Friday, December 24, 2010

Chinese consumers in 2010

As the year inches towards its final days, most urban Chinese having continued their march on the road to prosperity, will possibly look back at the days with a sense of satisfaction. However, the year had its share of disasters and mishaps and the Chinese brow was furrowed by a number of issues and preoccupations.

Inflation and the drive towards value

While the Merriam-Webster dictionary declared "austerity" to be the global word of the year, in an opinion poll in China the netizens declared the character zhang 涨 as the character of the year. The word means "rise", "go up" or "swell" and is often used in the context of the rampant and rapid price increase in China. Its election as the most important character of the year encapsulated the consumer angst at rising prices. So far China had managed to sustain an economic growth without facing the spectre of inflation. However things have been different in 2010 and the CPI has shown steady growth and the prices of vegetables, meat, milk and other daily necessities have been in an upward spiral. The Chinese consumers are unused to this phenomenon and it came as a rude awakening that a significant part of their income is going towards increased cost of living. Expectedly this worries the Chinese consumers, and marketers will need to work harder to provide persuasive arguments and alluring offers to persuade the consumers to open their purse strings. Management of pricing and value strategies will be one of the key challenges for marketers in 2011.

Disproportionate cost of housing

They say an Englishman's home is his castle - they haven't seen a Chinaman's attachment to an apartment. A Chinese' world revolves around his house - the attachment to the apartment is possibly more pronounced because just 15 years ago, there were no apartments to buy. The fact that house prices in big cities have increased several fold in the past five years has surely added fuel to this fiery desire to own an apartment. In fact given the fact that the stock market is languishing and interest incomes are low, makes property the only investment to make a killing, further driving its price. The young Chinese do not believe in the concept of renting an apartment when starting off in life and gradually saving for a few years to buy an apartment. An apartment should be available to house the nuptial bed - according to a recent poll, 70% of Chinese women will refuse the hand of any young man, whatever may be his attractions, if he fails to produce the keys to an apartment in his (and hers) name. This adds an additional challenge to the men, who being the more numerous sex, anyway have a disadvantage in terms of securing a bride. A popular television series called Dwelling Narrowness (Wo Ju) touchingly captured the dilemmas and the tension among the Chinese in relation to their obsession for an apartment. The Chinese love for brick and mortar has far reaching implications on their behaviour. Most importantly it reduces the amount of money they can spend on consumer products as the high property prices and the high corresponding mortgages take up a large proportion of their incomes. Ironically the high cost of the house goes hand in hand with the low cost of the household cleaners used by the consumers!

Rising anger against for privileges

As it has been a while since China allowed its citizens to get rich, now it has reached the generation of fu er dai (second generation rich). These and also the guan er dai (the sons and daughters of officials) enjoy privileges and comforts which the lesser mortals can only dream of. Consequently this generation is under constant scrutiny from the public and any sign of abuse of power or money is pounced upon. A telling sign of this was the public outcry that greeted an incidence in Hebei province. A young lad knocked down a young college student and shouted "Sue me if you dare - my dad is Li Gang". The fury and lampooning unleashed on this by the netizens was unprecedented. Needless to say that Mr Li Gang (a deputy police chief) had to publicly apologize and also forego his official posiition. From a marketing point of view, it would seem that the public sympathy is with the “self-made” man – depiction of privileged generation in communication, if required, should be done with caution.

Material girl

The ambivalence towards materialism was also demonstrated by public reaction to Ma Nuo who during a popular dating type of programme said, "I will rather cry in a BMW than laugh on a bicycle". This became a major topic of debate on the Chinese internet leading to much condemnation of crass materialism and indifference to true love. Even the authorities could not maintain their distance and condemned such utterances and their negative effect on the general populace. As a marketing lesson it icautions the marketers to shun insensitive commercialism or belittle emotional relationships.

