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IGC Marketing to China's Netizens

Lessons from marketing leaders in China on influencing purchasing trends and brand preference by persuading consumers online.

Marijn Driessen

on 12 November 2012

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Transcript of IGC Marketing to China's Netizens

look beyond China's myths
learn to harness netizens' persuasive powers
grasp opportunities where competitors don't Why Leading International Brands use China's Internet
to steer Buying Trends in their favor

And why many are failing ... There are many first-time buyers in rural China and it has hardly been covered by international brands. Everybody is looking for more and more cost efficient models, to penetrate rural China. "There are many first-time buyers in rural China,
while it has hardly been covered by international brands.

Everybody is looking for more and more cost efficient models,
in order to succeed outside of Tier 1 and 2 cities."

Karl Wu, Intel
Strategic Marketing Director, China The Dirt Road Myth Popular among the rising middle class.

More mobile internet users in China than in any other country.

High concentration of educated and affluent consumers Why debunk Myths anyway ? Commonly held mistakes are keeping international marketers from grasping the opportunities of engaging with Chinese consumers where they are most at home:
Their virtual reality. “I post on blogs and BBS because I can express myself to millions of people at once. I like the rush, and I feel empowered.”

Chinese netizen China’s Affordable Tiffany’s:
Online to Offline trend is boosting sales and building the brand The Lack of Freedom Myth Internet is the
freest medium of all,
and the preferred one
for expressing opinions openly. "The challenge we find is building a business from the ground up. In other international markets there is a fully developed live entertainment industry - not in China"

Mike Fitzmaurice, NBA Business Development Director China The Easy Breezy Myth Success is rare and depends on a network of local partners and relations with key influencers at various government levels. Debunking Myths Patterns of success of local marketing leaders “I believe the bloggers and their ideas. They are my friends and will tell me the truth, unlike advertisements.”

Anonymous netizen The Need to Belong ....
in a fragmented and rapidly changing society The need for Guidance ...
on how to spend it Netizen Drivers China's internet is trailing behind.

People are living in the dark ages of technology. De Industrieele Groote Club What drives consumers and brands to connect or repel, across cultures and across media? Amsterdam, May 14 2012 Marijn Driessen Tap into Subject Matter Experts in telecom, internet and media industry for QuickScans on local risks and opportunities. Figures: McKinsey The internet is not interesting to marketers as it is highly censored and people cannot speak their mind. According to CIC/Roland Berger, 2010 User generated novel "Naked Marriages"
gets licensed for film adaptation With a market of 1.3 billion consumers making a killing in China is within everyone's reach. Online writer Xiao Guier uploaded her novel on Hongxiu Tianxiang, a user generated literature site, which selects novels for publication when the synopses receives passionate comments from netizens. 2011 court ruling:

Siemens' sales exec. Mr. Tian gets 15 years in jail, and sr. exec Mr. Shi, of client China Mobile has been executed.

Siemens risks global reputation around corruption charges. http://sweetandsoursocialism.wordpress.com/category/china/corruption/ “Siemens Gate” ended on December 5th 2011, when the president of Siemens China, Roland Gerke, had to bite the dust and make a public apology. (Siemens sales exec who received USD 5 mil in commission for China Mobile deals) What's the big pulling power
of the Internet in China ? Commonly held misconceptions prevent international marketers from realizing their competitive advantage. The Dirt Road Myth
The Easy Breezy Myth
The Lack of Freedom Myth
The Lack of Creativity Myth The Like me as I am Myth
The One Nation One People Myth
The TV Rocks Myth Chinese consumers are among the most passionate and active internet users in the world. Understanding why, is the key to facilitating their behavior
in your favor. A need to belong
A need for self-expression
A need for guidance Chinese consumers benefit from technology leapfrogging By 2025, 70% will live in 221 cities of 1+ million, 400 million new people will have migrated to an urban area. Middle class is expected to grow to 75% of the population (from 30% today). Half a billion netizens Reach beyond Tier 1 and 2 cities through the Mouse & Mortar model 80% percent of Zbird’s sales is secured at retail experience centers.

Yet, most of the purchases originate from the Internet – a case of online presence driving offline sales.

Zbird’s revenue reached RMB 400 million in 2010, with a YoY increase of 177%. NBA has invested in relations with the Chinese government since the 1980's. Together they have committed to build 12 new basketball arena's, and the government has declared to build 800.000 courts, one in every village. China represents over half of international revenues.

In 2010, NBA China was valued at US$ 2.3 billion, according to Goldman Sachs. The reality of virtual freedom The true road to success .... Being part of an online community is also
a demonstration of connectedness The larger the group the smaller you feel. Isolation ... The Need for Self-Expression ...
of a people finding their voice Coca Cola's Minute Maid Pulpy was developed for the Chinese market. Within 4 years it was the number one juice in China. The brand is now leading the fruit juice market in 15 countries. Joining others as they express themselves is valued ... I am not a Weibo addict, I just find it relaxing to roar into the virtual world.”
Lu, 22 “In China, digital media is more important than traditional media. By leveraging earned media we get a higher return on investment.”
Nokia China On average every enterprise Sina Weibo account has over 5,000 fans; every Sina Weibo user follows on average four enterprise accounts. Over 56% of Sina Weibo users follow at least one enterprise account.
41% of top 500 local companies in China, compared to 29% on Fortune 500 list in 2011, have a presence on Sina Weibo.

