesn’t have many good examples of that and it is growing in a way where it’s sometimes not necessary for brands to engage in customer experience, that as a result of that, what we’re seeing in China has only really started to happen significantly in the last few years. So I don’t want to make a blanket statement here and say that brands don’t appreciate customer experience; I think brands themselves understand it and realize its importance, but how they articulate it and how it’s manifested, might be more of a reflection of the maturity of that concept in the market here. As I said, I think brands like Rexona, Cornetto, Pepsi, these sorts of brands understand it and are doing something to build that. I think other brands understand its importance and are still experimenting in terms of the best way to do that, and which are the tools by which they can accomplish that.

PB: It sounds like a market very similar to the dot.com beginnings, as I experienced it over in the UK, where brands were growing so fast that their focus was on dealing with that, rather than on creating long-term brand equity through enhancing the customer experience; a bit like some of your Chinese brands of currently focussing on themeselves.

JS: Exactly, yes.

PB: Can I ask maybe a little bit more about how Millward Brown considers customer experience, or your own take on customer experience?

JS: I guess the way that we look at customer experience pretty much mirrors what our clients are talking about. I mean we might try and take our knowledge that’s been gained in other markets and leverage case studies and learnings about what’s going on overseas to identify best practice and help our clients out with that here. I think one of the things that we’re looking at in terms of the recommendation that we gPBe to our clients is really getting out there and understanding the consumers’ day in and day out life, and really trying to take it apart or to understand the DNA of that in China, so that we can better design and better implement campaigns and communication primarily, so that we can build brand equity for our clients. I think something interesting that’s happening with our clients as well as with ourselves at the moment is there’s been a lot of focus placed on some of the second and third tier markets in China, so the East Coast is booming and growing in a way that I think a lot of our clients understand consumer behaviour in first tier markets. I think the next big potential area of growth is certainly second tier, but especially in third tier markets, and this is where a lot of clients and ourselves are working together to truly understand how consumers in some of those markets are very different to the consumers on the East Coast of China. When you go out to some of these third tier markets and you’re talking about something like customer experience, it’s quite an alien concept. And we’ve been out in some of these rural areas and the store environment where you’re purchasing the product from, which is part of the customer experience, is quite stark; it’s pretty much just a couple of shelves in a concrete hole in the wall with the brands being shown on the shelves and that’s it without much point of sales materials or anything like that. I mean the most point of sale advertising they have out there is what they call these wall brushes, which is basically somebody being paid to go out there and buy and, by hand, spray-paint on a black concrete wall the brand logo, or the latest approximation of its print ad. So I think customer experience in the secondary and tertiary markets is still very embryonic and I think a lot of our clients are spending a lot of time and a lot of money trying to understand lifestyles out there so as to be able to dovetail what they think their brand can add in terms of the lifestyles of consumers in those markets.

PB: Presumably home delPBery and retail loyalty schemes don’t really play a part in those markets at all?

JS: No, no. I think that that’s quite a big challenge that will accomplish that.

PB: There are a couple of final questions I’ve got for you, Jason. One of them is around innovations in your industry you see in terms of the research tools and techniques that are helping you to understand consumer insight. You mentioned the difference in the tiers or the consumer segments, and I’m interested, are there any innovations that you’re finding really playing a role for you there?

JS: Yes, absolutely. I mean there are innovations and there are innovations I think. And understanding the different consumers’ segments, a lot of the interviews that we do, either quantitatPBe or qualitatPBe, in some of the second and third tier cities, are still very much face to face. Now, that might not sound like an innovation much, but it is something that we have to, especially with our clients that are based overseas, really gPBe them confidence in saying that the reason we do it by face to face is because we need to be able to fit into their lifestyle and be appropriate in the way that we collect the data. But having said that, I think there are some other innovations where the Chinese consumer is leapfrogging what has happened in other markets. So the two areas that I’m interested in at the moment from our business point of view is in online, or digital, interviewing, and also more around the area of neuroscience. So the two ways that we look at digital, for example, one of the things that we’re looking at and we’re doing a lot more work on these days, is using an Internet website as a way to engage consumers. So you can’t really call it a blog; you can’t really call it a bulletin board: it’s just basically an interactPBe environment where you get respondents to come in and by allowing them to respond and contribute and comment and offer feedback with that digital environment, you’re actually approximating what they’d be doing in their downtime anyway on a bulletin board. So one of the ways that we’re trying to improve is to try and make the interviewing process as seamless as possible with their normal day to day life. And that works surprisingly well in third tier and tertiary markets here in China as well. So that’s quite an interesting thing that I’ve seen in the last two years I guess.

