TNS China

Social Media in China – Great Expectations

Great expectations

Perhaps no other recent phenomenon has generated as much expectations among marketers as social media. Fazed with increasing clutter and deteriorating ROI from their investments in conventional media, marketers are salivating at the thought of social media providing them with an opportunity to link up once again with the increasingly elusive and promiscuous consumer. In a research conducted by TNS among marketers in China, a large proportion of them said that social media is one of the most effective marketing tools today. In fact there is a common perception that social media is on its way to replace more and more of conventional media.

However the marketers are also clear that the potential offered by the media is far from realized today – in fact they feel that only a fraction of the potential of social media is tapped today – because “very few companies understand social media”, “the social media scene changes so fast that it is difficult to keep up”, “there are so many options to chose from” and lastly a complaint that their organisations are not able to find right agency partners or vendors to work with.

Vibrant social media on China

There is no denying the fact that social media has been growing rapidly. Specialist social networking sites such as – renren.com, kaixin001.oc, qzone.com and 51.com. have gathered a huge following in the last one or two year. If you consider other parts of social media such as blogs, bbs and video sharing nearly everyone is involved. Why is there such a powerful social media landscape in China? Why has social media exploded in China?

The key to answering this question lies in understanding the way the Chinese consumers look at the Internet. In the developed economies, consumers look at internet as a work tool, to increase efficiency or provide information. However, the Asian countries like China and India also look at it as a tool for self-expression. The fact that traditional forums for discussion and airing your views are scarce is a definite encouraging factor. Often debate and dispute is not possible at home – as many of the young people don’t have a sibling to fight with! It is not surprising that Chinese consumers are among the biggest bloggers in the world.

What has marketing got to do with this?

While it is interesting to know and acknowledge that people in China are fond of interacting socially with their friends and colleagues online, like to discuss juicy topics (like how well dressed is Xili Ge is, or about Furong Jie or the spicy details of the Shoshou Men), we need to still evaluate its relevance for brands. The relevance for brands comes from the fact that people are discussing about products and brands online. According to a TNS survey 86% of the social networking users have come across a negative comment on a brand online. Marketers have to be there to defend themselves. But it is not just about crisis management. 90% of the consumers we talked to have come across a positive comment online for a brand – pointing to the tremendous opportunity that the media offers to brands. It seems apparent therefore that people are talking about brands on social media – some are saying good things about brands, some are saying bad things about brands, Marketers can take of the risk of ignoring it or the can try to see how this can be monitored, moderated and veered in the positive direction.

Why do people talk?

The reason marketers are excited about social media is that they feel they can engineer positive conversations by persuading consumers to sing paeans about their brands. However, the major trigger for positive word of mouth is a high degree of consumer satisfaction. Consumers want to share their happiness from consuming wonderful products, or relish their gratifying experiences. So the best way to make them talk is to delight them. Another interesting trigger is the possibility that either a new brand or its advertising catches their attention. So every time marketing has something new to talk about, there is an opportunity. Hence triggering positive word of mouth can only be based on a sound foundation of solid product performance and genuine newness – it can not emerge out of nothing.

Mismatch of expectations and reality

The views of the marketers about social media are very clear and they see a distinct role for the medium– they expect social media to create WOM (word of mouth) or buzz and do strengthen the emotional bond, which is very different from that of conventional online advertising. While the role of social media is seen to strengthen the emotional bond and to develop loyalty, conventional online advertising has the job to create awareness and to inform (essentially the same job as that of advertising in traditional media such as television, but without TV’s ability to enhance image). Hence there is an expectation that because marketing communication works in an environment of social interaction, warmth and bonhomie, it will have a more profound effect on the consumer psyche than conventional advertising. But is it really so?

If you ask the consumers – there seems to be a mismatch , the consumers say brand exposure on social media makes them aware of the brand – put it into the consideration set – even nudge me to try it - but generating loyalty and bond with the brand - a bit unlikely. This indicates a gap between the marketers’ expectations from social media and the reality – which for us is a cause for reflection. Are we using social media appropriately? Is it that quite often marketing communication on social media websites is actually conventional advertising, and makes little attempt to engage the consumers or to generate a dialogue? It seems clear that if the great expectations from social media are to be realized, marketers and their consultants need to work harder in imbuing their brands’ presence with a character that connects more intimately with the consumers.

