1、10 KEY CONSIDERATIONS FOR CHINA MARKETING2024MINI-REPORT#210 KEY CONSIDERATIONSHIGH-LEVEL INSIGHTS FOR MARKETING LEADERS10 CONSIDERATIONSKey economic,cultural and political considerations shaping the China marketing landscape for 2024.BIG PICTURE INSIGHTS6.SOCIAL COMMERCE RIPS1.VALUE ABOVE ALL ELSE9

2、.TRUST STARTS TO FRAY4.MOVE TO MODESTY5.MOOD BOOSTING10.CAREFUL USE OF AI2.DIVIDES ARE GROWING7.IMPACT VS IMPRESSIONS8.DISCOUNT DILEMMAS3.HUSTLE AND HOPE1.VALUE ABOVE ALL ELSE There has been a major reshuffling of consumer priorities in the past several years,with trends flip-flopping as the economy

3、 has endured major adjustments.With China now starring down a deflationary recession,consumption patterns are responding to a more cautious mood.Prior to Covid,the middle class was upgrading rapidly from discount and value brands to luxury and leader brands.During this timeframe,spontaneous and emot

4、ional purchases became increasingly common.Luxury brands,together with fringe aspirant brands enjoyed solid gains during this time,tapping into promiscuous consumers with a discovery mindset.Fast forward to 2023-24 and the mind of the consumer has become more rational,more careful and measured.While

5、 there is still space for spontaneous and luxury buys,the trend is moving firmly in favor of finding VALUE.Weak results from shopping festivals(eg.Double 11,6:18),and the concurrent rise of Pinduoduo,point to rise of everyday low pricing replacing periodic discounts(and related emotional pressure th

6、at comes with festivals).In short,some of the joy is being sucked out of shopping,as rational considerations replace emotional instincts.In this context,brands will need to get very clear on being well positioned around rational,highly considered decision-making.Brands will need to shift more attent

7、ion from creating hype,toward demonstrating value.See Section 5 of this report for a deeper analysis on brand positioning and how it relates to Chinas changing consumer landscape.Many Chinese brands are well positioned as value players,having products which are at/near top quality but with prices si

8、gnificantly lower than luxury/leader brands.These brands will need to look beyond product quality and pricing,and improve emotional(intangible)value,in order to build sustainable margins.10 CONSIDERATIONS2.DIVIDES ARE GROWINGMoving thru 2024,insights around generational tiers and income tiers should

9、 prove more important than city tiers as the basis for consumer targeting.Rising economic tides once lifted all consumers,resulting in near endless prospects to grow around newly forming middle classes in lower tier cities.In this context,brands were focused on penetrating deeper into lower tier cit

10、ies,with the idea of being first to make firm connections in hot,newly forming communities.Economic contraction will require more specific focus on haves and have-nots,rich vs cautious,older vs younger.In this environment,wealthy and older consumers will nominally be moving ahead of the wider middle

11、 class,so will be courted by a growing range of luxury/leader brands.In the luxury space,top-end consumers are already carrying an outsized share of consumption.Reports from Farfetch were that the top 1%of customers accounted for 27%of all sales(by value)on the luxury platform.Luxury sales have gene

12、rally held up well in China,despite a growing sense of consumer caution.With an eroding property market and cascading stock markets,hard goods appear to be the most tangible,secure bets for maintaining wealth.Wealthier,older people(中式钱 or Chinese old money)in China are heavy buyers of luxuries as in

13、vestments.And for younger,less affluent consumers there is a thriving second-hand trade in luxury products.Anything with gold in it is selling well right now.From this perspective it would not be unreasonable to expect luxury brands to launch more products with precious materials in the year(s)ahead

14、.Premium spirits play a similar role as tangible,non-perishable investments.The generational rift between young and old,rich and under-employed in China is become more intense.It has a similar feel to the dynamic in western countries between boomers and Gen Y and Z.Younger Chinese,who are laying fla

15、t and hoping to let it rot are becoming disenchanted with parent and grandparents who had an easy path.OK Boomer!10 CONSIDERATIONS3.HUSTLE AND HOPE The job market in China has become increasingly soft.While the story about Chinas epic youth unemployment is already well documented,recent trends have

16、also seen waves of layoffs among more experienced,tenured staff,in white collar jobs.And,while younger,never-employed youth are laying flat,more mature newly unemployed are hustling to develop new streams of income.Set against this tightening economy,there is a surge of new businesses(and side-hustl

17、es)rising.Laid-off professionals are setting up boutique consulting firms,mom-and-pops are launching niche brands everyone is reselling products from far-and-wide onlinegig work and peer-to-peer gambits are becoming more commonplace.The verve and vigor of prime-aged Chinese is not easily extinguishe