Chinese twitter and its marketing opportunities

Internet users have been on a steady increase and as per the last official survey, China had 420 million internet users. The usage of internet in China is different from the developed countries as it is seen as less of a work or efficiency tool , but more of a tool for self-expression and social interaction. Last couple of years has seen the emergence of very strong social networking websites in China including Kaixin and Renren. However, the Twitter equivalent in China was missing till the emergence of Sina microblog. The Chinese netizens wholehearted embrace of microblogging has been one of the highlights of 2010. Never fond of e-mail, Weibo (microblog) is now the preferred way to keep in touch with their friends among the many Chinese internet users. The fact that you can follow the musings of celebrities comes as an additional bonus. Clearly to marketers it opens another very important channel through which they can reach out their brands and messages to the consumers. However, given the fact that it is a medium for consumers to bond with their friends and loved ones, marketing needs to think hard and innovatively to earn its place within this. Popularity often attracts abuse and in this case the birth of "follower factories" who can turn you into an instant celebrity with more than 10000 followers, at a price of fifty dollars.

The big fair and the window to the world

Of course the grand event of 2010 was the Shanghai Expo. This was Shanghai's chance to match Beijing's glory whole stole a march over Shanghai by staging a spectacular Olympics. Shanghai Expo attracted unprecedented number of visitors and people queued for up to 8 hours to peek inside the popular attractions (surprisingly the Saudi Arabian pavilion was a major hit, apart from China's own imposing structure). The Expo became a mega fair for the Chinese, who came in hordes, not just from Shanghai but from all parts of China. From the marketing perspective, one would argue that the Expo has made the Chinese more aware of the rest of the world and paved a way for higher acceptance of the products from outside China and also more interested in exploring the world themselves in the process benefiting global tourism. From an emotional point of view, the Expo was another feather in the cap for China though the tangible, long term economic benefits of the fair still remain to be seen.

Big business under suspicion

A spat between the popular internet message software QQ and the anti-virus software called 360 raised the consumer hackles, when QQ declared that the users can not use their software till they uninstall the 360 anti-virus programme. The words of a message from QQ to its users saying, "we have made a very difficult decision" provided much fodder for the consumer caricature who used its variants to mock companies and products who show a bullying attitude to the consumers. Chinese show little tolerance to big business bullying, and companies need to tread with care and ensure that consumers are treated with utmost respect.

Increasing concern for safety

Often faced with the undesirable consequences of poor quality products, the Chinese consumers' concern for safety has always been high. Another dimension was added to this when the nation witnessed a devastating fire in a 28 storey building under renovation in Shanghai in which 58 people lost their lives. The blame seems to fall on poor safety and management practices in the renovation process. This tragedy will undoubtedly strengthen the resolve of the Chinese consumers to demand nothing but the highest levels of safety from all products and services and marketers need to ensure that they are able to deliver this.

Written by Ashok Sethi

Monday, November 29, 2010

The Chinese Lap of Luxury

While the sinking finances of Western consumers prompted them to temporarily halt their indulgences in 2009, the Chinese consumers continue to march ahead on the gilded road of luxury and rewarded the luxury goods industry with a 20% growth for the year. The boom is further magnified this year - large new stores of Louis Vuitton, Coach and other such brands decorate the shopping streets of Shanghai and China is expected to show a 30% growth in luxury goods in 2010.

While rapid economic growth and swelling ranks of the rich are definitely fueling the market, there are also clear cultural factors which make the Chinese more attracted to luxury products than some other markets. The old Chinese saying "yi jin huan xiang" (return home in golden robes) expresses the phenomenon of using visible symbols to reflect your success. Having succeeded, it is important to make sure that your achievement is noticed and applauded. But at the same time traditional Chinese values do not suggest sticking out or drawing undue attention on oneself through conspicuous behavious or consumption ("qiang da chu tou niao" - the bird who sticks out his head gets shot!). Why then are the Chinese consumers lapping the expensive symbols of luxury? Apart from economic and cultural factors, I feel that there are a few other elements serving as psychological fuel for the luxury market in China.

1. Universality of ambition and common standard of evaluation of success. In China there is near universality of ambition - almost every person dreams of and strives for success. As compared to other societies which are more class based (social or economic), and people blessed or cursed by advantages and disadvantages of coming from specifc backgrounds or bloodlines, the relatively flat social structure and the fact that all money is "new money" puts everyone on a relatively equal footing in their endeavour for success . In a similar vein, not many symbols of success or achievement are available to display as the absence of "background" provides little opportunity to display your success other than through the symbolism of whatever your new money can buy. Luxury goods provide easily recognisable symbols or markers of having reached certain milestones.

