China in your hand
Shanghai’s impressive corporate skylineTalk to anyone who has worked in the marketing industry in China and they will tell you one thing: it is too exciting an opportunity to ignore, both commercially and culturally. But as marketers trying to promote our products and services, what issues do we face as we attempt to get our hands on a piece of this enormous market?
With an economy growing at over 7 per cent, a population of 1.3 billion and an Olympic-driven bonanza about to kick off, it’s easy to see why UK businesses are looking East. For most, China represents a mouth-watering opportunity, and for many it will deliver vast profits. But for the unprepared, it could end in disaster.
Tantalising it might be, but a fast buck is not guaranteed. While many UK companies have had established operations in China for years, it might come as a surprise to find out how few have actually made a profit. Rookie beware. It’s all too easy to be dazzled by statistics, but in reality success in the Chinese market means taking a long-term view. Even those lucky enough to make profits early still face a complex procedure to repatriate them and they will lose a significant proportion in harsh government taxes.
It is also worth noting that, however experienced we might be in our home market, a competitive advantage is very difficult to create and sustain in China. Marketing, advertising and direct marketing is more developed than many in our industry realise and the competition, especially in the agency sector, is tough, especially as all of the major networks are already established with global client portfolios. Increasingly they are providing expertise to domestic, emerging companies who have an eye on the European marketplace.
The upsides, however, far outweigh the down. The untapped potential of sectors such as finance and banking is there to be realised as WTO membership makes the Chinese government open them up to foreign competition. It is this, along with a plan to double the Chinese economy by 2010, that makes it the most exciting opportunity that western businesses will get in the next decade.
While they are major issues, infrastructure, legislation, skills levels and cultural differences are not the biggest problems that marketers of all disciplines will face. The most critical barrier to success stems from a misguided understanding of Chinese consumers themselves and, as a direct result, attempts to market to them.
Apart from the mythological 1.3 billion consumers (over 70 per cent of the population are rural dwellers of very low incomes), the most common misapprehension is the belief that we are dealing with a homogeneous and unsophisticated consumer population. This assumption is usually rooted in the notion that decades of economic and social control by the communist regime have smoothed out the usual differences you would expect to find in any population.
Many claim that, instead of a single market, China is in fact made up of over thirty distinct urban markets in addition to the vast rural population. AC Neilson has recently conducted a major piece of research that seeks to put sense to China’s complex consumer structure. They have divided consumers into five types: Adventurers, Worker Bees, Value Hunters, Herds and Laggards. As well as this, there are vast differences within these groups in terms of attitude and behaviour between cities, within cities and within the same social and occupational groups.
Spend some time in Beijing and Shanghai and the differences will scream out. Beijingers are generally conservative and risk-averse while the Shanghaiese are more image-conscious and ready to try new things. However, even within the same city, consumers of the same education, sex and age have radically different lifestyles.
Organisations, such as Motorola, who have been running CRM programmes for a couple of years, are only now finding out how fragmented the consumer market really is. This CRM-driven understanding of consumers has re-shaped their marketing approach. Instead of spending the vast proportion of their budgets on broadcast communication, they are increasingly using strategies we normally associate with more sophisticated, mature markets.
The lesson is simple and bodes well for the expanding direct marketing industry in China. Mix and match strategies within product and customer segments from day one. Motorola now combines broad-based strategies to target several sectors at the same time as they deliver target-specific messages for large or fast growing segments, for example, up-market, young professional males. In addition, they use highly targeted niche communications for small groups within those segments, such as early adopters. As in the West, they make use of traditional direct mail, on-line marketing and, increasingly, SMS to reach consumers.
While all of this seems old hat in our data-driven marketing world, it is not the norm for China yet. Ignoring these lessons will spell trouble for ill-prepared organisations that are relying on mass untargeted broadcast messages to sell their wares.
Importantly, China does actually have the infrastructure to accommodate integrated, multimedia communication strategies. Direct mail has not reached saturation point yet and consumers respond positively to postal communication. The bigger worry for direct marketers is Chinese government legislation and its seemingly random stance on direct mail.
From personal experience, the first thing that hits you is the sheer volume of consumers in a campaign (many millions in a single city), then the fact that the original 100 Chinese family names still account for some 90 per cent of China's one billion-plus people. Amazingly, only 19 surnames account for around 60 per cent of the population. And you thought you had database problems!
Finally, marketers bound for China might find the work of Kong Fan-Ren useful. A leading Chinese marketing expert, he has developed his own concept of customer-oriented “rules” for marketing in China, the 5Gs.
Guan lian (meaning relevance) – be relevant to the customer's needs, not those of the products you sell.
Gan shou (meaning receptivity) – be aware of the occasion and what the customer needs.
Gan ying (meaning responsiveness) – give the customer what he wants when he wants it.
Gan Jue (meaning feeling) – let the customer feel that it was his own decision to choose your product.
Guan xi (meaning relationship) – establish long lasting and mutually trusted relationships.
Wise words and, come to think of it, shouldn’t we be adopting those principles here too?
John Young is Managing Director of Oneagency. Prior to this he spent two years in China setting up and running a direct marketing agency for Omnicom. He has worked on direct marketing and CRM projects for clients such as Motorola, Microsoft, Bradford & Bingley and Vodafone.