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Going Global: Direct to China in the Year of the Horse

Date: February, 2014 --

This year in the last week of January, January 31 to be exact, much of China and Southeast Asia stopped work to celebrate the Lunar New Year, which in the Chinese calendar is the Year of the Horse. In China, people will be returning to the “ancestral” homes of their relatives and parents to celebrate, much as we in America drive ourselves to distraction for Thanksgiving reunions with family!  And the Year of the Horse is one of speed, fast victory or defeat, adventures appearing out of nowhere, and possible unanticipated romance. Decisiveness is rewarded, as is travel. 

In celebration let’s take a look at the state of direct marketing in China, a country whose development from a village-based agricultural country to an urban middle-class economic powerhouse, in one generation, has been breath-taking. 

Marketing Grows from Nothing…

First, in this country of over one billion people, the most populous in the world with 19% of its population, recall that until the mid-80’s there was no marketing. There was no private enterprise or competition in the economic realm, which gives rise to the need for marketing. It was only with the economic and political opening under Deng Hsiao-ping in the 1978-82 period that foreign investment and private economic activity became possible. 

Since then, urbanization and economic growth have been spectacular, and a middle-class consuming public has appeared. The numbers are staggering. 

·         51% of China’s 1.3 billion people live in cities

·         18,500,000 moved from the country to a city during 2013 alone, slightly fewer than the population of the entire State of New York

·         41% of its population is under 30

·         42% of the population regularly goes on-line, and 43% of those buy goods and services

·         In 2012, there were 7 million more online shoppers in China than in the US

·         82% of the population have a mobile phone

·         420,000,000 people access the Internet via mobile 

Direct Marketing Challenges

With economic growth and development, marketing has grown, but direct marketing did not grow significantly until the digital era. The postal system has no preferential rates for direct mail, for example, and it has discouraged the private sector development in this area by offering its own lists, creative services, and letter shop services.

 China Post’s B2C list offering is a survey-based database of people who return a questionnaire. While this is  a technique used with some success in New Zealand and Australia, consumer populations which are avid distance buyers, it is questionable whether the Chinese consumers are widely inclined to compete questionnaires, given that they are increasingly well-served by retail chains and eCommerce merchants.  

On the other hand, China Post’s own promotions claim response rates as high as 4%. In addition, their inventory is claimed to include comprehensive industry specific B2B lists for much of China. There are also a number of reputable private sector list managers with industry lists drawn from attendance at industry fairs and conventions. For B2B marketers these offerings may be of interest.

The picture is made cloudier, especially for B2C lists, due to the lack of clarity in laws regarding privacy, data protection and personal information. This has discouraged database development and contributed to list owners’ reluctance to release data to the market. These owners are also naturally suspicious of the likelihood that their competitors would obtain their customer lists, a well-founded suspicion since employees are generally not loyal to their employers.

All of which helps explain why the average consumer in China received 0.3 direct mail letters last year, against the 226 which an America consumer received, and why they are more responsive to mobile messages.

     Direct Marketing Opportunities

This is not to say that in the long run direct mail will not have a more lucrative future. In some businesses has an actual promising life. Banks are successful in marketing new services to their house lists and luxury brands and automobile companies are assiduous with database creation. But it must be borne in mind that price is a critical marketing factor to consider, and like the localization, requires finding the right balance between extremes.

 China’s Per Capita ($USD) GDP is $6,076, compared with Australia’s $67,723, United States’ $49,922, and United Kingdom’s $38,589. Companies new to the Chinese market, excluding luxury brands, must adjust prices to levels that their targets can afford. Another nuance is that there are significant income disparities in different regions of the country and among cities, which are (unofficially) classified as Tier 1, Tier 2, Tier 3 and so on, based on size.

Digital is going be the most effective marketing opportunity for most marketers. Aside from penetration and on-line presence of potential customers, recall that 82% of Chinese netizens have credit cards which they use on and offline. In 2013, the express industry in China delivered over 9 billion parcels, or 6 to 7 parcels per person. These numbers indicate that China probably became the largest on-line shopping market in the world in 2013. 

If you are marketing into the Chinese market from abroad or from within the country, look to Data Services to assist with all your Chinese data management and data quality needs, regardless of whether you utilize English-language or multi-byte mandarin character address data. Good to note that China Post’s addresses are UPU standard S-42 compliant, so hygiene is much easier than in the past.