Contributed by Brian Beagan

Brian Beagan

When I was requested by Allein to write on this subject I decided to start with some non marketing observations. It is probable that these will be regarded as personal, though I believe, are relevant to newcomers to China.

The issue is that China is different. When I first came to Asia in 1995 I lived in Hong Kong for three years and much to my wife’s chagrin, was permanently on the road. My beat was Sydney to Tokyo to Pakistan and all places in between. So whenever I stopped off in Singapore as I did regularly, I found it therapeutic… Little England compared to the rest of Asia. However, I left Hong Kong and went to live in Singapore and I was brought down to earth with a bump. It’s not British it’s Chinese! But the Westernised worlds of Singapore and Hong Kong do not prepare you for the step into China. The PRC is different. My base is in Guangzhou, has been for one year and will likely be so for the foreseeable future.

Unlike Singapore or Hong Kong the PRC requires a facility in Chinese. Unless you are a fluent Chinese speaker, an interpreter is a must have, and one that interprets accurately without opinion or personal spin is a bonus. “Just tell him what I say and tell me what he says. Nothing else” is the personal mantra of my American colleague, or so I thought till I was regaled by the translation woes of a Scottish software salesman who uttered the same sentiment.

Be ready to navigate the cities with prepared destination notes or handphone screens to show the taxi driver. One year later, and I have yet to meet an English-speaking taxi driver in Guangzhou. All it takes is a bit of planning, but it does side-swipe social spontaneity.

Mainland Chinese businessmen still put great store by relationship building and you have to be prepared for impromptu dinners being announced at 6pm after an afternoon locked in negotiation. To go into the Board Room, make your pitch, sign the deal and exit (or some such variant) has not been my experience. The company kitchen will rustle up a multi course meal and a bottle or two of red wine will appear, maybe a six pack and if things have gone really well, a bottle of baijui… the white liquor national drink of China.

If cigarette smoking causes you a problem, China is not the place for you! I do not know the percentages of smokers and heavy smokers, but smoking is all pervasive…. especially amongst young women. If you go to a restaurant that does not have a non-smoking section, there is every chance that the accompaniment to your meal will be the tables on both sides lighting up between the pauses in their eating.

But for me the critical issue is coming to terms with the size of the place, the numbers of people and the number of cities all under one flag. But at the same time recognising that there is not One China, but a diversity of markets.

There can be no such thing as monolithic China strategy. A strategy has to comprise of bite-sized pieces and be multi facetted to take account of location. For a long time China cities have been compartmentalized into Tiers 1 – 4, with Tier 1 cities having received the bulk of government funds to drive development. These monoliths (Beijing, Guangzhou, Shanghai and Shenzhen) are now overheated with government policy encouraging industry and social movement away to the other tiers. There is no agreed definition of the size criteria for each tier, indeed McKinsey argues for a 22 city cluster segmentation, but what is undoubtedly true is that the urban areas are at different stages of development across China… accordingly the mindsets and marketing requirements vary. Tiers 1 and 2 have been developed and are more sophisticated than Tiers 3 and 4. Significant marketing success and growth in Tiers 1 and 2 came from trial and initial purchase, and today the challenge there is to maintain momentum and build repeat business or sell premium variants. In Tiers 3 and 4 it is the job of marketers to replicate the trial successes of Tiers 1 and 2. An example from the Personal Care market serves to make the point. I will not allocate these two cities to tiers, but acknowledge that Hangzhou has seen more marketing development than regional Chengdu. In the past year 15% of people in Chengdu started to use Personal Care products whereas in Hangzhou the corresponding figure was 1%. And there is plenty of scope for growth, in a country where statistics abound, 75% of the Chinese urban population live in Tier 3 cities and beyond

Tiers 3 and 4 are of increasing interest to marketers as the government encourages industry and people movement out of pressurized Tiers 1 and 2. Also there is the urbanization phenomenon… agricultural workers are leaving the land for the higher wages paid in those cities. But marketers will have to adjust their plans to take account of the fact that Tier 3 and 4 people are unlikely to be familiar with their brands and may regress into Chinese insularity and brand conservatism in the face of Tier 1- style retail promotion.

But the Internet can be the agent of change and come to the aid of marketers. The Chinese are the heaviest Internet users in the world with 513 million users, compared to 245 million USA users and 121 million India users. So via the Internet Tiers 3 and 4 people can gain exposure to foreign brands only previously visible and available in Tiers 1 and 2. At the same time E-commerce is still emerging in China with 87 million people buying online in the first half of last year, but the 2015 forecast is for the China market to have tripled in size to USD420 billion, 20% higher than the USA projection.

If the Internet can help marketers it can also be a thorn in their side if not managed adroitly. The Chinese love shopping as their responsibility for 20% share of the world’s expenditure on luxury goods attests, but they are traditionally bargain hunters and the Internet has turned them into ‘savvy shoppers’. They are adept at comparing prices, specifications and performances which is a major headache for marketers. This is exacerbated by the Chinese love of Social Media. In 2011 a McKinsey survey of some 6,000 Internet users in Tiers 1,2 and 3 found that 95% had registered on a SM site, and 91% had visited a site in the previous six months. Use of Social Media for advice and comment has become a major definer of purchasing decisions for China consumers, and many marketers are perplexed about how to control or infiltrate it.

In general, the Chinese distrust formal institutions and mass communication, with advertising falling into that pejorative category for many. And their source of choice for purchasing information is now Social Media. It allows them to experience what they trust and want: peer-to-peer involvement in the information flow. There may be no Twitter or Facebook, but traffic on the four local sites more than compensates! Qzone, Sina Weibo, Tencent Weibo and Kaixin are thriving.

The online product critiques are rigorous with a collection of public favourites posting regularly. Some marketing companies suspect a significant amount of ‘critique placements’ whether to laud a product or lambast it. Either way, marketers have to learn how to manage Social Media and respond in kind to blogs or comment. Righteous Denial or Big Company Ethics do not cut it, they will merely promote a further savaging. And that is a big challenge to marketers… who is in charge of Social Media strategy? Should it be proactive or reactive? How to react when they do? And how is it integrated into the traditional brand planning structure? Or is it delegated to the digital media agency?

China is a fascinating place to live and work but the days of marketers earning a fast buck are long gone. If they ever even existed! China is a vast country in various stages of development and the people likewise. There are myriad currents and undertows for marketers to take advantage or beware, so a good chart is essential.

The Chinese consumers in Tiers 1 and 2 are becoming more sophisticated, with the naivete of individual brand preference being replaced by brand repertoires. Local brands are asserting themselves as viable quality options with consequent status appeal. All these are signs of a market reaching some sort of maturity. But conversely, people are still acknowledging that for a product to be well-known or expensive is an indication of quality.

The Chinese consumers in Tiers 3 and 4 have got it all coming their way. But should a marketer try to transplant the status quo of Tiers 1 and 2 there will likely be consumer backlash. Whether the consumers are migrants from Tiers 1 and 2, refugees from the land or long-time dwellers they are likely to be a tougher nut to crack than the original Tier 1 and 2 dwellers, particularly with the power of the internet harnessed in their favour.

New China marketers, bon voyage and bon chance!

Brian Beagan is BEI Global Director, China. BEI is the global marketing communications group. 

Brian can be reached on

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