China Digital Strategy for the SME Summarized: Pt.1
- December 22nd, 2015
- in Best Practice
For the western organization, there is no direct route to a profitable destination in the China market. Marketing here, as anywhere else, is increasingly digital, so that a route must be found on the Chinese Internet. But because the Information Age has made digital approaches so much more feasible than physical retail & distribution approaches, perhaps it is better to say that a route can thankfully be found on the Chinese Internet.
So how does the SME, with no prior or limited exposure to the China market, use digital strategy to reach realistic goals?
To put an answer in context, we must first address the two most popular methods, the myths around them, and why their upside is limited for most western organizations.
The Myth of the Magic Mandarin
“Can you introduce me to a distributor?” Is the first and all-too understandable wish for the SME that believes it faces an ocean of unknowable customers, inscrutable cultural preferences, scam artists, and vague laws rigged against it.
There are no magic Chinese partners who will buy big numbers at a fair price and “take care of the rest”. The rest is too fluid, and too demanding to be readily taken care of, simply because one is Chinese.
Considerable resources are needed to middleman your brand and market development. Without your involvement, a serious distributor will be buying your product as close as possible to cost, unless you have some amazing leverage.
For those clinging to hope for access to officials who will use their leverage to make mutual fortunes, post-WTO reality makes such hopes foolish. A perusal of China Policy will convince of that.
The Myth of the Magic Platform
“Complete solution” is a popular phrase Chinese platforms and agencies of all stripe use to describe themselves. Rest assured that no one website or agency can deliver both reach and support at reasonable costs, unless you are already a well-established brand in China.
Large agency premiums pinch margins single-digit thin. Success on Tmall and JD, two sites with 70% of China’s online B2C volume, demands significant, often infeasible commitment and cost. The competition is fierce, the pieces to juggle many. Smaller sites pose similar challenges and costs, with much less traffic.
As to building one’s own complete solution, an organization can add China business establishment, product registration, and taxation to the juggling act.
Beyond Myth and Magic – Growth Hacking
Anyone over thirty is forever getting used to living in an online world that digital technology has flattened, what Information Age prophet Marshall McLuhan called “living at the speed of light”.
Digital technology has made best practice marketing a method currently called “growth hacking”, using Internet tools that make it possible to track, test, iterate and improve marketing to the point that gambling on big China launches or entangling alliances is not only unnecessary, but counterproductive.
Growth hacking was pioneered by Hotmail, which embedded “P.S.: I love you. Get your free e-mail at Hotmail” in all emails, which garnered 10 million users in two years and $400 million from Microsoft.
Today, companies like Airbnb and Uber are bandied as examples of IT-powered brands that have scaled exponentially quickly. Chinese companies have done the same, such as Xiaomi, which used an Internet-only approach to go from zero to world’s 4th largest smartphone maker in under five years.
Defining Growth Hacking for an SME in China
The proposition is obviously not that SMEs should find or expect an industry-changing innovation in order to compete in China. Rather, it is to use the growth hacking methodology of getting, maintaining, and multiplying attention in a scalable and efficient way.
Likewise, the idea is for a western SME to leverage its existing value proposition, so that the marketing becomes baked in with the whole value chain, rather than a necessary evil once the product has been developed.
A western SME not yet “in China” has a wonderful value proposition: not being in China. The unchecked growth of cross border e commerce, in all of its forms, from Chinese consumers hazarding Amazon.com’s English, to Chinese daigou swarming Australian supermarkets to haul away pallets of infant formula, shows the ludicrously undersupplied China demand for authentic goods shipped from overseas.
Therefore, the growth hacking essential of finding a product/market fit for China is baked in to the proposition of being a premium, authentic western brand for Chinese consumers. Today, getting that fit just right – target audience, price point, messaging, channels, can be enabled through data and information, rather than the instinct and experience of putative China experts.
Justifying a Growth Hacking Strategy for China
Whether you call it “growth hacking”, “an agile approach”, or just “effective marketing”, the idea behind best practice China digital strategy is to push metrics with testable and scalable methodologies.
“Growth hacking” is what startups call this idea, and in many ways the SME entering the China market is like a startup: unsure of the core customer base, why it buys, or the best channels. An SME should be aiming for growth far beyond the 5% that large corporations find acceptable in a market, while dealing with the challenge of having no brand equity or extensive resources to develop it.