The Chinese market is constantly changing, but as income levels rise across China there is an increasing number of new consumers and first-time buyers who wish to purchase and experience new products and services. However, the Chinese market is evolving rapidly and to win these new consumers over you will need to continually reassess your marketing strategy to help raise the image, profile and understanding of your business in China.
Tradeshows and exhibitions are very good ways of meeting potential customers, but you still need to persuade them to buy your product. You will need to ensure that your sales literature is effective in English and Chinese and decide what kind of advertising is appropriate. You will almost certainly need to adapt your products to meet Chinese preferences or requirements in order to be able to sell them. Ignoring local regulations, tastes and cultural preferences is a recipe for failure.
For example, a lot of Chinese consumers attach much more importance to the functional aspect of many products than we do in NZ, so Chinese marketing campaigns may focus on these features rather than on what the product says about you as an individual.
Also, the concept of auspicious and inauspicious symbols is emotionally important to many people in China. Many companies make use of positive symbols and avoid those with negative connotations in order to maximise the success of their products. For example, the number 4 is regarded as unlucky, as the word “four” in Chinese sounds similar to the word for death, but 8 is regarded as lucky, as “eight” sounds similar to the words for prosperity and wealth.
The concepts of good and bad luck, or auspicious and inauspicious symbols, are emotionally important to many people in China. Therefore, in order to maximise the success of your products, make use of positive symbols and avoid those with negative connotations:
- 4 is regarded as unlucky, as “four” sounds similar to the word for death.
- 8 is regarded as very lucky, as “eight” sounds similar to the words for prosperity and wealth.
- 3 is also lucky, as it sounds similar to the word for “life” in Cantonese.
- 9 is also positive as it sounds like the word for “eternity” or “long term”, while 6 sounds similar to “good progress.”
- In Cantonese, 2 sounds like “yi” (easy), so placed before lucky numbers will sound like “easy luck”, eg 23 (easily growing), 26 (easily profitable), 28 (easily prosperous) and 29 (easily enough). But avoid placing before unlucky numbers, eg 24 (easy death). 2424 would be particularly bad!
- Some consider 13 is unlucky because 1+3=4.
- In Cantonese 7 sounds like “chut” (for sure), so placed with lucky numbers 2 and 8 means “certainly easy” (72), and “prosperous for sure” (78). Using the same logic, obviously avoid 74.
- Red and yellow/gold are regarded as lucky, but avoid white, which is associated with mourning.
- Use images of auspicious animals: dragon, phoenix, unicorn, tortoise (the Buddhist symbol of learning), crane and fish.
- Images of the Great Wall indicate stability and reliability.
- Avoid name plaques for opening ceremonies, as these are equivalent to your standing next to your tomb!
- Also avoid black borders around names or photos of people, since this is also associated with death.
Strategy and brand building
For many international companies, one of the key market entry barriers in China is low brand awareness in the local market. Chinese customers place a strong emphasis on brands that they have heard of, and those which are well established within the marketplace. Therefore building brand recognition is very important for newcomers in China who want to really make an impression. Well-designed marketing materials are essential to help a product stand out from other similar products and capture people’s imagination. NZ enterprises need to focus on presenting the uniqueness and specific qualities of their products compared with competitors and the advantages of purchasing them.
Brand names and marketing messages
Conventional marketing wisdom says that global brand consistency is important, but the Chinese language presents some very specific branding issues. In order to create a favourable impression of your company and your brand in China, it is essential to have a name that Chinese consumers can remember.
If a product name can’t be remembered, it is unlikely that many people will buy it. It is therefore essential to have a suitable Chinese company and product names in order to sell your products. If your target market is mainland China (as opposed to Hong Kong), it is not advisable to have a Cantonese translation of your company name, as this will not be readily understood outside Hong Kong.
The Chinese translation of Coca-Cola is an example of best practice and highlights the issues involved in creating a suitable name. Coca-Cola in Chinese is “Kekou-Kele” which not only sounds like the English but can also be translated as “Tasty and Joyful”, thus creating a name that is easily memorable for Chinese speakers while retaining some degree of global consistency. Another good example is B&Q, whose Chinese name is “Bai An Ju” and can be approximately translated as “Hundred Peaceful Homes”.
The concept of symbols is emotionally important to many people in China. Many many companies make use of positive symbols and avoid those with negative connotations in order to maximise the success of their products. For example, the number 4 is regarded as unlucky and 8 is regarded as lucky, because when spoken they sound like ‘death’ and ‘wealth’ respectively. So many businesses avoid the number 4 and often use the number 8 in promotional activities, branding, pricing offers and telephone numbers.
