TNS China

Chinese consumers in 2011

As the world prepares to bid adieu to 2011, the Chinese still have a few weeks before the year of the rabbit sprints off and the mighty dragon is ushered in. The Western world has seen a miserable year and this has been a tough year for the Chinese too. Inflation has been consistently high - the consumer price inflation finally being reined down to under 5% only in November, economy is slowing down - and the Shanghai Composite index has lost more than 20% of its value since the beginning of the year. However 2012 is the year of the dragon - which is as propitious and auspicious as they get. With furrowed brows and much on their mind, the Chinese look back at 2011 with reflection and look forward to 2012 with optimistic anticipation.

Slow train coming

While in 2010 the nation witnessed a devastating fire in a 28 storey building under renovation in Shanghai in which 58 people lost their lives, in 2011 it was the Wenzhou train crash which resulted in similar protestations and lament at a preventable loss . China has been on the fast track in developing the largest fast train network in the world, with trains running at speeds of up to 350 kms an hour. The “gao tie” high speed train service between Shanghai and Beijing was inaugurated around the middle of the year and now consumers can do this journey of 1300 kilometers in just over 5 hours. However, the euphoria over this undoubtedly extraordinary achievement was short lived, when two high speed trains collided (though on a different route) taking many lives with it. The Chinese citizens were aghast and protested vociferously against possible flouting of safety standards and lack of transparency. Transparency is something the Chinese have begin to value more and more - whether it is from the government or the companies who try to sell to them.

Swill oil and other food horrors

A few years ago the Chinese encountered the "melamine tragedy" - in which unscrupulous middlemen adulterated milk with the chemical. Hundreds of children developed stones in their kidneys and a few lost their lives. This year the consumers continue to be confounded by more food scares - the most horrifying of which was the alleged recycling of used cooking oil from sewers next to the restaurants. Consumers were also scared out of their wits by feeding of clenbuterol to pigs, which results in lean meat but can cause nausea, dizziness and heart palpitations in people who eat animals that were fed with it. We can be sure that the consumers are going to demand the highest level of food safety from manufacturers.

PM2.5 detector on the roof of the American Embassy

The health concerns of the consumers were not just confined to what they ate, but also the air they breathed. The number of smoggy days in Beijing and other big cities seem to have increased. Consumers complained that the official reports on air pollution were not accurate when they saw the results of the air pollution monitor that the American Embassy installed on its roof in Beijing. The Americans also measured PM2.5 particles (particles in the air with a diameter of less that 2.5 microns) which some scientist believe are actually more harmful than the larger ones. The government now has agreed to report PM2.5 in their pollution reports and hopefully the citizens can breathe more freely and look forward to cleaner air in 2012.

Rousing out of callousness

The Chinese have often felt that, preoccupied with the pursuit of money, there is certain degree of callousness that has overtaken the country and we often ignore injustices around us and hesitate to extend a helping hand. It took the tragic death of 2 year old Yueyue that roused the collective conscience of the nation and the Chinese took to upbraiding themselves for the thickness of their skin. The two year old was run over by two vehicles in Foshan, Guangdong and ignored by passerbys for several minutes. It is believed that a major factor which restrains the helping hand is the fear that the rescued may turn into an accuser, as it has occurred in a few incidents in the past. Several prominent professors on leading universities offered to compensate their students and cover their liabilities if they were ever sued by the subjects of their help. 2012 should see a more sensitive heart and a more willing hand.

Bad news for entertainment

In 2011 the authorities thought they need to protect the consumer from too much entertainment and also too much advertising. Firstly in March Chongqing television decided to go totally “ad-less”. In October, the State Administration of Radio, Film and Television (SARFT) decided to limit each of the country's 34 satellite channels to a maximum of 90 minutes of entertainment content from 7:30 pm to 10 pm every day. The remaining time, it was suggested, should be filled with news and programs to uplift the moral standards of the viewers. And most recently the officials announced that the government would impose a ban on advertisements in the middle of television dramas starting in 2012, though the ads will appear in the beginning and the end of the programmes. The marketers and the advertising industry feel that they can cope up with it – though some experts feel that it may drive more advertising to the digital medium.

