Why Western Marketing Strategies Fail in China
In recent years, China has become the beckoning land of opportunity with scores of international companies trying to break in to the Chinese market. As China’s economy matures, it becomes enticing, no longer for its cheap labor but rather for its growing consumer market. In the coming years, it will only become more important. China’s rapidly expanding middle class is expected to triple their spending over the coming years, reaching $6 trillion by 2020. Multinational companies cannot afford to overlook China, yet some have found themselves unable to break in to the Chinese market, whereas others have found more success in China than in their home country. Even companies with very similar products have achieved greatly varying levels of success.
A company’s marketing strategy is often the key to whether a product succeeds or fails in every market and especially in China. There are a plethora of reasons why western marketing strategies fail to reach Chinese consumers. Many companies believe that the same marketing campaigns that have been used elsewhere will also translate to the Chinese market, but this is often not the case. Chinese preferences, tastes, and interpretations are different from those of other cultures. Even within China, with its 56 ethnic groups and people with vastly varying levels of affluence, particular market demands differ across regions. On the other hand, some foreign companies have localized too much to the point that they have lost their unique appeal. Marketing mistakes in China come from various elements of the campaign, not only product but also promotion, price, and placement.
A 63% majority of international companies operating in China acknowledged that they needed to alter their product specifically for the Chinese market. In most cases, this does not mean completely creating a new product or service, but rather making small adjustments to better suit Chinese culture and preferences. Kraft Foods, upon discovering that Chinese do not like very sweet flavors, made an alternative Oreo cookie that had less sugar and included local favorite flavors such as green tea. Western fast food chains, in particular KFC, has had much success in China due to its combination of an extensive chicken menu, a favorite among Chinese, as well as local dishes. In fact, it has been doing so well that Yum!, which owns KFC and Pizza Hut, made 42% of its total profits from China last year. Other fast food chains that have nearly the same beef-filled menu as the United States have not had nearly as much success in China.
The success of China’s Taobao versus eBay demonstrates the importance of knowing one’s target audience. Both have the same basic service, providing a means through which individuals can sell products to other individuals, yet it is the platform and methods through which Taobao operates that specifically captured the Chinese market. EBay required purchasers to pay online using a credit card as is standard in the west. Taobao, understanding that many Chinese do not like to use credit cards online either because of not owning one or because of security concerns, allows customers to pay with cash on delivery. Price was another concern of using eBay, which required sellers to pay a fee for using their service. Taobao instead made profits through advertisements—something that is only a mild annoyance to Chinese website goers compared to a fee. Furthermore, due to the culture of bargaining and establishing trust and relationships before making purchasing decisions, Taobao added a chat feature to allow buyers and sellers to communicate with each other. EBay, fearing that the two parties would use this to make transactions without using their service—perhaps in part due to the service fee—chose not to add this feature. Despite its popularity in the United States, eBay was forced to terminate its China operations in 2006 after losing the market to Taobao.
On the other hand, having too much localization can hurt a brand just as badly as not having enough localization. Chinese like foreign products because they are unique and often are seen as a luxury item. If a foreign company localizes its products too much, it simply becomes a more expensive version of something Chinese companies already have. Therefore, multinational companies entering the Chinese market must carefully strike a balance between localizing and maintaining their original image. KFC appears to have discovered the right balance between western and Chinese, with a good mix of foreign and local dishes.
Creating a Chinese name for their brand is also a challenge for foreign companies. Some companies have been very successful with their Chinese name, having one that not only sounds like their original name but also translates well. Coca Cola’s Chinese name, 可口可乐 Ke Kou Ke Le, loosely translates to “happiness in the mouth” and also sounds like Coca Cola. Electronic company Best Buy’s Chinese name on the other hand is 百思买Bai Si Mai, which sounds like Best Buy but translates to “think one hundred times before buying.” Certainly there are additional reasons for Coca Cola’s success and Best Buy’s struggle in China, but a name surely has a profound impact on initially attracting customers to try the product.
The means through which a company promotes their products can also have a profound impact on the success or failure of the campaign. Advertising campaigns in China have gone awry when companies miscalculate the Chinese audience’s reaction to a particular message or fail to consider local conditions. The British Cadbury ‘Gorilla’ advertisement campaign featuring a gorilla playing drums was a huge success in the western market, generating millions of Youtube views and praise. Unfortunately, the advertisement did not translate well to the Chinese audience, who, rather than perceiving a gorilla playing drums as cute or funny, thought it confusing and strange. Other advertisements have been ineffective because they depict people and/or situations that are unfamiliar to the Chinese audience, such as a blonde family of four vacationing on a sunny California beach. Not only do the people in this advertisement not look Chinese, but it also fails to take into account that the typical Chinese family has only one child, does not vacation in California, and—especially for women—do not spend much time on the beach to avoid getting a tan. Multinational companies must also carefully consider current events and politics when designing advertisement campaigns. Sprite once had to pull an advertisement featuring a Taiwanese singer who was blacklisted by Beijing after singing the Taiwanese anthem at its President’s inauguration, causing controversy and losing money.
Price is another important marketing factor to consider, and like the localization, requires finding the right balance between two ends of the spectrum. China’s Per Capita GDP is $6,076 USD, compared with Australia’s $67,723, United States’ $49,922, and United Kingdom’s $38,589. Western companies operating in China must adjust their prices to suitable levels that their target Chinese consumer can afford. Companies should also consider price level differences across different regions of the country, as there are vast differences in income levels between Tier 1, Tier 2, Tier 3 and lower cities. However, foreign companies need not simply charge the lowest prices possible; marketing campaigns for luxury foreign products with a high perceived value could backfire if the price is too low. Luxury goods are a huge market in China, and more wealthy people are willing to pay more for valuable goods. If it is too inexpensive, it loses its value and uniqueness; it becomes a common product that everyone can have. Companies operating in China need to consider the perceived value of their products or services along with the disposable income level of their target audience, and price their products and services accordingly.
Place and product distribution has been a main source of failure for large “big box” stores such as Home Depot and Best Buy. These types of stores require a large amount of floor space, which can be very costly in centrally located areas, often pushing up in-store prices to compensate. With these restrictions and space limitations of inner big cities, many “big box” stores have been opened outside the main city area. China’s car market has been rapidly expanding, yet traffic congestion and parking hassles make shopping at these stores inconvenient. Plus, the store layout of stores like Home Depot, which primarily provides only the resources and tools, requires customers to have an idea of the do-it-yourself project before coming, which can be difficult for Chinese customers who have only in recent decades begun to own apartments and houses. IKEA has been an exception to the rule for these types of stores. Because IKEA provides in-store examples of trendy designs that customers can then replicate, it has become not just a chance to shop but a design learning experience that inspires creativity.
Multinational companies cannot afford to lose the Chinese market. The opportunities are great, but once a competitor gains a strong hold on the Chinese consumer it becomes more difficult to take it back. Companies looking to succeed in China must hire and listen to experts who understand Chinese cultural preferences, including both locals and foreigners with work experience in China. Many western marketing strategies fail in China simply because they do not understand the Chinese consumer. Young professionals in marketing need to experience China themselves and actively engage with their target audience starting with work, study abroad, language study, and internships in China. When designing a marketing campaign, the company will need to carefully consider their audience, keep any cultural particularities in mind, stay informed of current events affecting their consumers, and conduct thorough market research.