18、d.New shoots of optimism,hustle and hope are sprouting up.But,as fewer and fewer people are spending,it will be curious to see how many of these new enterprises are sustainable.Set against this wave of entrepreneurship,hustle and hope,there will be increasing interest in all things related to self-i

19、mprovement,entrepreneurship and productivity.Smart brands will want to evaluated opportunities to support this trend,with resources,opportunities,content and benefits-presented to support the goals of new entrepreneurs and people with side hustles.A wide array of learning platforms,communities and r

20、esources(as well as influencers)have risen up to meet this demand for up-skilling,re-skilling of workers who want to stay relevant as the economic pie shrinks further.10 CONSIDERATIONSThe current wave of entrepreneurship and(side)hustling is notably different from earlier waves.The level of professi

21、onalism applied to this wave is notably higher.The ex-professionals turning to owned businesses now,have more experience and more-at-stake than earlier groups(of GenZ and Y),who were more inclined to creating lifestyle businesses.4.MOVE TO MODESTY The return of consumption in China(post Covid)has be

22、en muted-especially when compared with markets like the US.Where US consumption has been marked by revenge spending and travel,Chinese have been slow to spend.Luxury spending sprees,gourmet dinners and grand international holidays have been replaced by activities and experiences closer to home,such

23、as;city walking,BBQs and making home a comfortable space to relax.General budget prudence has been a reaction to the stutter-re-start of the economy.This budget prudence comes together with a growing trend toward experiencesproducts which accelerated during Covid.People are choosing to create fun,hu

24、mble experiences with friends-bypassing the fancy restaurants and shopping malls for weekends outdoors and at friends homes.And,while there is traffic at shopping malls,there is more window shopping,less purchasing happening now.The stalled housing market(with prices edging downwards)also weighs hea

25、vily on propensity to consume.With the wealth effect being put into reverse,it looks like people may be conceding they will be in their current homes for much longer than previously imagined.If youre going to be living in your current pad for a long,long time,might as well make it a place you love.I

26、nternational travel looks like a relative bright spot for 2024.While it is unclear whether travel will truly bounce back,the impediments to travel are being lifted;air ticket prices are coming back down,more flights and routes are opening up,and visa wait times are easing.Look for Chinese internatio

27、nal travelers to slowly radiate back out globally,starting with Asian destinations closer to home(eg.Japan)in early 2024,North America,Europe in late 2024,early 2025.Chinese tourists to places like Hong Kong are skipping the watch shops and Michelin Star restaurants in favor of street food and hikin

28、g.Where,Chinese consumers used to brag about status purchases,they are now proud of travel hacks to save money;how to shower for free at community centers,how to find discounted meals and free activities.10 CONSIDERATIONS5.MOOD BOOSTINGTo fill the emotional void of the decades long consumption buzz,

29、Chinas consumers are looking for things that provide mood boosts,things that provide a sense of comfort and joy.Preferred mood boosters include a wide range of products and activities,from;small treats to premium snacks and spirits,from toys and games to plush collectibles,from pets to outdoor hobbi

30、es,fragrances and short videos.Brands in China(knowingly or not)have been leaning into this mood boosting impulse for years already.Two notable examples of how brands connect with this trend are;(1)with branded cafes,and(2)with brand collaborations that spark new looks/tastes for the brand.There are

31、 dozens of branded cafes(eg.Ralph Laurens“Ralphs”cafe),operated by luxury brands.Hoping to build emotional connections with consumers and increase dwell time,these branded cafes greatest trick is probably leveraging the mood boosting effect of caffeine to increase brand favorability.Novel brand coll

32、aborations work to create subtle dopamine hits when they creatively hack two otherwise unassociated brands together(think:Maotai x Luckin Coffee).Brands that can constantly keep launching fresh,new concepts(their own or thru collaborations)as affordable indulgences are well positioned in this enviro

33、nment.Digital content also plays a big role in this quest for mood boosting activities.Short videos standout as a notable remedy,with apps like ReelShort as an emerging star.The Chinese app(which is as popular outside China as inside),serves up serial content in the form of short form videos.ReelSho

34、rt drama series are super-distilled TV shows,offering up powerful,punchy episodes,which are quick and easy to watch,leaving an emotionally charged afterglow.Mood boosting and comfort giving products can be viewed as new luxuries(and affordable indulgences)helping to ease shopper withdrawal symptoms

35、and/or hangover loneliness from a slowing economy.Pets,collective toys,fragrances,novel foods and spirits are all thriving in the current environment.10 CONSIDERATIONS6.SOCIAL COMMERCE RIPSWhile social commerce has been a mainstay of the Chinese marketing ecosystem for many years,it is in the proces

36、s of a systemic pivot,as customers become more considered and cautious with purchases.The rationale is that,if I cant afford to make mistakes on what I buy,then Im going to do my homework and look for a lot of social proof.There is a dramatic reshuffling of go to ecommerce channels,with Taobao/Tmall

