This article is by Greg Paull, principal of R3, a global marketing consultancy focusing on agency relationships.
It was a cold snowing January morning in early 2012 in Beijing. There it was, a riot outside the Apple store, with “customers” lined up overnight to get their hands on the latest iPhone 4S. It looked to the world as if China had so thoroughly embraced Apple and, by extension, U.S. brands, that this was finally a market for the taking.
Well, one year later, Apple’s stock has lost the equivalent of a “Google’s” worth of market cap, Samsung has moved its China market share to over 25% , and local brands, offering larger screens and similar features, are proliferating the market, outselling Apple. While Steve Jobs‘ brand maintains “cachet” and a high price point in the middle kingdom, it has lacked the right product mix to gain market share the way it has dominated in other places. On top of this, it lacks distribution, not only through China Mobile, but out into other cities. Apple has more company stores in Pennsylvania than in China.
The lesson for U.S. marketers is that “China is different” and the ones that succeed here will be the companies that truly get under the fabric of the country from the inside. We see three main features of China not always visible at first glance.
Speed Is Everything
For most marketers, the innovation cycle is critical to growth, and the R&D investment, both in time and cost, is substantial. Local marketers in China have totally collapsed this process, through begging, borrowing or stealing innovation, mobilizing armies of workers to move faster, and not working to typical clocks. Zhang Riumin, chairman of Haier, the fastest-growing whitegoods firm in the world, maintains 70,000 people in his Qingdao factory, working around the clock. “National holidays are time for annual planning,” he once proclaimed, with a showcase of products that are never bleeding edge, always leading edge, and an incredible network and distribution system. To compete in China, throw away your rulebook on marketing timetables, and be prepared to move fast.
Treat “China” Like “Europe”
Treating China as a single market is a flawed concept – it’s 29 different provinces with their own peoples, dialects, customs and brand preferences. Procter & Gamble was one of the few U.S. marketers to realize this early on, investing extensively in proprietary research across multiple cities. By launching Olay in “single-serve” sachets, something they would never do in the West, they were able to drive first-time usage and brand loyalty among a target audience rapidly moving into the middle class. Many is the U.S. marketer that has landed at Nanjing Road in Shanghai and smelled the business opportunity – a smaller handful have ventured to Guangxi province or other Tier 3 and Tier 4 areas to assess their brands’ long-term potential here.
Rethink Digital Locally
As Facebook moves beyond 1 billion users, and digital becomes a critical marketing tool, U.S. marketers need to totally rethink digital based on the dynamics of the new China. With more than 500 million netizens, it’s now a mass media – but 29 of the top 30 digital companies are local (only Google makes it) – as well as 16 of the top 20 digital agencies. To understand digital in China, you need to leave your rulebook at the door.
China has led the world in terms of GDP and growth for 18 of the last 20 centuries. For the marketers and people here, they see it as inevitable that they will be there again. For U.S. marketers, the challenge is to co-exist with this mindset and confidence, not fight against it.