LONG-TERM GROWTH AND SHORT-TERM GOAL: COMPETING AGAINST BLING IN CHINA 18307100087 ourse English for Academic Purposes(Business) Date: 2 1 December. 2018
1 LONG-TERM GROWTH AND SHORT-TERM GOAL: COMPETING AGAINST BLING IN CHINA Wenyi YIN 18307100087 Course: English for Academic Purposes (Business) Date: 21 December, 2018
1. Summary of the case material Rochat Schmid is a 100-year-old Swiss maker of luxury timepieces haracterized by its elegance. In Shanghai, its watches are sold through Shanguang Chinas biggest jewellery retailer. Recently, it has been preparing to launch and market a new range of women's watches. However, its strong competitor Berlinger, is also launching gem-accented watches. Berlinger seems to fascinate more consumers because of its blingy characteristic and is welcomed by Shanguang to hold events to enlarge its publicity. Now R&s is facing both the decline in sales and the rejection of either adding more amounts or holding events in Shanguang 2. Identification of the problem R&s now plans to market the new product through the Chinese New Year ad blitz. Pearl, VP of marketing has come up with two distinct advertising strategies to promote r&s. The first is conventional and connects with the brand. The second makes a brave innovation, inviting Changchang Gao, a Chinese singer and actress to be the celebrity endorser and displaying the image of her flashing an irreverent smile and wearing three r&s watches. While pearl believes the innovation could cater to the Chinese customers' preference for bling and achieve the short-term goal of promoting sales, Simon, the Chief Creative Officer, prefers the conventional one which could maintain the company's elegant brand image and ensure its long-term development in China. The company is in a dilemma of determining whether the new advertisement campaign should be pushed for and what development strategy the company should adopt in Shanghai, a city completely different from any European cIties 3. Assessment of case information Now r&s is in an unfamiliar environment therefore the macro environment in
2 1． Summary of the case material Rochat & Schmid is a 100-year-old Swiss maker of luxury timepieces, characterized by its elegance. In Shanghai, its watches are sold through Shanguang, China’s biggest jewellery retailer. Recently, it has been preparing to launch and market a new range of women’s watches. However, its strong competitor Berlinger, is also launching gem-accented watches. Berlinger seems to fascinate more consumers because of its blingy characteristic and is welcomed by Shanguang to hold events to enlarge its publicity. Now R&S is facing both the decline in sales and the rejection of either adding more amounts or holding events in Shanguang. 2．Identification of the problem R&S now plans to market the new product through the Chinese New Year ad blitz. Pearl, VP of marketing has come up with two distinct advertising strategies to promote R&S. The first is conventional and connects with the brand. The second makes a brave innovation, inviting Changchang Gao, a Chinese singer and actress to be the celebrity endorser and displaying the image of her flashing an irreverent smile and wearing three R&S watches. While Pearl believes the innovation could cater to the Chinese customers’ preference for bling and achieve the short-term goal of promoting sales, Simon, the Chief Creative Officer, prefers the conventional one which could maintain the company’s elegant brand image and ensure its long-term development in China. The company is in a dilemma of determining whether the new advertisement campaign should be pushed for and what development strategy the company should adopt in Shanghai, a city completely different from any European cities. 3．Assessment of case information Now R&S is in an unfamiliar environment, therefore the macro environment in
Shanghai is crucial for determining both its marketing strategy and growth strategy To understand how external forces impact R&s, PEST analysis, which is an acronym for political, economic, social and technological, is applied here for a detailed assessment of case information The most relevant to the focused case concerns the social environment. The aesthetic preferences of Chinese have been gradually shifting from conspicuous sumption to modest consumption that ref independent thinking. The first advertising strategy featuring the image of sisters surprising each other with matching watches is mundane. It features "Mark every occasion tagline but fails to satisfy both the Chinese consumers'original conspicuous consuming preferences and the trend of pursuing uniqueness. The second one presenting an image of a flashy, irreverent celebrity in a short red dress, wearing three