Readying your brand_for_315_en

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News & Politics

Published on March 10, 2014

Author: SerenaSang

Source: slideshare.net

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The Crisis Handling of Chinese 3.15

Readying Your Brand for World Consumer Day in China

1 Every PR practitioner knows that World Consumer Rights Day (March 15 or 3.15) is a dangerous day for consumer brands in China – many are already preparing for this date including most of our clients. While consumer brands are the obvious targets for government and media exposure, there are a few special points for this year’s 3.15 that could affect how 1.3 billion consumers view the reputations of companies operating in China. March 15: A Grassroots Victory in China China’s booming economy has given its citizens greater purchasing power through more economic choices. At the same time, they are also increasingly more conscious of their rights as consumers. March 15 celebrates the international consumer movement and has become the most important occasion for Chinese consumers to mobilize citizen action, protest market abuses and social injustices that undermine the basic rights of all consumers. Each year, the nation’s broadcaster China Central TV (CCTV) televises the 3.15 Gala, a live program dedicated to exposing abuses by companies or within an industry. Companies highlighted on this program suffer serious damage to their reputations and often to the point where they are unable to recover their business: in 2010, HewlettPackard was exposed on the program for its substandard PCs and poor customer service and suffered a five percent loss in market share. What is CCTV planning for 2014? No media organization will divulge its editorial plans publicly therefore it’s impossible to accurately predict which issues will be highlighted in the upcoming 3.15 Gala. Based on detailed discussions with key media organizations, all expressed that they are planning special reports for March 15 (all have confidentiality agreements with their respective organizations so declined to disclose specific companies or name industries). Determinants for stories on CCTV 3.15 Gala 1. Whether it is a real concern for consumers; 2. Whether there is an urgent need to address or resolve the problem; and, 3. Whether it is common (e.g. not for a few individuals but for the wider public) According to Executive Director of CCTV 3.15 Gala Mr. Yin Wen

2 However, they revealed that the issues targeted Hidden Rule No. 2: MNCs are an easier target are related to consumers’ daily lives and have than domestic companies and the more visible attracted extensive public attention. the company, the greater the possibility of being targeted Our consultants reviewed media coverage over the last few months and analyzed data from key We also note the growing scrutiny of multinational stakeholders to look for clues that would lead us brands over domestic brands. For example, China to potential issues. Before we delve into those Economic Net first broke the story in November issues, we should consider two hidden rules of 2012 about a Chinese supplier to KFC using 3.15. banned antibiotics and hormones in its chicken. CCTV targeted McDonald’s on the 3.15 Gala in 2012. Among the 30 food scandals exposed in the Hidden Rule No. 1: B2C companies have a Chinese media in 2012, nearly one-third were greater chance of being exposed on 3.15 foreign brands including KFC, McDonald’s, compared with B2B companies Starbucks, Heinz, Nestle and Coca-cola. Starbucks was also targeted by CCTV in October Of the 49 companies exposed on CCTV’s 3.15 Gala 2013 for its expensive pricing. over the past six years, only six were B2B companies (i.e. substandard building materials, We certainly don’t overlook a fact that domestic substandard steel used in automobiles, etc). All enterprises, especially state-owned enterprises, companies are fair game, yet we can see a trend receive less scrutiny due to their government ties. where CCTV is focused on exposing certain However, based on recent cases of corruption and companies or brands rather than targeting an deaths associated with poor quality products, they industry. may not necessarily be immune in the future. Year Cases Industry/Type Company 2008 7 Messaging, beauty, building and decorative materials, medical, business fraud Huobao medicine 2009 9 Gold, information services, business fraud, medical building and decorative materials Double, National Highway 319 & 106, Good Memory pillows 2010 8 Auto parts, building and decorative materials, medical, utensils LG, Sony, HP, Telsda, Like medical 2011 8 2012 9 Communications, toys, fire equipment, liquid gas storage tank McDonald’s, China Merchants Banks, Carrefour, RoadWay, All-China Students’ Eyecare 2013 9 Medical, communications, information services Apple, Volkswagen, Chow Taiseng, Netease, JAC, AutoNavi Antiques, auto maintenance, building Kumho tires, Wangqin and FL and decorative materials, paper Mobile, Gome, Tianpopo products Xijiutang *Items in Bold represent MNCs

