The mind organizes and categorizes everything it sees. It’s a necessary mechanism to efficiently store information – Chess is a board game; a Macbook Pro is a computer. This mental shorthand helps make sense of our surroundings. But when looking at a population that’s larger than Europe and North America combined, how can we best collate China’s markets into more digestible, consistent segments?
The brightest minds have adopted a mind-boggling array of methods for slicing up this massive economy in order to better manage its size. East versus West, South versus North, coastal versus hinterland, rural versus urban, Tier-1 and -2 versus Tier-3 and -4, southern dialects versus Mandarin… the list goes on.
Thomas Talhelm from the University of Virginia’s offered a ‘rice theory’, which divides China based on how crops were historically grown. Rice farming, prevalent in the south, needs a great deal of work, planning and co-operation. But traditional wheat farming from the north requires less of all three. The upshot is southerners tend to be more collectivistic in their thinking, whereas northerners may be more independent. The insight could put a different spin on regional marketing approaches or even product development. The idea sounds almost like a Malcolm Gladwell theory and divvying up China this way can be quite persuasive. But as with any type of broad categorization, it has limitations and we need to take this regional collating with a grain of salt.
A few years ago, McKinsey also made an attempt with one of the most detailed breakdowns ever put to paper. It grouped China into 22 “city clusters” and while complex it had some caveats. Companies that are highly media-market driven may wish to “split the Shanghai cluster into sub-clusters,” as TV viewing habits can differ within this ‘mega-cluster.’ People from the Chengdu or Guangzhou clusters, however, watch similar TV shows, so they don’t need to be split.
However, China’s media markets are in constant flux, and this partitioning method is just as susceptible to armchair quarterbacking as any other. Anyone with some local familiarity will find things to nitpick -is Shijiazhuang really all that similar to Beijing? Or does slpitting Guangzhou and Shenzhen into separate mega-clusters overplay their differences? Nor does the method address the urban-rural divide or the fact that a great number of migrants drift between city clusters. But McKinsey doesn’t claim its map is for everyone.
Still, general consensus holds that China has over 600 media markets, which means that slotting them into groups is a formidable task. Numerous strategic consultants and academic institutions have put a great amount of effort into it, but as the two map approaches show, complexities can build on complexities. So how can we really make an informed decision about localization and media strategies with so many factors in play?
There may be another way to look at China. Recently, Havas Media conducted a study of almost 4,000 people in nearly 50 lower-tier cities (mainly Tier-3 to -5) to better understand consumers media consumption habits. Initially, we tried to group the findings for cities into geographical clusters as well…. an approach that fell apart quickly. Behaviour often varies within geographies: for instance, Guangzhou Province’s Zhaoqing and Qingyuan, about a two hour’s drive between them, both showed different audience preferences for media consumption. Radio, it seemed, was still the most effective way to reach Zhaoqing residents, while Qingyuan dwellers were more receptive to newspapers and billboards. Local television seemed to work best in Yangzhou, while the neighbouring cities of Xuzhou, Zhenjiang and Taizhou seemed to prefer street advertising.
So how do we make sense of it? First of all, as explained, we found no quick and easy way to divide China on any given map in a manner that provided us with actionable insights. We did discover, however, that cities could be set apart in a way that didn’t necessarily fall into border-to-border contiguous regions. We observed similarities in cities that had shared certain characteristics, such as population, density, number of central business districts, dialect variety and possibly, distance from the provincial capital. Also, based on the results of our media consumption survey, we found cities with specific characteristics relating to population and nature-of-business districts, were more receptive to certain types of out-of-home advertising than others. Also, in cities with specific population density and income characteristics, other types of out-of-home formats were more effective, and so on.
And contrary to what we mentioned earlier, another set of cities did show signs of regional clustering—as almost all were located in the southern Guangdong province, and were home to populations that spoke multiple local dialects. These southern urbanites tended to be more receptive to text advertising, particularly from newspapers.
This level of detail, against a backdrop of extensive choices and rising media costs, offers value to advertisers in a real commercial sense, particularly when companies are seeking proof points on media-investment effectiveness. But without intensive in-depth groundwork, can brands really communicate their messages effectively to lower-tier markets?