37、 losing ground to social-focused channels.In 2023,Pinduoduo grew 93%,Douyin grew 139%,RED was up 31%,Bilibili and Kuaishou were up double digits-all while Taobao was flat(according to Moojing).In the public domain,Pinduoduo is the main growth story.PDDs growth has been staggering,as consumers in top

38、-tier cities have joined lower tier consumers in discount hunting.The allure of group discounts have scaled nationally.Deals,reviews and recommendations are also flowing through WeChat(WeCom)as private traffic(word-of-mouth)have been a powerful driver of commerce.RED holds a special place in the fab

39、ric of China social commerce,as a trusted place for discovery,ratings and reviews-especially for newer products where opinions are not yet fully formed.In the current down economy,RED has also found itself at the center of a new trend where customers are seeking inexpensive self rewards.Customers se

40、eking this form of retail therapy are identifying products from factory accounts on RED and then turning to Alibabas factory-direct site to buy one-off designs.In the RED listings,these factories are namedropping,citing the global brands that they OEM for-adding to the appeal.The value for Chinese s

41、hoppers is getting brand-synonymous products at factory prices.In past years,social commerce was largely about building hype and converting excitment-to-conversion,with a potent mix of influencers,live-streaming and content.These aims are shifting to more sober,rational ends as consumers become more

42、 considered.Social commerce is now,more about organizing social proof,justification and confidence,around the questions of did I get a good deal and is the product good value.10 CONSIDERATIONS7.IMPACT VS IMPRESSIONSBrands and senior marketers are under increased pressure to demonstrate ROI on market

43、ing spend.It is not enough to report on a windfall of new impressions from campaigns pumped out into the digital ether.Brands must now focus on IMPACT-and the tangible gains that come from being in touch with their customers.This shift has several implications;First,brands must be focused on activat

44、ions that are memorable and emotionally connected with customers.The goal is to spark lasting memories and vault the brand into the customers list of considered brands.Second,there should be a mindset of quality over quantity with marketing.There is no point in spinning up an array of vacuous campai

45、gns if impact and engagement are the goals.Going through the motions with pray-and-pray media can be existentially damaging in this environment,where customers want greater connection and reassurance.Third,there has to be an even higher level of hustle applied to hybrid marketing-service activities,

46、where efforts are focused on community building,experiences and service quality.In this context,private traffic and the detailed work of cultivating customer interest and engagement is key.Measures of impact and ROI cannot be limited to bottom-of-funnel.Its too easy to optimize your brand into the g

47、round by focusing on conversion metrics.As spending becomes more considered,brands actually need to create mini-breakthroughs at the top-of-funnel,and build more sustainable pipelines of new customers.Creativity is the secret sauce when it comes to leveling up brand impact(and expanding the funnel).

48、Creating impact with customers can be achieved in many forms,from branded content,to events,collaborations,pop-ups AND service/support.Events and activities are really strong focus areas in the current environment,where people are looking for fun,free experiences.10 CONSIDERATIONS8.DISCOUNTING DILEM

49、MASWith spending down and scrutiny of purchases on the rise,brands need to re-evaluate pricing strategies and positioning.Most brands are loath to discount and forfeit margin.Sustaining higher prices for longer makes sense,especially for brands trying to level-up into premium and luxury ranks.Every

50、brands wants the margins that come with being a leader in the market.China is host to a plethora of aspirant brands,hoping to break into the premium space,when,in fact a very large percent of these brands should be playing in a lower tier.There will be immense pressure on brands(especially brands as

51、piring to premium status with inflated margins),to drop prices in China.This pressure will be fueled by category-wide races to the bottom.Races to the bottom will increase through 2024-price cuts will be ruthless and rapid.Brands will have to develop strategies to defend against these pricing wars b

52、y understanding customers better,demonstrating quality and value,closely monitoring price signals,together with improving precision of message targeting.And,in some cases,brands should in-fact participate in strategic price cutting-but do so not as a defenders,but as tacticians.Having a clear strate

53、gy is key.As margin pressures increase,brands will have to make tough decisions with how they approach growth and sustainability.We are already seeing a wave of divestments and retrenchments from global brands in China as they seek to de-risk.Weaker business units are being sold off,WOFEs are being

54、re-structured as JVs and licensing deals.Brands without clear purpose and positioning will be under growing pressure.Chinese brands are also showing signs of cracking under margin pressures-particularly brands in overly competitive categories(eg.Electric Vehicles)and brands who are discount players.

