What Alibaba can teach Chinese brands

Jack Ma strategically placed eight customers front and center during its IPO photo-op.
Jack Ma strategically placed eight customers front and center during its IPO photo-op.

The Chinese tech giant's successful IPO demonstrates the power of great communications

He has been the recognizable face of Alibaba since launching it from his Hangzhou apartment 15 years ago, but for the ringing of the bell to mark the company’s $21.8 billion IPO at the New York Stock Exchange, founder Jack Ma stepped away from center stage.

Instead, to celebrate what would turn out to be the world’s biggest public offering last month, eight customers of the e-commerce titan stepped into the spotlight for an historic photo op, taking the place of the company’s top brass. Depriving the moment of its most powerful brand — Ma — for a group that ranged from a Washington state cherry farmer to a Chinese bracelet seller was a pretty risky strategy.

But it paid off. Amid all the hype and media coverage, the move, reportedly planned for weeks and kept secret from customers themselves until the big day, was seen as typifying the company’s approach to the tricky process of building interest in a new market and keeping true to brand values while not over-inflating expectations.

Labeled a "phenomenal success" by Bob Zito, founder of Zito Partners and former executive vice president of the New York Stock Exchange, the good news marked a reassuring contrast to recent years, during which high interest in Chinese businesses had turned. These firms were taking a battering in U.S. markets from short sellers like Muddy Waters, which sought out weaknesses and exploited them ruthlessly.

So how had Alibaba handled expectations so successfully, and what lessons can other Chinese businesses with their eyes on the U.S. market learn?

While Alibaba declined to comment for this piece, citing a post-IPO ‘quiet period’, one PR figure close to the process disclosed that the focus was on "a clean, soft and controlled landing." Not an easy task for what had been until recently a juggernaut of largely unknown proportions for many investors.

Building the brand

Well before the listing process began was the slow and steady building of the company’s brand. Ma showed awareness of this from the very start, telling the media that he picked the name Alibaba because "everyone knows the story of Alibaba. He’s a young man who is willing to help others."

It sounds simple. But as Cohn & Wolfe’s China MD and chief branding officer Marina Leung asserts, "a lot of companies in China do not fully understand the value of a brand in terms of what they can achieve with it," adding that there is often an underestimation of how important non-financial markers and "the integrity of the mission" are for underwriters, foreign investors and banks.

The long-term clarity and strength of the overarching Alibaba story as a marketplace where buyers and sellers connect helped it handle reputational threats, such as consumer concern over fraudulent listings, to its 10 businesses along the way.

The company had taken a few knocks, but a strong overall brand in the domestic market helped it handle them. This gave it a strong base to work from ahead of the IPO filing.

However, it was Alibaba’s ability of to anticipate, react to, and communicate based upon a new set of standards and expectations in the shorter term that proved crucial to its success.

For example, when faced with suspicions over corporate governance and transparency regarding Chinese business in the minds of some investors, and question marks hanging over some of its own conduct, the company did thorough due diligence on its weaknesses. The result was a filing, issued in May, that included a list of risk factors which ran to 44 pages, twice as many as was provided by Facebook. This covered everything from concerns about the country’s Internet infrastructure through to the Office of the U.S. Trade Representative formerly labelling its markets as "notorious." The label has since been revoked.

Clear, thorough and well presented, the document demonstrated a business that was willing to open itself up to new levels of scrutiny and regulation.

Enough, if not all, concerns were addressed. As the PR insider said, "We wanted to diffuse concerns that people would see this business as problematically governed," adding that "while governance questions lingered" they "never overwhelmed" the process.

'Bare minimum' isn't enough

For FTI Consulting’s senior MD Cara O’Brien, this period of introspection and subsequent divulgence is something that other businesses seeking to make their mark in the U.S. would do well to emulate.

O’Brien, who handled work around Beijing-based Autohome’s U.S. IPO last year, said that companies "doing the bare minimum" to meet disclosure regulations in China will have to step up their game if they wish to succeed, especially in America. Demands regarding transparency from the consumer, too, are greater.

"Companies can be very vulnerable if they’re not very open," she said, "as people won’t understand your business and will think you’re hiding something."

Aware that communications requirements were different, Alibaba also brought in outside help for the process.

Having added Brunswick to its existing PR agency line up of Hill + Knowlton Strategies and Sard Verbinnen & Co. following the IPO filing. Alibaba also bolstered its internal team with a string of hires from the States, including former PepsiCo executive and U.S. Treasury aide Jim Wilkinson.

Ma described Wilkinson’s hire as being about "building bridges across geographic boundaries," and Wilkinson’s cross-sector experience speaks of the increased importance of a holistic approach to communications in a market where stakeholder engagement is a complex proposition.

Having seen it himself, APCO senior director James Robinson warns against companies attempting to manage major engagements with the U.S. market solely from China "due to cultural sensitivity or insecurity. It is important to have a management team on the ground."

This helps companies used to operating in the "fairly stable, highly regulated environment" of China who may find the shift to "understanding a multi-stakeholder environment where no one stakeholder in particular can guarantee your success" a "challenge,"  Robinson said.

Alibaba’s willingness to engage with a range of stakeholders was further demonstrated in its 10-day, pre-IPO roadshow, where the focus is often less about the finances than the ‘personality’ of the company.
As well as putting on 100 investor presentations in 10 countries, the company thrust its executive team into the spotlight, released engaging video content and competently handled the media.

'Average Joes'

Businesses would do well to take note of Ma’s relaxed, conversational style, which went a long way reassuring audiences in the U.S. that, as Zito put it, "this is a man they can trust and do business with. They feel that it is not scripted and understand the person behind the words."

Ogilvy & Mather’s Lyndon Cao, who runs the firm’s China practice in New York, said the resonance of the message typified in Alibaba’s roadshow went deeper.

Though led by Ma, the messaging found commonality between China and the States by talking about "the average Joes" that helped build the company and was typified in the bell-ringing move at the New York Stock Exchange.

"A very common mistake that Chinese companies make is that they love to talk statistics," Cao said, "but (in America) many people are not impressed by that."

There was also a telling strategic edge to the messaging, too.

Behind the folksy tone, the words of Ma and others balanced interest in external markets with reassurance to those in power domestically that the money would be largely invested there.

In their eagerness to embrace new markets, companies must not forget the domestic audience, whether consumers or politicians.

"There would have been communication with the Chinese government in the runup (to the IPO), and any major companies for such a major exercise would need their blessings" said Bell Pottinger’s John Wong, who added that such a moves can be positioned as "raising the soft power" of the political establishment abroad.

With the fears assuaged of both domestic and foreign markets, once those eight Alibaba sellers — who operate in a market of 279 million  "active buyers" who use the company — rang the bell, it was the turn of the markets to speak.

The value of good communications is sometimes hard to measure, but not this time. By the end of the day, Alibaba shares had soared by 38 percent.

This story first appeared on prweek.com.

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