China Connect: six ways to win in China


By Andrew Jobling, WGSN, 17 April 2013

The core strategies from marketing and digital conference China Connect, to help brands stay ahead of the game.

China Connect, 2013

WGSN analysis

  • Social media should form a core part of any strategy in China, due to a huge take-up among the online population and a real eagerness to engage and participate; don't forget the need to convert interest into purchases
  • E-commerce can help a brand penetrate deeper into China in a more economical way than bricks and mortar, with lower-tier consumers proving to be strong online spenders, with a relatively low level of exposure to the competition seen in tiers 1 and 2
  • Chinese consumers differ hugely between tiers and between geographies. Taking the time to really learn about the target consumer can pay off, as can thinking about location strategies in terms of regional clusters rather than tiers
  • Engagement is crucial - content is king with online video, while the status celebrities have in China means that associating with the right one can be a huge boost to a marketing strategy

At this year's China Connect - the annual Paris-based conference that focuses on China's marketing and digital landscape - a series of top-level speakers discussed the evolution of the sector within the country, focusing on leveraging consumer engagement across tiers and highlighting the best ways to win.

Six core strategies emerged:

Be social

Ignore social media at your peril – it is hugely popular in China and Vincent Digonnet, APAC president at Razorfish/Digitas, said that in China "the starting point is social".

"In China there is not a social component to campaigns," he said. "Social is the platform where you build brands, sell, everything!"

Digonnet said that 96% of online adults in China are active on social media, with 85% of those creators or curators. Building on that desire to create content and engage is key to success; 75% of all online users in China post ratings or reviews at least once a month (compared to less than 20% in the US), so it's important to give them what they want.

"Social media is powerful in China because people don't trust their institutions," said Digonnet. "They want to talk with their peers. Social media is a defence mechanism against a system they don't trust."

Vincent Digonnet, APAC president, Razorfish/Digitas

Sina Weibo

And there are other reasons why social media is important. Ken Hong, general manager of Weibo marketing strategy at Chinese social media giant Sina Weibo, said that 66% of Chinese social media users follow brands - that's an average of eight each. What's more, 85% of consumers actively discuss new events, products and brands with each other on Weibo; a study by McKinsey & Co shows that 67% of purchasing decisions in China are based on word of mouth.

However, Hong also warned that brands need to do more to move consumers on to the next stage, from following to buying.

"Once a consumer becomes a fan, that's not the end of the story," he said. "You need to nurture that relationship, have them more actively engage with the brand." That means social CRM and segmenting people into different groups to targeting them in different ways. It’s also important to think about people who aren't yet following the brand but could be enticed to. Existing followers - and most importantly those that re-post or otherwise help to promote the brand - can really help if they are actively engaged.

"It’s not just about a one-on-one relationship, it's about the role they can play for you on a social platform," said Hong.

Use e-commerce to go deeper

Angela Au-Yeung, e-commerce manager, Lee Jeans China

Laurence Lim-Dally, CEO, Cherry Blossoms Market Research

China’s online population is huge, with massive potential for further growth and some interesting characteristics when it comes to spending patterns.

"Tier 4 consumers spend 9% more per order than Tier 1," said Angela Au-Yeung, e-commerce manager at Lee Jeans, China, "and they are less discount driven, with 3% lower return rates than Tier 1."

While the higher tiers get most of the attention when it comes to retail stores, the nature of e-commerce means that a brand can be exposed to people all over the country in a very economical way, and it can pay off. Lee Jeans has had a store on Tmall since last August, and while 18% of its sales come from Tier 1 consumers and 27% come from Tier 2, 55% of sales come from Tier 3 and below.

"Top tier consumers are overwhelmed with choice," said Au-Yeung.

"You're competing with many big brands, as well as lots of fast-fashion retailers... Lower tier cities have lower average incomes, but Tier 4 spends similar amounts online as Tiers 2 and 3. They spend a greater percentage of disposable income online so they have great potential as consumers."

