Billions: Selling to the New Chinese Consumerby Tom Doctoroff
This book cracks the code of marketing to the New Chinese Consumer--all 1.3 billion of them. Marketers of some of the world's leading brands come to China without any clear understanding of their new audience. But the same rules do not apply in China. Doctoroff delves into the psychology of contemporary Chinese consumers to explain the importance of culture in… See more details below
This book cracks the code of marketing to the New Chinese Consumer--all 1.3 billion of them. Marketers of some of the world's leading brands come to China without any clear understanding of their new audience. But the same rules do not apply in China. Doctoroff delves into the psychology of contemporary Chinese consumers to explain the importance of culture in shaping buying decisions. He provides insight into consumers' fundamental motivations and reveals mistakes which many multinational competitors make. Anyone who plans to do business in China--especially those preparing for the 2008 Olympics in Beijing--shouldn't be without this book.
- St. Martin's Press
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Selling to the New Chinese Consumer
By Tom Doctoroff
Palgrave MacmillanCopyright © 2005 Tom Doctoroff
All rights reserved.
BIG DREAMS, SMALL POTATOES
THE MOTIVATIONS OF CHINA'S NEW MIDDLE CLASS
The psychology of the new middle class is marked by contradictions. China's history, its unity of spirit, and a missionary zeal to elevate the nation's role in the world are all net positives that will create a great modern nation. However, China's millennia-old dynastic and Confucian culture creates apparent "conflicts" that need to be carefully managed by marketers. The mindset of the newly affluent paradoxically blends an aggressive hunger for social and financial advancement with a rigid, hierarchical social structure that rewards conservatism. As a result, the Chinese psyche has always been torn between the polarities of ambition and caution. (Japanese, on the hand, are unadulterated safety seekers. Western countries, fueled by individualism, pretty much "go for it.") Denizens of the Middle Kingdom are pulled by a desire to both project individual status and protect family welfare. They are motivated by both a dynamic and impulsive "now" orientation versus a stable and balanced future focus.
The ambivalence between conspicuous consumption and conformist conservation has historically divided the hearts of Chinese. An explosion of lifestyle and economic opportunities, combined with the other reality of low incomes, rusted iron rice bowls, and expensive housing, exacerbates this tension. And smart marketers must help consumers resolve it. This chapter concludes with six ways to do this.
When we speak of the "Chinese middle class," to whom and to what do we refer? The economic answer is fairly straightforward, though difficult to quantify. Middle class means having enough disposable income to buy "stuff," not necessities. Middle class means cai (food to please), not fan (food to fill). Middle class means home ownership, a long-term savings plan, and car purchases (if not now, then one day). Middle class, in the parlance of the Sixteenth People's Congress, winks at a robust, yet pliable, xiao kang, which loosely translates as "petite bourgeoisie," beneficiaries of Jiang Zemin's self-aggrandizing (but still important) "Three Represents." (See here.)
Psychographically, however, the answer is rich, full of nuance, and challenging. The middle class defines the soul of a nation. It is the heart of a culture. It projects values intrinsic to a society not struggling for material survival. Around 90 percent of the United States' populace considers itself to be middle class. In China, a nation only recently liberated from the shackles of inefficient state planning and force-fed egalitarianism, that figure is probably no more than 10 percent. But China's middle class is still the essence of a culture boasting 5,000 years of often glorious history. Therefore, in defining the identity and motives of China's middle class, we are articulating the crux of Chinese civilization. As marketers, we are pinpointing its fundamental motivations of behavior and preference.
The business world has woken up to the power and size of China's fast-growing middle class. And, this time, it is sober-minded, finally abandoning fantasies of 1.3 billion souls releasing decades of pent-up consumerism. Distribution death traps, kamikaze sales teams, infectious corruption, and seemingly indecipherable regional preferences—not to mention 800 million rural dwellers living on less than three dollars a day—have shattered the illusion of gold in the topsoil.
However, the Chinese, particularly in the primary "cluster cities" of Beijing, Shanghai, and Guangzhou—as well as important secondary cities (e.g., Chengdu, Hangzhou, Dalian, Qingdao, Xiamen, even Chongqing)—are getting richer. There are at least 100 million individuals with "middle class" purchasing power (enough disposable income to indulge in nonessential goods ranging from a can of youth-cool Pepsi to a meticulously appointed living room). And this "middle class" is unlike any other in history in terms of scale, growth rates, and ambition. A couple of headline statistics:
Starting from scratch five years ago, China is the largest mobile phone market in the world with over 300 million handsets in use. Nokia, Motorola, and Samsung have major research and development centers in the PRC.
According to the Diamond Trading Company (DTC, formerly DeBeers), engagement ring penetration is approximately 80 percent in some key markets, up from less than 10 percent in 1994. Shanghainese are more susceptible to the sparkle factor than the much-wealthier Japanese, for whom acquisition rates hover at just above 50 percent.