Images and colours are also important. Red and gold are regarded as lucky colours, but white is associated with funerals and death. Images of animals are used to convey meaning and Chinese often use a dragon, phoenix, unicorn, tortoise (Buddhist symbol of learning), crane and fish to convey attributes such as vitality, strength, longevity, beauty, intelligence or versatility.
It’s advisable to spend some time getting this right. The name is, after all, the first thing your potential customers will see. There is no right or wrong way when translating into Chinese – the name you will ultimately end up with will be a combination of the translator’s recommendations and your own preferences.
Having a geographical focus
Almost the same size as Europe, with twice the population, China should NOT be regarded as a single national market, but as a varied region made up of over 30 different provinces and municipalities. Coastal ‘first-tier’ cities in the east of China, including Beijing and Shanghai, have been characterised in recent times by rapid and continuous growth and vast consumer markets have emerged with rapid sales growth for international labels and luxury goods.
However, some markets within these first-tier cities are even becoming saturated and the emerging markets in inland second-tier cities such as Chongqing, Chengdu and Changsha cannot be ignored. The increasing middle class population has led to a sharp increase in brand awareness and consumption. Apart from the increased buying power, there is a lack of globally-recognised brands in these second-tier city markets. Establishing a presence early on is an option that helps protect the brand from the fierce competition it would face in the well-developed regions.
Though it is often said that China is a land of regions differentiated by local languages, foods and customs, this is an oversimplification of the country and does not relate to the needs of companies. Issues relating to law, taxation, product quality and government procurement are certainly national. However, what is more relevant to business is the identification of sources of raw materials, supply chain and clients that can be most efficiently joined through a company’s manufacturing and sales bases and networks.
For companies who are able to define a client base, either consumer or corporate, within a “City Cluster” it is important to note that marketing activity to raise client awareness may be localised. Successful brand recognition in one “City Cluster” does not automatically lead to recognition outside that cluster. “City Clusters” therefore offer a defined geographical perspective of what can otherwise be a vast and intimidating market. Most of the clusters are within the constraints of a single province and so the politically driven economic direction for the cluster can be more easily determined. As areas of large population, the size of the client base for either consumer or corporate markets supports a sustainable business model. Infrastructure, physical and business services are well established. These individual clusters are areas where the marketing of a product or service can be launched and maintained. For all these reasons, for companies making a market entry and even for companies who have a presence in another region of China, adopting a “City Cluster” perspective offers structure to the modelling of their development strategy. See the “Choosing the right location in mainland China” section elsewhere in this guide for more information on regional cities and city clusters.
Once you have made contact with a Chinese company it's likely that your day-to-day phone and email communications will be in English with one of the company’s English-speaking members of staff. If you do not think the standard of English in the Chinese company is up to scratch, you might wish to ask for parallel Chinese texts and get them translated; this could be a valuable investment. An important part of setting up arrangements in China is to ensure that communication issues are covered in detail.
If you are going to sign anything – as obvious as it sounds – make sure you get it translated first, and by an independent translator. Do not rely on your customers’ or suppliers’ translation and do not be pressured into signing anything that you do not fully understand. Most failures occur in relationships because of fractured communications and mutual misunderstandings.
If China is likely to become a significant part of your business, you may also wish to take up the challenge of learning Chinese yourself – even having a basic level of communication will create a positive impression and will have the added benefit of making your trips to China more enjoyable. However, even if you do attain a reasonable level of fluency (which can take over two years with dedicated study), an interpreter – or a Chinese-speaking member of staff – is still an essential in business meetings.
Developing a business development strategy
Market information gathering:
- Undertake some dedicated and specific market research – consumer trends, perceptions, tastes and preferences
- Understand the competition and their relative strengths
Local knowledge and insight:
- Explore entry barriers, regulations, logistics, IP, customs and tax
- Visit various locations yourself (not just Beijing or Shanghai) and spend time learning the market
- Utilise local contacts, networks, advisers – who know the market
Targeting and positioning:
- Segment this target group into focused sub-segments by location, and also by behaviour, attitude and lifestyle
- Focus – target smaller sub-segments, and develop plans on how best to reach them and serve them
Market entry decisions:
- Explore various channels to market and business models
- Consider working with partners, distributors and agents
- Explore China’s e-commerce channels and opportunities
Product & service provision:
- Consider specific needs of China’s middle income consumers that need you to alter the product/service offering
- Focus and emphasise product/service differentiators in China – such as quality, novelty, customer services and after-sales
- If you can’t compete on price, then don’t compete on price
Branding & communications:
- Don’t rely on ‘foreign or British’ brand superiority – have a clear message for the middle income consumers
- Develop a social media plan, have China specific promotions, discounts, VIP range/services and loyalty schemes
- Invest in learning about this large and diverse group of consumers – who will buy your product/service and why?
