Ogilvy POV | Adam O’Conor, Chief Executive, Ogilvy & Mather Hong Kong
This year’s rankings support the view that established, international brands continue to market themselves more effectively. But this is only partially true, as spending on traditional media and advertising by leading players is becoming less of a guarantee of success. The realities of a digital world mean that companies, and agencies, now need to be smarter, bolder and more attuned to consumers to drive brand reputation. The supporting editorials dissect the current brand and marketing landscape in Hong Kong, pinpointing the array of opportunities in a market characterised by its distinctive geography and culture.
For all the talk of the growing threat to big brands of disruption from smaller, more nimble businesses, one of the most surprising elements of this year’s Hong Kong rankings is support for the view that established, international brands continue to market themselves more effectively.
The usual names and logos again continue to dominate the coveted top positions, as in 2014, and in 2013. Given the narrative around disruption in branding, advertising and campaigning ushering in a new order, the big disrupters and haywire local brands are conspicuous by their absence. Also missing are those leading ‘human’ brands – the influential international and local cultural icons that consumers take their lead from and crave association with. Overall, the supremacy of traditional ‘hero’ brands appears to be a constant.
Is it perhaps inevitable that many of the most high-profile, global brands, with sizable budgets remain out in front. However, marketers are now acutely aware that spending on traditional media and advertising by leading players is becoming less of a guarantee of success for brands.
In Hong Kong, its physical geography and unique urban environment, with a selection of high-traffic locations, means that outdoor media will always remain attractive for brands. However, the growing power of digitally-native millennials in Hong Kong presents a new and distinct challenge for brands. This group, for whom digital is their main currency, represents the future power wallets for consumer brands. The realities of a digital world mean that companies, and agencies, need to be smarter, bolder and, most importantly, more attuned to consumers to drive brand reputation.
Fundamentally, brand campaigns must continue to excite, inspire, educate, or entertain (or preferably all four!) to be successful. Many retail and apparel brands are already innovating to offer omni-channel services to consumers that extend beyond a basic transactional interaction to a more experiential offering.
To be successful in this new digital and increasingly competitive landscape, brands now need clearer differentiation, greater originality and stronger authenticity. To achieve this, a more forensic understanding of the drivers of key consumer archetypes is essential. Brands, and agencies, must develop a deeper knowledge base of their target customer groups to enable them to design and execute more segmented strategies that can be deployed via the most relevant channels.
The days of pre-packaged campaigns designed for set channels are no longer sufficient – clients have developed stronger, in-house capabilities and demanding ever more in terms of value for money. For agencies, internal structures and skills mix must evolve to provide the creative solutions required by brands. Recruitment needs to be geared towards tapping into new talent pools with cutting-edge expertise in emerging areas such as, user experience, creative technology and innovation. Much can also be learned by forming strategic partnerships with individuals and organisations in the start-up community about how to cultivate a more disruptive mindset, experimental consciousness and innovative ideas.
Agencies also need to become more adept at leveraging the business of ideas with clients. Current relationships with clients are often restricted to interactions with like-minded marketers. Instead, account teams need to forge close links and direct dialogue with clients’ chief financial, innovation and operating officers to devise brand strategies, agree appropriate performance measures and evaluate outcomes.
More strategically for Hong Kong, it is imperative that the sector shows a greater willingness to flex its creative muscles. Hong Kong needs to be looked to as the doorway, and not the doormat, for international companies looking to enter the Greater China, or the wider Asia Pacific market. Hong Kong needs to be viewed as a regional and global hub where energy, innovation and disruption are constants and international and local players can thrive. Hong Kong needs to be known for the same things it is already renowned for, but also its confidence in being different.
Multiple reports tell us Hong Kong is the most mobile market in Asia. But at the same time there are conventions that keep the culture grounded in a surprisingly undigital mindset. Brands that speak to Hongkongers on both levels do best in the market. Read our expert advice to learn more about becoming a top brand in Hong Kong.
One of Asia’s most international cities, Hong Kong’s mobile-usage rate is ahead of most markets but the city’s savvy shoppers seem to be lagging in the purchase department this year.
Recognized as the second largest recipient of foreign direct investment (FDI) in Asia and the world’s most services-oriented economy with services sectors accounting for more than 90 per cent of GDP, Hong Kong is a country heavily dependent on international trade and tourism. According to the Hong Kong Trade Development Council (HKTDC), in 2014 the city’s economy expanded 2.3 per cent in real terms, down slightly from 2.9 per cent in 2013.
The soft growth experienced over the previous year can largely be attributed to the slower global economic recovery weighing on exports of goods, the slackening of tourist spending and weaker domestic demand. Growth in private consumption expenditure weakened to 2.7 per cent in 2014, from 4.6 per cent in 2013. Investment expenditure, including machinery and equipment acquisition, dropped 0.3 per cent in 2014, from 2.2 per cent growth in 2013.
While the analyst community is generally cautiously optimistic about Hong Kong’s economic outlook this year, the value of retail sales, in nominal terms, dropped 2 per cent year-on-year in both January and February 2015, after a small decline of 0.2 per cent in 2014. Labour market conditions remain tight, with the seasonally adjusted unemployment rate at 3.3 per cent for the first quarter of 2015, which is close to the lowest level in 17 years. Meanwhile, HKTDC numbers show Hong Kong’s consumer prices rose 4.4 per cent year-on-year in the first quarter, after rising by 4.4 per cent in 2014.
Consumer confidence is relatively buoyant in Hong Kong and has remained largely unchanged for the past few years. This trend continued in the first quarter of 2015, with Nielsen’s Consumer Confidence Index recording a score of 106 for Hong Kong, compared to 107 in the previous two quarters. (A score above or below the baseline of 100 indicates the degree of optimism or pessimism in a market. The Asia-Pacific average was 107 and the global average was 97.)
Stable optimism and a positive economic outlook for Hong Kong, however, are not helping to drive consumers’ readiness to spend. The latest government figures show that the value of total retail sales in March 2015 decreased by 2.9 per cent compared with the same month last year. Value sales of jewelry, watches and clocks, and valuable gifts saw the largest decrease, down 18.6 per cent. Most types of retail outlets recorded year-on-year declines in sales, conceivably reflecting the slowdown in inbound tourism.
Increasing access to connected devices and the capabilities of those devices is helping to shape the behaviours and purchasing habits, as well as the media consumption, of consumers in Hong Kong. Over 80 per cent of Hong Kong households use smartphones, 6 percentage-points more than the U.S. Along with this increase in mobile usage, particularly smartphones, m-commerce is playing an increasingly significant role in the Hong Kong retail landscape, with more than one quarter of consumers in Hong Kong (28 per cent) now reporting to shop on their mobile phones.
For the remainder of 2015 and the year ahead Hong Kong’s retail sales performance is likely to continue facing headwinds as a result of declining inbound tourism. Despite the challenges, however, the continuing (albeit slow) global economic recovery and stable labor market should support consumer sentiment and safeguard against any significant pressures on consumer spending.
Below are the top performing brands in Hong Kong. Click on the image to learn more:
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