Making it to Madison Avenue

Understanding consumers

This article in The Economist reminded me a lot of what I was told by all the planners at BBH, about those cultural differences and details it is important to understand when dealing with foreign markets. China is the next big thing and so a lot of brands are now trying to crack this market.

The Economist presents, in their eyes, a typical Chinese consumer:

LILY LI wears a lanyard with a little plastic card around her neck, even at weekends. It is a badge of honour: it shows that she has a white-collar job. (She is a secretary at Access Asia, a retail-research company in Shanghai.) She uses Apple earphones for the cheap Chinese mobile phone in her pocket, so it looks as if she owns an iPhone. And she drives to work, though it takes four times longer than public transport, just to show off her little car.

After decades of deprivation and conformism, Chinese consumers regard expensive consumer goods as trophies of success. In public, they show off. In private, they pinch pennies. The owner of a gleaming new BMW will drive around for half an hour to avoid a 50 cent parking fee. And she will hesitate to spend much on interior decoration, because only her family sees the inside of her flat.

‘The mystery of the Chinese consumer’, The Economist, (09/07/2011), p. 59.

An example of a brand that’s got it right:

Back in America, Kentucky Fried Chicken (KFC, part of Yum! Brands) is dwarfed by McDonald’s. In China it has 3,300 restaurants—more than three times as many as its rival—and opens a new one each day. The secret of its popularity is local managers with the freedom to adapt KFC’s offerings to the Chinese palate. That means fewer bargain buckets of wings and more congee, a rice porridge with pork, pickles or mushrooms.

‘The mystery of the Chinese consumer’, The Economist, (09/07/2011), p. 60.

However, there are also examples of brands that have got it wrong by misreading the market:

Home Depot, an American DIY chain, is retreating from China after trying for years to persuade middle-class Chinese people to decorate their own homes.

Home Depot “didn’t understand the market for home decoration,” says Ben Cavender at China Market Research in Shanghai. Chinese people typically have no garages in which to store tools. And there are legions of poor people who will paint and decorate for low wages. The middle classes tend to hire decoration companies, which subcontract to whichever construction firm pays the best kickbacks. At the beginning of this year Home Depot closed its last shop in Beijing. It now has only seven stores on the Chinese mainland.
‘The mystery of the Chinese consumer’, The Economist, (09/07/2011), p. 60.