marketing to

lower tier Chinese youthJanuary 2010

In 2010, China Youthology wanted to learn more about China’s third and fourth tier youth.

We conducted extensive research, and started conversations with China’s community of youth market researchers and practitioners.

This report presents our collective lower tier market insights and implications.

This report draws on the following sources:

China Normal foundation research by China Youthologywww.chinanormal.com

Youthology Salon panel discussion featuring:Ellen Hou, Head of planning, TBWA ShanghaiHuan Zhang, CEO of ThindoScott Sun, Product manager, ANTA

Interviews with:Ellen Hou, Head of planning, TBWA ShanghaiHuan Zhang, CEO of Thindo Cindy Hu, Head of Global Trend Research, NokiaStella Ji, Marketing manager, Pepsico (beverage)Joanna Liu, Sales development & planning manager, Pepsico (food)Bill Wang, Ex-marketing manager, Master Kang (Kang Shi Fu)Hujing Wang, Research manager, Lining

All photos by Go Takayama

Youthology Salon is a gathering of youth market researchers and practitioners to share experiences and insights and encourage open conversation within the community.

In the last Youthology Salon on China Normal, participants come from Anta, BBH, Google, JWT, Kraft, Leo Burnett, Metersbonwe, Nike, OC&C, Ogilvy, P&G, Pepsico International, Pernod Ricard, Peugeot Citroen, Publicis, Sainsbury’s, Starcom, TBWA, Vans, Unilever... We want to thank all the participants for their comments and questions.

What is a ‘lower tier city’ in our research?

•1st tier (4 cities): hypercities Beijing, Shanghai, Guangzhou, and Shenzhen

•2nd tier (20-30 cities): developed provincial capitals (eg. Chengdu, Wuhan, Shenyang, Tianjin, Hangzhou) and a few comparably rich non-capital cities (eg. Wuxi, Foshan, Dongguan, Dalian)

•3rd tier (20-30 cities): less developed (in-land) provincial capitals (eg. Lanzhou, Guiyang, Zhengzhou) and comparably developed non-capital cities (e. Xuzhou, Tangshan, etc)

•4th tier (more than 200 cities): all other prefecture cities

•5th tier: county level and below

The big picture:

There is no single marketing strategy that will work for top and lower tier youth.

Lower tier youth and top tier youth

live in different worlds.

The difference is

the role of normal.

Top tier youth escape normal to succeed.

They must be confident and special

to distinguish themselves from the competition.

The pressure is high, but the future is open.

They chase their dreams.

Lower tier youth obey normal to succeed.

They must be compliant and cultivate relationships,

or society will deny them permission to rise.

The pressure is low, but the future is not theirs to decide.

They let things be.

But they are still

dreaming.

Their challenge is:

How to be special,

without going too far?

Brands share this challenge with lower tier youth, and in order to thrive, must figure out how to resolve it together.

1. Communication ContentWhat kind of messages will resonate with lower tier youth?

Lower tier youth are not listening to brand stories.Brand stories attach distinct values and beliefs to products.

Lower tier youth do not want to advertise distinct values and beliefs.

What if other people do not approve?

But they are listening to product stories.Lower tier youth are excited about new experiences enabled by consumption.

They want to try so many things, and know so little about what there is to try.

Tangible product experience

Scott SunProduct ManagerANTA

“I think lower tier consumers care more about functional benefits than emotional. For example, when Anta introduced its new bounce technology, at the pitch for the campaign the creative director just made these noises: ‘Thoom! Wham! Boom!’

“The sounds gave a really visceral message that the bounce tech is like an explosion, and in the end we used this idea in our TVC.”

‘Bounce Tech’

“The slogan for Wanmei Eye Essence is “Flick flick flick, flick away the eye wrinkles” and it works very well with lower tier women. Why? Our research showed lower tier women know very little about skincare. We had to state the product function obviously, introduce them to what it does. The eye essence costs RMB398 per bottle, more expensive than many international products, but sales are still great, almost 200 million RMB after launch.