1 in every 100 visits (1%) in China is on Sina Weibo (compared to .4 in the UK and .2 in the US)

Read more: http://www.chinainternetwatch.com/1420/sina-weibo-enterprise/#ixzz1sEaF5rLy http://ame.asia/general/winners-best-insights-strategic-thinking Consultancy practice:
International Strategic Marketing in dynamic and competitive markets. "No other country comes close
in the importance of electronic word of mouth. "

Garrett Michaels, Ogylivy One
Business Strategist Director China There is no denying that China is an extremely unpredictable market place, led by a central government with a sophisticated communications system
in place, affecting all forms of media.

This being said ... Look at what people are passionate about... 56.3% of Chinese netizens agree that through ewom they can learn about brands Data by Roland Berger/CIC 81% of BBS (Chinese forums) and Blog users check ewom before making a purchase decision Data by CIC KFC staff from different stores told different excuses and some of them printed out the official statement and put it at the cashier. This led to protests in many KFC restaurants by customers who felt they were cheated and being lied to. Some customers refused to leave, demanding explanations and that KFC honor their promotion. Victim of Success Today 48% of netizens are micro-blogging,
or a quarter of a billion consumers. Sina propelled micro-blogging (Weibo) into China at the end of 2009, by using celebrities to promote the service. "People universally respond to honesty and true connection. If brands are willing to give this, then they can turn a negative situation positive."
Rand Han, local industry expert After the PR crisis Siemens opened a Weibo account
to connect directly with their audience Luo Yonghao has 1.3 million fans on Weibo Over half a billion Chinese consumers are online, over 80% of China's middle class is online.
69% of internet users access the internet via their mobile phone.
More smartphones sold in China (22% of global market) than in the US (16%).
1 billion mobile phones.
Chinese netizens are also the most passionate of their kind. Why only local leaders with corporate authority succeed?
MNC head quarters outside of China, invest in social media campaigns that can be applied in most parts of the world. Not in China however as the players and the playing field are very different to what they are used to. The true size of the appeal 130.000 brands have Sina Weibo corporate account
L'Oreal's online store is a primary point-of-sales to women living in cities where the brand has no retail presence (300.000 registered online shoppers in 2010). 249 million active Weibo users
Tencent's Qzone has 47x more (71 m UV) monthly views than Facebook Keep a permanent pulse on online buzz, to understand sentiment around the brands, the themes and activities that customers are passionate about and find inspiration in conversation topics. Siemens opened a Sina Weibo account to deal with customer concerns - AFTER - widespread complaints and bad PR. BMW follows brand ambassadors back and gives them a stage. Opening accounts on RenRen, Douban Kaixin, Weibo helped brands like Lancome, Mini and Lufthansa get a feeling for the online behavior and preferences of their target customers. Vancl identified writer and race car driver HanHan as an important influencer of a young and independent generation. Sephora collaborates with style blogger MissNiuNiu to draw attention to new product lines. Rosebeauty and Lufthansa Jetsetters offer value in the form of guidance, that consumers were craving and no other brand was offering. Participants and viewers of the BMW East Joy Journey were equally involved by sharing the stories and pictures that represent who they want to be using Weibo.

Vancl's photoshop tool allowed young people to express who they aspire to be, thereby making a profound emotional connection. Profit tripled in first year. Nokia uses a process that always ends with Activation on their own platform. Hereby controlling the identification of customers and prospects - enabling them to reward for brand ambassadorship. a one-way ticket to Asia strategic marketing adviser The China Table 1 2 WHY THE MIND-SHIFT is crucial ... In China, netizens are the ultimate seducers of purchasing trends, not marketers!I If netizens are the ultimate persuaders,
what's the role of the marketer?

Begin by understanding why consumers are online ... A need to belong, a desire for self-expression and a need for guidance is driving Chinese consumers into their digital home.
Chinese consumer are being seduced on the internet, whether your brand is part of it or not. In China, netizens are particularly active, passionate and vocal, which makes these consumers the angels or devils of brand advocacy. Marketers around the world aim to engage with their target audience in order to influence purchasing behavior in favor of their brand. While the game is still the focal point, the NBA has changed into a brand that has an impact on everyday life.
L@veNBA environment on Sina serves as a bonding platform.

Within 6 month online broadcast gained larger audience than traditional TV in same period. 4.35 million followers on Weibo, more than twice that on Twitter.