Things are looking sunnier than one might have thought possible only a couple of years ago. However, the middle class is not an easy nut to crack. Its purchasing power is limited and, at the same time, the "newly affluent" are experiencing a great deal of angst as they sort thorough competing life-choice demands. The dilemmas faced by a market with a population of twice the size of France are invitations to harness the ambitions buried in them and extract the energy to fuel in-market success.
One of the keys to unleashing these forces is first identifying the underlying drivers of middle-income Chinese citizens who are only now achieving critical mass. As a result, we must explore both the dynamism of contemporary China and the enduring legacies of thousands of years of history. We then translate a "master" or "unifying insight" into six marketing guidelines that can be applied to the vast majority of consumer goods.
SOME CAVEATS, NATURALLY
Yes, this is an ambitious goal and one rife with subjectivity. So it makes sense that, even before beginning, we will start off with a few caveats. First, the conclusions drawn about Chinese are just that—about Chinese. However, one might glean an impression that they articulate the drama of the entire human condition ... but this is not the case. Emotions are universal but the degree to which each is expressed is not. Second, one might question whether these findings are ephemeral, bound to change during what Time magazine called "The Next Cultural Revolution." Rest assured that they are not a passing fad. In fact, it is likely that these conclusions trend toward timeless. Such an assertion is not intellectual megalomania. Instead, it recognizes the role of cultural roots, however they may be defined, in a society's make-up. Across time, across socioeconomic strata, across geography, the essence of "Chineseness" has applications. That said, the expression of Chinese values does assume different forms. They reinforce—perpetuate, rather—the presentness of the past. They are the keys to deciphering the code of China's cultural blueprint; and decipher it we must to make a profit selling a bar of soap, a mobile phone, or a car. (According to Kristin Stapleton, a professor of Asian history at the University of Kentucky, claims of cultural "permanence" have been intellectually discredited to the point of scorn. Of course, culture is not genetic and, therefore, not as unchangeable as skin color or eye shape. However, mores are not ephemeral. "Internationalized" Hong Kong is still "Chinese." Oil-rich Saudi Arabia is still tribal. Culture—and, in particular, Chinese culture—withstands the test of time.)
MIDDLE CLASS CULTURAL ROOTS
To explore the country's soul, let's take a journey back a few thousand years. Any theorizing regarding "What makes China Chinese?" must start with a basic understanding of ru jia, the Confucian school of thought. We must also absorb the influence of a Daoist worldview ("Cyclical Dynasticism") that contrasts with the West's monotheistic humanism. Together they form the contours of the contemporary Chinese heart and economic engine.
So, what is the essence of Confucianism? Confucius articulated a model of an ideal social structure based on "conformist reward." He lived in the later Zhou dynasty, around 500 BC, a time of civil war and diminished central government power. Kongzi, as the Chinese call him, set his gaze to the past, an idealized golden era when society was perfectly ordered and harmonious. Confucius and disciples of his, such as Mencius, laid out an intricate code of conduct, centered on five key "relationship dyads" or wu lun in which everyone had strictly defined roles and responsibilities: (a) father to son, (b) husband to wife, (c) ruler to minister, (d) friend to friend, and (e) older brother to younger brother. Over centuries, with neo-Confucian rigidity peaking during the Qing dynasty in the nineteenth century, society's structure became a fixed variable. Things were regimented, hierarchical. In large part, the burst of early-twentieth-century reform was a reaction against an ossified Confucian order that militated against modern reform. But it came too late.
And yet, for a couple thousand years, Confucian thought was a hugely positive force in the evolution of Chinese artistic, political, philosophical, and economic sophistication. In its time, Confucianism ignited a revolution of inestimable magnitude. To a certain extent, it shifted emphasis away from heaven to the here and now. It also spawned the first socially mobile society. In theory, even a field hand could study the Si Shu Wu Jing, take the Civil Service exam, and enter the ranks of the noble gentry or the dynastic court. By unconditionally accepting—internalizing—the social order, one could move up within it. And what rose eventually fell. As early as the Han dynasty (220 BC), equal inheritance was mandated. Wealth was divided between the sons to ensure that economic entitlement did not sustain a complacent clan.
Confucius therefore created a somewhat schizophrenic society. On one hand, the human world was regimented. On the other, it was incredibly alive. It was dynamic, rising and falling, collectively morphing into something different time and time again. It fueled a system of rewards designed to encourage drive and initiative. Of course, individualism—a challenge to the supremacy of the emperor's order or a "me before us" worldview—was immoral. So, dynastic China was regimented, but it was ambitious. It was mechanical but fluid. It was okay to push, but not too hard. Progress was good. Challenge was bad. This is one layer of conflict among contemporary denizens of the Middle Kingdom—aspiration versus rigidity. This leads to the next layer described below, the tension between the hopefulness of upward mobility and the helplessness of an unavoidable destiny.
Western Individualism and Empowerment
Moving 4,000 miles to the west, to Israel, the cradle of Judeo-Christian civilization, when the Biblical patriarchs (Adam, Abraham, Isaac, et al.) spoke with God, He offered a quid pro quo: "Accept my 'word' (i.e., law), and I will reward you with a heaven on earth." The deal triggered a series of contracts between man and God culminating in the Ten Commandments and Jesus' Sermon on the Mount, both articulations of the rules governing ideal society.