Written by Ashok Sethi

Ashok.Sethi@tns-global.com

Smile please

Chinese standardization

As I reached the boarding gate at the Beijing airport, the lady from the airline took my boarding card, momentarily glanced at it and passed it to a colleague standing next to her. Her colleague in turn put it under the scanner, and passed it to the third colleague. The third colleague decorated the card with an artful squiggle with her pen and waved me on, as a disembodied recorded voice expressed the airline’s gratitude at my patronage by saying “xie xie”. Further down near the aircraft, another airline staff member tore the boarding pass into two, passed it to the security man, who planted another squiggle on it and I entered the aircraft.

The Chinese service model seems to be based on the principles of assembly line of the manufacturing process in which the Chinese clearly excel. The service is divided neatly into different processes and a standardized delivery of a basic quality is designed to be made for each element. Standardization rather than customization is the goal. “If you have to thank every customer, why not have a recording to spew it out than leave it to the whim of fickle humans,” the Chinese think. The taxis in Shanghai belt out both a welcome and a farewell message, both in Chinese and amusing English ( including reminding you "not to forget any belongings you take"). Does the recorded message achieve the service provider’s intention of making the customer feel valued or does it actually devalue them and makes them feel like cattle? In my view the Chinese airline process of handling the passenger and his bags seem to be quite similar – perhaps they do not play the “thank you” recording to the bags, and not physically shove the passenger on to the aircraft (thought he Shanghai Metro has hired people who stand at the platforms at peak times and do push the passengers on to the trains).

Customised Indian model

The Indian service model, on the other hand, is based on the concept of customised service. Several factors will influence the behavior of the staff at the counter - which may include how her mother-in-law treated her in the morning, whether she got a seat on the bus to the airport and even the quality of the tea that she had in the canteen. If you are lucky, you will be greeted with a beaming smile, solicitous attitude, and made to feel like a king. On a bad day (her bad day, which soon becomes your bad day too) you may be scowled at and blamed for interrupting her well deserved rest.

But most of all, her behavior and attitude will be based on what she feels the particular customer deserves. Coming from deep notions of a class based society, the behavior will often depend upon at what level or class of society does the person behind the counter pegs you at. Hence, if you are neatly dressed, exude an air of confidence and sophistication, you may be greeted with a smile. On the other hand if you present a bedraggled appearance and are classified as ordinary riff-raff you may be treated with perfunctory callousness. Indian model could do with a bit of standardization - though perhaps not a talking machine.

The Japanese way

The Japanese are of course, known for their high standards of manufacturing (Toyota recalls not withstanding) as well as service. The Japanese service combines the Chinese standardization, with an Indian customization and intimacy, without the class discrimination. While the service is still performed by humans, machines are used to monitor the level of the delivery. Computers and cameras check the level of curvature of the smiles of the service staff at the Keihin Electric Express Railway Company, to check if the smile is wide enough to infuse the customer with the required feeling of warmth.

Some may feel that the installation of smile scanners is a step too far. Nevertheless, both the Indian and the Chinese service models need to learn a great deal from the Japanese and I would strongly recommend that the Japanese smile scanners be installed at all airline counters in both India and China. But I fear that the Chinese solution may be to replace the current voice tape recording with a video recording, showing the smile of a machine monitored Japanese employee! And the Indian solution? May be the staff will only switch on the scanner when they do feel like smiling.

Written by Ashok Sethi

Ashok.Sethi@tns-global.com

Who will replace the American consumer?

Vacancy for the top slot

Robert Zoellick the president of the World Bank is leading a global search for the replacement of the American consumer. The American consumer served the world well over the past decade. They bought in large quantities, extravagantly and indiscriminately. They bought regardless of where the product came from, what it did for them and whether they had place in the house to keep it – which led to their having to buy larger and larger houses to keep the things that they bought.