r&s watches on one arm, however, is innovative and unexpected. In the short term, the frivolous image might stir up the local consumers'temporary desires for conspicuous consumption, thus easing its current crisis of flat sales and shrinking market. Moreover, celebrity endorsement could be an effective touchpoint in r&s's marketing communications because Gao could produce celebrity effect among her fans to evoke their interest in the brand. In the long run, however, the frivolous content of the advertisement might disconnect with the elegant heritage of the brand and deviate from the social and cultural environment which emphasizes more on independence instead of imitation In terms of Chinese political environment, r&s might reconsider their target consumers. Owing to the anticorruption movement, the gifting market shrank, and the watch sales decreased almost 10 percent in 2014. To triumph over Berlinger, R&s should quickly adapt to the political policies. Therefore, its target consumers should be shifted from rich officials to the middle class, especially ordinary millennials 1 Jennifer Post, What Is a PEST Analysis?"Business News Daily, September 21, 2018, https://www.businessnewsdaily.com/5512-pest-analysis-definition-examples-templates.htmlaccessed November 2018 2 Jennifer Post, What Is a PEST Analysis? Business News Daily, September 21, 2018 https://www.businessnewsdaily.com/5512-pest-analysis-definition-examples-templates.htmlaccessed shleigh Holcz, "The Economics of Anti-Corruption: Goods Market, June 11, 2016, https://www.curias.net/politics/2016/6/11/the-economics-of-anti-corruption-has-chinas-luxury-goods-market-lo st-its-shine, accessed November 2018
3 Shanghai is crucial for determining both its marketing strategy and growth strategy. To understand how external forces 1 impact R&S, PEST analysis, which is an acronym for political, economic, social and technological, 2 is applied here for a detailed assessment of case information. The most relevant to the focused case concerns the social environment. The aesthetic preferences of Chinese have been gradually shifting from conspicuous consumption to modest consumption that reflects their independent thinking. The first advertising strategy featuring the image of sisters surprising each other with matching watches is mundane. It features ‘Mark every occasion’ tagline but fails to satisfy both the Chinese consumers’ original conspicuous consuming preferences and the trend of pursuing uniqueness. The second one presenting an image of a flashy, irreverent celebrity in a short red dress, wearing three R&S watches on one arm, however, is innovative and unexpected. In the short term, the frivolous image might stir up the local consumers’ temporary desires for conspicuous consumption, thus easing its current crisis of flat sales and shrinking market. Moreover, celebrity endorsement could be an effective touchpoint in R&S’s marketing communications because Gao could produce celebrity effect among her fans to evoke their interest in the brand. In the long run, however, the frivolous content of the advertisement might disconnect with the elegant heritage of the brand and deviate from the social and cultural environment which emphasizes more on independence instead of imitation. In terms of Chinese political environment, R&S might reconsider their target consumers. Owing to the anticorruption movement, the gifting market shrank, and the watch sales decreased almost 10 percent in 20143 . To triumph over Berlinger, R&S should quickly adapt to the political policies. Therefore, its target consumers should be shifted from rich officials to the middle class, especially ordinary millennials. 1 Jennifer Post, “What Is a PEST Analysis?” Business News Daily, September 21, 2018, https://www.businessnewsdaily.com/5512-pest-analysis-definition-examples-templates.html, accessed November 2018 2 Jennifer Post, “What Is a PEST Analysis?” Business News Daily, September 21, 2018, https://www.businessnewsdaily.com/5512-pest-analysis-definition-examples-templates.html, accessed November 2018 3 Ashleigh Holcz, “The Economics of Anti-Corruption: The Chinese Luxury Goods Market,” June 11, 2016, https://www.curias.net/politics/2016/6/11/the-economics-of-anti-corruption-has-chinas-luxury-goods-market-lo st-its-shine, accessed November 2018
