Tuesday, December 12, 2006

Marketing in China

Last week I spent a few days in Shanghai to better understand the state of data-driven marketing in China. I don’t want to dive into the current stereotypical description of China as an economy with an untamed boom, more than 1 billion potential customers, the incessant focus on making money, and so on, but I will try to summarize some of my observations. All with the caveat that I didn’t spend sufficient time to dive deep into many of the described issues and opportunities but the time spent gave me a hint of what’s going on:
  • I was thoroughly impressed with the marketing expertise and knowledge of most marketers I met. The combination of strong influence from Hongkong, Taiwan, and other Asian countries, as well as the willingness to learn and improve with a strongly growing and demanding home market puts the Chinese marketer in the center of an upcoming dramatic revolution that will impact the marketing industry in North America, too. In a couple of years probably 20% of all marketers will be Chinese.
  • The hunger for more data and insight-driven marketing is enormous, but the expertise and qualification to deliver against this need is very small. The lack of expertise is driven by the almost non-existing focus of Chinese universities on the data marketing discipline as well as the fact that there are no real marketing-oriented apprenticeships within the large local companies. Only some of the multinationals provide data centric guidance and education of their marketers.
  • The currently 150 million members of the middle class will grow to approximately 300 million over the next 5 years. Most of them will have significant consumption capital. But most of these consumers will not be able to afford high-priced products, but they will be eager to buy low priced branded products. This will put an enormous cost pressure on all marketing activities and expenditures, including the generation of data-driven insights.
  • The lack of expertise in Marketing Strategy, including Strategic Planning, will become a serious challenge in developing world class marketers and marketing programs in China. Most companies are run by utterly success-driven entrepreneur types that have no training, understanding, or significant respect for the complex marketing discipline that we are accustomed to.

What are the key implications of this situation? Let me try three key ones:

  • We will need to deliver Data Intelligence at a fraction of our current cost structure that we are used to in North America and Europe. It’s not just about outsourcing basic analytical work to low cost labor countries but about rethinking our whole approach, methodologies, and applications with which we generate insights.
  • We have to think differently about scale, a 100 million customer data base will be merely average.
  • We need to find fast and smart solutions for training and educating Chinese Marketers in the data-driven discipline that we are exercising every day.

China and its growing community of marketers is definitely one of the most exciting challenges for us today. The success and failures of not just transporting our acquired knowledge of data-driven marketing to China but to initiate a 2-way dialogue will be critical in advancing our discipline. There are so many brilliant Chinese minds that should (and soon will) be part of our virtual marketing community. I can’t wait for my next visit to learn and observe even more.


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Anonymous DMC said...

Michael - I get the sense from your comments that you assume Chinense consumers will demonstrate similar response behaviors to what we see in N. America and Europe ("100 MM customer database will be merely average"). I think it is interesting to explore the success rate of response-based and 1:1 marketing strategies in China over the past 5 years. The road ahead for us westerners will be to get a sense of what is typical and expected, such as retention rates, response rates, brand affinity, etc. Whoever gets a handle on these types of expectations will be well ahead of the pack. Granted, the universe of potential customers is growing so quickly, even a marginally lower response rate will yield respectible results. But as the world rushes to China's doorstep, the competition for products and services will grow at the same explosive rate as their economy.
I look forward to reading your comments on the barriers to successfully engage consumers in China sometime soon.

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Blogger Chris Brown said...

Wow, you are really into the marketing data!! I found your blog as a result of the Viral Garden's Marketing blog meme... and I linked to your blog at mine: brandandmarket.blogspot.com.

Now I'm trying to check out each marketing blog and am very intrigued by your trip to China.

During your visit to China did you notice a big difference in the way brands were promoted to the consumer? Do they use the same tools and techniques that are used in the US? Is it more or less sophisticated than in the US?

Are there branding publications in China too -- like Brandweek and Adweek? I'm just curious...Thanks.
Chris Brown

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