8Ps of Marketing in China
Foreign corporate that have been successful in China have created long-term win-win relationships with local companies that have allowed them to understand the market better, create a channel to customers and gain the government and business relationships that are an important part of creating open access to the market. Developing and nurturing effective partnerships is important in creating an effective marketing plan in China and yet it creates an extra layer of complexity.
China has traditionally been a very price-sensitive market and this is still the case especially in the less affluent regional cities. However, the growth of the more affluent and aspirational middle classes has created opportunities in niche markets where international companies can deliver premium products at a higher price. Chinese consumers will accept higher prices for trustworthy brands and high quality products. While pricing must reflect the quality and attractiveness of any company’s products, it must also be attractive to Chinese consumers. As in all market pricing it will be set based upon the perceived value specific to the customers in that market. Naturally, marketers must take into account both their international competitors that can deliver high-value products and their new domestic competitors that already have strong and entrenched relationships within the market.
There are markets in China such as Shanghai and Beijing that have become crowded with a wealth of imported products available to customers. It is therefore important that companies differentiate their product in these competitive markets, which may involve customisation. Alternatively, some companies have chosen to focus on less-competitive areas of China. Regional cities in China are developing strongly and represent areas of opportunity for NZ companies who want to get their product in early.
Understanding the nuances of the Chinese market and Chinese consumers, and balancing that with the strengths of your business, is going to be useful for your China strategy. For this reason, many international companies choose to hire local Chinese staff to assist in creating and executing their marketing plan in China. This way your company can leverage the knowledge and relationships of their local team, gain realtime feedback on how the business is developing and also deliver hands-on relationship management with partner companies within China. By using an incubator service, SMEs can gain the benefits of having representation in the market at a lower cost, but the team must be managed effectively and remotely from the NZ.
As mentioned in previous sections, it is helpful to view China as a country of many different markets rather than one large market. One of the keys to success for many businesses is researching and understanding where to focus the company’s resources for maximum impact. Many successful SMEs focus on one particular area to build deep relationships with partners and customers first. If they are new to market, they often test the viability of their product first on a small scale. Once confident that their products resonate with the Chinese consumers they then look to expand quickly.
As businesses develop internationally they need to understand how they can expand their quality control and core standards internationally too. This creates an extra layer of complexity working with partners in a market as far away as China. While it is important to put your new Chinese customer at the centre of your marketing planning, the processes side of the business cannot be overlooked as this will be the backbone of providing consistently high levels of quality and service to your clients.
Focusing on a niche client and a core geographical area will help you create a communications strategy that is effective and manageable. The use of television or other mass media for communications is often regarded as expensive and not targeted enough to be effective. Social media is regarded as a very powerful tool; however, a clear strategy needs to be created to create positive messages of your brand and to manage any messages that may be detrimental to your business in China. Naturally, all communications need to be translated into Mandarin and/or Cantonese and managed in Mandarin and/or Cantonese too. Although many young Chinese consumers speak English, if you are aiming to create a message that really has impact and resonates with a Chinese audience it is often prudent to use Mandarin/Cantonese or a combination of these as well as English. Be aware too, that although the written characters may be the same (with simplified script in mainland China and traditional script in Hong Kong and Taiwan), there may sometimes be a few localised words or nuances too.
8. Physical environment
The northern part of China is extremely cold and the southern tip of Guangzhou is tropical, seasonal trends vary, lifestyles vary and businesses operate and staff work differently in many different ways. The major cities are often congested with traffic and many major cities suffer from environmental issues. It is important therefore to ensure that your product is relevant to the lives of those who live in the area where it is going to be sold. Physical promotional materials must also be prominent and remain in good condition, whatever the physical environment has in store.
Technological Change & Social Media
The acceptance and usage of technology and mobile devices in China has grown exponentially. China has the highest total number of internet users in the world, with nearly 600 million users, over 400 million of whom are mobile internet users. The internet therefore has become a key source for finding information on products and services, communicating with communities of interest and engaging with customers across China. Channels such as Facebook and Twitter that Western communities may be used to are not widely available in China; however, there are Chinese equivalents such as ‘Weibo’ and ‘WeChat’ which are widely used with Chinese consumers.
Chinese social media have become an important part of many companies’ marketing communications and sales strategies in the China market. International marketers are keen to engage with influencers within these social media communities to increase awareness of their brands and communicate marketing messages. Some brands have done very well by using these platforms, and if these tools are utilised effectively, they can be a low-cost alternative to traditional advertising.Social media is an important tool when a NZ business promotes its products in China, and there are several reasons why even SMEs should consider embracing social media in their marketing:
- Cost Efficiency: Registering a social media account costs nothing. But companies can use it to respond to consumers directly, promote products and build up a community.
- Enabling Peer-to-peer Dialogue: Social media allows companies interact with consumers in a real-time dialogue, which can increase brand loyalty.