Considering the sluggish economic environment, r&s could employ integrated arketing communications to encourage local consumers to splurge. Besides advertising strategy, other marketing tools could also be applied to optimise the communication of a consistent message of the company's brands to target consumers As far as the technological environment is concerned, r&s could take advantage of local popular social media like Wechat and Weibo to promote the brand to the digital savvy target consumers. According to Bain analysis, more and more Chinese millennials tend to rely on digital to receive luxury information. Pearls second innovative marketing proposal focuses on Gao who has 30 million followers on Weibo, thus having an edge in increasing the online penetration of the brand and improving r&s's public ity and brand recognition 4. Solutions and justifications The above analysis shows that given the changes in the macro environment of the Chinese market, it is sensible for R&s to adopt the celebrity endorsement proposed by Pearl but re-examine the contract and the content of the advertisement Special innovation on marketing should be made to impress its local target customers while risks brought by innovation should be controlled to the minimum. The core principle is to boost the sales to solve the current crisis as far as possible, on the basis of maintaining the brand essence of elegance. And the method is to use integrated marketing communications, which combines various channels including advertising, public relations and other marketing tools together to promote a consistent trustworthy brand message to target customers 4.1 Marketing innovation For marketing innovation, R&s is recommended to adopt the celebrity endorsement, considering the cultural and social environment, and make advertisement go viral on digital platforms by leveraging Weibo, considering the technological environment Bain&company,2017chinaLuxurymArketStudyhttp://www.bain.comcn/,accessedNovember2018
4 Considering the sluggish economic environment, R&S could employ integrated marketing communications to encourage local consumers to splurge. Besides advertising strategy, other marketing tools could also be applied to optimise the communication of a consistent message of the company's brands to target consumers. As far as the technological environment is concerned, R&S could take advantage of local popular social media like Wechat and Weibo to promote the brand to the digital savvy target consumers. According to Bain analysis, more and more Chinese millennials tend to rely on digital to receive luxury information. 4 Pearl’s second innovative marketing proposal focuses on Gao who has 30 million followers on Weibo, thus having an edge in increasing the online penetration of the brand and improving R&S’s publicity and brand recognition. 4．Solutions and justifications The above analysis shows that given the changes in the macro environment of the Chinese market, it is sensible for R&S to adopt the celebrity endorsement proposed by Pearl but re-examine the contract and the content of the advertisement. Special innovation on marketing should be made to impress its local target customers, while risks brought by innovation should be controlled to the minimum. The core principle is to boost the sales to solve the current crisis as far as possible, on the basis of maintaining the brand essence of elegance. And the method is to use integrated marketing communications, which combines various channels including advertising, public relations and other marketing tools together to promote a consistent trustworthy brand message to target customers. 4.1 Marketing innovation For marketing innovation, R&S is recommended to adopt the celebrity endorsement, considering the cultural and social environment, and make the advertisement go viral on digital platforms by leveraging Weibo, considering the technological environment. 4 Bain & Company, “2017 China Luxury Market Study,”, http://www.bain.com.cn/, accessed November 2018
Celebrity endorsement is a convenient way to open the market in China, as oposed by Pearl and Song. For instance, Gogoboi, a popular Weibo key opinion leader, partnered with Gucci to launch his 2017 Holiday Collection on his official Weibo account. The combination of celebrity endorsement and digital platform produced a remarkable outcome: within 5 days, all of the promoted items were sold out, which was comparable to that of Givenchy's sales in July. Similarly, r&S could eize the opportunity to make an innovation on advertisement marketing as proposed by pearl and leverage the digital platform to promote its innovative advertisement campaign. As the innovation adapts to the change in Chinese cultural and technological environment, short-term sales could be boosted as far as possible and more traffic could be driven to r&s rather than berlinger 4.2 Risk control While innovation in marketing should be made, risks should also be considered and controlled prudently. To reduce the risks to the minimum, r&s should reconsider the length of the contract signed with Gao in terms of the cost and benefit, and modify the advertisement