3 CCTV utilizes social media to disclose hints Leveraging the powerful reach of social media, CCTV opened weibo accounts on the Tencent and Sina Weibo platforms to disseminate news and updates about 3.15. It also has a WeChat subscription account. Despite the number of followers on the Tencent Weibo account, it is not active compared with Sina Weibo. While active, the WeChat account has been disseminating multiple articles and links on various topics that have no relation to 3.15. We found strong hints on Sina Weibo and identified six topics that CCTV could target: personal financial management, food quality and safety, fake cosmetics, home appliances, online dating services, and telecommunications fraud. Government oversight suggests certain issues may be reported The China Consumers’ Association (CCA) is the national body sanctioned by the State Council with the legal authority to protect consumers’ interests by means of supervision of goods and services. Each year the CCA releases a report of consumer complaints it reviews categorized by industry. Consumer electronics receive so many complaints that the CCA has divided it into three separate categories (telecommunications equipment, multimedia devices and computers). Products 2013 H1 2012 H1 % Change Telecommunications products (mobile phones, walkie-talkie, etc) 23,039 17,382 33% Food 12,832 14,487 -11% Apparel 11,782 15,167 -22% Automobile and parts 9,784 7638 28% Shoes 8,784 7,911 11% Kitchen appliances 6,628 5,929 12% Home decoration and building materials 6,223 6,321 -2% Multi-media devices (CD, MP3, DVD, stereo, etc) Computers 5,563 7,669 -27% 5,260 4,930 7% Air-conditioners 5,039 4,654 8% Source: China Consumer Association @CCTV315 Opened: 2010 Followers: 1,083,935 @CCTV315 Opened: 2010.1 Followers: 456,814

4 Industries at risk Taking clues from our conversations with media and analyzing social media and industry bodies, we believe the following issues could be targeted for this year’s 3.15: Food quality and safety. Food quality and safety will continue to remain a top social and political priority in China. Given the number of scandals in the last year – from tainted rice to floating pigs in rivers – the media will continue to expose unsavory practices. Food and beverage producers, restaurants, or even food packaging companies may be targeted. Pharmaceutical and healthcare. Since GSK and other pharmaceuticals were exposed for bribery last year, the health care industry has received increasing scrutiny from the general public. Stories have surfaced about unfair pricing practices in China and the rest of the world, expensive therapies recommended by doctors, and the safety of drug ingredients. Public health issues are becoming increasingly synonymous with food safety issues in China. new financial products. Most notable is Yu’E Bao, an investment product offered by Alibaba, China’s largest e-commerce business. Within six months of its launch, more than RMB 100 billion (US$ 16.5 billion). Meanwhile, it has spurred the growth of online fraud: 360 Internet Security monitored counted 64,000 fraudelent websites between Q1 and Q3 2013, up 42% from the same period in 2012. These sites have cheated users by fabricated returns with an average loss of RMB31,000 (US$ 5160) per person. This was raised in the CCTV 3.15 Gala weibo account, which leads us to believe that companies operating in this industry will be at risk this. E-commerce. With more than 618 million Chinese netizens at the end of 2013 (that’s nearly twice the entire population of the United States), and nearly 81% accessing the internet through mobile devices, we believe e-commerce could be a major target for consumer action. Taobao, China’s leading online shopping platform, recorded a whopping 30 billion Yuan (USD4.9 billion) after 21 hours of trading on Double 11 in 2013. Yet, that shopping holiday unveiled multiple problems including fake products, fraudulent product information, delayed delivery, limited warranties, and refusal to refund items. We could see a story related to this immensely popular sector. Consumer electronics. China is arguably the largest market for consumer electronics, and it clearly remains a hot target for complaints (the number of complaints in the mobile phone category jumped 33% alone according to CCA data). CCTV 3.15 Gala has also made it point to Express delivery. Benefiting from rapid growth in expose at least one electronic brand each year, e-commerce, the express delivery sector is therefore we will surely see another case in 2014. expected to reach volume of 19.2 billion parcels Automobiles. With 21.98 million new vehicles by 2017. Yet, it’s a highly competitive, low margin sold in 2013, China remains the largest auto business with more than 35,000 courier market in the world. CCA data also revealed nearly companies in China. Safety and service are often 30% increase in complaints. Besides product overlooked as these companies struggle to quality and driving safety issues, we have seen compete on price. Last December nine people numerous complaints about the high costs of were poisoned and one died as a result of a toxic maintenance and repairs surfacing. There are also chemical leak during a delivery. Moreover, many reports about fraud in the used-cars market. consumers continuously complain about theft, poor handling of goods, and delayed service that Online finance. As China loosens restrictions in we believe CCTV may expose problems in this the financial sector, we have seen an explosion in industry this year.