China's own heaven

Largely an atheist nation, and not believing in the existence of heaven or hell, the Chinese have created their own heaven in space. Tiangong-1 or "Heavenly Palace -1" space station module was successfully launched this year. Subsequently Shenzhou VII spacecraft gloriously docked with the space station and returned back to earth in one piece. It is believed that this is a strategy to compensate for the possible decline in Chinese exports, by opening up a new revenue stream by renting space in the Chinese "heaven" to the religious departed from the West.  

Marriage for love

It its attempt to foster greater love and lower commerce in marriage, 

the Supreme Court  made it clear that a home purchased before marriage is the personal property of the person who bought it. In case of divorce, the registered owner will keep the house but needs to compensate the partner if he or she contributed to any mortgage payments and any other expense which increased value in the property. The amendment to the marriage law was largely seen as rational, though the view was divided on whether it will discourage fortune hunting and result in a greater number of marriages being founded on the solid rock of love. 

Naked marriage and other dressing downs

Confounded by rising cost of marriage, a new trend of naked marriage took shape in 2011. Contrary to what is suggested by the name, the nuptials do not take place in a state of undress; the "nakedness" is merely figurative and indicates that the couple took the plunge without the usual extravagant preparations and expense which accompany the occasion. The phrase caught the fancy of the citizens and they quickly coined other things that you can do with a similar degree of unpreparedness or vulnerability - such as naked resignation (resigning without another job) or naked examination (showing up for the test without adequate preparation). 2012 should see more the Chinese showing more willingness to break away from the herd, and follow their own hearts and minds.

Written by Ashok Sethi

Ashok.Sethi@tnsglobal.com

New languages of the Chinese internet

Chinese Weibo

When we compare the Chinese microblog (Weibo) with Twitter, we often forget that as each Chinese character is, in fact, a word. This means you can communicate a lot more in 130 Chinese characters as compared to 130 Latin characters. Chinese microbloggers are fully utilizing this freedom and license and the Weibo has become a hotbed of protest, expression of solidarity, generosity and philanthropy and even romance. The last one did lead to some unexpected consequences for a Chinese official, who mistook Weiboi as a one on one, private communication tool and was found to be romancing his mistress and fixing a surreptitious rendevous, in open sight of millions of bemused Weibo users!

First on Weibo

It is not surprising, therefore, that often Weibo is the first to report important news and generate a lively debate. When China’s image of progress and dynamism, assiduously created by erecting an enormous and still expanding network of bullet trains, was tarnished with a collision of two trains near Wenzhou, in which more than 30 people lost their lives, the accident was first reported on Sina Weibo (a popular Chinese microblog). The topic touched a raw nerve with the Chinese consumers and the continued discussion on Weibo thereafter generated strident criticism of the railways for lack of transparency and possible flouting of safety standards. The authorities have taken the lashing seriously and have withdrawn several trains for safety examination and actually reduced the speed of many trains, including the flagship Shanghai to Beijing service. The defiant mood is characteristic of the Chinese middle class consumers, who are trying to protect themselves and their families from anything ranging from sub-standard infant milk powder, to restaurant food prepared from recycled oil to unsafe rail travel – and quite often Weibo is the platform where they first air their grievances.

The language of the internet

It is often said that the development of a civilisation or a society is indicated by the degree of sophistication of its language. In Weibo and other parts of the Internet, Chinese netizens have developed not one, but several languages on the internet. These, referred to as "Mars languages" (火星文) are widely used on the internet not just by the consumers, but now increasingly also by the marketers. These include "pao xiao ti " or the roaring style, which the consumers often use to express their frustration on the many challenges of life – often linked to study and work. Or the “tao bao ti”, named after the all pervasive e-commerce platform called Taobao, where you can buy anything from a freshly slaughtered chicken to a luxury automobile. “Tao bao ti” embodies the solicitous attitude and the language that the vendors on Taobao often adopt to win customers in face of an extraordinarily fierce competition.

