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Marketing Insights: Finding your footing in a fragmented Chinese market

China is fast becoming the market to watch out for. The country is digitising at breakneck speed. Data from the China International Network Information Centre showed that the number of internet users in 2016 amounted to 731 million, with 53.1% of the population online. Today, an average smartphone user in China spends approximately 3.9 hours on his or her smartphone. These 3.9 hours are spent in a highly fragmented manner across multiple apps and mobile sites.

Meanwhile, WPP and Kantar Millward Brown’s 2018 BrandZ report ranked Tencent and Alibaba as the fifth and ninth most valuable global brands, while Chinese e-commerce company was ranked 59th among newcomer brands. Cracking the Chinese market as such, is becoming an important agenda for many western brands.

During a recent insights titled “Discovering the secret to adopting data-driven marketing in China” sponsored by iClick Interactive,created in collaboration with Marketing, Yan Lee, the company’s chief product officer, said mobile marketing spending in China surpassed PC two years ago. He added that it might be the first country with the largest economy to witness digital marketing surpassing offline marketing, in terms of print, TV, outdoor and magazines.

“Digital is taking over China. Because the country is so large, there is no single publication – not even the TV station – that can really cover the expanse of the entire country itself,” Lee said. He also described the publishing landscape in China to be “relatively fragmented”, as compared to the US, where Facebook and Google take up more than 80% of market share and are seen as a duopoly.

In China, Alibaba, Baidu and Tencent form only 60% of market share in total, with the remaining being shared by several other publishers such as Beijing-based news and content platform Toutiao and video platform Xigua.  Besides the fragmentation in the publishing space, another challenge that companies encounter when marketing in China is the lack of standardisation of ad size guidelines. This is unlike companies in the US, which adhere to standards set by the Interactive Advertising Bureau. Due to the lack of standardisation and fragmentation that exists in the Chinese market, companies turn to marketing technology to help consolidate all channels and various data sources into one single platform, so they can better understand consumers.

As such, artificial intelligence (AI) plays an important role in predicting market trends more effectively and making marketing descisions quickly.  The iClick Interactive database for example, comprises two million websites and 109,000 mobile apps, collecting 0.8 terrabytes of data daily on consumers, allowing companies to identify, access and engage the right audience for their campaigns.

According to Lee, market intelligence is especially important for a country as large and fragmented as China. While companies can constantly stick to “conservative” or “safe” picks by targeting only consumers based in tier-one cities such as Beijing, Shanghai, Shenzhen or Guangzhou, they might not be “striking [their] pot of gold” in China. Companies should make use of the market intelligence they have through the data gathered, to identify more potential markets within China that they should venture into.

“By employing AI and having standardised tracking or data definitions, be it in Singapore or China itself, marketers will be able to accelerate their entire digital transformation from offline to online, as well as traditional to new forms of engagement with consumers, and drive the performance that their marketing strategy deserves,” Lee said.

With insights in hand, brands need to start building their presence surrounding their customers’ needs and behaviour, and synchronise their content with their existing marketing efforts. Thereafter, they can move on to measuring and optimising their content, by consolidating data points with a real-time dashboard. The next step would be strategic listening, where brands can look into various cultural nuances and deep dive into their brand campaigns.

Combining hard data with soft insights, brands can gather social intelligence to inform or recalibrate their marketing strategies.

Being proactive at the initial stage helps brands build up the database that they require before turning it into insights and reacting to it.

The power of transaction data

Last year, eMarketer forecasted that the overall digital ad spend in China will reach US$50.31 billion, of which 72.0% will go to mobile channels. Video was also listed as the fastest growing ad format within digital, and is expected to reach US$17.68 billion in 2021, overtaking TV which is forecasted to reach US$17.22 billion. To succeed in digital marketing, companies have to be very targeted.

This is where transaction data comes in. Transaction data is not only real-time but also has the ability to provide details such as time stamp and location of transaction. According to speakers, this provides an accurate snapshot of consumer behaviours over time.  Additionally, transaction data is anonymised and made available to marketing technology platforms, enabling them to leverage real behavioural data insights to better target consumers.

The data also helps companies understand consumers’ loyalty towards the organisation, reward them for their loyalty, as well as help acquire new prospects. Leveraging payments data helps to make these decisions a little smarter.

Opportunities for new growth in China

While tier-one cities such as Beijing and Shanghai are popular among companies that wish to break into China, Katharine Zhou, MD, innovation and marketing APAC, Ipsos, urges marketers to go beyond urban hotspots for new sources of businesses.

Second-tier cities such as Suzhou or Hangzhou, which is seen as China’s Silicon Valley, as well as third-tier cities and rural areas offer “huge potential” for companies looking to expand into China. To effectively do so, companies can leverage digital to reach smaller cities and micro-segments, as well as make use of insights and data to carry out more effective targeting of consumers.

Zhou added during iClick’s insights that having local relevance is important when it comes to expanding into the market and connecting with Chinese consumers.

“Getting access to product, logistics and distribution is no longer a barrier, and digital is making it more challenging for companies to compete in the Chinese market. As such, companies will need to customise their offerings and actively engaging with consumers,” Zhou said.

Meanwhile, companies should also look out for China’s digital natives who are “not your average consumer”, Radhecka Roy, Ipsos’ global lead – strategic curation, said. The digital natives comprise 18 to 22 year olds in China who see themselves as co-creators. Hence, Roy said companies will need to include them in their marketing strategy and engage them accordingly.

Additionally, the digital natives in China are also “very open” to online marketing, with 70% of them not using ad blockers. As such, their openness presents a good opportunity for brands to engage them online.

Targeting Chinese travellers

According to Singapore Tourism Board’s Tourism Sector Performance fourth quarter 2017, the country’s international visitor arrivals (IVA) witnessed a 6% year-on-year growth, amounting to 17.4 million. China was listed as the top market for IVAs, increasing by 13% to 3,227,000 visitors last year.

China also generated SG$0.9 billion tourism receipts last year, coming out on top ahead of Indonesia and India.

Leone Lau, associate sales director, China Search Asia, said during iClick’s insights most Chinese tourists to Singapore originate from the eastern provinces or tier-one cities. According to her, individuals from these areas have better spending power, and are mainly highly-educated young females in their 20s.

Also, Chinese travellers generally take about 50 days to plan for their trip, which is surprising considering the fact that they have access to vast amounts of information online. The main reason behind this, Lau said, is because Chinese travellers source for information through various platforms, such as social media, travel portals and friends. Also, they browse through different travel apps more than 120 times when doing research.

Click Search Asia partners with Baidu to target overseas markets such as Hong Kong, Singapore and Taiwan, to provide online advertising solutions to marketers who want to develop their business in China. Besides keyword targeting, Click Search Asia is also able to effectively target consumers through specific data sets such as browser cookies and phone numbers, which are provided by its hotel clients.

Meanwhile, Cindy Dai, Ctrip’s digital marketing manager, said it focuses on four peak travel seasons – Chinese New Year, Summer holidays, Labour Day and National Day holiday. The Chinese provider of travel services has a total of 300 billion users on its platform comprising 47% females and 53% males, and 75% of its bookings come from the mobile app.

To target users more precisely, Ctrip classifies them into four different membership tiers – regular, gold, platinum and diamond. This allows them to more effectively target tourists with higher spending power which are in the platinum and diamond tiers. Dai added that its marketing strategies revolve around three stages – pre-travel for potential tourists, during-travel for the confirmed tourist and after-travel.

“For after travel, we mainly focus on social networks and have key opinion leaders as well as word of mouth campaigns to stimulate a second-time purchase,” Dai said.