The L2 ThinkTank is one of the thought-leaders in marketing that I respect most. A digital thinktank with ties to NYU, their findings are data-based, insightful and actionable. And expensive: an annual membership runs well into the five-digits. Given that, it was a privilege to spend January 24th participating in L2's Focus 2013 Clinic at NYU. Modules ranged in topic from China, to the changing landscape of retail, and the enterprise effect.
Dedicating one-third of the clinic scope to this economy of the East, the message was clear: brands can't afford to ignore the Chinese consumer. The Chinese development story is staggering, going from virtually no development (Shanghai, as rice paddies) to the second largest economy in the world in just 30 years. How and why did this happen? Doug Guthrie, Dean of The George Washington School of Business, identifies the pillars of gradualism, decentralization, foreign investment, cross-industry strategizing, and public private partnerships. If how they got there is known, where they will go from here is less so, as political uncertainty, decentralization (a double-edged sword), digital isolationism, and the flight of capital raise are raising questions as to the sustainability of China's economic growth.
Looking beyond the policies and politics, what does this mean for brands, for the beauty, luxury and retail companies of the US looking to tap into China's 1.3 billion consumers?
L2's research has yielded key learnings on the Chinese market:
1. Digital is ground zero for targeting affluential Chinese consumers. E-commerce is growing in China (Bobbie Brown, Shiseido, Coach, Ferragamo, DVF and Valentino entered the Chinese e-market in 2012) but still largely untapped.
2. Search engine market share is decentralized (no go-to Google), as is the social media ecosystem. Social media engagement rates are also notably lower, however video consumption is huge.
3. Email marketing (a traditional focus of efforts in the US) is not as effective in China, showing lower open and click through rates.
4. Real time platforms are emerging. WeChat reaches 70% of 3G phones in China, offering more of a 2-way communication platform.
5. China's social media ecosystem is fragmented, with the US power-players Facebook, Twitter and YouTube being replaced by multiple localized counterparts.
6. China is mobile, with 38% of internet users accessing it solely through mobile device.
The Chinese luxury consumer is young, digitally native, and researching goods before making a purchase. (Sounds like the US, no?) So if a successful China strategy IS a successful digital strategy, what does THAT look like?
1. It understands their tech. Lower internet speeds plus more access through mobile devices requires content be mindful of slower load speeds.
2. It's platform agnostic. Brands need to invest in digital content that can be broadcast across fragmented the social media ecosystem.
3. There is a mobile for everything you do (literally).
4. It combines earned with pay-to-play (as with Post+Beam's earned + paid + shared + owned approach to marketing), from search engine banner ads to local celebrity endorsement.
5. E-commerce is the endgame. Funneling to e-commerce is shown to be the top driver of digital success across platforms.
6. It uses local payment systems (credit card penetration is low in China)
China is a complex, fragmented and uncertain economy, but the consumer potential makes it impossible (or unwise) for US brands to ignore. Brands are doing it successfully, but the approach must be entirely tailored to the Chinese consumer - not a copy-and-paste of US efforts - and incredibly well-informed.