Marketing to China’s 4th-6th Tier Cities.

A recent report from Ogilvy titled “China Beyond” uncovers quite a few interesting findings on China’s 4th – 6th tier rural cities. Data cover a wide range of insights and business strategies for marketing to China’s lower tiers.

The book cover is interesting as well – newspaper is often used as wallpaper in China’s rural cities; the gold character on the bottom left means “Joy” (specifically used for marriages) and the little red slogan on the right side bottom is an old communist slogan meaning “Bound together to reach a comfortable life by working and laboring and combining families together.”

The report is an interesting read – give it a go when you get a chance.

A brief overview of key points:

With the influx of migrant labor, communities have established new rules of engagement and trust. The “web of favors” replaces the time-honored, high-trust relationship in small communities. This is where small, local companies compete with big corporations – by offering timely, relevant and free services to all community members.

The pace of development is amplified by the anxious youth and their relationship with technology. Most young people, though optimistic about the future, do not know how to use the Internet for information, education and better opportunities. Their online behavior mirrors the lackluster, drab realities of a provincial life. Brands that are able to redirect some of the pent-up energy to fuel entrepreneurship, creativity and consumerism are likely to benefit.

Families in small towns usually have two children, and their sphere of influence is arguably larger than that of the pampered big city child. This social reality offers many opportunities for marketers to become more relevant to consumers by helping to create a better future for children. They also need to be cognizant of the influence an older sibling can have on the behavior of the younger child. At the same time, there is relatively less pressure exerted upon children – since all the family’s hopes do not rest on that one child. 

In spite of a focus on children’s futures, there are few formal and reliable avenues for kids and parents to learn what career choices will be available to them when they grow up. Computer brands could take a lead on grassroots initiatives because no matter what profession, the computer is a tool that can be used by all. Perhaps a ‘skills and aptitude testing mobile lab’?

Nationalism is a touchy, inflammatory topic that easily unifies consumer behavior in low tier cities. International companies need to be sensitive enough not to antagonize local customers. At the same time, pragmatism in low tier markets signals that economic benefits drive nationalistic causes, not the other way around. 

China’s low tier cities represent the other end of globalization. It produces fresh foods and raw materials as much as it produces new ideas. It is at this level where cultural diversity and local distinctiveness can be teased out and used as resources. These cultural learnings will help a brand to find a place for its product or service in local people’s culture and everyday practice.

There is a natural affinity with open spaces. In low tier cities, many engagements and interactions happen in public. This is contrary to urban people living in closed quarters, with limited capacity and range for activities. It demonstrates that brands must communicate with consumers on the move.

For instance, the hang out culture in lower tier cities means outdoor media can be used to engage rather than simply inform. Brands could tell more ‘stories’ rather than a ‘short message’ or ‘one key visual’. Brands could help people to hang out together in places they naturally tend to converge to. Food and beverage brands could bring people together with make-shift stools, tables and fixed umbrellas as premia.

Counterfeit brands have taken off in low tier cities as consumers desire brands that symbolize success but are unable to buy the real brands due to vast income gaps. As a result, fake FMCG and consumer durables brands are widely available in China’s lower tier cities – a different phenomenon from what is seen in the big cities where luxury brand fakes proliferate.

Mom-and-pop stores and wet markets are being pushed out while hypermarkets and open-shelf convenience stores are taking over. However, these stores stock far more local and national Chinese brands than international brands. There is also a strong appetite for “new things,” which means consumers easily tire of old brands that do not constantly change and innovate.

Easy, fast communication and cheap transportation have changed the rules of the distribution business. Distributors no longer need to be in the convenient areas of the city and they sell to a broader reach of customers. Location, however, is not obsolete and spatial competition is likely to intensify in the near future.

Key Business findings then are:

1. Consumers in low tier markets have a stronger capacity to spend money than most companies would have estimated. The key is to educate them on how, and unleash their consumption will. For instance, young people have access to the internet, but they don’t know what sites to visit or what the internet can do for them to further their ambitions, creating an opportunity for distance learning courses. This would offer them the equal opportunity that many crave.

2. Brands must recognize and take advantage of diversity and local characteristics to deliver authentic products and experiences.

3. There are good reasons to celebrate the “everyday” and “ordinary” to connect with consumers who appreciate the “pleasure of small things.”

4. Continuous and engaging in-store activities with consumers are key to improving a brand’s standing. Consumers here have time at their disposal.

5. Sales promotions are the quickest way to boost sales for FMCG products.

6. There are huge opportunities for consumer durables and home furnishing companies to help people decorate or renovate their homes. For instance, small town living is typified by mostly unkempt, disorganized homes so home building brands might collaborate with consumer durable marketers and media companies to sell the concept of home makeovers.

7. Brands can team up with local enterprises for philanthropic work, providing training, funding and building public facilities to enhance their corporate image.

8. Retailers are the powerful frontline of communications that turn shoppers into buyers. For instance, consumers’ lack of product knowledge in lower tier cities underlies the importance of conducting sales training for frontline staff and providing them with regular product updates.

9. Distributors can play a much larger role in the distribution chain when they are freed from the constraints of space and geography.

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Tagged as: oglivy, rural cities