5 Cosmetics. Despite the withdrawal of Revlon and Garnier brands from China last year, China’s cosmetics industry, which includes skin care, makeup, perfume, men’s cosmetics, and babycare products, ranks third in the world valued at USD26 billion. Local media questioning Nu Skin’s business practices operations resulted in government probes into operations in China. Fake and shoddy products remain a centerpiece in news stories and CCTV itself has selected this industry as a target this year. Other clues that you may be targeted There is no exact formula to determine whether or not you will be profiled on the CCTV 3.15 Gala but there are some signs you should note that would increase your chances. In addition to the hidden rules and industries at risk, 1. Have customer complaints escalated in the last year? 2. Have you or any colleagues received a call from CCTV or its subsidiary asking for advertising cooperation? Pollution-related enterprises. Deteriorating air quality has generated increasing alarm in the key 3. Have you ever been criticized by CCTV becities of Beijing and Shanghai as well as affected fore? the tourism sector and company recruitment. Moreover, Xi Jinping’s administration has placed environmental conservation and sustainable If you answered “Yes” to any of the questions development as a top priority. It’s likely that CCTV above, then it’s time to prepare your team for may delve into this by highlighted certain March 15. industries that account for a large part of the pollution. Companies in petrochemical, iron or steel industries or companies at risk for air, water and soil pollution should remain vigilant: it’ll be wise to review internal processes to ensure emissions are within government guidelines.

6 Better safe than sorry Every company is at risk for 3.15 so we recommend taking a few prudent steps to ensure your company is prepared. Listening system – Monitor any and all news coverage for your brand or company name. Try to include any industry-related issues and developments so you can see how they may affect your business. Don’t forget to monitor social media and online conversations. Prepare teams – Most consumer brands have a special task-force in the days leading up to and following March 15. The team may be comprised of people from various departments all with particular roles and responsibilities, i.e. PR/communications, legal, HR, operations, sales/customer service, etc. Consider conducting scenarioplanning exercise where the team goes through probable situation in a close setting. This helps teams identify possible gaps in the process so it can be fixed in time for 3.15. We believe the best preparation is to experience one yourself. Secure senior involvement early – Keep an open line to the company head or country manager, and ensure the executive is available to review and approve company statements as necessary. The executive may be called upon to give an interview immediately so be sure to prepare him or her with media training. Statement from McDonald’s on weibo Speedy, responsive mechanism – When a damaging story emerges, know how to respond to the story. What is the message? Do you issue a press release? Arrange a press conference? After scenario-planning training, you’ll have pre-ready statements and action steps to refine and apply. It’s no longer possible to wait 24 hours to issue a response: we advise having an official statement within the first four hours. Ensure content is appropriate for the channel - Be sure the message is suitable for the audience. For example, a cold, wordy statement posted on Weibo won’t be received well. Messages should address the issue but also alleviate the real concern of the general public. See McDonald’s statement from 2012 highlighted in our previous white paper, The Art of Weibo Crisis Management. Utilize all tools to communicate with your stakeholders – Weibo is a tool to rapidly disseminate your messages to the online public. However, you also need to consider employees, key clients, and partners in your communications. Consider using other tools like WeChat or email to communicate in real-time with your key stakeholders. Media are not enemies – Media will naturally contact you if you are named on March 15. Don’t be silent – media will fill the void with rumors or misinformation making it more difficult to get your story across. Maintain an open attitude with media and keep them updated regularly. For example, you can give media updates on the issue, investigation results, or announce corrective action taken.

