Saturday, December 1, 2012

Half price for those with no "better half"

Singles' Day

One would have thought that Singles' Day would be a celebration of being single, when those who consider themselves lucky having escaped the clutches of matrimony, will revel with gusto and exchange congratulatory messages.  However in China, one of the few countries which has taken to the festival with enthusiasm, we see dating parties, mass marriage ceremonies and other activities designed to help the singles in losing their independence. Singles' Day seems to be treated as an occasion to attempt to rid oneself of one's single-hood and start dreaming of romantic togetherness, rather than a celebration of "single-hood". 

Online shopping extravaganza

While the significance that this day (which is celebrated every year on the 11th day of the 11th month) is debatable, the marketers have latched on to this and adopted it as a day when they will get rid of their inventories and persuade consumers to liberally open their purse strings.  During some other holidays also, most notably golden week holidays (or huangjinzhou ), we witness festooned shopping malls beckoning customers with enticing deals. Customers normally do not disappoint the marketers and reach liberally for their wallets during this period of biannual break (down to two a year from the earlier three, as May Day holiday is reduced to a single day celebration). Other festivals like Mother's Day or Father's Day also try to offer excuses for retail therapy. Singles' Day is a relative new addition to these hyper shopping festivals. The logic of why one should shop on Singles' Day is not clear (one can more easily understand why one would shop on Valentine's Day). Perhaps it is to console oneself, literally using shopping as a therapy for loneliness. Or to buy the latest fashion paraphernalia to prepare oneself for the mating ritual and try to win the attention of the opposite sex while dressed like a peacock. One needs these accessories as the game is becoming increasingly competitive, the gender imbalance in China means that there would be 24 million Chinese men who will be unable to secure a bride in the next 10 years. For these souls Singles' Day may become a life-long celebration (or lament), and "half price" at the retail shops a substitute of having a "better half".

With the unstoppable growth in popularity of online shopping, the e-commerce vendors are trying to create their own occasions for shopping. They seem to have successfully hijacked Singles' day shopping bonanza and clearly established it as a special occasion not just for any shopping buy specially for online shopping. This year it is estimated that 213 million of the 550 million internet users, took the opportunity to click a purchase on Singles' Day. Alibaba, the owner of the largest online platforms in China (Taobao and Tmall) claims to have offloaded merchandise worth a hefty 19.1 billion yuan on a single Singles' day. The secret of the success is attributed to generous discounting, with some products available for picking at half the regular price. 

Marketing opportunity

Is this shopping orgy, on a particular day of the year, with no natural connection to buying, a marketing success? Does it lead to sustained increased consumption, or merely an advancement of the purchase date, as is true with many other promotions? Does it really add value to the brands or the retailers in the long run? As with all promotions, marketers need to seek answers to these questions by carefully studying consumer behavior and attitudes. At the same time they need to worry about the potentially negative effect of heavy price-offs on brand image. In fact they need to explore how they can convert this occasion from a mere opportunity to offload their unsold goods, to an occasion to knit a bond with the consumers. According to the TIME magazine's "10 Ideas that are changing  your life", living alone is the new norm - 28% of all U.S. households are made up of people who live alone. With declining birth rate, delayed marriages and high divorce rate, the number of single member households in China is also on the increase. Marketers need to adopt a long-term strategy and look at the Singles' Day as an opportunity and occasion to win the affection and hearts of these singles in a more durable manner (after all they are still unattached and very likely to be open to a bit of love and wooing!) rather than merely a tactical opportunity to lighten their unsold inventory.

Written by Ashok Sethi
Regional Development Director – GfK Consumer Experiences, Asia Pacific

Friday, August 24, 2012

Importance of being "Foreign" -Global, local or glocal?

Multi-national companies in China often wonder the extent to which they should emphasize their foreign origin to the consumers as against demonstrating roots and strength in the local market.  In general it is true that in China, as in many other developing countries, products of international origin command a certain degree of respect and are often favored over their domestic rivals. The reasons for this are not difficult to fathom - including frequent disastrous experiences that consumers have had with some miscreant local players. However, given the ascending star of China on the global stage and the emergence of a strong streak of national pride, one could also be forgiven to assume that emphasizing local roots is of paramount importance.

Like many marketing riddles in developing markets, this is a complex question and the answer depends upon many factors. First of these factors is whether the product category in question is a premium product or an inexpensive product of daily use. At one end of the spectrum are luxury product categories.  In these categories, only international brands have been able to register their prowess with the consumers so far. Consumers use such products for their exclusivity, as status symbols and as markers of success in their climb up the ladder of success. Brands are valued for their high quality, craftsmanship and heritage. Brands are often strongly associated with a country and derive their image from the perception of the country (as in case of Luxury automobiles from Germany, a country known for its craftsmanship and engineering skills, or perfumes from France, associated with romance and chic)  Clearly establishing your international origin is of critical importance in this category. Such brands normally do not need to (in fact are not advised to) adopt their core offer and brand essence  to the local markets.

At the other end of the spectrum are daily use products whose usage is in the private space. Whether you use an expensive premium product or a cheap one, may have a significant effect on how well does your bathroom floor shine, but not in terms of how are you seen by your friends and compatriots. The consumer choice of such products is based on price and basic functionality, and consumers show little concern about the origin or provenance of the brand. In fact, often the consumers are not able to correctly classify such fast moving consumer goods as local or foreign. In a research among consumers in second tier cities of China, many consumers mentioned Johnson & Johnson as coming from Shanghai!

