The shifting political and economic sands in Europe and the US are making China more appealing to British businesses and brands with ambitions to expand into major international markets.
The key question for UK marketers is: ‘How can our brand crack China?’ How do you take that first step on the 4,831-mile journey from Sheffield to Shanghai, or Birmingham to Beijing? Here are five things to consider.
1 – Make sure China needs your product
On paper, moving into China appears to make complete sense. It has the fastest growing economy in history. Between 2000 and 2012, the urban middle class grew from 4% of households to 64%. China is now the world’s largest market for luxury brands. But in practice, China may not be the right market for your product.
Two trends are now emerging. First, younger consumers (aged 30 and under) are moving away from classic, established Western brands in search of new, less obvious alternatives. Quality is still key, but so is stand-out. Second, at the other end of the scale, Chinese consumers on a budget are increasingly turning to local brands for practical products such as soap. They are not prepared to pay extra for imported products that do the same job. UK marketers need to make sure there is real demand in China for their brands. The size and scale of the Chinese market doesn’t guarantee success.
2 – Work with the system
Over the last three years the ruling Communist Party of China (CPC) has launched a series of free-trade zones across China, as test beds for economic reforms that could be rolled out nationally. The UK government is working closely with the Chinese on this project. China is an increasingly open marketplace for UK brands. However, doing business in China is not always easy. In 2015 in its Doing Business report the World Bank put China 84th in the global league table based on the “ease of doing business”. The main reason is the Chinese system is still bound by red tape and hierarchies. Whereas most developed economies have discarded out-of-date systems that are now judged to hold back innovation and growth in favour of open structures, red tape is still a common feature between government and business, and Chinese workers exist in very hierarchical teams. The best way to set up your business in China is on a region by region basis – enabling you to build local relationships with local government, allowing more decision-making to take place at a regional level and opening the door to more modern business models and structures.
3 – Don’t assume your market positioning will carry
The biggest challenge for UK marketers is building a position in this vast market. The starting point is learning to leave behind all you know and love about your market position in the UK. This way you can start to see what stage marketing is at in China today.
Customer research is a relatively new tool in China with data and insights less readily available. It’s therefore easy (and tempting) for UK marketers to apply Western experiences, misjudging what their market position should be. Yes, many Chinese consumers have money and the middle class is growing rapidly, but it’s wrong to assume that your message will resonate. You will undoubtedly need a different, perhaps simpler, approach to building a successful market position in China – one based on the local market.
4 – Treat China like a collection of smaller countries
Many UK marketers get excited by China because of its size and the vast opportunities they think this offers. But even the world’s largest brands can struggle if they approach China as one country and one market. Viewed this way, China becomes too overwhelming and, perhaps more importantly, marketers can miss the individual variations and opportunities that exist within the 31 regions that make up modern China. It pays to see China more like a collection of smaller, separate countries that you can explore and get to know, rather than one vast territory to ‘conquer’.
5 – Adapt your message to the relevant segment
China is seeing, for the first time, three very distinct consumer groups emerge – value consumers, middle classes and affluent. Before the economic boom 15 years ago the Chinese economy was driven by undifferentiated mass consumption, with one value proposition (often based on a product’s functional benefits) for all brands. It made marketing relatively simple. Now that China has very different consumer segments, marketers have to work much harder to create specific brand propositions and messages.
UK companies moving into China need a detailed understanding of each consumer group, and a focused proposition for those that are relevant. The key to success is targeting increasingly narrower consumer segments, with increasingly tailored value propositions.
UK Government is supporting growth in China
Through David Cameron’s premiership the UK courted trade links with China which has now started to trickle down to become tangible opportunities and tools for our businesses. Look at the UK Trade and Investment website and review the tools and listed sector opportunities:
- Renewable Energy
- Financial Services
- Advanced Manufacturing
- Oil and Gas
The World Bank’s Doing Business report