Friday, May 3, 2019

Marketing in China is different [updated]

Article documenting US/Chinese differences in marketing:
  • China merchants have access to consumers over many different media:
  • ... most notably, Baidu, Alibaba, and Tencent, which together are known by the acronym BAT. To put this in a Western context, imagine if Amazon, Bank of America, Google, Facebook, Activision Blizzard, CNN, and ESPN were all owned by one company. That’s essentially how the big conglomerates work in China, with the BAT companies controlling most of the digital content across industries. 
    [This kind of consolidation allows for data collection that most westerners would find objectionable; but consolidation makes it possible for cross-platform programs to engage consumers seamlessly on a variety of media.]
  • Chinese companies have low discount rates
  • “Chinese companies have a growth mindset,” explained Hai Ye, a partner at McKinsey & Company. “Many of them can tolerate relatively low profitability in order to scale up quickly. This difference—driving market share versus bottom-line profit—gives the Chinese companies an advantage because they are willing to make big investments and take short-term losses to achieve long-term dominance.”

  • Speed-to-market is a huge priority:
  • Danielle Jin of Visa recalled how she approached her job when she worked as a marketer in the U.S. consumer packaged goods industry. “We would sit down with Walmart one to two years in advance and think about what seasonal promotion we would want to have,” she said. “We would have a thought-out calendar that centered primarily on price promotions—a system and process created over decades that was based on a somewhat rigid planning process.” By contrast, she explained, “a marketer with a Chinese mindset would talk about creating seamless content that cut across multiple platforms and was temporally relevant" [weeks, not years].

  • Bottom Line: Certainly US marketers could learn a lot from China.  But it is not clear that these techniques would work in the US, for at least three reasons
    1. Privacy concerns would prevent much of the data collection and sharing that is prevalent in China.  
    2. Antitrust Laws would likely prevent the kind of media consolidation that makes much of this possible 
    3. Older (mature) firms in the US where the struggle is to steal share rather than grow the market, mean that speed and growth may not be as important as profit [think Prisoners' Pricing Dilemma] 
  • Up until the last few years, the cost of capital/ loans was low.  Competitors that couldn’t beat you on quality and profit margins would go for scale and top line numbers. This results in everyone going opting for the top line. Contributing to this are state owned enterprises who are in every industry and tasked with top line growth, not profit margins.
  • China is also really new at marketing. Most of the big sales companies are distributors who have only sold existing, western brands so they don’t have experience building brands themselves. If you think about the biggest Chinese brands, they are known for their size, not their crafty branding. 
  • There is also a thing in China about “face.”  You can call it honor, prestige, or ego. Whatever it is, the biggest is seen as the strongest. I am working on launching a brand in China right now and I just had dinner two nights ago with my friend / distributor. We both agree that we would prefer to launch in tier 2 & 3 cities and get a bigger margin than fight it out in the more competitive tier 1 cities and lose money. As a Chinese guy once told my dad, “Sometimes we save face, but lose ass.”


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  3. Thanks for this information. This is a very nice post. The best way to deal with the complexities of the Chinese Marketing and advertising purposes is to invest in and hire locally.But it is a complex and diverse consumer market, and it is vital to tailor your marketing strategies and even your products.