The workers in far off lands of China, India and Africa toiled away in Dickensian conditions to satiate the American consumer demand. They worked 12 hours a day in sweltering workshops, with no overtime or social security to provide affordable goods to American consumers, who in turn obliged by consuming prodigious quantities of them. However, it is felt that American consumer can not do an encore of this remarkable performance in the coming decade. A desperate need exists to find a replacement. Someone, who could continue to fuel the global growth that we benefited from in the last decade – or else the world faces a recession.

The Chinese candidacy

In a number of circles the name of the Chinese consumer is being whispered as a possible candidate this role. Can the Chinese consumer spin the same magic as the American consumer and keep us on the growth trajectory? The advocates for designating the Chinese consumer as the replacement of the American sustainers of world economy argued, that the fact that there are four times as many Chinese as Americans is a good starting point and makes the Chinese consumer a good potential candidate. “But they don’t even have one tenth of the purchasing power,” argued Robert Zoellick. “That money is required to make a purchase, is an old-fashioned concept and is has been clearly demolished by the American consumer,” argued the advocates. Anyway money is a nebulous concept, we have seen trillions go here and there and none is wiser as to why and where it went and how it seems to be re-appearing again. What we do know is that when it re-appears it does seem to gravitate to the bonus packages of the American bankers. In fact sometimes it reaches the banker even before it reaches the bank, which itself needs to be kept afloat by funding from the State.

The clinching argument came from those who triumphantly revealed that it was anyway the Chinese money that the Americans were spending. Hence it wasn’t really the American consumer but actually the Chinese consumer who was providing the growth to the world economy. The Chinese consumers toiled in sweatshops and gave a part of their hard-earned money to Americans who used it to buy the goods that the Chinese workers sweated to produce. So it all worked out quite well – Americans did what they did best and are known for, and the Chinese did what their culture and tradition guided, giving them satisfaction of following their values of hard work, thrift and moderation.

Then why bother to change? Change will mean that both Chinese and American consumers will need to go against their grain. Imagine embarrassed and flustered Chinese moving through the supermarket aisles and staring at large packs of frozen dumplings or dried beef that they know they will not be able to eat, or looking at toys for their only child who they know does not need any more. At the same time, American consumers having to change their perception of a bank to a place where they save their money than where they borrow money from (and take out sub-prime mortgages from), is also an uphill task. Given the current image of the banks and the federal bail-outs, how will American consumers have the heart to trust their own money with a bank? For decades they have been guided by a belief that it is better to have the bank’s money with them than have their money in the bank and it will not be easy to change this principle which has served them so well over the years..

Status quo

Still immersed in deep reflection, Rober Zoellick concluded,” The solution is status quo - and even more status for the Americans and more quo for the Chinese”. Let Chinese workers labor more and produce even cheaper and better goods for the American consumers. Let them lend more money to their American brethren so that they can continue to stuff their large houses with more toys, electric drills, synthetic carpets and dildos made by Chinese factories. Only the Americans have houses large enough to accommodate more shopping any way.

President Obama congratulating Ben Bernanke on being the Person of Year for the TIME magazine for 2009 said, “Ben, you do us proud. You have done well so far. If you need more money – go East, young man. Work closely with your runners up in TIME magazine – the unnamed Chinese worker – and you might just save the world.”

Written by Ashok Sethi

Ashok.Sethi@tns-global.com

Chinese consumers’ tight fists

The magic eight

Eight is a lucky number in China. The opening ceremony of Beijing Olympics commenced on the eighth day of the eighth month of 2008 at 8.08.08 pm. The car number plates with a few eights go for thousands of dollars in auctions and the consumer will willingly cough up a significant premium to acquire a mobile phone number which is festooned with a couple of eights.

Eight is also the percentage by which, the economists believe, the Chinese economy must grow to provide jobs to the millions of students graduating from Universities, or the rural folks migrating to the cities in search of a better life. The first two quarters of this year have been difficult – China could only muster up a 6.1% GDP growth in Q1 of 2009 and just missed the magic mark of eight in Q2 with a 7.95 growth. However the Q3 figures came at 8.9% and the whole of China heaved a collective sigh of relief that the growth of 8% will be achievable this year.

