Jenny Chan 陳詠欣
Nov 14, 2016

Chinese consumers power an innovation engine

CHINA INNOVATION 2016: China’s innovations in business models translate to imaginative marketing, enabled by novelty-craving consumers who are keen to experiment.

Chinese consumers power an innovation engine

The most fascinating part of marketing in China has always been the rise and evolution of fresh business models to solve consumer problems. 

From direct online purchases of overseas goods (known as haitao), to peer-to-peer mobile payments via digital hongbao; to online-to-offline commerce, or O2O (an acronym deemed peculiar when initially coined), to the hectic rise of live-streaming and virtual gifting on zhibo sites — brands have hopped on for the ride.

In fact, Alibaba has combined all of the above for its mammoth Singles Day online sales bonanza. The lead-up to the 11 November shopping festival — expanded this year to last 24 days rather than hours — included a live-streamed eight-hour fashion show, an end-to-end virtual reality shopping journey, and offline QR codes that link to online-only products.

China’s business models, novel in themselves, have automatically become communications channels opening up new avenues for marketers, says Philip Hwang, associate director of strategy at Brandimage China.

He puts this partly down to a societal craving to express individuality and reach out to the wider world. Live-streaming ads, for example, would “never happen” in any other country that values privacy. “There is no sense of privacy here in China. It’s more of a ‘let’s just kick down the doors and let’s just do it’ attitude,” he says. 

See all of our annual CHINA INNOVATION features

Props to marketers? No, props actually to Chinese consumers, who enable marketing innovation by being willing to accept imperfect product or service iterations, then giving feedback to brands for rapid refinement. Domestic household appliance, smartphone and internet brands, highlights a McKinsey report, are outperforming others as they have learned to read consumer minds — fast.

“The key word for China is speed,” says Hwang, adding that business models in the West don’t evolve as quickly, providing less leeway for marketing.

It’s fun in China

“Nothing is useless for marketers in China,” says Hwang, not even a robot dog or a mobile phone shaped like a robot (see below)— both of which were exhibited at this year’s CES Asia. “The product doesn’t have to be functional because as long as it’s fun, Chinese people will talk about it and share it.”

This pursuit of fun has seen entertainment marketing explode in a unique way in China, where intellectual property from mainstream movies can extend out to brands, points out Chris Chen, CEO & ECD at Trio Isobar. 

DreamWorks, for instance, allowed Master Kong to create a “branded character” called Master Rabbit in a spinoff production of the movie Kungfu Panda 3, as well as use Kungfu Panda assets to market its instant noodles.

And watch Frank Underwood — aka Kevin Spacey — tell Chinese shoppers to buy “burner phones” and “presidential M&Ms” in a somehwat offbeat plug for Singles Day last year, and you realise how show business is a fixture of consumption in China.

The latest and greatest

Chinese consumers crave and expect novelty, such that a Forrester report calls 57 percent of metropolitan adults “progressive pioneers”, who lead the demand for both product and experience innovation. 

In Edelman’s 2015 study, Innovation and the earned brand, Chinese consumers called for more innovation to come from traditional industries such as energy, healthcare, food and beverage, and education.

On the flipside, they complained that the pace of innovation from technology and mobile brands was “too fast” and questioned their motives. They feel like these brands are “shouting at them” with more than half (52 percent) being bored or frustrated by constant reminders to upgrade and update. Two in three Chinese consumers also believe brands are simply innovating to keep profits high, according to the study. “[The brands] may be innovating, but they are failing as marketers and not moving in the right direction in how they communicate,” elaborate the authors.  

Three’s a crowd

No one has applied innovation better than China’s infamous BAT of Baidu, Alibaba and Tencent. 

At Tencent’s WeChat, innovation stems from the “intense integration and hyper customer experience all within one app”, says Darren Burns, China president and Asia-Pacific chair of innovation and creativity, Weber Shandwick.

WeChat Pay, along with Alibaba’s Alipay, is creating a cashless society where anything from gold futures to fried rice can be paid for. For marketers, this removes countless barriers to purchase, says Ernest Tan, Edelman China’s national consumer chair.

Yet this seemingly unassailable trio has developed a wobbly leg. The B in BAT has “gone off the tracks”, according to Vineet Arora, managing director of Havas Media China. Search giant Baidu has gone from having the largest share of digital ad revenues of “any company in China” last year, according to eMarketer, to being hit by negative press and regulatory punishment over ambiguity between its paid ads and organic searches. 

Arora tips LeEco — a brand that weaves together UHD TVs, phones, cars, bikes and films in hope of seamless marketing — as a strong contender to take Baidu’s place on the podium, given its forward-facing and strong O2O strategy, a lynchpin of Chinese marketing.

Baidu’s fall from grace highlights the key challenge for brand marketers in China: how to stay innovative and sustain consumer desire and standing over time.

How to stay innovative

Sustaining consumer desire and standing the test of time—that is real marketing innovation, says Raymond Ye, vice president of marketing for China at Shangri-la Hotels and Resorts.

“It will be sustainable when we think about how our brand can truly matter. It’s almost like building a walled garden around our consumers with this focus,” he says.

Ye likes to think that Shangri-la’s Golden Circle program is innovative in terms of loyalty marketing, as customers can redeem points in an easier way and also receive tangible benefits faster than other programs.

Innovation often involves injecting convenience and ease in large doses, but Ye advises not to stop there, especially when a brand’s customer base is getting more diverse and younger by day. “It means you have to start from new ground, often”.

A couple of years ago, Xiaomi was lauded as the textbook example of marketing innovation, but even it is going back to old–school ways after studying its competitors. Going through a difficult time, beaten down by Huawei, Oppo and Vivo, Xiaomi started new ground by opening offline stores, a first for the brand.

One of the issues holding back wider innovation is the level of marketing education that professionals, both Chinese and international, receive, says Jerry Clode, head of digital and social insight at Resonance China.

“A fundamental tenet of marketing are the concepts of positioning and differentiation, however this is not sufficiently understood by many practitioners, and result in an impulse to copy predominant practices,” he says. 

This is particularly evident in digital marketing, where the idea of "trending topics” drowns out any sense of a brand’s voice, Clode adds.

When it comes to brand marketing, it’s not always obvious what to preserve and what to change.

Fei Wei, chief creative officer of FCB Greater China, proposes a way to innovate: first identify the untouchable or sacred part of your brand; everything on top of it is flexible.

Next, have a “never finish” attitude, he recommends. “Be quick to embrace stuff you didn’t think of initially, then continuously improve based on newer knowledge you obtain everyday. Never think your work is ‘finished’.”

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