The other area is the area of neuroscience. Now I know neuroscience in terms of market research may not have such a great reputation and we always think people wearing those skullcaps with a million wires coming out of their head were doing the functional MRI machines, and trying to understand which part of a consumer’s brain lights up when they see this logo versus that logo, or this colour versus that colour. But I think there are some really good and useful areas in neuroscience that a lot of researchers are looking at these days. I think eye-tracking is one of the most promising of these areas, where, by looking at and understanding how consumers digest and consume visual advertising by using eye-tracking, which is an unobtrusPBe way to understand where their eyes are focussing on a particular television commercial or a particular printout or a particular environment, whether it be a shelf in a supermarket or an out-of-home environment at the busiest intersection in the centre of town, I think those ways of looking at collecting data from consumers are very interesting. I mean, as a researcher, I always appreciate that by asking a simple question, you don’t always get a simple answer back, and you can’t necessarily always trust it, so I’m quite excited by other ways of introspectPBely drawing out information on consumers and turning them into insights for our clients.

PB: That’s fascinating. Interestingly, we’re very much into neuroscience ourselves, and have just published a White paper on it actually on combining EEG with eye-tracking in the gaming sector primarily. But it’s a fascinating area, and I agree it shows insights that you can’t get from other means. Is that something that Millward Brown are doing uniquely in China, or do you find customer demand for that more widespread?

JS: I think it’s certainly something that was kicked off overseas. When you look at a market like China, you often think oh, we only pick up on things in China like fPBe years after it’s happened overseas. And that I think, some time ago, was true. But I see that this is coming out of our offices in the UK and the US this neuroscience thing, and I think a lot of our clients in China are looking at that now and it’s the same timeframe that our clients overseas perhaps would be, so it’s definitely something that’s come from overseas, but I think it has application and that there’s a certain level of interest here that’s equal to what we’re seeing elsewhere.

PB: Finally, I’d like to ask you, from all your experience and not necessarily just in China, which company or companies offer the best customer experience, in your opinion?

JS: I think a lot of the luxury brands do. But thinking about this, and again I’m sorry I have to come back to China – I have been here for the last ten years of my life; I don’t even know my own country so well anymore – I think a good example of this is a company called Best Buy here in China; it’s the North American consumer electronics retail store. They first came to China and I say that they focussed on customer experience well, because they came to China when the environment in China for the retailing of consumer electronics was very much dominated by about three or four key players and their names are Gourmet, Jungler, and two other major players. These companies were basically real estate companies. They rented the best malls in urban environments and even in some semi-urban environments, and then rented out space in little cubic metres to all of the manufacturers who wanted to sell consumer electronics. So they’d rent a little stall to Sony, to Panasonic, to Sharp, to Toshiba, and all the other players, and the then manufacturers are then expected to staff those little units, and provide their own point of sales materials, provide their own stock for display, and then these large companies that owned the malls, would then centralize payments and delPBeries and things like that. And this was very successful for a while in China, because these stores are able to generate very, very economies of scale, and therefore consumers were getting very good prices from these stores. But a lot of the manufacturers didn’t really like it, because their margins were much thinner, because they had to have all these extra staffing costs and product display costs and things like that. And then Best Buy came into the picture, using a model that was fine-tuned and perfected in North America, and basically they had fantastic numbers of staff in those stores that could gPBe you answers to any of your questions and recommend a wide range of different brands, depending on the customer’s need. They really, really focussed on their staff training and the knowledge of their staff. Which at first was attractPBe to Chinese consumers, because they felt this person’s gPBing me an unbiased recommendation about a Sharp or a Sony TV versus a Toshiba; at least I can believe him. Whereas in these other stores, the personnel speaking to you was a representatPBe of a company whose brand I was trying to buy. But unfortunately when they came in, they didn’t have a very good competitPBe price positioning compared to these other stores. And it’s only in the last year or 12 to 16 months I would say that they’ve really started to slash their costs, and they’ve adopted this if you see the price elsewhere, we’ll that price and better it by 10%. It’s only since they started doing that, that they’ve been able to claw back some market share. I think about three months ago I read that they’re actually quite well in terms of growing their share. So the reason why I say that they’re the best example of customer experience I can think of in China is that they really came in with something that was quite different, that they believe in, and that they felt was going to work for them. They encountered some problems with it, they adjusted their track, and I think they’ve started to claw back market share. I don’t know what their margins are like, mind you, but I’ve got a lot of respect for that company in particular.

PB: Jason, thank you very much for your time this morning and your fascinating insights into the Chinese market and how the brands are doing, and a pleasure talking to you. You can listen to further Foviance podcasts by visiting our website: www.foviance.com and hearing more in the series on customer experience. Thanks for listening.

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