7 Anatomy of CCTV 3.15 Gala Hundreds of millions of people tune into the CCTV 3.15 Gala every March 15 to see the drama unfolding for those companies who fail the Chinese consumer. Months of hard work goes into the evening program. Read how the program is put together and how CCTV stories influence other reporting. According to Executive Director Yin Wen, preparations can start as early as June or July the year before the program. Yin Wen and his editorial board review and collates complaints gathered from CCTV hotlines and related government bodies including the China Consumers’ Association, the General Administration of Quality Supervision, Inspection and Quarantine (ASQIQ), and State Administration for Industry and Commerce (SAIC). The team may also identify topics most frequently discussed on the internet. Most of the production team comes from CCTV-2, the business and finance channel, who are considered most familiar with business and have investigative reporting skills. Overseas reporters may also be engaged to supplement stories. Each reporting team is assigned one or two topics to report (out of 20 named by the editorial board) and produces a story about 6-10 minutes in length. These stories are reviewed in late February. Reporters are known to go undercover to collect first-hand information or contact industry insiders to validate information. This approach is necessary to support the story: as Mr. Yin said, “We are making a conclusive report hence we have to make the report irrefutable.” The decision to broadcast those stories on March 15 is made one day before, on March 14. The editorial board evaluates and weighs the persuasiveness, influence and consequences of each story. However, this is not the final version. The executive director has on hand two versions for the 3.15 Gala with different stories. No one really knows which version will be aired. Have the other stories been abandoned? Certainly not! CCTV-2 have multiple other programs to broadcast those stories, with some aired the morning of March 15 on an hourly basis as a build-up to the 3.15 Gala. Moreover, a supplemental program, 3.15 in Action, is broadcasted daily in the days immediately after March 15. Editorial Board of CCTV 3.15 Gala Yin Wen ( ) Executive Director Shi Yadong ( ) Executive Editor Chen Hengting ( ) Director Chai Zhehong ) ( Chief Copywriter Li Yi ( ) Director

8 How CCTV influences other media MSLGROUP examined the media coverage for two cases – HP and Volkswagen – that were highlighted in 2010 and 2013, respectively. Other media outlets had previously reported on the same issues that were ultimately broadcasted on the CCTV 3.15 Gala. The reach and influence between the two reporting periods shows how coverage is astonishingly amplified. Thus, it’s crucial to address issues immediately once raised in the media. Proactively communicating your solution or progress will limit the possibility that CCTV will choose to highlight the problem during 3.15. HP Media Coverage 4894 1331 30 1 ITXINWEN.com report 11-18 Mar 2010 CCTV report 15-22 Mar 2010 Print media Online media For more information, please contact: Shanghai +86 (021) 5169 9311 Daisy Zhu, Managing Director, China Daisy.Zhu@mslgroup.com Volkswagen Media Coverage 9976 Beijing +86 (010) 8573 0688 Thomas Liu, General Manager, Beijing Thomas.Liu@mslgroup.com Straus Wang, Consultant Straus.Wang@mslgroup.com 60 1006 2 Southern Metropolis Daily report 7-14 Jan 2013 CCTV report 15-22 Mar 2013 About MSLGROUP We are a Next Generation Agency that creates and celebrates big ideas and communications solutions in the digital age. Boundless thinking, innovation driven by insights and an entrepreneurial spirit excite us. We are relentless truth-seekers and collaborate widely to discover pearls of wisdom. MSLGROUP is Publicis Groupe’s strategic communications and engagement group, advisors in all aspects of communication strategy: from consumer PR to financial communications, from public affairs to reputation management and from crisis communications to experiential marketing and events, with more than 3,500 people across close to 100 offices worldwide. We deliver multi-channel creative programs for more than 25 of the world’s top 100 brands, as well as advise them on critical business issues. The group offers strategic planning and counsel, insight-guided thinking and big, compelling ideas – followed by thorough execution. In 2013, The Holmes Report recognized MSLGROUP as the “Best Corporate Consultancy in the World” and “Asia Pacific Consultancy of the Year”. In the same year, Campaign Asia named MSLGROUP PR Agency Network of the Year for the second consecutive year (2012 and 2013). MSLGROUP has the largest PR, social media and events teams in Greater China (12 offices and 700+ professionals) with brands MSLGROUP China, Genedigi Group, Luminous Experiential Marketing Communications, and King Harvests. MSLGROUP China is the fastest-growing PR and social engagement consultancy in China since 1994. The specialist full-service international firm counts 200+ staff in Beijing, Shanghai, Guangzhou and Chengdu. We were named “China Agency of the Year” twice in the last four years by The Holmes Report. MSLGROUP China also won accolades from the International PR Association, China PR Association, the International Business Awards, and China’s New Media Festival. Learn more about us at: www.mslgroup.cn | Sina Weibo: @mslgroup

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