Tencent’s NBA-QQ VIP members receive eCommerce discounts and access to exclusive products. Revenue streams include internet value added services, stadium tickets and retail sales (merchandise) through 20.000+ outlets. NBA is strongly embedded both on- and offline A Marketer's Framework: China's Dragon of Persuasion The importance of Trust Electronic Word of Mouth influences purchase trends Within 6 weeks 617.000 consumers created their own Minute Maid "Rituals" video, helping to shift brand awareness with +10% as 94 million consumers watched the adds and the virals. RMB 27 million in free publicity was generated. Are brands tapping into this ? “Many people in China are developing a sense of style for the first time. So it's understandable that they are seeking guidance from others,
before making a purchasing decision.”
Karl Wu Director of Marketing and Brand Strategy Intel China How do I avoid making the wrong decision? Are brands tapping into this ? Vancl Star was launched by fashion e-tailor Vancl in 2011. Customers who show off their look and inspire sales by their friends earn a 10% profit share. Chinese Millennials indicate the number one reason why we’ll switch brands is:

If a brand gives them the tools to help them in other areas of their life. Source: Edelman The 8095 Exchange, their actions surrounding brands It's not just about making the right purchase decision In Short Regional sales and marketing director for IBM eBusiness in the supply chain industry The Issue at Hand 3 China's digital playing field fragmented nature of platforms and user bases can lead to spreading resources too thinly
commercial platforms look for immediate return, there are no free rides
relying on 3rd party measurement can lead to misplaced confidence Marketers need to cope with the unfamiliarity and dynamic nature of ... 7 steps to persuading consumers online 1. Build presence online
2. Deepen understanding of target audience
3. Protect against negative sentiment
4. Identify influencers and give them a stage
5. Build a branded platform to become part of netizen culture
6. Give ordinary netizens the tools to show off your brand culture
7. Bring netizens to your own domain for accurate measurement and continue the loop of loyalty by rewarding advocates 4 Myths Netizens Platforms Patterns “Attitudes to new forms of marketing are changing in China. Yet, there is a tendency in marketing teams to do what you are used to doing.

So making digital a priority is our biggest challenge. Having the support from our VP of marketing has been critical." Buy-in from the top Brand director, L'Oreal “In the West there is a clear category leader in most internet spaces. We do not see the same in China, there are many different players competing in the same domain. Here we do not have the luxury to focus on one category leader, we to be more spread." No category leaders William Moss, Motorola China
Director of Communications Why this is proving to be tricky “We have the sophistication to know in real-time what works and what does not. We learned to be a lot more responsive and flexible in our marketing efforts, to be quicker, more nimble, which is possible online." Prepared for success Yee Wee Koh, Nokia China Build your own branded platform Rosebeauty was launched in 2007 and rivals other popular Beauty BBS and its integrated online store reaches 100s of smaller cities where L'Oreal has no retail presence. 4 million members
64% of members visit more than once a day Embed brand in an existing platform Lufthansa's community on RenRen serves as a bridge between cultures.

Lufthansa is consistent in using the theme "jetsetters" across digital channels. How can brands be a force of persuasion? Dr. Robert Cialdini argues influencing others is no luck or magic but a science.

He identifies six principles of persuasion marketers can use persuade consumers to say "yes" to their brand. ! Lessons from NBA When sentiment turns against a brand Why the curiosity for China China is a pressure cooker of today's marketing challenges: Going to the source of knowledge; experience from local practitioners
Collaborations with RSM and LSE Preparations 1. technology is changing consumers' purchase decision making process
2. contact between consumers and brands is increasingly direct
3. the need of being capable to respond to a fast changing market Strategic Marketing in
dynamic and competitive markets.
Network and quick scans in China. Thank you International marketers are often misguided by myths that suggest that China is not ready for digital or mobile marketing .

The reality is that brand preferences and spending patterns develop online, whether a marketer takes part in it or not.

MNCs underestimate the passion Chinese consumers have for the internet. While people are extremely internet savvy and place more trust in this medium than any other source of information.

China's digital playing field does not fit in the global social media campaigns presented by HQ. Local marketing leaders are on their own and have to lead. ! ! 987 million mobile users
338 mobile internet (712 by 2015)
113 mobile internet in US NBA's core capability is technology Chinese netizens produce more content than professional websites in China.

58% of Chinese netizens agree that ewom influence their purchasing decisions, compared to only 19% of American counterparts.
A persuasive structure that gradually, yet consistently strengthens the bond with consumers
Help netizens to share the brand story by adding value and making it easy
Prepared for success requires measurement and agility
Buy-in from the top shortens decision cycles and ensures strategic commitment
Support from local and specialized partners Analyzing how brands can be a force of persuasion Giving netizens the tools to spread your brand story across platforms HanHan inspired with his expression of identity:
I love racing, I love 29Rmb T-shirts, I am like you, I am Fan Ke. Sales grew 300% YoY
in 2010 to Rmb 2 billion The company finally settled on the operating model of casual dining in 1998. Su revealed that for the year of 2012, the company plans to invest over CNY700 million to open at least 150 new restaurants in China.

Statistics provided by the market research firm Euromonitor International showed that by 2010, the scale of the Chinese pizza restaurant market was about CNY8.3 billion, of which 46.8% was controlled by Yum. By the end of 2011, Yum had opened 4,493 restaurants in China, including 626 Pizza Hut restaurants. www.fluidnations.com Marketing to China's Netizens Persuaders of the
World's Biggest Market About the author The Urgency to Face China's Netizens Marijn Driessen presenting at
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