Speaking at a high-level summit of multi-national CEOs last Friday in Beijing, Professor Hai Wen, vice president of Peking University, focused on the mobile phone industry to illustrate the vast opportunity presented by the Chinese market. According to Professor Hai, when mobile phones first appeared in China in 1987, sales were predicted to reach 800,000 by the year 2000. By the time the millennium turned, sales had actually surpassed 87 million. Today there are 490 million mobile phones in China; during this year’s Spring Festival, these phones delivered over 15 billion SMS text messages.
Professor Hai was speaking at the CEO Summit “Winning in China.” Hosted by CCTV and GroupM, the event underscored both the promise and the complex challenges of the Chinese market. Sir Martin Sorrell gave the keynote address, in which he also attested to China’s enormous potential, saying “In China, CEO’s are smiling. In Europe, they are not.” As higher incomes in China drive increased consumption of goods and services, the challenge for multi-national corporations (MNCs) is not to grow sales, but to retain share, and in particular, to avoid losing ground to the cheaper, local competition. And that challenge is made particularly difficult by the complexity of the Chinese market.
From the outside, we tend to see China as one country, similar perhaps to the United States. Instead, it might better be compared to Europe, with its wide range of different cultures, characteristics and preferences. Layer on top of this the wide difference in spending power between the urban middle class and the rural poor, different levels of familiarity with brands, and, not least, the contrast between modern retail practices and traditional trade. The end result is a Rubik’s cube of interlocking variables that makes a one-size-fits-all approach impossible.
In a session titled “Winning the Battle in China,” we heard from four senior marketers who are attempting to solve this puzzle. They represented some of the world’s biggest MNCs: Unilever, Motorola, Mars and Pepsi. All agreed that the biggest opportunity facing MNC brands lies beyond China’s major cities in the true mass market.
Three key barriers were highlighted during the discussion:
1. Low disposable incomes, which constrain peoples’ ability to by premium branded goods
2. Local competitors who, because of lower production and distribution costs, can sell goods at prices 40 to 60 percent lower than MNCs (and who often enjoy considerable goodwill among local consumers)
3. The challenge of penetrating the traditional trade, which relies more on trust between the sales person and shopkeeper than on good marketing and listing incentives
Advantages enjoyed by MNCs include the Chinese enthusiasm for western brands, and the fact that, on the whole, MNC brands are viewed as better quality and more trustworthy than those from local manufacturers (although this may be changing in the major cities of Shanghai, Beijing, and Guangzhou). The discussion highlighted the need for effective in-store activation, coupled with strong above-the-line, brand-building marketing.
Three additional themes were implicit in the conversation:
1) The need for a strong, unifying brand proposition that can stretch across differing levels of consumer sophistication
Consumers in rural areas may need and understand brands primarily as a symbol of trust. The proposition for them is: “This is a big, safe brand to choose.” But in the more sophisticated markets of Beijing, Shanghai and Guangzhou, consumers are faced with more brand choice and seek the product best able to meet their needs. Frank Braeken, group vice president for Unilever of Greater China, spoke to the need to create a real personality for a brand, and to develop that personality over time, just like bringing up a child.
2) The need for consistency in communication
It is not easy to present the same image and personality to consumers over time, in the face of a rapidly changing society and fierce local competition. To accomplish this, marketers must really understand their consumers and tap into the fundamental drivers of the category and brand. Michael Tatelman, corporate vice-president and general manager of mobile devices for Motorola in North Asia, stressed the need for integrated marketing, citing the launch of the pink V3 mobile phone, which featured TV, PR, point-of purchase materials, and even new uniforms for sales promoters, all linked to a common theme.
3) The need for local execution of the overall strategy
Given the complexity of China as a market, it was generally agreed that overall strategy is best executed at the local level. Richard Lee, vice president of Pepsi in Greater China, stated that brands should not pursue different strategies but different tactics. He highlighted the need for a dedicated and active field marketing team to activate sales at the local level.
(25 votes, average: 3.28 out of 5)
Loading ...