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October 21, 2009

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Use digital media to tap inland areas

China's inland market of almost a billion people is a focus of central government development policies, but analysts advise investors to do their homework before venturing outside the nation's prosperous east coast corridor.
Doing business in China's hinterland has its surprises, according to market researchers. People who live in areas considered economically backward are not necessarily backward in their thinking, and the digital age is allowing them to leapfrog traditional development phases.
"The new emerging cities are not simply copies of bigger cities and have been developing in a much different way," said Peng Gang, director of integration strategy at Bates 141 China, an Asian marketing communications network under WPP.
"Companies that employ the same marketing strategies as they have used in major cities will encounter huge obstacles in building up their brands in emerging cities," he added.
The Chinese government, keen to end economic disparities between coastal and inland areas, is pouring stimulus money into emerging inland markets and offering incentives for companies to invest there.
Researchers tracking consumer trends in central and western areas of China are coming up with sometimes unexpected results. For one thing, hinterland consumers turn out to be more digitally savvy than assumed. For another, their choice of brands is often closely related to "mianzi," a desire to enhance their reputation, respect, recognition and social standing.
Retail sales of consumer goods at and below the county level totaled 3.48 trillion yuan (US$510 billion) in 2008, nearly double from four years earlier, according to recent figures from the National Bureau of Statistics.
"Purchasing power or disposable income in lower tier cities may be stronger than the first and second-tier cities and stronger than our expectations," said McKinsey analyst Max Magni.
As a result, consumers in inland markets are playing catch up with their brethren in larger cities and are showing a voracious appetite for new product lines.
Digital media
Since many of them have limited access to what they want in their local communities, they have turned to digital media to search for information, swap ideas and even shop online.
"Bulletin board systems and other digital media have a bigger impact on consumer purchasing behavior in lower tier cities than in larger cities," said Meg Chen, general manager of the digital department of ZenithOptimedia China, a media services group owned by Publicis Groupe.
"It is kind of surprising," Chen said.
Companies which want to succeed in China's emerging markets need to focus on people like An Hui, who lives in a small city in the central province of Hubei. She is a user of, a leading consumer-to-consumer marketplace Website.
"I do some shopping on," the 26-year-old said. "I originally went there because of relatively lower prices, but now I shop for items not available here. I buy nearly everything online."
Searching for the latest fashion trends and lifestyle products is not only a matter of shopping but also a pleasant diversion for many who live in smaller cities deprived of the buzz of big metropolitan areas. They no longer want to be left behind, market researchers said.
"Networking becomes a larger part of their life and gradually changes their lifestyles and purchasing behavior," said Peng. "With the increasing spread of computers in these areas, sometimes more time is spent online than in watching television or reading magazines."
That's a cue for advertisers and for companies seeking to promote their brands.
"The digital media has developed so rapidly that companies have to change as fast as the technology," said Steve King, chief executive of ZenithOptimedia worldwide.
More channels
One or two years ago, the booming technology of short messaging was considered an advertising platform full of opportunities. Nowadays more communication channels have opened, such as mobile videos.
"It sets high requirements on the media profession's understanding of new technologies and the influences of new media on consumers," said King. "Many factors have to be taken into consideration with the use of new media, including creative ideas in marketing activities and how to circulate the information."
King said the use of digital media in China, including mobile phones, social networking and blogs, is developing faster than the global average, and that's true even in more remote areas of the country.
"Lower tier cities, which are unmapped territory for most brands, have a unique set of values," said Steven Chang, chief executive officer of Optimedia China. "Seeking community support and social recognition are very important to people there."
In the West, it might be called "keeping up with the Joneses." In China, it's called "mianzi."
Xu Lin, a 36-year-old health products agent in the city of Benxi in the northeast province of Liaoning, describes that trend in her community.
"Buying a car is not necessary because taxi fares are very cheap," said Xu. "But many buy new cars here as a show of social status."
In the household of Wang Yunlin and her husband in a small city in Shandong Province, status is a state-of-the-art television set. The couple spent nearly 13,000 yuan on a 46-inch Skyworth liquid crystal display television. They prominently display it in their living room.
The inland market's narrow exposure to the outside world has shielded it from the worst effects of the global financial crisis, giving it a firm footing for urbanization and modernization. But progress won't come overnight, analysts warn.
"The great consumer potential of the emerging cities will be unlocked only gradually in the long run," said Bates 141 China's Peng. "Companies which want to do business there need to develop long-term marketing plans based on a full understanding of local demand."


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