55、Nobody really wins in a race to the bottom.Many Chinese brands are redirecting efforts toward foreign markets where margin pressures are not as dire.See Totems report on China Brands Going Global.There is a school of thought that suggests price cutting earlier is better,as it;(1)puts your brand ahea

56、d of the curve,drawing-down on sales earlier,taking sales from competitors,(2)it puts your brand in position to have a larger pool of customers to market and resell to,and(3)you immediately improve CAC(and reduce marketing spend).Category analysis matters a great deal in building these strategies.10

57、 CONSIDERATIONS9.TRUST UNDER PRESSUREAdding insult to injury,in a down market,the challenges and costs of maintaining trust with customers are rising.Customers have increased expectations of the brands they are buying under these conditions.Brands must prove themselves worthy of customer trust-espec

58、ially larger,more expensive brands.And,middle tier brands,selling products that were once low-involvement,now find themselves having to support higher-involvement(deeply considered)purchase decisions.Previously unassailable brands like Canada Goose and Florasis have had to manage through several PR

59、crises in 2023.The stakes for buyers and seller are rising.Simple mistakes can turn into major PR challenges that shake customer trust.Brands need to carefully review products,communications and services within this new,more delicate context.The larger the brand,the more susceptible they are likely

60、to be in the crosshairs of rising consumer expectations.The higher the premium paid to the brand,the higher the expectation to perform.And,foreign brands need to be particularly careful in this context,as geopolitics weigh heavily in the background.Trust works both ways.Customers too are increasingl

61、y betraying the trust of the brands they love.Abuse of returns policies and goodwill is a notable example.Return rates are skyrocketing across all pricing categories.Some luxury brands are reporting returns rates in the 50%range-which stings when you consider how complex reverse logistics are with t

62、hese dear products.Ecommerce platforms stand in the middle of this issue.Many platforms have enacted“refund-only”policies that allow items to be returned with less reason(eg.No flaw with the product,but simple dont like it and want a full refund).Look for ecommerce platforms who are staunchly compet

63、itive with one another to maintain customer loyally,to maintain very liberal policies on returns.10 CONSIDERATIONSAt the same time,grey market and fake products are also on the rise.Global distributors(from other markets where sales are slow)are dumping legitimate products into China-at the exact sa

64、me time as brands are struggling to maintain margins among competitors in China.The rise of grey market product on sites like Dewu,Pinduoduo and on private traffic(WeChat)has been staggering.10.CARE-FUL APPLICATION OF AIAI(Artificial Intelligence)had a banner year in 2023,as ChatGPT and a host of ot

65、her global AI platforms captured the imagination of marketers and consumers alike.How will AI play out in China,given the changed consumer mindset?As consumers become more cautious,prudent and considered toward purchase decisions,AI should find its optimal role in China as a tool to help marshall wa

66、ry consumers along paths-to-purchase.As a performance focused marketing tool,AI could be applied to better identifying concerns,questions and hesitations,while designing optimal,personalized remedies.Given this backdrop,brand marketers in China should game plan for two pathways with AI;1.External Ap

67、plications:Customer-facing activities such as virtual idols,chat and customer service,and AI-augmented and interactive campaigns and events,link to CRM and customer insights.2.Internal Systems/Apps:For improvement of,and measurement of marketing systems,such as user insights,path-to-purchase analyse

68、s,predictive analytics and scenario modeling.Baidu has rolled out comprehensive plans to automate marketing systems but its probably too early for most brands.An important first step for most brands(apart from experimenting with content creation)is to get organized with already existing brand inform

69、ation and systems-and audit AI-readiness together with cost/benefit projections.Totem has outlined a framework for how marketing leaders should be approaching AI transformation and investments,with the aim of answering the questions of;(1)what investments should be made,and when,and(2)how to balance

70、 cost savings from early AI trials with the potential revenue gains of more integral investments.China and Chinese audiences are,in many ways THE most primed for the adoption of AI.Given the digital-first bias of Chinese audiences,AI is an incremental step.By contrast,the average citizen in the West

71、 is still several steps behind.That said,regulations may stand in the way of LLMs being given carte blanche access to audiences in China.10 CONSIDERATIONSSEE THE FULL REPORTTOTEMLink to the complete 122 page report or scan the QR code to Totems Website.CONTACT US Email: TOTEMMARKETING INSIGHTS Totem

72、 has a mission to support and provide the insights that C-Level marketers need in planning the growth of their brands,in China,Asia and Globally.As such,Totem has created a wide set of reports about the key issues being encountered at the leading edges of marketing.The 70+reports created by Totem ha

73、ve been viewed over a million times by global marketing leaders.Totem reports cover topics on the frontlines of digital innovation,offering in-depth insight into the future of marketing,including;China and Asia trends,global DTC strategies,new market analyses and AI for brands.TOTEMDETAILED DATA AND

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76、/GLOBALKAREN LEEBRAND PLANNING-CHINASUMMER FENGINSIGHTS&PLANNING-ASIAJANE LANINSIGHTS&PLANNING-CHINATotem works with a range of brands in Asia,China and Globally.Projects for our clients address critical marketing and growth issues including;-Brand strategy,positioning,category design-Market and com

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