2. The simple perception of money. In China the history of branding and availability of quality goods is rather short. Over the last 20 years, Chinese consumers have discovered that money generally buys superior quality and hence expect the expensively priced luxury goods to deliver matching value. Chinese attraction to luxury products, therefore, is driven by an expectation of high quality. As an implication, for luxury goods manufacturers, it is equally important to ensure and deliver product excellence and exquisite craftsmanship, as it is to project a luxurious and exclusive image.

3. Lack of inverted snobbery. In China, there is no inverted snobbery or "old money" looking down on the ostentatious behaviour of the "new rich", which discourages the use of luxury products and in fact makes it fashionable to appear casual and use moderately priced products. This sentiment restricts the market of luxury goods in developed markets, but because of the relative homogeneity of the society (e.g. all money is new money) does not appear to make a strong dent in China.

4. Absence of price anchors. Dan Ariely in his book "Predictably Irrational" talks about the concept of arbitrary coherence. We tend to assess the value of goods and services in relation to certain anchor benchmarks or comparison standards (which some times can be quite arbitrary and irrational). In countries like India, which are also booming economies, but where there has been a historic continuity of consumption, the consumers have grown up with products and services which were low priced but still delivered acceptable quality. In relation to these historical anchors it is more difficult for Indian consumers to accept the high prices of luxury goods, But in China where there was a long discontinuity in consumption of quality products, many consumers have no anchor of what a good quality hand bag, watch or a car should cost - making it easier for them to accept the high prices of luxury goods.

These factors combined with China's rapid economic development and cultural factors provide a potent mix, resulting in a resplendent display of luxury and a great market for purveyors of these pleasures.

Written by Ashok Sethi

Monday, August 2, 2010

China surpasses Japan as the second largest economy in the world

China surpasses Japan as the second largest economy in the world

China’s economy grew 10.3% in the second quarter of 2010 - to reach $ 1,33 trillion. Japan in comparison grew 0.4% to reach $1.28 trillion. It would seem to imply that China has now overtaken Japan to become the second largest economy in the world. The media has touted it as another feather in China’s cap and has reported it with a mix of grudging admiration and trepidation. Zhang Lin, a young conscientious journalist decided that objectivity was in order, and decided to seek the views of a cross-section of people to this apparent milestone.

The first stop was at a prominent university in Beijing. Professor Xiao, head of the department of philosophy in a leading university remarked, ” If you really think about it, this landmark is of little consequence or importance. It is as meaningless as any of the other comparison or achievement standards that we set for ourselves (most of which seem to be well rounded numbers as hundred billion, one trillion and so on). It is a creditable achievement that China’s economy has been consistently on the rise and China has been able to lift millions out of poverty and give a large proportion of its citizens a decent existence. But it is entirely irrelevant that it has surpassed Japan or any other country in economic might.”

Zhang Lin’s eyes shone as she heard the professor. “How true!” she thought. Why do we need to always think in terms of benchmarks and milestones? Let’s look at what it really means for the lives of the Chinese people. “I need to check how does the common Chinese man (or woman) react to the news.” Driven by this thought she decided to take a train to the hinterland and talk to some Chinese farmers.

On the way out, Zhang Lin was tempted to knock at the office of the head of the economics department. Professor Zheng’s furrowed brow suggested deep cogitation. “China is the most populous country in the world,” the professor said. “It is expected that if it continues on the path of growth it will assume one of the top slots sooner or later. The fact that it is larger than Japan is of no consequence as Japan only has one tenth of China’s population. China had edged past the economies of France, Germany and UK which it surpassed in its stride in the last 3 years. In fact if China continues to grow at this pace, it will also overtake the US and become the number one economy in the world in 2030 or earlier.”

Wang Lan a farmer in the Henan provinve was ploughing his field when the Zhang Lin approached him with the news. “Shushu (uncle),” the reporter said “China has overtaken Japan to become the second largest economy in the world. What do you think about this news?”. Wang Lan looked at the reporter with a mixture of amusement and bewilderment and burst out “I hope my crops don’t get eaten by the floods and I can get a good yield. May be better than they get in Japan!” 720 million rural residents of China still have an average per capita income of less than a thousand dollars a year. Every year they eke out a meager living in face of drought and floods. China’s challenge is to make the growth inclusive and broad and improve the lives of its still large rural population.