“Consumers lacking product knowledge rely a lot on clear and direct product communications. They want a logical story about what the product is for.”Zhang Huan

CEOThindo

‘Flick flick flick, flick away the eye wrinkles’

Explain clearly:what does the product do?

“The L’Oreal woman is very first tier: ‘I’m independent, confident, I live in the spotlight.’ The NIVEA woman is less confident, more introverted. She’s very pampered, but she still has dreams. Lower tier women ages 20-29 are this kind of ‘little princess,‘ single children that grew up showered in love. One woman we met really influenced us: looking at a picture of her and her husband holding their daughter, she said ‘I always want to be the little princess wrapped in white.’ So we made NIVEA part of that, made consumers feel like they are at the center of love, loved and cared for by loved ones.

“People always care about your product story. You don’t have to give up emotional relevance to communicate functional benefits.”

Emotional benefits can workBut you have to be relevant

Ellen HouHead of PlanningTBWA

‘To be at the center of love’

Show lower tier youth what your products do. Benefits can be emotional, but resonate with their lives.

Summary: Tell clear product stories

But adapting communications is not enough.

We must adapt our products.

Products in the cultural context

“Adidas withdrew the entire Originals line from lower tier cities. Originals is very retro, and that style meant very little to lower tier youth. They will launch a new sub-brand soon and it will be designed to fit lower tier youth better in terms of product selection, design, and pricing.

“You cannot offer the same products but telling different stories across tiers. Product localization is needed.”

Ellen HouHead of PlanningTBWA

2. ProductsHow to localize products for lower tier youth?

Lower tier youth want to feel special and cool.Consumption gives lower tier youth rare freedom to express themselves,

and connects them to a more cosmopolitan first tier lifestyle.

They value that feeling,

and have the spending power to get it.

But never too special. Never too cool.Consumption is also important for negotiating status and social norms.

Lower tier youth are not eager to innovate or diverge from established peer behavior.

Know and adapt to local norms

Aiyaya Chained Retail“Aiyaya is a chained retail specialized in cosmetics and accessories for young females. Revenue has achieved 1.2 billion the last few years. We found Chinese consumers in lower tier cities are very different. They are more like followers. They will be upset if they feel isolated from other people. So Aiyaya has changed the lower-tier strategy. The cosmetic shops of Aiyaya are not as fashionable as those in top tier cities.

“Lower tier youth want to keep up with the trend, to fit in with others but avoid being outstanding.” Zhang Huan

CEOThindo

“We find often consumers in tier 3 or tier 4 cities will spend more per shopping trip even than consumers in tier 1 cities. Spending power and how much money you have are different. Cost of living in lower tier cities is much less than top tier cities, they have more freedom to spend on themselves. They will even borrow money to buy stuff that their friends or family members already have to make sure they are keeping up.

“They’re not like top tier youth fighting hard for a house or a car. Consumers in lower tier cities have proportionally more spending power.”

Less pressure meansmore to spend on themselves

Zhang HuanCEOThindo

Localization does not necessarily mean lower prices.Give them products that feel special, but that willnot cause friction with peers.

Summary: Know the cultural context

3. Communication Channels

Which channels are best to reach lower tier youth?

Lower tier youth are increasingly engaged with mobile Internet.Mobile phones are the major source of status and entertainment for most lower tier youth.

But they use the Internet like mass media.Lower tier youth stick to a narrow range of sites and online services. They rarely search for new networks or influences. They want to be into the same things as their friends.

Mass media works

“We called CCTV5 Quanzhou channel because we saw a lot of brands from Quanzhou doing advertising there. To me Anta did right to spend a big chunk of money in this single channel, getting full brand exposure in the channel, because eventually every one of our target consumers became aware of our brand.”

Scott SunProduct ManagerANTA

Choose targeted programming

“The audience of CBA and NBA is totally different. You may think CBA has no good to talk about, however, when I watched CBA games in Guangdong in 2005 and 2006, the stadium was amazing, it reeked of smoke and excitement…it was fully packed! Anta’s sponsorship for CBA has definitely improved brand perception among lower tier consumers.”