For products which fall somewhere in between the continuum of luxury and pedestrian, the issue is a bit more involved and establishing the international origin can be a plus though not necessarily so. While being foreign may be associated with better quality, being nimble and having a strong pulse of the market and the consumers can be even more important. Marketers have to carefully decide the relative emphasis they need to place on their international origin and local roots. One important guiding factor is the specific product category. For high technology products, consumer experience suggests that international brands bring in a quality and panache that local brands struggle to achieve. On the other hand for some categories such as skin-care or apparel, understanding of local tastes and preferences can act as a plus. In this middle territory, local brands often try to disguise themselves as international ones by choosing names such as Metersbonwe ( a popular apparel brand in China) with varying degrees of success. 

The third factor guiding the brand's strategy is specific to the brand. For brands like Coca Cola and Nike, which through clever and consistent marketing investments, have built a unique narrative and aura for themselves, which has stood the test of time as well the test of geographical diversity, it makes sense to exploit their universal value in all markets. For other brands, which though still international, lack that strong narrative, localisation and ammasing local strength may be a more logical choice. Even when such brands choose to retain their global aura and persona, localization of communication themes and styles is necessary - absence of which often leads to alienation.    

Lastly, while such preferences and attitudes do determine the importance of being "foreign", certain events can suddenly change the equation. The most notable of which has been the milk contamination scandal, which drove mothers to imported milk powder to ensure the safety of their children. In a short period of time, the share of imported milk powders rose to unimaginable levels. International marketers need to be on the look out for such sudden "change of wind", which can make their provenance and heritage more valued by the consumers.

Written by Ashok Sethi

Thursday, May 10, 2012

The case of the fraudulent frauleins

Financial fraud is becoming more salient in China. Interestingly, of late, we have witnessed a number of "fraudster frauleins" – a few women entrepreneurs who scooted (or tried unsuccessfully to scoot) after relieving a number of gullible lenders of rather large sums of money. Ms. Zhang Hong, boss of a medical devices company in Nanjing in Jiangsu province, went missing with her son a few weeks ago. Along with her went a sum of RMB 500 million which she owes to several hundred private lenders. In another case of the "most beautiful boss", Ms. Gu Chunfang was apprehended in Shanghai, having earlier tried to make herself scarce with an equally large sum of money. While the temptation for these skilful and attractive operators is strong, the punishment in China is disproportionately severe. Ms. Wu Ying, another comely entrepreneur from neighbouring Zhejiang Province, is facing a death sentence for crimes involving similar fund raising.

In China it is not easy for small and medium enterprises to borrow from banks to finance their operations. Most banks are state-owned and they tend to favour lending to state-owned enterprises. On the other hand, China's large body of savers are finding it difficult to find attractive returns, as interest rates are low, the stock market has been sluggish, and the property market is on a strong leash. The lure of double-digit returns through private lending, therefore, is not insignificant. Hence there is a healthy demand as well as supply for private lending.

The effect of pulchritude on human emotions and behaviour is a complex subject. Daniel Hamermesh, an economist at the University of Texas, has been frequently writing about “pulchronomics” or the linkage of looks and economics. In a recent book called “Beauty Pays” he professes that, over a lifetime, a good looking worker in America might on average make $230,000 (in terms of today’s wages) more than a relatively plain one.   Beauty generates the confidence of competence and trust. Research has shown looks of the candidates play a significant role in voters’ choice. And  given the number of cases of fraudulent frauleins in China, one can possibly at least raise the hypothesis that Chinese men of substance find themselves reaching more readily for their wallets when confronted with a woman of grace.

In the meanwhile the Supreme People’s Court of China has overturned the death sentence for Wu Ying and ordered a retrial. It is not known whether the defendant’s good looks and youth were a part of the factors which led the judges to overrule the severe punishment.  But research does show that good looking offenders do get away with lighter punishments.

Friday, March 16, 2012


China found another hero in Jeremy Lin, whose success gave birth to a new word "Linsanity". The lightning and stratospheric ascent of Jeremy Lin in popularity among the Chinese seems to suggest that they are rather desperately in search of heroes and ready to overlook minor details of origin and political belief (Jeremy Lin is a Christian with his origins in Taiwan) in their embrace of such icons.

The psychology of this quest for heroes possibly lies in the Chinese desire for celebration of their achievements as well as international recognition of their success. While China is continuously adding to its list of achievements domestically, international recognition is often not forthcoming or comes begrudgingly. Even if recognition is accorded, it comes with a spectre of Chinese dominance. While Western nations refuse to applaud China's achievements, Western brands need to make sure that they do so – or else they will lose the opportunity for emotional connection with the Chinese.

While national or clannish identification definitely leads to hero worship, the developing countries like China and India reward  another characteristic in selection of their heroes – which is the quality of being underdog, who wins accolades against all odds, fighting and valiantly overcoming the hurdles and barriers which came in his way. On the face of it Harvard educated Jeremy Lin is hardly an underdog – a privileged Asian kid form an Ivy league university. However these are the precise characteristics, which make him an underdog in the world of NBA – which rewards not Ivy league education but towering body height and impressive physique – something which one would not associate easily with Jermey Lin and which perhaps does enhance the value of his accomplishments as seen by his large fan base in China.

Ashok Sethi