China Chinese Markets Marketing

Part One: Consequences of ‘NOT’ Understanding your Target Audience in China

Chinese Consumer Sexy chinese girls Shopping, Understanding your Target Audience in China

Photo Source: Emerging Growth

Importance of Understanding your Target Audience in China

The Chinese consumer is changing and understanding your target audience in China is becoming more and more important. In the next three posts, we will take a look at how the Chinese consumers are segmenting and how companies can better prepare for the shifting market.

According to a WARC Briefing, “China already has the world’s largest car market, the biggest internet and mobile population, the biggest share of growth in retail dollars worldwide and the second-biggest economy overall.” The importance of entering the Chinese market is blatantly obvious and the importance of entering successfully is unparalleled and the only way to enter successfully is by understanding your target audience in China.

Consequences of ‘NOT‘ Understanding your Target Audience in China

Many “Western Giants” have fallen in China, companies including Best Buy, Google, Home Depot, Mattel, etc. Not all of these companies have failed because of the same reason but many have failed because they didn’t understand their target audience in China.

Mattel is too Sexy

If you have studied or read about foreign businesses entering China than you have heard of Mattel and their Barbie failure. This case seems to be the most obvious example of not understanding your target audience in China. From the start of the flagship store it was obvious they had no clear understanding of China, they tried to target both women and girls without knowing which segment would connect with their product. Turns out either connected.

According to Anil Gupta and Haiyan Wang, Business Week, “Despite the many unknowns, Mattel designed the Shanghai store to target both young girls as well as adult women, thereby significantly increasing the risk that a misconnect with either segment could doom the whole venture. The giant store size also meant that Mattel needed to have a very large mix of product and service lines in the store—900 display cases, a restaurant, a spa, a cocktail bar, and an adult clothing section, to name just a few. The large variety of products and services rendered it impossible for the company to figure out in advance which ones to localize, how much to localize, which of them would catch on with customers, and how much customers would be willing to pay.”

So, why didn’t this work? Barbie is American. Barbie is the role model of what an American woman should inspire to be, according to Americans. She is strong, smart, independent, social, and confident. These are the same things Chinese women wish for right? Wrong. The ideal woman in China is very different, especially in rural China.

Mattel also failed in not understanding their brand reach. In China, nobody knows Barbie, so why would they pay a premium for products they don’t know or care about. “Since Barbie is not a cultural icon in China as she is in America, Chinese consumers couldn’t care less about Barbie-branded products. – Global Post

Mattel missed on almost every level. Not only did they not understand that the locals could not relate to an American icon, they also failed to understand how women shop. The Chinese are modest and often wear “Cute” clothes.

According to Forbes, “Unfortunately Mattel failed to execute the strategy well. Like Apple when it launched the iPhone in China, Barbie made the mistake of paying too little attention to local consumer tastes. Chinese women tend to like cutesy, girlish pink clothes (think Hello Kitty), not the sexy and skimpy kind Fields designed. Odd as it sounds, Snoopy-branded clothes, cartoon logos and all, are hot sellers for women entering the white-collar workforce.”

Chinese women are often sexually repressed and therefore do not embrace “Sexy”. In China, women should be pure and honest not daring or sexy. This mindset is changing but most women still embrace the traditional Chinese values. In the end, Mattel couldn’t compete in China because they didn’t take the time to understand their target audience.

Best Buy is nice but too expensive

Best Buy took an American business model and dropped it on China, the results were easily predictable and after five years of “seeing red (not Chinese money)” they pulled out. According to Shaun Rein, CNBC Contributor, “Best Buy in China was perceived as being too expensive, with many of their products priced higher than in local markets. Why buy a Sony DVD player or Nokia phone at Best Buy when you can pay less for the exact same product at a local store? Consumers will only be willing to pay more, like at the Apple stores, if they are buying something they cannot get elsewhere.”

The local competitors could offer a lower price because many of them are willing to use questionable business practices. Local retailers are more willing to sell counterfeit products or software and many do not provide continued services (return policies, warranties, etc.). The American model of economy of scale didn’t work because the prices were still too high compared to local retailers.

Also, the local retailers bargain allowing customers to “win” the right price. Bargaining is a part of life in China and many Chinese enjoy the interaction. By having fixed prices that were higher than local retailers and considered expensive, Best Buy turned many Chinese shoppers away. This was one of the major problems, along with others, that caused Best Buy to fail in China. Best Buy failed because they didn’t understand their target audience in China. They didn’t understand how Chinese shop or how Chinese shop for electronics.

Home Depot is beneath us

Another big-box store failed because they didn’t understand what, how, and where. The Chinese have a superiority complex, within China. Rich Chinese often look down on the poor and anything associated with the poor*, which includes manual labor. Being able to buy something shows wealth, this includes home improvement.

When Home Depot failed in China, a company spokeswoman said, “China is a do-it-for-me market, not a do-it-yourself market, so we have to adjust.” This showed a lack of understanding their target audience in China. Anyone, who has spent time in China, would have been able to tell you the Chinese like things done for them.

According to Benjamin Carlson, Global Post, “There are several factors behind the failure. First was simply timing: Home Depot came late to China, after its competitors already had a foothold. By the time it arrived China’s growth was slowing down. Second was the nature of China’s housing market. Many people buy homes for investment and speculation, not to improve. Third was the store format. As Best Buy and other American retailers have found, Chinese consumers don’t like big, boxy warehouses far away from a city center. Finally, and most fatally, Home Depot tried to bring American notions of DIY to a market where labor was so cheap that most people simply hired a handyman.”

* This is not unique to China.

Part Two: Changing Demographics: Age Gap, Wealth Gap, Location, Language, and Gender Roles (Continue Reading)

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