When Liu Xing, a worker in the toy factory in Dongguan when informed of this achievement said, “I get RMB 1000 per month in the factory, how much does a factory worker in Japan get?” It is estimated that 150 million migrant workers from rural areas work in large cities of China. While wages in China are increasing, clearly their incomes and living standards are far from the standard of living in Japan or any of the other economies that China surpassed in its stride in the fast few years. When you look at it on a per capita basis, the fact is that China only has a per capita GDP of $3,800 as compared to Japan at nearly $ 40,000 and the US at $ 43,000. Clearly China has a long way to go if it needs to provide the same standard of living that Japan and US have been providing to its citizens,

What is of importance is whether China will be able to sustain the momentum and continue to grow at this pace for the next 30 years so. Even more important is the question whether the growth will be inclusive, embrace the poor farmers and the migrant workers and not destroy the environment.

Economic power is often equated with political might. With the second largest economy in the world, is China the second most powerful nation in the world, should the world fear China and put up defenses to protect itself from the juggernaut that’s China ? Professor Wang at one of the local universities in Guangdong did not seem to think this way. “China becoming the second largest economy in the world does not imply that it is has become the second most powerful nation in the world or the second most influential country. Economic might and a large consumer base gives you bargaining power for trade, large foreign exchange surpluses provide you with an investment muscle to further progress your interests in other parts of the world but does not put a crown on your head and make you a figure of either fear or admiration.”

In another part of the world Sarah Palin, the failed Republican candidate in the last American presidential elections took the call from Zhang Lin and said on the telephone “Senator McCain and I would have never let is happen if the Americans had voted for us rather than Obama. Today the second largest, tomorrow the largest – where will it stop? I have four children and none of them speak Mandarin. And I don’t want them to be looking for jobs in Shanghai. I hope Obama will do something.”

President Obama’s office chose not to respond to the development or Sarah Palin’s remark. Inside sources say that the White House is carefully evaluating the consequences of the development and will respond “as appropriate”.

Written by Ashok Sethi

Saturday, July 24, 2010

Social Media in China – Great Expectations

Social Media in China – Great Expectations

Great expectations

Perhaps no other recent phenomenon has generated as much expectations among marketers as social media. Fazed with increasing clutter and deteriorating ROI from their investments in conventional media, marketers are salivating at the thought of social media providing them with an opportunity to link up once again with the increasingly elusive and promiscuous consumer. In a research conducted by TNS among marketers in China, a large proportion of them said that social media is one of the most effective marketing tools today. In fact there is a common perception that social media is on its way to replace more and more of conventional media.

However the marketers are also clear that the potential offered by the media is far from realized today – in fact they feel that only a fraction of the potential of social media is tapped today – because “very few companies understand social media”, “the social media scene changes so fast that it is difficult to keep up”, “there are so many options to chose from” and lastly a complaint that their organisations are not able to find right agency partners or vendors to work with.

Vibrant social media on China

There is no denying the fact that social media has been growing rapidly. Specialist social networking sites such as –, kaixin001.oc, and have gathered a huge following in the last one or two year. If you consider other parts of social media such as blogs, bbs and video sharing nearly everyone is involved. Why is there such a powerful social media landscape in China? Why has social media exploded in China?

The key to answering this question lies in understanding the way the Chinese consumers look at the Internet. In the developed economies, consumers look at internet as a work tool, to increase efficiency or provide information. However, the Asian countries like China and India also look at it as a tool for self-expression. The fact that traditional forums for discussion and airing your views are scarce is a definite encouraging factor. Often debate and dispute is not possible at home – as many of the young people don’t have a sibling to fight with! It is not surprising that Chinese consumers are among the biggest bloggers in the world.

What has marketing got to do with this?

While it is interesting to know and acknowledge that people in China are fond of interacting socially with their friends and colleagues online, like to discuss juicy topics (like how well dressed is Xili Ge is, or about Furong Jie or the spicy details of the Shoshou Men), we need to still evaluate its relevance for brands. The relevance for brands comes from the fact that people are discussing about products and brands online. According to a TNS survey 86% of the social networking users have come across a negative comment on a brand online. Marketers have to be there to defend themselves. But it is not just about crisis management. 90% of the consumers we talked to have come across a positive comment online for a brand – pointing to the tremendous opportunity that the media offers to brands. It seems apparent therefore that people are talking about brands on social media – some are saying good things about brands, some are saying bad things about brands, Marketers can take of the risk of ignoring it or the can try to see how this can be monitored, moderated and veered in the positive direction.