Scott SunProduct ManagerANTA

Mobile Internet increasingly popular

“When we were in the field, we found the majority of net café visitors are big fans of online gaming, but this is only a small group within the entire group of netizens.

“Mobile internet is much more popular among youth. Even if their own mobile phone has no data plan, they will try to get online access any way they can around their school, in order to share songs and novels. “

Lisa LiCEOChina Youthology

Internet usage is limited tosmall number of key sites

“We talked about Internet usage with a group of girls in Guang’an. They spend tons of time online everyday watching Hunan TV programs on PPlive, and playing QQ games, etc. But when we told them they can find videos about Youthology on Youku, they asked us, ‘what is Youku,’ they had never heard of it.“

Lisa LiCEOChina Youthology

Summary: Go mass, develop mobile

TV still works for lower tier youth. Know what they are watching.

They might not be active explorers online, but lower tier youthare engaged with mobile Internet. Work with their online habits.

Actually, there is another crucially important channel

for making strong connections with lower tier youth.

Your stores.

”When a brand like Adidas enters the lower tier market, they may start a sub-brand that fits the market better. The entire store layout will be designed to fit local consumer’s taste and enhance their shopping experience. In the end lower tier youth might not spend a lot of money, but they will spend a lot of time in the store.

“If you want to spread your brand in lower tier cities, your primary channel is not conventional TV or magazines. It’s your retail space.”

The retail communication channel

Ellen HouHead of PlanningTBWA

4. RetailWhat do lower tier youth want from a shopping experience?

Lower tier youth go shopping a lot.Retail centers are the most modern, exciting, and dynamic places in their cities.

And there are so few hobbies, interests, and leisure options competing for their time.

Shopping is a major source of enjoyment and new experiences. Lower tier youth are hungry to hang out, experiment, and engage.

Make the time they spend in your store count.

Make them feel special

“Statistics shows a small Wanmei Cosmetics counter in a small town in Henan province brings in 30K in revenue a year. Lower tier consumers actually don’t care much about brands, they care more about service. If your service is particularly good they’ll remember, even better if you give them a promotion.

“It’s incredible, but if you treat them right, the spending power of lower tier consumers can exceed your imagination.”

Zhang HuanCEOThindo

Be part of the center

”Compared with top tier consumers, lower tier youth have much more limited places to shop. When they gather to shop they usually go to major centers.

“So my suggestion to brands is opening as many stores as possible in big cities, but opening big stores in major shopping venues in lower tier cities.”

”People in lower tier cities get excited about a big department store or a beautiful fountain in front of the mall, because these can have great significance to their lives.

“These spaces can be the culture center of the city and important gathering places.”

Ellen HouHead of PlanningTBWA

Zhang HuanCEOThindo

Loyalty to retailersstronger than brands

Jay Mark CaplanResearch ManagerChina Youthology

“In Xuzhou, a student brought us to his favorite clothing store. The street was crammed with shops selling almost exactly the same selection, all knockoff brands. The store he liked sold the same knockoffs, but they had branded the retail experience: they had cool design and product display, almost like a first tier boutique. That’s why our friend kept going back.

“In lower tier cities retailers mean more than brand names. Good cosmetics come from the big shopping centers and bad stuff comes from the street market. Real Nike comes from the Nike store and fakes come from the street market right next door.

“Lower tier youth don’t care what’s on the label. They learn to trust the retailer.”

Summary: Build a retail experience

Lower tier youth want an engaging shopping experience.The way you design your stores will have a big impacton how they perceive your brand and products.

5. Wrap Up

What is the key takeaway?

Communication Content

Communication Channels

Retail

Product

Clear product stories with practical and emotional benefits

Targeted mass media, but keep an eye on mobile Internet

Customer experience is your best connection, treat them well and give them a space to hang out

Lower tier youth have money to spend on themselves,give them ‘cool stuff’ that makes sense in their cultural context

Thank you!

More about China Normal foundation research: www.chinanormal.comFollow us on blog: www.chinayouthology.com/blog

Hope to see you on the next Youthology Salon!