Across the world approximately 30,000 products are launched every year, for any brand standing out in this ocean of choice is hard, but we think it’s even harder for Chinese companies entering western markets.
Aside from the obvious cultural, social and language differences, the competitive landscape and the behaviours of consumers are so different that the things that have made a business successful in China will not have the same effect in the developed markets of the west, and may in fact work against growth and profitability. So in a series of articles we’ll be looking at the challenges facing Chinese companies in these markets and exploring some of the potential ways to overcome them.
We’ll start with a fundamental difference. Market maturity. For the past +30 years China’s economy and market sectors have been high-growth, rapidly evolving markets in which speed of thought and action can be the key driver of value creation. In mature markets growth is slower and the market dynamics are different, so a different approach is needed.
Of course, in countries with completely different histories and culture there are vast differences in the economy, competitive landscape and, consumer and business behaviour, that all need to be considered. But the key feature of most western markets, and what makes them fundamentally different to most Chinese markets, is market maturity.
For the past +30 years China’s economy and market sectors have been high-growth, rapidly evolving markets in which speed of thought and action can be the key driver of value creation. In mature markets growth is slower and the market dynamics are different, so a different approach is needed.
- A mature market is characterised by slow growth in which customer needs and attitudes towards the market and its main players evolve slowly.
- Typically the market is dominated by a few well-known brands whose market share only changes slowly, if at all.
- These dominant players focus on brand and channel strategy rather than product innovation as the key drivers of sales.
For example, during the past few years, while the total value of the UK bicycle market has slowly increased, the total volume of sales has declined somewhat. The market is dominated by a handful of brands, of which the biggest are Trek, Giant and Specialised, while on the retail side of the business Halfords is by far the biggest retailer with 26% of all sales in the market.
Although the last big trend to drive substantial growth was 25 years ago when mountain bikes arrived, new profitable niches have been opening up. The folding bike segment now accounts for 4% of the total UK bicycle market. Until recently Brompton Bicycles was virtually the only player in this market, but as the segment continues to grow new competitors have begun to enter the market at lower price points.
The eBike segment also continues to grow. It’s relevant to modern consumers’ desire for cleaner, greener commuting in the UK cities has led to its steady growth, but with sales still lower than markets like Germany or the Netherlands, it has considerable potential.
In mature markets, doing more of the same is unlikely to unlock new growth. With consumer demands largely met, it is only the companies able to look at the market from a fresh perspective and identify new un-met consumer needs that succeed. In the case of foldable bikes, the un-met need was consumers looking for a more convenient way to combine cycling with commuting by train; with ebikes, consumers desire for cleaner, greener and more convenient commuting options in the UK’s congested cities.
For any company considering their mature market strategy there are three critical elements for success.
- Look for emerging consumer segments where there’s a gap between new consumer attitudes and behaviours and what is currently being provided.
If we look at the instant coffee market in the UK Nescafe has been the number 1 brand over many years. In order to maintain its position it constantly looks for new consumer needs. As consumers began to worry that caffeine was bad for their health it introduced de-caffeinated versions; as consumers wanted more premium coffee it introduced special varieties from specific places, for example, Indonesian Sumatra Coffee; as consumers looked for more exotic flavours it introduced Macha flavoured versions, etc. All these new consumer demands are small parts of the overall market, but by identifying and meeting the needs of these sub-segments Nescafe continues to maintain its number one position.
- Don’t get lost in the crowd. Establish and adhere to a clear source of differentiation from key competitors. Mature markets are full of me-too competitors, whose offer and marketing don’t stand out.
In the mid 2000s in UK and Europe, Hewlett Packard recognised that there was a huge mismatch between the way computer brands sold their products which was based on the technology (processor speed, silicon chip type, etc), and how consumers bought computers, which was based on how it could help them live their lives.
So Hewlett Packard completely changed its marketing and introduced the ‘The Computer is Personal Again’ communications campaign. Showing how Hewlett Packard computers would fit into consumers lives and make it easier to do every-day tasks was completely different to what every other brand was doing at the time. It helped Hewlett Packard stand out from the competition, increase its sales volumes and increase its profit margin.
- Get the pricing right. It’s easier to enter a mature market at a low price point – there’s less risk for consumers when trying a new and unknown brand if the price is lower. Once you get your brand and marketing established then introduce new higher price variants.
During the late 1980’s and even in the early 1990’s in the UK Samsung TVs were sold as lower price TVs. Although their functionality was equal to the higher priced Japanese competition their quality was inconsistent. In order to sell their products at a higher price point Samsung first changed their manufacturing and quality control processes to make product quality more consistent. Then, as quality improved they introduced new advertising to spread this news, and also to improve the presentation of the Samsung brand so that UK consumers were prepared to accept new higher price products. In the UK today Samsung TVs are some of the most expensive desirable products in the market.
In all these examples the foundation for success was a detailed understanding of the consumer and how their attitudes and behaviours could create opportunities for the brand or act as barrier to its growth and profitability. For an in-depth understanding of UK consumers and how to match your products to the right target audience contact us.
Wesconnex is a unique marketing agency, established to help emerging Chinese brands grow faster and more efficiently in the UK. We provide localised Marketing Strategy & Planning, Ad Optimisation and Creation, and Content Marketing.