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Faced with a series of noisy protests over the past three weeks, Japanese consumer goods companies could be forgiven for feeling slightly nervous about their Chinese business.

Yet while chief executives have been fretting about calls to boycott their products, marketing experts believe there is no need for panic. "There is no evidence that sales of Japanese consumer goods are being affected in the short term," insists Mark Patterson, head of the Asia operation of MindShare, a media buying agency owned by WPP, the marketing services giant.

Although he has urged clients to leave their media plans unchanged, Mr Patterson suggests that Japanese companies step up consumer research on the impact of anti-Japanese sentiment.

"The problem is that people, particularly in China, will tell you what you want to hear, rather than what they actually buy," he says. "Our experience suggests that most Chinese are not ready to ditch their Japanese mobile phones because of ideology."

Mr Patterson is no stranger to tricky situations. During the 2003 Sars outbreak in China, he advised international clients to shift advertising spending from television and newspapers to online media, because "people turned to the internet for information and communication".

It is only one example of how MindShare is trying to steer international clients through the minefield that is China's media market.

The company, which counts Unilever, Ford, Nike and Pepsi among its clients, boasts a six per cent share of China's highly fragmented media buying market. Last year, the company spent about $700m on behalf of clients, mostly on traditional media such as television, newspapers and magazines.

While international media buying groups account for about a quarter of annual advertising spending in China, more than 100,000 small media brokers account for the remainder.

This fragmentation has allowed CCTV, the state-owned television network, to become the country's dominant seller of broadcast advertising.

To improve its bargaining position, MindShare has emphasised its list of international clients, who tend to spend a disproportionate amount of their marketing budgets on national television campaigns.

"CCTV is trying to attract more multinational clients, because they help the network to lift its brand value inside and outside of China," says Mr Patterson.

Still, for a truly national television campaign, CCTV is only one part of the puzzle owing to its comparatively weak viewing figures in southern China.

"There are 2,200 channels and 36 stations, including CCTV, provincial satellite television, provincial terrestrial television and city television," says Mr Patterson. "The biggest challenge for us is to optimise the investment efficiency across these different layers."

Another problem is the lack of reliable media consumption data outside big cities such as Beijing, Shanghai and Guangzhou. To collect data in the far-flung corners of the country, MindShare has joined forces with an unlikely promoter of market forces - the Communist Youth League of China, which is mandatory for high-school students to join.

"Once you go beyond the top 25 cities, you have to use less advanced research tools," says Mr Patterson. "We are paying [Youth League] members to record their media consumption in diaries."

MindShare is also seeking to promote its ability to pool buying power within WPP, which has three competing media buying agencies in China, including the recently acquired Mediacom.

"We go into the big annual negotiations with vendors as a group, which allows us to do a deal based on combined market share," says Mr Patterson.

In China, the group counts Nestlé's Nescafé as well as Kraft's Maxwell House, its arch rival, among its clients. It reflects a global consolidation in the media buying market, which is dominated by four marketing services giants, which include WPP, Omnicom, IPG and Publicis.

"One of the big challenges is conflict management," admits Mr Patterson.

Still, the main challenge is to execute clients' strategies in difficult markets such as China, where salary levels are rising and staff loyalty is dwindling. It does not help that media buying agencies offer "a lot of scope" for bribery and corruption.

"You have got companies that are spending a lot of money, and you have media vendors who will do all sorts of things to get a bigger share of these budgets," says Mr Patterson. "You cannot stamp out corruption, but you have to develop a reputation for not tolerating it."

According to the company's rules, employees have to declare gifts worth more than Rmb500 ($60). Typical forms of bribery include cards for automated teller machines, houses and cars.

MindShare says that it has had to sack corrupt employees "on a relatively regular basis". As Mr Patterson puts it: "By the standards of our business, Hong Kong is extremely clean, while Taiwan and China are not."

Copyright The Financial Times Limited 2017. All rights reserved.
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