proposed by pearl to prevent the mismatching of Gao's image and R&ss brand image 4.2.1 To reconsider the length of the contract When reconsidering the length of the contract. R&s could use Pr tools to evaluate the cost and benefit when deciding the length of the contrast. First, it could sponsor an elegant ball which will invite Changchang Gao and the media to spark a small conversation on Weibo, and then collect the data of the responses from target consumers. After that, it could evaluate public responses and assess Gao's public influence, and then negotiate the length of the term with gao The major reasons for the above suggestions include: there could be potential risks that some target consumers might be unfamiliar with or dislike Gao, Gao mig become less popular because of some uncertain scandals in the future, and her image might not fit with the brand reputation Holding an elegant ball and sparking a small https://jingdaily.com/guccis-smart-kol-strategies-chn/biEsinChinaDecember28,2017, Huixin Deng, 2017 in Review: Gucci's Smart KOL Strate accessed december 2018
5 Celebrity endorsement is a convenient way to open the market in China, as proposed by Pearl and Song. For instance, Gogoboi, a popular Weibo key opinion leader, partnered with Gucci to launch his 2017 Holiday Collection on his official Weibo account. The combination of celebrity endorsement and digital platform produced a remarkable outcome: within 5 days, all of the promoted items were sold out, which was comparable to that of Givenchy’s sales in July5 . Similarly, R&S could seize the opportunity to make an innovation on advertisement marketing as proposed by Pearl and leverage the digital platform to promote its innovative advertisement campaign. As the innovation adapts to the change in Chinese cultural and technological environment, short-term sales could be boosted as far as possible and more traffic could be driven to R&S rather than Berlinger. 4.2 Risk control While innovation in marketing should be made, risks should also be considered and controlled prudently. To reduce the risks to the minimum, R&S should reconsider the length of the contract signed with Gao in terms of the cost and benefit, and modify the advertisement proposed by Pearl to prevent the mismatching of Gao’s image and R&S’s brand image. 4.2.1 To reconsider the length of the contract When reconsidering the length of the contract, R&S could use PR tools to evaluate the cost and benefit when deciding the length of the contrast. First, it could sponsor an elegant ball which will invite Changchang Gao and the media to spark a small conversation on Weibo, and then collect the data of the responses from target consumers. After that, it could evaluate public responses and assess Gao’s public influence, and then negotiate the length of the term with Gao. The major reasons for the above suggestions include: there could be potential risks that some target consumers might be unfamiliar with or dislike Gao, Gao might become less popular because of some uncertain scandals in the future, and her image might not fit with the brand reputation. Holding an elegant ball and sparking a small 5 Huixin Deng, “2017 in Review: Gucci’s Smart KOL Strategies in China,” December 28, 2017, https://jingdaily.com/guccis-smart-kol-strategies-china/, accessed December 2018
conversation on Weibo could not only observe the responses from a small sample of target consumers, but also prevent possible cyberbullying and high cost of holding a splashy event. Taking advantage of big data strategy to assess Gao's image could be precise and convenient. Therefore, evaluating Gao's image and its influences on target consumers and doing a careful cost and benefit analysis can give r&s a clear road map of how long the contrast should last 4.2.2 To redesign the advertisement When redesigning the advertisement, it could feature the present elegant image of Gao wearing the newly-launched watch talking to herself in the past who was flashier. Moreover, the new slogan"change and pursue your inner self could be added to better illustrate the connotation of the advertisement To ensure both the long-term growth and the short-term goal, the advertisement must fit with R&s's heritage: subtle elegance, while the psychology of the target consumers should also be considered. It might be difficult to consider both the brand reputation and the preferences of local consumers, but there is indeed a successful business case of balancing the two for R&s to learn from, that is, gucci's collaboration with Li Yuchun, a Chinese pop singer and actress well-known in China Li Yuchun represents feminism, breaking the stereotype of Asian women being sweet and gentle, which not only caters to the aesthetic