Why do people talk?

The reason marketers are excited about social media is that they feel they can engineer positive conversations by persuading consumers to sing paeans about their brands. However, the major trigger for positive word of mouth is a high degree of consumer satisfaction. Consumers want to share their happiness from consuming wonderful products, or relish their gratifying experiences. So the best way to make them talk is to delight them. Another interesting trigger is the possibility that either a new brand or its advertising catches their attention. So every time marketing has something new to talk about, there is an opportunity. Hence triggering positive word of mouth can only be based on a sound foundation of solid product performance and genuine newness – it can not emerge out of nothing.

Mismatch of expectations and reality

The views of the marketers about social media are very clear and they see a distinct role for the medium– they expect social media to create WOM (word of mouth) or buzz and do strengthen the emotional bond, which is very different from that of conventional online advertising. While the role of social media is seen to strengthen the emotional bond and to develop loyalty, conventional online advertising has the job to create awareness and to inform (essentially the same job as that of advertising in traditional media such as television, but without TV’s ability to enhance image). Hence there is an expectation that because marketing communication works in an environment of social interaction, warmth and bonhomie, it will have a more profound effect on the consumer psyche than conventional advertising. But is it really so?

If you ask the consumers – there seems to be a mismatch , the consumers say brand exposure on social media makes them aware of the brand – put it into the consideration set – even nudge me to try it - but generating loyalty and bond with the brand - a bit unlikely. This indicates a gap between the marketers’ expectations from social media and the reality – which for us is a cause for reflection. Are we using social media appropriately? Is it that quite often marketing communication on social media websites is actually conventional advertising, and makes little attempt to engage the consumers or to generate a dialogue? It seems clear that if the great expectations from social media are to be realized, marketers and their consultants need to work harder in imbuing their brands’ presence with a character that connects more intimately with the consumers.

Written by Ashok Sethi

Tuesday, April 20, 2010

Smile please

Smile please

Chinese standardization

As I reached the boarding gate at the Beijing airport, the lady from the airline took my boarding card, momentarily glanced at it and passed it to a colleague standing next to her. Her colleague in turn put it under the scanner, and passed it to the third colleague. The third colleague decorated the card with an artful squiggle with her pen and waved me on, as a disembodied recorded voice expressed the airline’s gratitude at my patronage by saying “xie xie”. Further down near the aircraft, another airline staff member tore the boarding pass into two, passed it to the security man, who planted another squiggle on it and I entered the aircraft.

The Chinese service model seems to be based on the principles of assembly line of the manufacturing process in which the Chinese clearly excel. The service is divided neatly into different processes and a standardized delivery of a basic quality is designed to be made for each element. Standardization rather than customization is the goal. “If you have to thank every customer, why not have a recording to spew it out than leave it to the whim of fickle humans,” the Chinese think. The taxis in Shanghai belt out both a welcome and a farewell message, both in Chinese and amusing English ( including reminding you "not to forget any belongings you take"). Does the recorded message achieve the service provider’s intention of making the customer feel valued or does it actually devalue them and makes them feel like cattle? In my view the Chinese airline process of handling the passenger and his bags seem to be quite similar – perhaps they do not play the “thank you” recording to the bags, and not physically shove the passenger on to the aircraft (thought he Shanghai Metro has hired people who stand at the platforms at peak times and do push the passengers on to the trains).

Customised Indian model

The Indian service model, on the other hand, is based on the concept of customised service. Several factors will influence the behavior of the staff at the counter - which may include how her mother-in-law treated her in the morning, whether she got a seat on the bus to the airport and even the quality of the tea that she had in the canteen. If you are lucky, you will be greeted with a beaming smile, solicitous attitude, and made to feel like a king. On a bad day (her bad day, which soon becomes your bad day too) you may be scowled at and blamed for interrupting her well deserved rest.

But most of all, her behavior and attitude will be based on what she feels the particular customer deserves. Coming from deep notions of a class based society, the behavior will often depend upon at what level or class of society does the person behind the counter pegs you at. Hence, if you are neatly dressed, exude an air of confidence and sophistication, you may be greeted with a smile. On the other hand if you present a bedraggled appearance and are classified as ordinary riff-raff you may be treated with perfunctory callousness. Indian model could do with a bit of standardization - though perhaps not a talking machine.