高考(Gao kao), the mega test of endurance and knowledge that the young Chinese need to go through to secure college admission, unfortunately decided to prohibit the use of 火星文(Mars language) in the exam, earning the epithet of "ungelievable" (meaning not cool or awesome) from the 8 million students who undertake this examination in an attempt to secure a position in a good university and pave the way to a bright future. These students, who face immense pressure (yali da 压力大as they like to say - which can also mean "my pear is big” when you change to another set of homonymous characters) will have to curb their inclination for these unorthodox modes of expression - at least for the two and half days that they toil in the examination hall.

Written by Ashok Sethi

Ashok.Sethi@tnsglobal.com

Demographic dividend or population explosion?

Counting the millions

2010 was the year of census operations and billions were spent in enumerating and profiling the populations of the largest countries in the world. The greatest contemporary world power, the United States, as well as the future powers of China and India undertook the onerous but important task of counting their residents. Currently China retains the crown of the most populous country in the world, though its status is increasingly threatened by India. China announced that it added 73.9 million Chinese from 2000 to 2010, taking the current population to 1.37 billion. India on the other hand exhibited a much higher level of productivity and added 181 million Indians in the same decade, taking its population to 1.21 billion - a mere 160 million short of China's. US on a more modest base only added 27.3 million Americans. But its growth rate in the decade was nearly twice as high as that of China but only half as much of India.

Demographic dividend

Historically India's high fertility rate and rapid population increase was often referred to by economists and experts as "population explosion" - an ominous phenomenon threatening the country’s multitudes with misery and starvation. However, economists are a malleable tribe, who like to show flexibility and often change their views with the direction of the wind. Today, India's teeming millions are being referred to as the country’s "demographic dividend" and expected to help it maintain its economic growth engine, even help it surpass China’s economic pace some time in the future. The logic of having a large proportion of the population in the economically active age group (that is to have a favourable dependency ratio) is irrefutable - this group has to generate the resources not only for themselves but also look after the youth and care of the elderly who are no longer in the work force. However this needs to be balanced with the cost of over population and low share of family resources that each child enjoys in large families. Surely it does not condone having hordes of children by penurious parents who do not have the wherewithal to bring them up, educate and prepare them to be economically productive citizens. The logic of having large families just to ensure a good supply of income earners for the nation does not seem to stand scrutiny in today's resource scare and over populated world.

Even if we do accept that having an adverse dependency ratio, places a burden on the society, the answer for the developed countries could be in other measures, including higher retirement age and relaxed immigration policies, which will attract migrants of income earning age into the country and redress the imbalance. This is precisely what is happening in the US - where the population increase is mainly contributed by the Hispanics and the Asians, rather than white population. In fact this may offer the best of both worlds - ensuring that there are enough income earners, without having to invest in creating, educating and developing them! Like running its IT services, US can consider outsourcing the task of maintaining its demographic dividend to India!

Additionally while comparing the "demographic dividend" of India and China the economist also need to take into consideration the economic potential of the population. On this criterion, China scores a lot higher, given higher education levels and a much higher participation of women in the workforce.

Wanted : 24 million brides

The census also indicated that both China and India continued to suffer from a gender imbalance with China having 51.3% of its population as male. Experts estimate that 24 million Chinese men will be unable to secure a bride in the next 10 years. Unfortunately neighboring India will not be able to help much as it is likely to face its own scarcity of marriageable women – India’s population is 51.5% males (but only 914 girls for every 1,000 boys under the age of six). US could come to rescue - as it has more females than males (50.8% females) though currently one sees more evidence of American men succumbing to the charm of Chinese women, than Chinese men seeking American brides!