Clearly the magic has been achieved with a lot of stimulus - Chinese government is trying to spend four trillion yuan in stimulating the economy. Money is being poured into building roads, bridges and some income generating activities. In the first nine months of the GDP growth of 7.7 percent, 7.3 percent came from investment and 4 percentage points from consumption (decease in exports brought down the total figure to 7.7%). Exports continue to decline, though as the mood in the US brightens a little, the rate of decline has come down. Economists predict that the exports may actually start growing next year – but are unlikely to touch the 2007 levels in the near future as the American consumer may never reach back the frenzied shopping that they exhibited to the delight and the economic growth of the whole world.

Consumer

Economist say (softly in China and more shrilly in the West) that the Chinese consumer must spend more to compensate for the loss of exports and redress the global imbalance where the American consumers were sustaining the global economy with their profligate consumption of Chinese goods and the Chinese Consumers saving as much as one-fourth of their incomes. Hence the critical question now is whether the Chinese consumer will spend more and save the global economy.

The traditional reason that is given for the Chinese consumer to save a large proportion of their income is that a large number of them do not enjoy social security and need to set aside for their retirement and possible medical expenses. Secondly, culturally Chinese are considered to be thrifty and saving rather than consumption is considered a virtue. While these factors – whether cultural or structural – do contribute to the Chinese households stashing away a large proportion of their income there are other social and emotional reasons for this behaviour.

The other barriers to consumption

Owning an house ranks among the most important desires and goals for a Chinese. The idea of living in rented accommodation is alien and unacceptable. Traditionally Chinese have liked the idea of stability and state provided that by allotting life long accommodation, which you keep even after retirement. With state housing gone for most, the Chinese are rushing to buy apartments. The strong demand coupled with a relatively controlled supply has made the cost of housing disproportionate to the consumers’ income. Today the average per capita annual urban disposable income in Shanghai will buy two square meters of an apartment. Additionally Chinese need to cough up 30% of the price as down payment.

On the other hand social norms today make the idea of continuing to live with the parents after marriage as nearly inconceivable (no pun intended) and no self-respecting woman will accept a man’s hand in marriage unless the hand holds the keys to an apartment. With low starting salaries even for University graduates, parents need to bear the burden of saving for the down payment. The high mortgage payments in relation to the income further reduces the spending ability of the consumers.

Secondly, while impending marriage of the child brings a substantial financial burden for the family, the university education before that is also a formidable expense. As China moves towards becoming a market economy, the cost of education has been increasing steadily. Today for an average family the cost of providing a university education may take up as much as one-third to half the disposable income of the family. Even school education costs are going up as more Chinese consider the idea of sending their child to an expensive private school.

Thirdly the average Chinese consumer is value driven. Products receive a microscopic scrutiny and intensive comparison and valuation. Prices are compared thoroughly and promotions and deals welcomed enthusiastically. While there is a trend of premiumisation, it is not universal and applies more to products of visible consumption which can make the consumer look good and successful. Additionally the disappointment that many consumers faced, when the salary increases and bonuses were less than generous in the beginning of the year or the business growth challenged, has thrown a spanner on the path of moving to premium products.

Hence while the Chinese consumer will gradually spend more, and consumption as a proportion of the Chinese GDP will move up from its uniquely low level today, the movement is going to be gradual unless significant changes are made to make housing and education more accessible and affordable and the consumer regains the confidence of continued prosperity.

Written by Ashok Sethi

Ashok.Sethi@tns-global.com

What the current environment means for fine tuning marketing strategies in China

There is no time in China like today. On one side it is buffeted by the tsunami of global economic crisis, on the other side its consumer base is rapidly increasing in size and value. How can marketers make the best of this unique juncture in time and deploy the most effective strategies for establishing a firm position in China.

Presented below ten strategies that the marketers can consider to thrive in these times.

1. New strategies for new times

The changed economic conditions is affecting consumer behaviour and attitudes. Can the marketing strategies based on the understanding of the consumers in the prosperous times still hold water now. Consumers are changing their behaviour in several different ways and various underlying attitudes and values govern these changes. It is critical for us to re-look at the consumer and refresh our understanding to fine tune the marketing strategies.

