In China, Buicks mean status

BEIJING -- China's burgeoning consumer market is providing a second life for a lot of American products.

''Many American brands were drowning and looking for a lifeboat -- then China came along," said Edward Bell, head of planning with the advertising firm Ogilvy & Mather Beijing. ''Here companies can start with a clean slate and create totally new images for a totally different audience."

Many Chinese got their first glimpse of American products from the movies or heard about them from immigrant friends. But the perceptions of the newly enriched consumers can be a tad off.

Consider Buick, often considered a grandpa's car in the United States. In China, ''Buick is an expensive car, and has a very big name," said Yan Lili, 30, a corporate manager in Beijing. ''I'd love to own one."

The difference in perception is partly because of market conditions. Buicks were among the first foreign cars on Chinese roads, and both the cars and their promotional campaigns impressed Chinese consumers.

Partly, that's because the bottom end of the consumer market in China extends far lower than it does in the United States. ''Compared to local cars," Bell said, Buicks ''are expensive; they're big; and they're foreign. And so they're as much of a status badge as an Audi."

That's allowed Buick's parent, General Motors Corp., to charge its Chinese consumers about $37,000 for a Buick Regal that retails for about $23,000 in the United States. Yet GM's Chinese buyers get only one-third of the three-year bumper-to-bumper warranty American consumers get.

A recent survey of 1,800 US businesses in China by the American Chamber of Commerce in Beijing found that the profit margins for 42 percent of them were higher than their average worldwide margins.

A little-discussed reason US companies enjoy pricing freedoms in China is that the country's newly created middle-class lacks product awareness.

What's more, there are no Ralph Naders in China, and many industries, including the auto industry, are controlled by a few large state-owned companies that have entered into joint ventures with foreign companies.

With the state having a vested interest in corporate profitability, local media, which is mostly state-controlled, does hardly any consumer reporting. Since most Chinese consumers can't read US publications, both because of China's controls on access to foreign media and natural language barriers, they have no independent perceptions of brands, their image or their history, making it easy for companies to create perceptions through marketing campaigns, Bell said.

In China, red BMWs and black Mercedes are often seen as the cars of choice for ritzy Chinese. So GM's marketing campaign for Buick positioned the Buick Regal as the car of respectability. GM declined to comment, but the company's Chinese website says the Regal was created as a ''sign of respect for successful leaders."

Bell said the field is divided between foreign companies trying to win over consumers in China's massive low-end market and its small but wealthy top-tier segments. Some brands, such as Johnson & Johnson Baby Shampoo, have created local versions of their products that they sell in China for less than half the US price. Others, such as Maggi, have used the core values of their brand to extend beyond traditional products, such as ready-to-eat soups, into new segments that serve local needs, such as ready-to-eat dumplings.

But other companies have elevated US brands. In Beijing, freezers selling Haagen-Dazs ice cream stand proudly in the lobbies of five-star hotels. The price for a pint of Swiss vanilla: $10, compared to around $3 in the United States.

''Part of the reason for such pricing is simply extra costs, such as transportation and duties," said Eddie Lu, marketing manager with Haagen-Dazs in Shanghai. But more significantly, in China Haagen-Dazs has sidestepped its US image of being a premium supermarket brand to position itself as the deliverer of a uniquely luxurious culinary ''experience", Lu added.

The strategy is working well because ''there's a 'reward yourself' lifestyle here," said Lu. ''People don't mind paying for prestige items, especially if they are foreign."

The strategy has worked so well that Haagen-Dazs has opened several elegantly appointed ice cream 'cafes' where dating teenagers pay as much as $40 for a sundae.