Written by Ashok Sethi

Ashok.Sethi@tnsglobal.com

Retailing in small towns

The diversity

China has 654 official cities, whose urban population ranges from over 20 million residents for Shanghai to less than a hundred thousand for a small county level city. The cities differ not only in terms of the population but also in terms of economic activity, occupational profile, income and spending ability of the residents. As the top tier cities become more competitive and saturated, more and more companies are taking their wares to the smaller towns in search of new consumers. The important marketing question is whether the marketers should paint the smaller cities with the same brush stroke and replicate their large town strategies and tactics for these emerging markets, or should they modify and fine-tune their actions to enhance their effectiveness?

City tier or geography

There is a school of thinking which propounds that city tier differences are becoming less consequential and geography takes precedence in determining consumer behaviour and not city tier. It is expected that the differences between neighbouring large and small cities will gradually diminish and consumption patterns become more homogeneous. The reasons are because development of better transportation and high speed railways will encourage more movement among the cities and the large cities will expand their boundaries and take some of the neighboring cities under their fold,. However there are intrinsic differences between large and small cities (population is the usual basis for dividing cities into various tiers) in terms of consumer profile, lifestyle and media habits which have significant implications on marketing.

In Shanghai over 3.2 million adults enjoy a monthly household income of over RMB 100,000 and in Nantong, just 100 kms away, only around a 100,000 adults have the same income. The relative strength of various media is vastly different across different city tiers. While internet penetration is increasing in lower tier cities also, the frequency of use is much higher in larger cities as compared to the smaller cites (78% of internet users access the net every day in tier1 cites as compared to only 28% in tier 4). Similarly while nearly all large city internet users access the internet from a PC at home, in smaller cites, reliance of iCafes is significantly higher.

It is natural that in a geographical cluster of homogeneous cities, similar strategies would work, but when the cities within a geographical cluster are heterogeneous, different strategies need to be adopted.

Implications for retailers

Despite the differences today, the smaller cities are in transition and a huge change is underway - the change is in terms of movement from traditional trade to organised trade, from primitive modes of transportation to modern ones, from old run-down houses to modern swanky apartments, and from traditional entertainment venues to the modern ones. Malls and retail outlets need to help the consumers in this transition – facilitate access the new things they want and at the same time help them preserve what they cherish from the old. We give below eight implications for marketers and retailers as they move from large cities to smaller ones.

1. Consumers in small towns want to make the best choices and derive the best value for their money. In order to achieve their aim they are willing to go to greater lengths than consumers in larger cities, who are more driven by convenience. Convenience, therefore does not enjoy the same importance in smaller cities as it does in larger cities. Consumers in large cities are time poor and cash rich - whereas for those in lower tier cities just the reverse holds true.

Store designs often have to make trade offs between convenience and thorough immersion and good exposure of the consumer to the full range of products. The trade-offs in larger city tiers are often made in favour of convenience. One exception to this rule is IKEA stores, which even in big cities sacrifice convenience for exposure. The IKEA strategy is the one which retailers need to follow in lower tier cities - let the consumer see the products properly, have a good experience - even if it takes more time and causes a bit of inconvenience.

2. Access and location. Most small towns and cities have a predictable lay out with a central area clearly defined and marked out. Consumers often converge to the centre and public transportation often runs from the centre to the outlying areas. This central area, therefore presents the most logical location for retail establishments. While a central location may still be possible in smaller cities, over time newer malls and departmental stores have no option but to open in relatively distant areas. Retailers need to have a strategy for attracting the consumers to the store in these locations. This could include free transportation, identifying potential transportation hubs such as metro stations or addition of some specific services to the mall. Mall owners and retailers must study the local situation in each city and decide on the ways to compensate for location deficiency if it exists.

