What makes Chinese consumers tick? That’s the question Chris Reitermann has been puzzling over for the last two decades.
Reitermann began his career at advertising giant Ogilvy & Mather in the 1990s, moving to Beijing in 2000 to set up the digital agency OgilvyInteractive. Since then, he has risen to head up the company’s entire operations in China. In this interview, he discusses the dramatic changes that have taken place in China advertising during his time here, why China has much to learn from India on running a great campaign, and what the industry may look like by 2027.
Q. Ogilvy is currently undergoing a big restructuring called the Next Chapter strategy. What is the purpose of this strategy?
A. There are a couple of forces behind this. From a broader industry perspective, there’s a big push for integration and consolidation. Integration driven by clients, because in a more and more fragmented world, they want more simplicity. And there’s an increased push by holding companies for them not to just buy more companies but to extract maximum value from the assets that they have. It’s also a chance for us to re-focus on our core business. As a company in a growing environment, you sometimes forget what you’re all about. And Ogilvy, from the first day that David Ogilvy founded the company, has been about building brands.
Q: Ogilvy’s parent company WPP and the other members of the global advertising industry’s “big five”—Omnicom, Publicis, Interpublic and Dentsu—faced headwinds in 2017. Was this also the case in China?
A. Well, let me first talk a bit more broadly. Our business is always a reflection of our clients’ business. So, if our big clients struggle, we will struggle, because marketing and advertising spending is usually the first thing that companies cut. Also, what has affected the industry is a lot of the new forces that are developing in a more digital world. Ten years ago, we were really competing with the other four holding companies; now, we’re competing with consultancies, with the platforms—Facebook, Google and so on—so the competitive setup has changed.
Coming back to the China question, in China we have felt it less. We had a tougher year in 2016, because the whole market cooled down a little bit. But this year (2017), after Q1, China started to rebound a little and we have felt it, our clients have felt it, so this year has been a fairly good year for us. And a lot of the forces that I’ve talked about, like the consultancies, they’re less of a threat here. The platforms are also less of a threat here, because if you look at Facebook and Google and the percentage of their revenue that comes from advertising versus Tencent and Alibaba, it’s a huge gap. But they will get into that, so we are aware and prepared.
Q. Since the launch of the Belt and Road Initiative, we’re seeing more Chinese brands going abroad. How is that affecting Ogilvy?
A. I think it’s very good for us, obviously, but I would also say it’s a bit over-hyped. Obviously, there are now many Chinese companies going abroad, investing abroad, building businesses abroad, but it’s not yet at a stage where these companies invest significant amounts of money in brand building abroad. I think Huawei is the only company in China that actually has a larger share of business outside of China than in China.
But that said, there’s definitely a big trend and a huge opportunity to build on that trend, and I’m absolutely convinced that in the next 10 years we’ll see some major Chinese companies becoming big global forces in their industries. We just had a meeting for the 2018 budget, where we showed our US colleagues how much I believe China will become a global force in many categories. China is making such big leaps domestically. So, on the back of that, they have huge cash reserves, massive amounts of technology, accelerating innovation, which they will eventually bring to other places. It will become very big for us.
Q. Could you expand on that? How big is very big?
A. I haven’t quantified it yet in a dollar amount, but I gave them some examples. For example, everyone’s talking about Alibaba, huge e-commerce player, but what I showed them is how that company or that phenomenon will drive a lot of other things.
Because of the sheer size of its e-commerce market, China will become a huge leader in cloud computing. This is already happening: Alibaba, Tencent and Baidu are investing massively outside of China, and companies like IBM are seeing huge threats from them.
That’s how these companies will go global. It won’t necessarily be the traditional route followed by FMCG (fast-moving consumer goods) companies. It’s through technology, innovation, that they’ll accelerate their development outside China.
And I showed them, because of cloud computing, they will be a world leader in autonomous driving, and because of that in artificial intelligence. It drives a lot of things, and at the end you have 10 different categories, all of which will be emerging industries where China will become a world leader. Take automotive as an example. In 10-20 years, I think China will be a leader in automotive. Not necessarily in engine, fossil-fuel driving, but electric cars, autonomous driving.
Q. In a recent report, Nielsen suggested that e-commerce shopping festivals are becoming less effective in China because consumers are becoming less price-focused and less impulsive. Have you noticed that trend, and how would you compare a middle-class Chinese consumer to someone in the US?
A. That’s a big question… I don’t think I would generally say they’ve become less price-driven or price-conscious. I think that shopping behavior overall has completely changed, and in many categories the existing retail setup has basically exploded. Hypermarkets in China are increasingly going out of business because it’s all done through e-commerce. There are all these neighborhood 7-Elevens and little stores popping up, because that’s how people shop now.
In terms of price sensitivity, I don’t think it’ll ever change. Chinese people like a good deal, that’s very Chinese, but in different categories it has changed. Firstly, everything is much more transparent now, you always know where you can get the best deal, any day of the week. So, people, the way they shop now, especially for bigger ticket items, is they go to a shop, look it up, and then go online and find the best deal.
Because of all this, people wait for the shopping festivals. What people never talk about when you look at the Single’s Day (Double-11) festival: a lot of people stop shopping three months before. They just basically wait for November 11 for anything they want to buy. So, people say, ‘Oh, Alibaba made $25 billion in sales on Double-11,’ but they never talk about the $25 billion of goods not sold the three months before when people were waiting.
Q. Some marketers have suggested that in China, brands over-spend on digital marketing. What’s your opinion on this?
A. I wouldn’t say they’re over-spending. I think, like with every new thing, you learn as you go. Not every dollar that is spent on digital is spent in the most effective way, but the same happened with TV and other things 50 years ago. And I think it’s actually better for clients to over-spend, and then adjust and learn, than to not spend.