Know your audience

To get ahead in China, it pays to get to know your audience. Laurence Lim-Dally, CEO of Hong Kong-based Cherry Blossoms Market Research, reviewed a number of advertisements and highlighted the positive and negative factors regarding their likely appeal in China. Key lessons for what will and won't work include:

Positive Negative
Sophisticated concepts and execution Adverts that go beyond Chinese boundaries of elegance
Western connotations – western equals sophistication Lack of glamour or aspirational associations
Depictions of craftsmanship and luxury Lengthy, complicated adverts
Resonance with Chinese values, such as heritage and tradition Lack of Chinese cultural resonance – avoid clichés
References to key issues for Chinese people, such as family and the western aspirations of younger generations
Lack of connection to the product being advertised

Meanwhile Laurent Malaveille, global head of digital, CRM and e-commerce at Clarins Group, said that it is necessary to refine products for the local market and that brands should look "through Asian eyes".

"Adjust your products to local specifications, listen to Chinese women and adjust to local tastes," he said.

Dan Xu, VP of Chinese online shopping mall Meilishuo, said that women on the site like three things: beautiful things; the new and hot; and individual recommendations.

"We do recommendations for users; when they are searching for one type of thing we recommend something complementary," he said. "The website also has a fashion team that translates the latest trends. They can give certain things more weight on the site. So we have top down styling tips and bottom up recommendations."

Location, location, location

Erik Roth, Partner, McKinsey & Co

Meilishuo

In such a vast and diverse country as China, getting the location strategy right is really important. What's clear is that urbanisation has played an massive role over the last 30 years (400 million people have moved from rural to urban areas, according to McKinsey & Co figures) and it will continue to do the same in the years to come. GDP in 2025 is estimated at €17trn, five times that of France, while China is expected to have an urban population of 900 million, and over 200 cities with 1million+ populations.

But how to best make the most of this? Erik Roth, partner at McKinsey & Co, said that despite the focus on tiers in China it is best to approach the country in terms of clusters.

"There’s more similarity between cities next to each other than tiers," he said. "So we always say if you want to enter China, look at where the growth is and target the cluster."

Nathalie Remy, principle at McKinsey & Co, said that clusters are important from a macro perspective when developing a "go to market" plan, but it is also important to look at individual cities due to differences in spending patterns between them.

"The challenge in China is not to tackle the mega cities, but to target and make choices for the next 200," she said. "Chinese middleweight cities [still with populations of 5-10 million] will make up 228 of the top 600 cities in the world by 2025, and will represent 45% of GDP growth in China."

Engage through video

Leo Liang, senior director, national business development, Youku-Tudou

Alexis de Gemini, CEO, A2G Creations

Online video is hugely popular in China and Leo Liang, senior director, national business development at leading player Youku-Tudou, said that there are now more videos being watched than searches being performed.

He also added that 370 million people visit Youku-Tudou each month to view a mix of bought-in copyrighted content (70%), user-generated content (20%) and originally developed content by the company (10%). It’s free to watch, with adverts shown at the start of the videos, and Liang said that if the object is product promotion - and brands want people to watch for 15 or 30 seconds - then advertising on a service like Youku-Tudou is more appropriate than simply hosting a video on social networking platforms.

"Over 75% of video viewers are willing to interact with the video, if the content is interesting enough," he said. "So content is king."

Celebrity status symbols

Don’t underestimate the power of celebrity in China.

"Celebrity status in China is not like Europe – when you are a celebrity in China, you are bigger than celebrities anywhere else," said TV producer and director Alexis de Gemini, CEO of A2G Creations. "These people have a lot of power."

Liang described celebrity endorsement as "critical", saying many brands he had worked with had had really good results with it; but there is a catch – associating a brand with a certain celebrity's value can be problematic if that celebrity has a fall from grace.

"If you’re not a well-known brand in China, I think celebrity endorsement is definitely for you," said de Gemini. "You have to be very careful to match the brand to the values, but if you find the right celebrity it definitely helps you."