The Japanese way

The Japanese are of course, known for their high standards of manufacturing (Toyota recalls not withstanding) as well as service. The Japanese service combines the Chinese standardization, with an Indian customization and intimacy, without the class discrimination. While the service is still performed by humans, machines are used to monitor the level of the delivery. Computers and cameras check the level of curvature of the smiles of the service staff at the Keihin Electric Express Railway Company, to check if the smile is wide enough to infuse the customer with the required feeling of warmth.

Some may feel that the installation of smile scanners is a step too far. Nevertheless, both the Indian and the Chinese service models need to learn a great deal from the Japanese and I would strongly recommend that the Japanese smile scanners be installed at all airline counters in both India and China. But I fear that the Chinese solution may be to replace the current voice tape recording with a video recording, showing the smile of a machine monitored Japanese employee! And the Indian solution? May be the staff will only switch on the scanner when they do feel like smiling.

Written by Ashok Sethi

Tuesday, March 9, 2010

Who will replace the American consumer?

Vacancy for the top slot

Robert Zoellick the president of the World Bank is leading a global search for the replacement of the American consumer. The American consumer served the world well over the past decade. They bought in large quantities, extravagantly and indiscriminately. They bought regardless of where the product came from, what it did for them and whether they had place in the house to keep it – which led to their having to buy larger and larger houses to keep the things that they bought.

The workers in far off lands of China, India and Africa toiled away in Dickensian conditions to satiate the American consumer demand. They worked 12 hours a day in sweltering workshops, with no overtime or social security to provide affordable goods to American consumers, who in turn obliged by consuming prodigious quantities of them. However, it is felt that American consumer can not do an encore of this remarkable performance in the coming decade. A desperate need exists to find a replacement. Someone, who could continue to fuel the global growth that we benefited from in the last decade – or else the world faces a recession.

The Chinese candidacy

In a number of circles the name of the Chinese consumer is being whispered as a possible candidate this role. Can the Chinese consumer spin the same magic as the American consumer and keep us on the growth trajectory? The advocates for designating the Chinese consumer as the replacement of the American sustainers of world economy argued, that the fact that there are four times as many Chinese as Americans is a good starting point and makes the Chinese consumer a good potential candidate. “But they don’t even have one tenth of the purchasing power,” argued Robert Zoellick. “That money is required to make a purchase, is an old-fashioned concept and is has been clearly demolished by the American consumer,” argued the advocates. Anyway money is a nebulous concept, we have seen trillions go here and there and none is wiser as to why and where it went and how it seems to be re-appearing again. What we do know is that when it re-appears it does seem to gravitate to the bonus packages of the American bankers. In fact sometimes it reaches the banker even before it reaches the bank, which itself needs to be kept afloat by funding from the State.

The clinching argument came from those who triumphantly revealed that it was anyway the Chinese money that the Americans were spending. Hence it wasn’t really the American consumer but actually the Chinese consumer who was providing the growth to the world economy. The Chinese consumers toiled in sweatshops and gave a part of their hard-earned money to Americans who used it to buy the goods that the Chinese workers sweated to produce. So it all worked out quite well – Americans did what they did best and are known for, and the Chinese did what their culture and tradition guided, giving them satisfaction of following their values of hard work, thrift and moderation.

Then why bother to change? Change will mean that both Chinese and American consumers will need to go against their grain. Imagine embarrassed and flustered Chinese moving through the supermarket aisles and staring at large packs of frozen dumplings or dried beef that they know they will not be able to eat, or looking at toys for their only child who they know does not need any more. At the same time, American consumers having to change their perception of a bank to a place where they save their money than where they borrow money from (and take out sub-prime mortgages from), is also an uphill task. Given the current image of the banks and the federal bail-outs, how will American consumers have the heart to trust their own money with a bank? For decades they have been guided by a belief that it is better to have the bank’s money with them than have their money in the bank and it will not be easy to change this principle which has served them so well over the years..

Status quo

Still immersed in deep reflection, Rober Zoellick concluded,” The solution is status quo - and even more status for the Americans and more quo for the Chinese”. Let Chinese workers labor more and produce even cheaper and better goods for the American consumers. Let them lend more money to their American brethren so that they can continue to stuff their large houses with more toys, electric drills, synthetic carpets and dildos made by Chinese factories. Only the Americans have houses large enough to accommodate more shopping any way.

