What’s the secret to succeeding as a foreign brand in China? Start by leaving your assumptions at the border. Basing strategies on the preconceived notion that Chinese consumers have been patiently awaiting the arrival of your foreign brand is a misguided approach. While your cracker may very well be America’s favorite, that means nothing to a Chinese consumer.
Chinese consumers are highly connected and accustomed to having an abundance of choice. They can get what they want when they want it. Similarly, assuming your first move is to educate consumers about your product and how to use it will likely fall on deaf ears. Chinese consumers are comfortable doing things their own way.
Rather, engagement needs to focus on resisting the urge to generalize, avoiding coming across as preachy, and doing more to empower consumers on a local level. That begins with developing a better sense of what the Chinese market opportunity really is all about and how to access it.
After accepting that what works back home will not automatically work in China, the first thing global brands need to understand is that there is no one universal China. The country’s geographical landscape is diverse in terms of climates, terrains, and cultures. Just because a product succeeds in Shanghai does not automatically mean it will do well in Guangzhou or Shenzhen.
The Chinese consumer landscape also evolves rapidly. Market research needs to be ongoing if strategy is to remain on target. Such fluidity requires brand strategies to encompass a unique blend of awareness, adaptability, and agility if a brand is to survive in China today.
How Missteps Occur
Two foreign brands that attempted to transplant themselves into China, Tesco and Best Buy, serve as reminders of how important deep, up-to-date research on shopper behavior is.
In Best Buy’s case, the retailer assumed it would win the hearts and wallets of Chinese consumers through providing a great store experience and customer service — the same way it typically does in the United States. However, while Chinese shoppers love to shop, they are known to shop for the best price and not necessarily the best experience, making store environment and customer service a non-starter. Moreover, Best Buy did not fully appreciate that Chinese consumers are savvy in finding ways to connect directly with product manufacturers rather than with a middleman retailer.
Tesco’s failure resulted from a lack of understanding about how loyalty is perceived in China when it comes to retailer shopping. The British supermarket chain assumed that its clubcard would be globally attractive. However, because Chinese consumers like to shop around and find having choices empowering, many make a point of collecting loyalty cards with no intention of remaining loyal to any one card. In fact, 63% of Chinese consumers with loyalty cards have four or more. General confusion about the difference between loyalty cards and rewards cards undermined Tesco’s strategy.
Cracking the Code: Adapting the Brand
In addition to checking your assumptions before acting upon them, successfully marketing to Chinese consumers requires speaking to a perspective shaped by local and generational habits and preferences. While selling consumers on the importance of fitness is a sound strategy in many markets, with 415 million Millennials and an abundance of government-sponsored facilities, there is already widespread interest in health and fitness throughout China.
Nike, adidas, and Under Armour (the latest entrant), for example, have all done extremely well in China by supplying the clothing, equipment, and gear to fuel this fitness craze. There is plenty of room for newer players like lululemon; in China, such brands may need to adjust their lifestyle messaging to include product performance as well.
Many brands find that careful consideration as to how to go about adapting their marketing execution strategies within China also helps them win awareness as they move into less saturated regions (lower-tier cities); cultural preferences shift with the terrain. For instance, initially, the Danish brewer Carlsberg offered its 'international' portfolio in tier-one Chinese cities but then took a local approach elsewhere. Launching its Tuborg brand through a series of sponsorships at local Chinese music festivals, the brewer partnered with the music company Modern Sky to develop a presence in China’s second- and third-tier cities, where it has also become associated with environmentalist activities.
Going this route is likely to be worthwhile for brands that are willing to vary their engagement strategies. According to a recent Morgan Stanley report, consumer spending in China’s lower-tier cities, such as Changsha, could reach $9.7 trillion by 2030. For a frame of reference, that amount is on par with the size of the entire Chinese economy in 2015.
Disposable income in these areas is also accelerating. Discretionary consumer categories are expected to grow 13.4 percent between 2010 and 2020, while the semi-necessities and true necessities categories are expected to grow 10.9% and 7.2% respectively. Moving into these diverse provincial markets offers the prospect of attractive payoffs.
Where East and West Align
Similarities do exist between Chinese and Western consumers in that brands are finding traction with influencer or key opinion leader (KOL) blogs, short videos, and live streaming in both markets.
Chinese consumers now prioritize KOL recommendations over brand advertisements or paid content. Alibaba, the Chinese e-commerce giant, has reportedly been investing in social media and entertainment platforms to introduce more influential bloggers and performers to its Taobao Marketplace, boosting the number of active mobile buyers by 25% in the last quarter of 2016.
Given their high levels of engagement and cost-effectiveness, as well as the speed at which they can be produced, lively videos are also a valuable tool for brands marketing in China, especially considering the deep penetration of smartphones and the burgeoning state of communications networks in the country. Similarly, live streaming is gaining traction: According to Huachung Securities, it had already become a $1.8 billion industry in 2015 and is expected to reach $15.9 billion by 2020.
Brands are not only using live streaming for straightforward purposes such as product demonstrations, but also to tap into China’s social-sharing culture through some outrageous stunts. When Mondelēz International used the latter technique to launch a new Oreo cookie in China, it accumulated more than 30 million views on mobile devices and ramped up its brand awareness rapidly.
Among younger Chinese consumers, the hunger for more connectivity with their social group through digital and social media stems from a desire to stand out from their peers. Hence, the “food porn” and selfie movements have taken off dramatically in the past few years in China. While social platforms are becoming just as important in China as they are in the West, the WeChat app (a savvy mix of WhatsApp, Facebook, and Twitter) dominates.
Brands are thus under growing pressure to be “selfie-worthy.” Thriving in any market requires engaging consumers by satisfying their true wants and needs and doing so through the channels they prefer to interact with — and this dynamic is no different in China. The differences lie in the frames of reference and criteria Chinese consumers use when spending, as well as variances in those reference points and preferences across a vast geographic expanse.
Global brands willing to take the time to understand this — and how China’s marketplaces and economics are constantly evolving — will find themselves much farther down the road to gaining a sustainable share of a growing opportunity.