Bigger Reach than Email: Social media encourages information-sharing on the Internet.
Weibo is the most popular blogging platform for Chinese users. While fundamentally structured like Twitter, the differences in the Chinese and English languages caused this media site to develop differently. Since 140 characters in Mandarin can hold much more content than 140 characters in English, the length of communication on Weibo is considered much more extended than its English version. This allows individuals to, instead of just dropping one-liners for each post, do microblogging. Companies with a Weibo account can also increase their level of communication with its customers, posting messages that contain much more content than what they can accomplish with Twitter. Many people take to Weibo to follow celebrities, influencers, and like-minded individuals.
Youku is similar to YouTube in that both host videos for users by users, Youku Tudou contains less self-produced content and more professionally created ones. People often use this site to stream or download movies and watch TV shows. It is essentially an online alternative to watching television or going to a movie theater. Much of these videos are from foreign sources, from American movies to Japanese dramas. They are subtitled in Mandarin.
Chinese consumers purchased 3.877 trillion yuan ($589.61 billion) worth of goods online in 2015, a 33.3% increase from a year earlier, according to the National Bureau of Statistics in China. The 500 merchants ranked in the Internet Retailer 2016 China 500—the largest online retailers in China as measured by their annual online sales—grew 59.6% in 2015 to $198.30 billion from $124.22 billion, representing 33.6% of the total Chinese e-commerce market.
Retailers and brands based outside of China shared in that growth. The growing online retail sales for brands and retailers based outside of China is not surprising given the strong demand among middle-class Chinese for foreign goods, from Apple Inc.’s iPhones to Wal-Mart Stores Inc.’s food and household goods. Alibaba Group Holding Ltd. reported that 33% of Chinese consumers bought items from international brands during the 24-hour Singles’ Day event Nov. 11, 2015.
Among the factors driving growth are growing sales from consumers in China’s villages, and the steady growth in the number of Chinese shoppers who can access the web through mobile phones.
There were 668 million Internet users in China by June 2015, and about 89% of them, roughly 594 million consumers, could access the web through mobile devices, according to the China Internet Network Information Center. During Alibaba’s Singles’ Day sales in November, Chinese consumers purchased $14 billion worth of products, and 70% of sales were transacted on mobile devices, according to Alibaba.
Rural areas, where there are few physical stores, also present huge potential for online merchants. There were 186 million Internet users living outside of China’s cities as of June 2015, and 60% of them had never made an online purchase, according to China’s Ministry of Commerce. To encourage more rural shoppers to order online, e-commerce firms are rapidly improving their facilities in those areas. Alibaba, whose big online marketplaces Taobao and Tmall account for about 75% of China’s online retail sales, has built 100,000 service centers in small towns or villages where residents can get help both buying online and in joining the 8 million sellers who offer their wares on Taobao. Those shops also help farmers sell their products across the country. The Ministry of Commerce says web sales of fresh foods topped 38 billion yuan ($5.76 billion) in the first three quarters of 2015, 50% more than all the online foods sales during the whole of 2014.
China’s government has taken a series of steps to make it easier for consumers to buy overseas goods via the web since 2012, including setting up cross-border e-commerce pilot zones—now in 10 cities—where China’s customs service provides fast clearance of small orders sent to Chinese consumers. Foreign companies can ship orders from abroad or store goods in these areas without them clearing customs. Then, as orders are received, they can send them through the streamlined customs process.
In the first two years after their introduction in late 2013, the special zones processed 100 million parcels that generated 15.5 billion yuan ($2.36 billion) in sales for foreign web merchants, according to Chinese customs authority General Administration of Customs of China.
Chinese consumers now can also buy small quantities of imported goods that have not been approved for general sale in China. That opens up opportunities for online merchants, particularly those selling food and nutritional products, as China’s government normally requires that all such items go through an approval process than can take a year or two.
Furthermore, China does not collect sales tax in cross-border e-commerce, and the customs duty tax on items in some categories has been cut by more than half for items purchased from websites outside of China. That makes buying online from foreign web retailers even more attractive to Chinese consumers.
Many international brands and retailers are taking advantage of this relatively low-cost and convenient way to expand their businesses into China. The number of overseas companies operating in China’s free trade zones doubled in 2015, according to the Ministry of Commerce.
Meanwhile, operators of large online marketplaces in China, such as Alibaba, JD.com Inc. and Amazon, have responded to these relaxed cross-border rules by creating special areas on their shopping portals featuring imported goods. For example, Alibaba launched Tmall Global in February 2014 to allow foreign companies without a China business license to sell online to Chinese consumers under the new e-commerce regulations. Sales on Tmall Global increased 179% in the fourth quarter of 2015 from a year earlier, Alibaba reported in its quarterly earnings report.