President Obama congratulating Ben Bernanke on being the Person of Year for the TIME magazine for 2009 said, “Ben, you do us proud. You have done well so far. If you need more money – go East, young man. Work closely with your runners up in TIME magazine – the unnamed Chinese worker – and you might just save the world.”

Written by Ashok Sethi

Thursday, January 28, 2010

Shoe for a shoe

Jail term for a pioneer

Wiser counsel seems to have prevailed. Muntadhar al-Zeidi, condemned for three years in Iraqi jail for throwing shoes at George Bush is out in six months They pronounced a three years sentence for a brave visionary who tried to change the world through innovative thinking! If we need to put Al-Zeidi, the Iraqi hero for flinging his shoes at George Bush behind bars, why not put all the marketing gurus and most of all Philip Kotler in jail, whose text book of marketing management clearly describes the marketing strategies of market expansion and product extension.

Saviour of soles

The shoe factories in Guangdong province of China were reeling under the impact of financial crisis. The anguished migrant workers losing their jobs and dreading the prospect of being reunited with their families in their rural abodes were desperate. “Stimulate domestic demand as a substitute for exports” cried out the venerable economists, eager to give advice and bring succor to the lives of the affected poor in export reliant countries. But can even the 1.3 billion Chinese consumers match the demand created by Americans, who on an average used to buy 30 pairs of shoes in a year!

It was a remarkable demonstration of the innovative thinking that the Guangdong Shoe Export Association hired Al-Zeidy to throw a pair of shoes at George Bush and demonstrate a new use for the product to boost its sagging demand. Imagine, if people started throwing shoes as well as wearing them? With millions of appropriate and deserving targets and billions of potential throwers, the factories can open their gates again and the workers can get back to the task of stitching the uppers to the soles. The Chinese government’s buy-in and support was secured, and the Prime Minister Wen Jia Bao himself volunteered to be the spokesman and a target for shoes in Cambridge University earlier this year.

A whole new world

Special shoes will be designed for bankers, made from sub-prime materials and leveraged at the heels. The politicians will get thick leather shoes to match the thickness of their own hides. The insurance companies will get shoes, the risk of wearing which will match the risk profile of the assets that they insured. We could even get rating agencies to rate the shoe in terms of aerodynamics, the speed and distance to which it can travel, and how much it will hurt when it will hurt the target.

The market could be segmented both by the thrower and the throwee – stilettos for the highbrow, the humble canvas shoe for the amateur, sneakers for the nimble, athletic types and budget shoes for those on a shoe-string. Shoes could be color coordinated for maximum impact – black shoes for Obama, white for Bush, brown for Manmohan Singh and yellow for Wen Jiabao.

Shoe for a shoe

The mind boggles at the opportunity, if the principle of “a tooth for a tooth and a nail for a nail” could be extended to “a shoe for a shoe”. The great leaders and the eminent public speakers, would then come to the meetings equipped with their own set of shoes, to fling them back at any miscreant who dares to throw one at them. Imagine public meetings, in which shoes are flying like rockets in each direction and every swing contributing to the rescue of shoe industry in Southern China, and ultimately to the rejuvenation of the global economy.

“Let me make it very clear,” president Obama said. “White House will not abandon the view that a shoe is a wearable accessory, whose primary role is protection and adornment of the feet. However, if it can find additional utility as a saviour of the global economy, I am sure Secretary Geitner will welcome it with open arms.”

In Dongguan in Guangdong province of China, as the shoe factory worker Lian Ping uses his chopsticks to voraciously swirl multiple strands of noodles from his bowl to his mouth, he can be rest assured that his next bowl of noodles or rice is not imperiled by the lack of demand of shoes in the world. He has to thank Al-Zeidy for this - who would not have spent six months in jail for nothing – he would have saved our soles.

Written by Ashok Sethi

Tuesday, January 12, 2010

What the current environment means for fine tuning marketing strategies in China

There is no time in China like today. On one side it is buffeted by the tsunami of global economic crisis, on the other side its consumer base is rapidly increasing in size and value. How can marketers make the best of this unique juncture in time and deploy the most effective strategies for establishing a firm position in China.

Presented below ten strategies that the marketers can consider to thrive in these times.