There are limits to the categorization that we can impose on China and still trust that it can hold water for the foreseeable future. We could also extrapolate these findings to a larger set of cities, but knowing the complexity and cultural richness of China, findings can be contextually challenged and will often need clear validation. Chasing multiple constantly shifting markets requires a cost-prohibitive outlay of resources in on-the-ground fieldwork, and may be a futile effort over the long term.
But perhaps we should question the previously held notion that the landscape is shifting towards increasing media localization. To paraphrase the famed hockey player, Wayne Gretzky: brands should move “to where the puck is going to be, not where it’s been.”
The good news is our study shows the market moving in ways that brands lacking in limitless resources can still achieve effective reach in lower tier markets. What is universal to all these cities is online and mobile-media consumption is growing and increasingly prominent as a segment. More and more lower-tier consumers are going digital.
This has been validated by multiple studies in the past few years. We found, in a late 2013 Travelling Planner ethnographic study that consumers in Weifang (a third tier city in Shangdong) were clearly digitally oriented. We followed the media consumption of three single mothers and found, with lives revolving around their children, the three faced days of repetitious tasks and general tedium. Only smartphones (shopping or surfing the internet) could break the monotony. Younger Weifang girls we interviewed were even more digitally savvy.
So brands may not be doing everything they can to engage these very digital consumers. A recent Havas study, The Chinese luxury Journey, revealed that high-end brands do not do enough to leverage owned social media channels, including official Weibo pages, to raise brand awareness.
Amy Chen, Director of Social Innovation and Digital Marketing at Lenovo Mobile BG, credits this to constraints arising from the rapidly growing demand for digital talent: “Many brands are quite zealous about embracing social media,” says Chen. “This is made clear by the tight talent market, where many advertisers recruit aggressively for social or e-commerce positions. But because the talent demand exceeds supply by such a large degree, social media is left underutilized.” Our luxury study still showed that social media, despite underutilization, was highly influential in the consumer path to purchase. So imagine how much more could be achieved.
“With a specific target audience in mind, brands can collect first-hand information through social media to better understand the behavior of their target consumers,” says Chen. “It’s very important to speak their language and deliver messages at the right time.” She cites a recent story of online crayfish (freshwater lobster) vendors who performed incredibly well during the World Cup. Grabbing a chance to feed hungry soccer fans who gather to watch overnight matches with friends, these vendors produced real-time social content with appetizing crayfish images on Weibo at strategic times throughout the night. They would then take orders on WeChat or over the phone, maintaining their delivery service well into the morning. Like the Jet of the past century, digital technology has made China much smaller, but the playground has become exponentially larger.
Two tools are expanding marketers’ capability to zoom in and sell to lower-tier target consumers. One is e-commerce (and m-commerce), which is well known and already entrenched in China. It will only become more viable with continuing logistics, infrastructure and payment development in the lower tier. For example, Tencent’s Tenpay has integrated with mobile chat app WeChat to allow consumers easier access to e-payment services. Social commerce and a proliferation of cheap Android devices have given retailers a fast-track way to test local markets and find quick acceptability for a given product. Xiaomi, for instance, managed to clear 150,000 Mi3 smartphones in less than 10 minutes using WeChat.
The second tool is the growth of programmatic buying, which allows ad buyers to hone in and sell to audiences in target regions much more accurately and efficiently than before. With programmatic and demand-side platforms, tracking tools have also become increasingly sophisticated, with insights that were once theoretical —such as the cost of customer acquisition, value of each acquisition and projected lifetime value— becoming more of a reality. It’s increasingly viable for smaller brands to sell and communicate through lower-tier regions, completely on digital channels.
China’s 600-plus markets can be a bewildering maze and the best minds have strained admirably to find common maps to help navigate it. But all the breakdown and mapping may not be needed when you can target consumer behaviors directly rather than by deduction. China’s improving e-commerce infrastructure, along with acceptance and growth of programmatic buying and other digital communications, means the day is fast approaching when a mobile device held in the palm of the hand will be clearly acknowledged as the quickest, most cost-effective and straightest route to the hearts and minds of lower-tier city consumers.
Herman Cheng is marketing and PR manager and Vineet Arora is MD for Arena (Havas Media) China.