values of the local Chinese consumers but also fits the brands heritage status of identity". Similarly, the advertisement after being redesigned could ensure both the short-term goal and the long-term growth. Firstly, Gao's transformation from the role of a singer to an actress highlights the independent thinking and the courage to change, which per fectly caters to the millennials psychology and motivates them to change, splurge for themselves and pursue a higher living standard. Secondly, as the contrast between Gao's flashy image in the past and her elegant image in the present is clearly presented, it would convey its consistent elegance and unique heritage to the consumers Huixin Deng, "2017 in Review: Gucci's Smart KOL Strategies in China, December 28, 2017, https://jingdaily.com/guccis-smart-kol-strategies-china/,accesseddEcember2018
6 conversation on Weibo could not only observe the responses from a small sample of target consumers, but also prevent possible cyberbullying and high cost of holding a splashy event. Taking advantage of big data strategy to assess Gao’s image could be precise and convenient. Therefore, evaluating Gao’s image and its influences on target consumers and doing a careful cost and benefit analysis can give R&S a clear road map of how long the contrast should last. 4.2.2 To redesign the advertisement When redesigning the advertisement, it could feature the present elegant image of Gao wearing the newly-launched watch talking to herself in the past who was flashier. Moreover, the new slogan “change and pursue your inner self” could be added to better illustrate the connotation of the advertisement. To ensure both the long-term growth and the short-term goal, the advertisement must fit with R&S’s heritage: subtle elegance, while the psychology of the target consumers should also be considered. It might be difficult to consider both the brand reputation and the preferences of local consumers, but there is indeed a successful business case of balancing the two for R&S to learn from, that is, Gucci’s collaboration with Li Yuchun6 , a Chinese pop singer and actress well-known in China. Li Yuchun represents feminism, breaking the stereotype of Asian women being sweet and gentle, which not only caters to the aesthetic values of the local Chinese consumers but also fits the brand’s heritage “status of identity”. Similarly, the advertisement after being redesigned could ensure both the short-term goal and the long-term growth. Firstly, Gao’s transformation from the role of a singer to an actress highlights the independent thinking and the courage to change, which perfectly caters to the millennials’ psychology and motivates them to change, splurge for themselves and pursue a higher living standard. Secondly, as the contrast between Gao’s flashy image in the past and her elegant image in the present is clearly presented, it would convey its consistent elegance and unique heritage to the consumers. 6 Huixin Deng, “2017 in Review: Gucci’s Smart KOL Strategies in China,” December 28, 2017, https://jingdaily.com/guccis-smart-kol-strategies-china/, accessed December 2018
5. Conclusion To sum up according to relevant case information and concrete assessment, R&s is supposed to adopt the celebrity endorsement but reconsider the length of the contract and redesign the advertisement by employing integrated marketing communications. In this way, through marketing innovation including celebrity endorsement and digital promotion, r&s could cater to the social and technological environment in China to boost short-term sales for the company. Through risk control including re-examining the contract and the content of the advertisement, r&s could maintain its consistent elegant brand image and ensure its long-term growth in China Therefore, it is a relatively comprehensive and profitable marketing strategy that focusing on short-term goal and long-term growth at the same time
7 5. Conclusion To sum up, according to relevant case information and concrete assessment, R&S is supposed to adopt the celebrity endorsement but reconsider the length of the contract and redesign the advertisement by employing integrated marketing communications. In this way, through marketing innovation including celebrity endorsement and digital promotion, R&S could cater to the social and technological environment in China to boost short-term sales for the company. Through risk control including re-examining the contract and the content of the advertisement, R&S could maintain its consistent elegant brand image and ensure its long-term growth in China. Therefore, it is a relatively comprehensive and profitable marketing strategy that focusing on short-term goal and long-term growth at the same time