1. New strategies for new times

The changed economic conditions is affecting consumer behaviour and attitudes. Can the marketing strategies based on the understanding of the consumers in the prosperous times still hold water now. Consumers are changing their behaviour in several different ways and various underlying attitudes and values govern these changes. It is critical for us to re-look at the consumer and refresh our understanding to fine tune the marketing strategies.

2. Segment and decide

Not all the consumers react to the environmental changes in the same way. Different consumers have different reactions to the financial challenge – ranging from an extreme tightening of the purse-strings, to a nonchalant continuation of the current indulgences. Tightening may be reflected in different tangible and psychological ways. Manufacturers also need to offer a range of different solutions and propositions to meet these changes in behavior.

Additionally, different consumer segments may be affected to different extent – and growth may vary from segment to segment. In luxury goods, for example, connoisseurship and indulgence segments may grow more as compared to the pure status segment, as these consumers’ relationship with luxury segments is not only emotional but also very tangible.

3. Find new pastures

In these times, growth may be easier to come about through geographical expansion, than competitive fight in the current markets. The impact of the slowdown is more pronounced in larger cities – though the smaller towns and villages are also affected if they relied on export based industries. Hence while growth may be challenged in the larger cities, it may be a good time to set forth and explore new markets in county towns, townships and villages. These are the markets which are growing at a faster pace and offer greater return for investments.

4. Emphasize value – re look at your brand portfolio

It does not take rocket science to conclude that in these times the consumers will look for value. The challenge is to offer value without compromising the image. There are different strategies to deliver value – some are appropriate and some ill-advised – some will damage the brand equity permanently, some will keep the image intact but still help adjust to the times. Research shows that direct price reductions are likely to damage more than temporary discounts, and decreasing pack sizes more harmful that increasing pack size at the same price.

5. Look at your distribution channels

A strained economic situation not only changes the consumer, but also changes the shopper. Consumers are normally more attached to the brand than the retail store, hence their first choice is not to change the brand, but try to locate the same brand at a cheaper price at another store.

With more time at hand and greater incentive to economize, more consumers are likely to shop at hyper markets than the more ubiquitous but pricier supermarkets and convenience stores. The search for value and bargains will also turn the shoppers to internet shopping–the only channel that will grow even faster than hypermarkets

6. Help the consumer – teach her, train her, comfort and reassure her

Research indicates that Chinese consumers’ response to the economic challenge is cerebral. When opportunities are fewer and the competition more fierce the Chinese consumers will want to further enhance their skills and knowledge. Clearly it is very good news for companies teaching English or computer programming. But the opportunity is not confined to these firms – the FMCG industry could also take a more educative communication stance - wine makers could try to educate the consumers about appreciating fine wines, cosmetic companies could offer lessons on skin care and food companies could coach on diet and nutrition.

7. Family, home and security

When the going gets tough, the consumers tend to take comfort at home and in the arms of the loved ones. Recession is the ideal time to catch up with friends, take the children to the park and visit the parents, and in the process enjoy emotional warmth to compensate for the coldness of the economic climate. The children are likely to pay a heavy price for this, with parents having more time and inclination as well as a renewed determination to help their children with their studies. This offers opportunities to promote in-home consumption, rather than out of home consumption – which in many categories such as alcohol, is much more expensive.

8. Communication

It is not just the product but also the message which needs to reflect the current consumer mind. The communication messages of today needs to reflect sentiments of care and protection, rational and considered behaviour and performance and value These tones of communication, which always appealed to the Chinese consumers, are likely to find even greater resonance in these times.

9.. Go digital

For the largest internet population in the world, internet has so far been a tool of entertainment and information – less so a tool for commerce. However the initial barriers are being overcome and consumers are discovering the joys of internet shopping. The attributes consumer associate with internet shopping are variety, enables detailed evaluation and comparisons and competitive prices. These are the attributes the consumer will be looking in the times of economic slowdown.

10, Keep a permanent hand on the pulse of the consumer

These are dynamic times. Things are changing at a phenomenal pace. As a result, so is the consumer mood and sentiment, which will have an effect on her decision making and the brands and products that she buys. If marketers don’t feel her pulse all the time, they could go wrong. One can not just listen to the consumer once a year - marketers need to put their ears firmly on the ground and listen to every change of beat, every nuance of the consumer mood and continue to fine tune the strategy.,

Published in South China Morning Post, July 27, 2009
Written by Ashok Sethi, TNS China