3. Educate the consumers. Given the relatively small history of branding and quality products in China, many buyers are first time buyers. Over 50% of luxury goods buyers today have never bought luxury before. Retail outlet for them is therefore not just a final purchase point, but a place to evaluate the various alternatives - often with no prior experience. In this context, the consumer may often be confused and the retailer may lose the sale if the consumer is unable to decide. The retailer in small cities has the job to educate and guide the consumer and help them make the decision.

Recognising this, many marketers add in-shop demonstration and education activities to help consumer make the choice. Hydron, an eye care brand, established mobile stations in low tier cities’ which offered eye examinations and eye health communication for students. Hydron built its brand image through its exceptional consumer education efforts and was selected as one of the “Most popular brands” by college students in China. Another brand which has done consumer education rather well is Nokia - which opened a number of small shops in over 600 prefecture-level and county-level cities. These shops also offer product demonstration to help consumers better understand the product capabilities and accept its price.

4. Localize marketing programs. Localization of the marketing programs is warranted from several perspectives:

- Firstly the media environment is different, with the role of outdoor media, outdoor activities and social intercourse in public areas such as the public square being higher

- Secondly in order to develop credibility at the local level, the retail stores need to develop and demonstrate local support and roots. Enlistment of local well known personalities need to supplement the use of international and national spokespersons or communication. Local dialect is often used by retailers to strike a chord with the population.

- Lastly traditions and festivals play a greater role in smaller towns and cities and hence provide a greater opportunity to leverage for sales promotion.

Localization is required not just for the marketing activities but even for the product range itself. An example of a retailer which has very successfully used local marketing is Ling zhi or Bestseller Company whose brands include JackJones, ONLY and VERA MODA. Ling Zhi's annual revenue in China has increased by an average of 20% a year in the past 3 years. It has more than 3000 shops in China and around 1000 shops are in Tier3 or Tier 4 cities, and a few hundred even in Tier 5 cities.

5. Make the customer feel at home. 91% of the consumers in small cities said that good staff attitude is a strong factor in their choice of the store. The retailers need to make the shopping environment attractive, but at the same time not too alien - the consumer should feel drawn but not daunted. This is not just about providing excellent service - but it is about making the consumers feel absolutely comfortable in the environment, where they are not shy to interact with the product or the sales staff. A significant number of Chinese internet users comment positively or negatively about brands on the internet and one of the things that makes them comment is their experience of service. There is a lot of positive buzz on the internet nowadays about a girl and her boy friend who had a stormy scene in Hai Di Lao hot pot restaurant. The waiter sent them a card and flowers trying to bring them together again.

6. Simplify. The range of available products in China has multiplied several fold in a short period of time. The number of options that the consumers are suddenly exposed to is bewilderingly large. Behavioral science has told us that "too much choice" is confusing and some times leads to loss of sale. Retailers in lower tier cities needs to strike a balance between offering consumers enough choice so to meet their needs, but at the same time not get totally confused. Shelf displays need to be designed with this objective in mind. Displays can be designed at two levels - with a primary display in the front , and a secondary display to be accessed if the customer needs greater choice. Retailers need to experiment on this count and reach the optimal display configuration for them.

7. Leverage the internet. E-commerce has penetrated well into China's lower tier cities. In fact one of the reasons why lower tier consumers do online shopping is because premium and luxury brands are not well distributed in these cities. The success of Taobao in lower tier cities bears a great testimony to this. We also know that while online shopping is attractive to consumers, there are also certain barriers. Most importantly trust, fear about quality or fake products and payment and delivery related issues are thorny points with the consumers. We also know that there is a multi-directional traffic and interaction between online and offline stores which includes online search and offline buying, or offline evaluation and online buying for lower price or any other reason, or even online search, offline examination and finally online buying.

Retailers should develop a concerted strategy to link their offline and online stores. Computer terminals can help the customers surf the online store for greater variety and selection. The retailer can arrange for the customer to order from the online store and pay in the offline store and collect the products. Burberry recently provided all their in store sales staff with an iPad. The staff can use the iPad to expose the consumer to a larger range of products or explain product qualities better.

