S.Y. Lau, president at Tencent Online Media Group, senior executive vice president at Tencent Holdings, which owns WeChat, on how he is “planning for the digital awakening” – from the challenges of scale to the enormous opportunities facing Chinese brands and international brands targeting China:
China’s rise to become the world’s largest economy is no longer a question of “if”, but one of “when.”
With more smart phone and internet users than any other country in the world and a booming digital eco-system, China is leading a digital revolution. Services like WeChat are now moving outside of the Chinese national audience and into international markets.
Thinking about scale in China
“Getting heard in this environment requires more creativity and understanding of the Chinese audience” (S.Y. Lau, president at Tencent Online Media Group)
For marketers, the question has been: “How do we market into China?” This meant understanding how online and internet culture was changing buyer behavior in the country. How ready are we as marketers for the awakening of the world’s second largest consumption-driven economy? How does China’s size and scale impact the digital behaviors of the entire population there? The investment made in the Chinese internet infrastructure and wireless connectivity has been huge over the past few years. This has now seen significant results. According to the China Internet Network Information Center the country now has more than 618m internet users across the country, while 500m users access internet services via mobile devices – this represents around 80% of all internet users. This is almost 10% growth over the past year.
The digital sector will also contribute more and more to China’s overall GDP. According to Boston Consulting Group, the digital economy will be responsible for 6.9 % of the national GDP by 2016. Only the UK and South Korea will see greater contribution from digital to their respective country’s GDP. The digital economy is comprised of a combination of many different types of business, evolving rapidly and radically with the development of the internet. In China, it is made up mainly of online advertising, gaming, ecommerce, e-payment, and newly emerging services that are closely intertwined with the off-line business world. The rapid growth of China’s internet audience drives this range of services, as well as encouraging entrepreneurs and experimentation. This makes it increasingly competitive to get attention: social networking and news apps compete for time with video, music and shopping services. Getting heard in this environment requires more creativity and understanding of the Chinese audience.
Social, sales and awareness
The growth of WeChat goes alongside this increasing range of services that are available to mobile internet users. It has seen more opportunity for marketers to develop both their creativity and their ability to demonstrate return on investment. As an example, the addition of payments support into WeChat means that brands can take advantage of opportunities to interact with customers from initial interest through to purchase, if that is what customers want. This does not have to be limited to small, commodity purchases either.
Mercedez-Benz on WeChat
“Some 338 Smart cars were sold within three minutes of the purchase option being made available – a staggering return on investment for Mercedes-Benz” (S.Y. Lau, president at Tencent Online Media Group)
Tencent conducted a campaign with Mercedes-Benz around their Smart car line. A limited edition version was made available only through WeChat. More than 600,000 users followed the launch, while 6,677 qualified sales leads were generated. More than 1,751 people paid a deposit on a Smart car through the app itself. Most impressively, 338 Smart cars were sold within three minutes of the purchase option being made available. This represented a staggering return on investment for Mercedes-Benz, while it also showcased how flexible WeChat could be in delivering marketing campaigns.
At the same time, this campaign demonstrates that using social as a channel has to be based on getting the entire customer journey right. The brand and offering have to provide a great fit with the customer’s experience and expectations. Without this fit being right, marketing campaigns will not provide the appropriate response and return on investment. By listening to their customers, brands and marketers can judge whether it is right to use social as a full sales conversion tool, or for its ability to raise awareness and push potential customers to other marketing content.
China’s future impact on international marketing – not the other way around
The growth of China as a market has meant that more brands have increased their investment in marketing in the country. However, this approach is not the only area that marketers have to consider. As tools like WeChat have grown internationally, marketers will have to consider how these Chinese services may have a global impact on marketing strategy as well. As more companies look to understand their offline-to-online (OTO) strategies, the ability to manage that transition becomes more important.
“Brands will have to fully understand how those digital advances in China may disrupt traditional marketing approaches around the world as well” (S.Y. Lau, president at Tencent Online Media Group)
WeChat is designed to provide that OTO point of control, bringing together how individuals interact with each other but also how they consume brand advertising and new services. Brands will have to fully understand how those digital advances in China may disrupt traditional marketing approaches around the world as well. The growth of Asian social networks will ultimately lead to new marketing campaigns that take on the same approach that Chinese companies have been using successfully. This is founded on three key themes: the speed of digital sector growth, the competition in the market, and the requirement for OTO integration.
Surpassing the West
Though China got off to a late start, internet take-up in China has surpassed the West, particularly around mobile. Mobile internet in China currently accounts for nearly 90% of the total internet population; in the US, it is about 60%. At the same time, mobile is also becoming a chosen channel for ecommerce more rapidly, too. Over 70% of Chinese mobile internet users have used m-commerce compared to about 31% in the USA.
“The internet acts as a leveler which mitigates the uneven regional developments in this huge country” (S.Y. Lau, president at Tencent Online Media Group)
Last year, the top three internet companies in the USA accounted for 20% of the total market value. In China, the top three companies only take 5% of the total market value. This leaves plenty of room for smaller enterprises and new entrants. The infusion of fresh and small companies is a common theme, and this entrepreneurial environment is a healthy one to foster new business types and to accelerate development. OTO is becoming increasingly important for Chinese-style internet development. I’ve asked myself why are offline businesses in China integrating so quickly with the digital world? Because the internet acts as a leveler which mitigates the uneven regional developments in this huge country.
Through the internet, people in all cities can buy the same products, enjoy the same discounts, get to know the latest fashion, and live the way that people in the first-tier cities do, given that there are only three first-tier cities in China: Beijing, Shanghai, and Guangzhou. Ten years ago, 40% of the spending power of the middle class in China would reside simply in these tier-one cities. But right now, this percentage is reduced down to less than 20%. Within the next decade, 75% of the middle class in China will come from the third-tier and fourth-tier cities. The effect of this is largely driven by urbanisation and online consumption in the rural areas. Online consumption in third- and fourth-tier cities increased by more than 100% during the last year, while in first- and second-tier cities, it was less than 30%.
Leading from the marketing department
These changes in the market are affecting how marketers build and run their campaigns. This idea of being “customer-centric” is attracting more interest – indeed, which marketer would state that their company did not listen to their customers? However, it has to be embedded into how a company approaches its operations.
Marketers will have to take on even more of a leadership role within their companies, wherever they are based and whatever industry they work in. As consumers have more data available to them and more options on how they spend their time and money, so marketers will have to work in smarter ways to earn their attention. Marketing professionals can provide essential leadership to their companies, ensuring that their organisations stay focused on the needs of their customers.
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Article: Marketing Magazine