Your MBA Marketing Class and Chinese Consumers
February 6th, 2008
A hat tip to Dan Harris and the China Law Blog for this lead ….
Here is a really, really interesting power point presentation by advertising giant Ogilvy on consumers in China’s Tier II and III cities. Some great stuff in here that will relate to what you are studying or will study in your MBA marketing class this winter quarter (e.g., branding, market segmentation, packaging, impulse buying, distribution channels, price sensitivity, who makes the family buying decisions, etc. anyone?). This material also highlights why so many foreign firms are trying to get into the market there — the consumer class and their spending power in these lower tier cities are on the upswing. This presentation is worth spending a few minutes to click through and study. Doing so, via this compare and contrast measure, also helped me better understand the marketing of products here in the US. Once in China, as you walk in and out of stores, and as you bus from A to B and look out the window, you need to think back to this material and connect some of the dots as related to your coursework ….
Entry Filed under: Pre-Departure, Beijing, Shanghai, Shenzhen, China, Guangzhou, Hangzhou, Hong Kong, Macau, Misc., Post Trip Wrap-Up re: China
7 Comments Add your own
1. Gary Chou | February 6th, 2008 at 11:35 pm
Language Translation:
Slide 36: The son when asked who that character on his t-shirt is, answered, “I don’t know.” (It was Mickey Mouse.)
Cultural Translation:
Slide 21: Consumer Attitude - Risk
Substantial number are willing to take risks. Examples:
-Nude Models on Billboard
-My daughter is learning dance.
American most likely won’t understand the “risk” implied here. Basically there are people who are willing to pose for underwear advertisement is a sign of people opening up their minds and become more willing to take risk. (Chinese are very conservative!)
As for the “learning dance” thing, basically success of a child is defined by medical school or engineering. Anything deviated from that, especially performing art and music is considered “low.” It’s considered selling one’s physical body instead of intelligence. On the other hand, art and music as part time are very popular, it displays (to other people) 1. our family has money to pay for such training and 2. our family has more culture than you.
In conclusion, parents invested large portion of wealth into their kids hoping to live through them. They want their kids to be well versed in art and music but God forbids them to become artist or musicians. They must be doctors and engineers.
2. Gary Chou | February 6th, 2008 at 11:42 pm
Sorry I am getting off-topic here (too emotionally attached to this part of my culture). (This was the reason I was afraid to commit too much to this blog last quarter, because I knew I would get very emotional.)
So speaking of learning dance for a girl, one would ask, “how about all those Olympic athletes China seems to pop uo by the dozens?” Most people probably don’t know how brutal, un-humane and and out-right gross the way China cultivate, or shall I say, breed, its athletes?
Why do you think Yao Ming’s parents are both so tall? Did they happen to meet and fall in love? No, they were, like all other specially talented people, sent to dorm and trained since age of 3, 24/7, for the sole purpose of becoming world class athletes or breed even more extraordinary people.
Most of them will fail, from disqualification or permanent injuries, and their stories will never be heard, as their lives would be ruined and possessed no other training or skill.
Only few of them would shine, and gain popularity, then they had to face politics, power struggle, and fear of being punished/sent away.
You can read about the story of Yao Ming’s parents from Time’s cover story here:
http://www.time.com/time/asia/covers/501051114/story.html
It’s truly heart wrenching.
Just a short excerpt:
“News of Yao Ming’s birth was quickly relayed across town to the top leaders of the Shanghai Sports Commission. They were not surprised. These men and women had been trying to cultivate a new generation of athletes who would embody the rising power of China. The boy in the maternity ward represented, in many ways, the culmination of their plan.
The experiment had no code name, but in Shanghai basketball circles it might as well have been called Operation Yao Ming. The wheels had been set in motion more than a quarter-century earlier, when Chairman Mao Zedong exhorted his followers to funnel the nation’s most genetically gifted youngsters into the emerging communist sports machine. Two generations of Yao Ming’s forebears had been singled out by authorities for their hulking physiques, and his mother and father had both been drafted into the sports system. “We had been looking forward to the arrival of Yao Ming for three generations,” says Wang Chongguang, a retired Shanghai coach who played with Yao’s father in the 1970s and would coach Yao himself in the ’90s. “That’s why I thought his name should be Yao Panpan.” Long-Awaited Yao. “
3. Joan Lindsey-Mullikin | December 16th, 2008 at 8:05 pm
The PowerPoint on Chinese Consumer Behavior is very interesting. Thank you. That is exactly what we will be doing in our Consumer Behavior Segment. We will be looking at the U.S. Market and how it it can be studied by subcultures, demographics, social class, and groups (families, households, etc.). We will definitely have to consider this presentation at that time. I look forward to it.
4. Raquel Rusing | February 5th, 2009 at 7:06 pm
I was fixated on slide number 22, about China’s debt-averse population and how that contributes to its high rate of savings because I am appalled by the second by second rise of our nation’s debt. And not only that, but also by how many Americans are accumulating personal debt unnecessarily.