Confucius and Moses were, on some levels, similar. They both disseminated a perfect order, an idealized social structure. But Confucius was a man with no links to a supreme being. Moses and his forefathers had direct, one-on-one relationships with God. The moral code conceived by a single deity was a gift articulated by the infinite Unknowable and then given to individuals.
It was more than divine generosity. The Torah is a covenant, an empowering pact that offers a clear reward for accepting God into the heart. Heaven also served as a readily identifiable return on investment. But both Judaism and Christianity are rooted in individualism: a man or woman, through a one-on-one relationship with God and acceptance of His Word, has the ability to change a nation's or individual's fate. Not just circumstances, but destiny. True, God's ways are unknowable. He always puts obstacles on the path, but the ultimate reward is clear and within reach of the individual.
The freedom to touch the face of God is the ultimate empowerment. It is also the soul of monotheistic—Western—society. Our history is a bumpy yet steady progression to a Promised Land. It is also "linear" in the sense that, over time, man and God work together to achieve an increasingly evolved moral consciousness. Furthermore, Europeans and Americans view their moral "destination" as absolute, a place at which cultural relativism becomes irrelevant.
Asian Randomness and Insecurity
Most Asian societies, on the other hand, regard history as a combination of randomness and cyclicity, despite the centeredness of Confucianism. More specifically, fears of random chaos are alleviated through the imposition of a structured, cyclical code of conduct and worldview.
In China, Japan, Southeast Asia, and ancient Greece and Rome, God doesn't exist. But gods do. They are all too knowable. They have human flaws, including caprice, the one most likely to cause mortals grief. A man can pray from sunrise to sunset, even sitting atop a mountain close to heaven's ear, with no guarantee of reward. Polytheistic cultures are built around a "pain but no gain" credo. They do not expect progress. They crave appeasement, predictability, and shelter from the next crop-flooding storm or life-snuffing earthquake.
Such randomness is unsettling and leads to collective helplessness. It also nurtures legal and social codes that maximize predictability. Dynastic China imposed structure in a multitude of ways. Confucianism ordered the world of Small Things. The Mandate of Heaven explained—and predicted—history's sweep.
Structure as Safety
Man's inherent state is precarious. As a result, religious, political, and philosophical institutions are naturally geared toward propagating order. Chinese were, and continue to be, obsessive about balance and predictability. Daoism's yin and yang (i.e., feminine versus masculine forces) are an integration of the ba gua, or eight natural elements evenly divided between feminine and masculine forces that can be combined in only sixty-four pre-set ways (see figure 1.1). The lunar calendar is cyclical, with each "animal" corresponding to one of twelve "earthly branches." Lucky dates for marriage, auspicious office openings, and astrological license plates are all structure-obsessed manifestations of a preordained temporal rotation. Then there are the ten heavenly stems that correspond to times of the day, but let's not obsess about the mathematics. Suffice it to say, when you combine an earthly branch and a heavenly stem, fate is the result. Every man, woman, and child is marching toward a fundamentally unalterable destiny. And destiny is a function of immutable cycles against which no one had better put up a fight. The best he can hope for is to understand—and, possibly, manage—his fate. (If it's meant to rain, it will rain. But he can bring an umbrella.) He can never avoid what must be. In the words of Henri-Charles Puech, author of Man and Time: "No event is unique, nothing is enacted but once ... every event has been enacted, is enacted, and will be enacted perpetually; the same individuals have appeared, appear, and will appear at every turn of the circle."
The Clan, the Emperor, and a Lack of Civil Institutions
In the grand scheme of things, a god can't be counted on and the individual doesn't count for much. So society is structured around two polarized centers of gravity: the clan and the emperor. Under the watchful eye of Confucius, each has a responsibility to the other. The extended family must submit to the ruler and the ruler must wield power correctly, working for the collective good. When an emperor abuses or squanders his might, he forfeits the Mandate of Heaven (so says Mencius). Preceded by a brief period of spectacular disaster, history inevitably returns to its natural and tranquil state. The relentless order is reestablished. Another cycle of time has run its course.
Excerpted from Billions by Tom Doctoroff. Copyright © 2005 Tom Doctoroff. Excerpted by permission of Palgrave Macmillan.
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You can find an abundance of books about doing business in China. This one, however, takes a rare approach. Ad expert Tom Doctoroff confines his commentary (for the most part) to a subject he has the expertise to address ¿ advertising ¿ although he tends to generalize a bit about Chinese history and philosophy. He offers evidence and examples from both successful and unsuccessful ad campaigns to support his assertions about what will work if you want to build your brand in China. We find that this short book offers interesting perspectives on the Chinese consumer market, while it also provides a refresher course on the main principles of advertising and brand building in any market, whether it be East or West.
Tom Doctoroff's Billions decodes today's China, with an eye on marketing opportunities, and also provides great insights and ideas about what to expect from China in the near future. I found the information on the coming Olympics of particular value, as a communications professional trying to understand the Bejing 2008 scene.