Analysis: The practice of individual branding among Chinese manufacturers

Gasgoo.com (Shanghai) - In the past years, several Chinese own brand manufacturers have started revising their brand structures and reorganizing their sales networks around individual brands. Great Wall is one of the most recent to do so, with President Wang Fengying announcing a new logo change for the manufacturer's SUV line last month. The debate behind individual branding for Chinese manufacturers has been an intense one, with several such proposals failing to achieve the results that they originally set out to gain. Will Great Wall manage to succeed where others have not? In order to better understand industry viewpoints on the issue, Gasgoo.com (Chinese) conducted a week-long survey on the issue, collecting opinions from 2,117 insiders and experts.

The first question on the survey was directly aimed at Great Wall's individual branding plan. Despite the manufacturer's assertion that their decision was a result of extensive long-term consideration and planning, the majority of participants were not very optimistic. 56 percent of participants said they didn't believe the prospects for the plan were good. Only 26 percent believe it was a smart decision, while the remaining 18 percent said it was too early to make a definite judgment, remaining undecided.

Great Wall has been one of China's best performing own brand manufacturers, gaining both market share and industry praise. The manufacturer has been especially successfully in the SUV market, with the Haval series continuing to expand into several new segments. Whether comparing sales performance, profitability or brand image, Great Wall's models are squarely at the forefront of own brand manufacturers.

In order to better accommodate consumer demand, Great Wall has implemented three marketing plans for each of its core vehicle types, codenamed C1, C2 and C3. The manufacturer has already seen a great deal of success with its Haval SUV and Voleex sedan lines. The C3 plan will be aimed at further developing the Wingle series of pickup trucks. The manufacturer also sells minivans. Great Wall's relatively rich and varied product lineup allows it to stand apart from other Chinese manufacturers, who rely primarily on sedan sales. Therefore, comparing the viability of its brand restructuring plan to those of other manufacturers may not be entirely fair. However, the costs and rewards associated with such plans require further inspection.

Chery and BYD were among the first manufacturers to embark on individual branding projects, later followed by Geely and others. In the short-term, these projects helped stimulate sales growth. However, due to lack of product variety, manpower and financial resources, the restructuring had more of a negative influence than a positive one. Furthermore, Great Wall is still in a period of expansion, with several of its individual products not yet fully mature, which may further negatively affect its brand restructuring plans.

In the second question of the survey, participants were asked whether or not they believed individual branding is necessary for own brand manufacturers. Only 27 percent agreed that it was an unavoidable step that needs to be taken for own brands to improve their overall brand recognition. 50 percent of participants, meanwhile, believe that it is not entirely needed. The remaining 24 percent were undecided.

Far before it became common practice for manufacturers to reorganize their sales networks, BYD had already completed an individual branding project in a relatively short amount of time. The manufacturer was not only able to implement the plans quickly, it also made a lot of notable gains in sales growth. However, due to some dealerships' poor grasp of their new products and other problems, BYD's sales started to suffer last year. Ultimately, the manufacturer decided to reunify its four brands, putting an end to its bold three-year experiment. Chery and Geely also have yet to garner significant gains from their restructuring programs.

It can be said that most Chinese own brand manufacturers have faced a continuously uphill battle since their infancy. They entered a market which primarily was, and continues to be, controlled by foreign enterprises, which possess both superior technology and resources. To create a recognizable brand image in this sort of environment is, needless to say, very difficult. Despite making several advances, most domestic brands very quickly hit a glass ceiling. However, without a solid foundation and strong brand image, rashly going about implementing an individual brand structure will most likely lead to further losses for own brands.

The third question asked participants what they felt was the most important requirement for necessitating individual branding among own brands. Over half of the participants answered that having a diverse product line and sufficient sales volume were the most important conditions, gaining 29 percent and 27 percent of the votes, respectively. Meanwhile, 18 percent of participants believe that a surplus of market resources was the most ideal condition. Only 12 percent believe that a situation would arise where one brand cannot handle the manufacturer's full product lineup, thereby requiring reorganization.

In a rapidly developing market, having more products and brands in their lineup, logically speaking, would help increase sales for own brand manufacturers. However, despite the fact that the Chinese market is continuing to expand, the enormous growth rates of 2009 and 2010 are clearly a thing of the past. In the current environment, where sales growth is moderate at best and new models aren't introduced as frequently, dealerships that have undergone brand and sales restructuring are unable to ensure earlier levels of profitability. Without increased sales, the entire network will be unable to further develop. Unless manufacturers have the utmost confidence in their products, are able to provide continuous financial support and have done sufficient research on the market and future trends, individual branding remains an overall risky venture.

Changan is just one example of a manufacturer whose branding project was unsuccessful due to a poor grasp of market conditions. The manufacturer had previously tried to divide its Benben, Zhixiang and Yuexiang lines among two different networks based on vehicle size, without much success.

When asked to compare the benefits with the costs of recent cases of domestic manufacturers' individual branding projects, the majority of participants, 60 percent, believe that the costs outweighed the benefits. Only 16 percent disagreed, while 24 percent said that the issue needed to be judged on a case-per-case basis.

Whether it is short-term profits or increased market share that has ignited the recent craze for brand restructuring among own brands, the difficulties associated with embarking on such a project and the questionable long-term gains prove that it is not something to be taken lightly. We recommend that own brand manufacturers strongly consider the risks and take great care before implementing individual branding plans.