8. Not just shopping. Perhaps an obvious point, albeit an extremely important one. General attitudes towards shopping are different in China as compared to the developed world, and within China in the lower tier cities as compared to the key cities. Shopping is not a routine chore - but something to be enjoyed and relished. it is a source of entertainment and a shopping trip can be an leisure outing. Consumer attraction to shopping malls will increase if they could add more supplementary entertainment activities to truly make shopping a leisure activity.

Written by Ashok Sethi

Ashok.Sethi@tnsglobal.com

Mobile Life

It is believed that when the Christian cavalry first appeared in the new world the pagans thought that the horse and the rider was one person. Visitors from outer space on seeing the modern humans with a mobile phone glued to their faces, or a blue tooth head set in their ears, could well also think that the mobile phone is really an integral part of our bodies. We surely seem to rely on it almost as much as we do on our organs. We use the phone to talk, send messages, chat with friends, take pictures, read news and books, listen to music, watch movies, and even transfer money. Many would argue no other recent invention has transformed the mankind to the extent that mobile phone has.

It has not just enriched the lives of the well-heeled - allowing them to use Facebook, watch Youtube and read the New York Times on their smart phones, it has empowered the poor in developing countries through countless applications - helping them to use a mobile phone to check the weather forecast to plan the sowing, check prices for their crops and even transfer money to their families and loved ones. To women it has become a safety device, encouraging them to go out and work, while providing peace of mind to their families. Secondly, unlike in many other ways, it is not the West but the Chinese and the Indian mobile phone users who are leading the way in discovering innovative and life changing ways of using mobile phones. Convergence, much talked about in the West, saw more success in the East - emerging market consumers are less likely to be able to spend money on multiple devices and use the mobile device not just as a communication tool - but also as a education device, a personal organiser and as an entertainment centre.

While PCs remain the most frequent conduit to the internet, a large number of consumers in China use a mobile phone to access the internet. In fact a significant number (over 50 million) only use a mobile phone to access the internet, as they do not have access to PC based internet. Mobile internet in developing countries, therefore, is driven by two horses - it is not just the urban rich who use their smart phones to access the net, it also consumers in smaller towns and rural areas, whose only access to the web is through the mobile device.

Understanding how consumers use mobile phones, what motivates their usage and what more do they want to do with them is of enormous importance to those who make the phones, those who provide the service and those who design the applications that run on the phones. The transformation of the phone into a media vehicle makes it of interest to anyone who wants to reach the consumers with their brand messages. This makes the phone of huge relevance and importance to any company and any organisation which has anything to do with the consumers.

While we understand a lot about how and why people use mobile phones, the technology is continuously outpacing our understanding. TNS’ Mobile Life: Global Technology Insights ((discovermobilelife.com) is an annual investigation into the mobile market place, in it’s sixth year Mobile Life: GTI is designed to keep a constant finger on the mobile consumer's pulse (or rather their thumbs and fingers which they use to do make their phones do the most amazing things possible). Mobile Life: GTI measures what consumers do with their phones, how often do they do it, where they do it, when they do it and most importantly why they do it. Understanding the motivations, mood and feelings consumers experience while engaged in various mobile activities is important to understand so that the marketers can match the tone of their messages with the emotions experienced by the consumers when engaged in various activities. In this way the messages are less likely to be seen as intrusive and received more enthusiastically.

What will be the future of this marvellous little device, which helps us bond with other human beings, gives us peace of mind, assuring us of the security of our loved ones, entertains us, navigates us and even helps us earn a livelihood? Mobile Life:GTI is the only truly global study to investigate these areas. With a coverage spanning 42 countries and 34,000 consumers, it offers unparalleled understanding of the consumer relationship - functional as well as emotional - with their mobile devices and a sound basis for a wide range of marketing decisions.

For more information on this study visit discovermobilelife.com

Written by Ashok Sethi

Ashok.Sethi@tnsglobal.com