2. Segment and decide

Not all the consumers react to the environmental changes in the same way. Different consumers have different reactions to the financial challenge –  ranging from an extreme tightening of the purse-strings, to a nonchalant continuation of the current indulgences. Tightening may be reflected in different tangible and psychological ways. Manufacturers also need to offer a range of different solutions and propositions to meet these changes in behavior.

Additionally, different consumer segments may be affected to different extent – and growth may vary from segment to segment. In luxury goods, for example,   connoisseurship and indulgence segments may grow more as compared to the pure status segment, as these consumers’ relationship with luxury segments is not only emotional but also very tangible.

3. Find new pastures

In these times, growth may be easier to come about through geographical expansion, than competitive fight in the current markets. The impact of the slowdown is more pronounced in larger cities – though the smaller towns and villages are also affected if they relied on export based industries. Hence while growth may be challenged in the larger cities, it may be a good time to set forth and explore new markets in county towns, townships and villages. These are the markets which are growing at a faster pace and offer greater return for investments.

4. Emphasize value – re look at your brand portfolio

It does not take rocket science to conclude that in these times the consumers will look for value. The challenge is to offer value without compromising the image. There are different strategies to deliver value – some are appropriate and some ill-advised – some will damage the brand equity permanently, some will keep the image intact but still help adjust to the times. Research shows that direct price reductions are likely to damage more than temporary discounts, and decreasing pack sizes more harmful that increasing pack size at the same price.

5. Look at your distribution channels

A strained economic situation not only changes the consumer, but also changes the shopper. Consumers are normally more attached to the brand than the retail store, hence their first choice is not to change the brand, but try to locate the same brand at a cheaper price at another store.

With more time at hand and greater incentive to economize, more consumers are likely to shop at hyper markets than the more ubiquitous but pricier supermarkets and convenience stores. The search for value and bargains will also turn the shoppers to internet shopping–the only channel that will grow even faster than hypermarkets

6. Help the consumer – teach her, train her, comfort and reassure her

Research indicates that Chinese consumers’ response to the economic challenge is cerebral. When opportunities are fewer and the competition more fierce the Chinese consumers will want to further enhance their skills and knowledge. Clearly it is very good news for companies teaching English or computer programming. But the opportunity is not confined to these firms – the FMCG industry could also take a more educative communication stance - wine makers could try to educate the consumers about appreciating fine wines, cosmetic companies could offer lessons on skin care and food companies could coach on diet and nutrition.

7. Family, home and security

When the going gets tough, the consumers tend to take comfort at home and in the arms of the loved ones. Recession is the ideal time to catch up with friends, take the children to the park and visit the parents, and in the process enjoy emotional warmth to compensate for the coldness of the economic climate. The children are likely to pay a heavy price for this, with parents having more time and inclination as well as a renewed determination to help their children with their studies. This offers opportunities to promote in-home consumption, rather than out of home consumption – which in many categories such as alcohol, is much more expensive.

8. Communication

It is not just the product but also the message which needs to reflect the current consumer mind. The communication messages of today needs to reflect sentiments of care and protection, rational and considered behaviour and performance and value These tones of communication, which always appealed to the Chinese consumers, are likely to find even greater resonance in these times.

9. Go digital

For the largest internet population in the world, internet has so far been a tool of entertainment and information – less so a tool for commerce. However the initial barriers are being overcome and consumers are discovering the joys of internet shopping. The attributes consumer associate with internet shopping are variety, enables detailed evaluation and comparisons and competitive prices. These are the attributes the consumer will be looking in the times of economic slowdown.

10. Keep a permanent hand on the pulse of the consumer

These are dynamic times. Things are changing at a phenomenal pace. As a result, so is the consumer mood and sentiment, which will have an effect on her decision making and the brands and products that she buys. If marketers don’t feel her pulse all the time, they could go wrong. One can not just listen to the consumer once a year - marketers need to put their ears firmly on the ground and listen to every change of beat, every nuance of the consumer mood and continue to fine tune the strategy.,

Published in South China Morning Post, July 27, 2009
Written by Ashok Sethi, TNS China