This is one of the great things about China, because people here just do it—they optimize and learn. In Japan, the mentality is, ‘It’s difficult, let’s just continue to do what we’ve always done, so that we don’t screw anything up.’ Whereas here, it’s, ‘Let’s forget everything we’ve done and do something new, and if it doesn’t work, we’ll do something else.’
But the problem is, a lot of what clients have done in the past doesn’t really apply anymore in the same way, and nobody knows what the right answer is. If you’re a marketing director today and you have $100 million to spend, where do you spend it? It’s a very difficult question. Ten years ago, you would say, ‘OK, 80% on CCTV and a few billboards and everything will be fine.’ Now we have WeChat, Alibaba, e-commerce, mobile, programmatic, unlimited options. I actually think on WeChat or Alibaba, clients don’t spend enough yet.
Q. Do you think that the way brands use these digital platforms will change?
A. Yeah, that’s the thing, because a lot of clients still think about WeChat as an advertising channel. Increasingly, we’re going with our clients to these platforms not with the intent to just buy advertising, but to form strategic partnerships, to do something much more long-term that provides customer value rather than to just do advertising.
Q. Could you give me an example of that kind of project?
A. One client we work with that I always think is probably the most advanced in China as a modern marketer is Yum!—KFC—a very big client of ours. It’s amazing how they work across the whole digital ecosystem in China. And how for them marketing has changed over the last… not even five years. Five years ago, they were the most traditional marketer in the space—they did 15-second TV commercials for every new promotion, and that’s it. Now, they are one of the biggest home delivery providers in China, they have a big investment by Alibaba, one of the largest mobile-payment players in China.
Q. How do you stay ahead of the game in a market as fast-moving as China?
A. The thing is, with things changing so fast, I also think people have the tendency to just jump on every fad. I always try to educate our clients in China. When you look at advertising in India or Thailand, for example, I think it’s much better than in China—better in that it connects more to really basic human insights. Because when you talk to consumers, the way you reach consumers or create an emotional bond with them, it’s very basic things: family, love, boyfriend, girlfriend, stuff like that. But in China, you’re always trying to find the next great, crazy, new thing that comes up. So people forget the basics of creating empathy and human emotions in advertising, and that’s why a lot of the advertising we see in China… How do I say it in a nice way? It’s very functional and very much driven by what’s the latest thing, rather than really emotional stories that connect.
Q. Is this pressure for the “new thing” coming mainly from the clients?
A. It’s the nature of the market. Number one, it’s a fairly young market, at least in marketing or brand terms. Twenty-five years ago, there basically was no advertising, so it has been a fast-changing market and environment. When you operate in an environment like that, you get used to the fact that you can’t possibly do the same thing again that you did last week.
That’s something I often have discussions about with our clients. Last year, we did a campaign for a client—hugely successful, great insight, great campaign. So you’d think you would do the same thing this year. No, they don’t want it. If someone in the West stumbled upon that, they would use it for the next 15 years. But no, they can’t possibly do the same thing twice.
Q. We’ve talked a lot about change. What things have stayed the same over the last 20 years?
A. So many things… One thing that has been a mystery to me ever since I came here is why China hasn’t become a force in our business as much as in many other places. Because advertising in China, at least from a creative point of view, hasn’t developed as much as it could or should have.
It’s complicated. People always say China is very different, and the regions and people are all very different, but I always say that’s the case for India, but still they’re managing to do great advertising. In China, good advertising is just about doing something different, but most people don’t want to do something different. We often talk to clients, for example in the auto industry, and we tell them, ‘Look, every other company in China is also doing exactly the same thing.’ And they say, ‘Yeah, I want that too.’ There isn’t this ambition to stand out from the crowd, to do something different.
Q: Has this attitude changed at all over the years?
A: Actually, I think that 20 years ago you saw better advertising than now. In the early days, there wasn’t a lot to benchmark against, so clients just did something. We launched [the Volkswagen] Santana here in China, the first car that we’d ever launched. The ad that we did 20 years ago for the Santana would still look pretty good compared to everything else we do. But that was very emotional, it was different and people today don’t want to do it, or want to do it to a lesser extent.
What has happened in advertising is, because people have gained more experience over the years, people say that in certain channels things have to be done in a certain way. And if you look at TV, for example, it has basically become a 15-second format on CCTV—that’s not a lot of time to do something creative. So what most clients do now is say that on TV they’ll just provide a very functional message so people get what the product is all about, and then they use digital or online to do something more emotional. But often whatever is done online doesn’t have the same impact as what you do on TV.
But obviously over the last 20 years, talent has developed much more. In our industry there are better, more creative people, and clients are becoming more sophisticated, so we are getting there, but with slow, baby steps.
Q: What do you think will be the biggest changes in China’s advertising industry over the next decade?
A: I think the market will get more local. At the same time, Chinese companies will become more international, so it will be an interesting time in terms of figuring out what’s the right setup to do that. We see that a lot with our clients, the people that you need to do work on Chinese brands in Chinese and on Chinese brands outside of China—they are very different, and also the composition of these teams is very different.
We went through that experience with several of our local clients, because when they want to go abroad, they say, ‘I only want global experts.’ So we fly in people from New York or London, but the clients have no idea what they’re talking about. There is a big cultural gap, and to get that right you need a good mix of people that understand how these Chinese companies work, that can actually interact with them and understand them. And then, mix that with people who have experience in building global businesses, global brands, which is not easy.
But I do think digital will definitely be by far the most disruptive force for the next 10 years. And I think what is very important to us is that we continue to stay true to what our business is all about, and that’s building brands, because the basic principles of building brands is not going to change. But how that manifests itself—that will definitely change. That is going to be a big challenge for us to figure out.