Marty brought my attention to a documentary called I.O.U.S.A. because he wanted to show a screening of it to the GSBA. I researched the movie and found a 30 minute summarized video clip.
To take a moment of advertisement, we have the full movie and will have a screening for it on Wednesday February 25. Check your email for updates as they come.
The documentary stresses how our current standard of living is unsustainable because we rely too heavily on credit. I was interested in how this relates to China and an article in the NY Times (China Losing Taste for Debt from US) discusses the role China plays in our debt: apparently they buy it. Why would China want to do this?
Summarizing from The Washington Post:
China became the largest foreign creditor to the U.S. in November 2008. Because of this, China has great influence over the American economy. Should China choose to stop buying U.S. debt, it would cease one of the largest in-flows of capital into the country, making it harder for businesses to obtain loans and raising interest rates and commodity prices for consumers. If China were to begin selling U.S. debt –essentially cashing in its government bonds — it would actually remove money from the U.S. economy, creating an even more dire situation.
Another issue is the disparity between the currencies. In the global economy, the dollar has much more buying power than the yuan (China’s denomination). This makes U.S. goods more expensive to export to foreign nations than Chinese goods. As such, China’s prices for manufactured goods are far more competitive than those of the U.S.
Does China hold our fate?
5. Raquel Rusing | February 5th, 2009 at 7:12 pm
My usual computer saaviness has failed me. Here are the hyperlinks:
I.O.U.S.A.
Summarized Video Clips
China Losing Taste for Debt from US
The Washington Post
At some point I’ll stop commenting on this one… haha.
6. Lonnie B Hodge | February 22nd, 2009 at 6:54 am
Gary, thanks for spot on remarks and clarification. This is recommendation season for colleges and I have been inundated with requests. Most of my graduating students know what they want to do, but few will defy their folks. The most artistic among my Ivy League leaders here will sadly end up in finance or business instead of what they love.
There is not enough room here to post all that I thought and felt as I went through the presentation; hence, I feel a long blog post coming on….I will let you know…
My former dean at SYSU did a brand study for Ali Baba a few years ago and found that brands ARE incredible important here, but only when it comes to products that will be seen in public. Anything else is bought solely based on cost and perceived quality for the money spent: Chinese will buy goods from Japan or Korea before Vietnam or China as they see them as more durable.
I do not think country folks are more propaganda prone (in fact quite the opposite considering there are 18,000 public demonstrations against the government in rural communities each year) rather rural folks have to depend on actual, versus Internet, Word of Mouth for product info. and that info comes from sales people who are held accountable for the merchandise sold. Chinese people want recourse when they buy something of high value. The comment I am referencing, whether you meant it to be so, came off sounding a bit Xenophobic and is too easy an answer. I reported, via social media networks, the happenings in Gansu and Xinjiang during the Olympics and can assure you that rural folks are the ones who make central government quiver and baffle the insulated academics and corporate suits in Beijing.
Since I do consulting for S&P’s team with managers of funds that can singlely influence a stock’s value I am vigilant about spending as much time talking to company chiefs as I am about data mining the bulletin boards, polling students and bringing on interns from Tier I, II and III communities.
Look again at the sampling for the study: 20 in depth interviews with families and experts. That means they missed a lot of provinces. And 530 exit interviews I am guessing could not/did not encompass statistically relevant groups from some of the far-flung markets they want you to believe they understand. There are five cities within 90 minutes of me that have distinctly different dialects (nearly languages), eating habits and community mores, folkways, superstitions etc…
Ogilvy’s presentation is typical of their corporate approach: they generate a lot of slides to impress less informed, but well heeled, clients (it is a million yuan to get in the door at Ogilvy) and they do little to actually tell you how to secure an advantage with the data they present. They are big and have captured a load of clients, but do a remarkably poor job of leveraging social media and optimizing ads for client ROI. They tend to hire folks with better profiles than an actual knowledge of the marketplace–Kaiser Kuo (who is leaving them) being a rare exception.
I think the data is, as Morgan said, is pretty superficial. I think you would do better to spend a few sessions interviewing Gary than retaining Ogilvy.
Great Post…..
One day Dan Harris will tell me how he does so much in a day….
- Lonnie Hodge
7. Xiaofei Song | March 9th, 2009 at 9:42 pm
This is a very interesting presentation. I remember in our marketing class, we learn the consumer behavior dividing by age, such as baby boomer, generation X, and generation Y…. This presentation studied the Chinese consumer behavior by dividing them into three tires. It is very interesting to see the differences. I did some marketing research for my undergraduate marketing project, for me, it seems, the most different between consumers are their income levels. Right now, lots of people from the third tired cities move to the first and second tired cities. Big cities mix with people have all levels of income. Therefore, I think it is hard to really measure the consumer’s behavior by cities. As all knows, Chinese culture is different by regions too. Even big cities, such as Beijing and Shanghai, have a lot of difference of their consumer behavior.
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