After 28 years of continuous growth, sales volumes declined for the first time in China’s domestic automobile market in 2018. In 2018, the total sales volume was 28.08 million, representing a reduction of 2.76% compared to the 28.88 million recorded in 2017. The sales volumes of passenger cars also decreased by 7.99% [1]. The downtrend seen in China’s automobile sector is a microcosm of the real economy which is under significant pressure in China. Influenced by the deleveraging in the finance sector, trade frictions, everyone agrees on one thing…winter is coming. So how can enterprise and their brands offset consumer fears and continue to grow in China? How can enterprise leverage new technologies and leverage the vast amount of data generated by mass content consumption?
Consumption Differentiation…What does that mean?
The rampant consumerism which hallmarked the last couple of decades in China could be coming to an end. Pessimism amongst consumers on the economic outlook and career prospects are shaping more pragmatic purchasing behaviors. Inflation and other pressures mean that Chinese consumers are shifting away from material consumption and seeking other ways to escape from the stresses of their careers. From this basic start point, we are witnessing the birth of new and differentiated consumer purchasing behaviors in China, or, as we like to say consumption differentiation.
Consumption differentiation is a concept which entails consumer reaction to the rising cost of online entertainments, cultural activities, and training courses and the comparatively low cost and ease of access to the basic necessities of life. The concept of consumption differentiation also entails separating consumers into different groups based on unique features and habits. So how can enterprise leverage the concept of consumption differentiation and avoid the impending winter? How can enterprise develop bespoke marketing campaigns which allow niche markets and minor demographics to be effectively targeted?
“Digital Natives” and the Year of the Vlog
According to a report published by Deloitte, digital media dominates post-00s’ entertainment now. Video, especially short video, is the most popular medium. Video websites have become the main channel for post-00s to obtain information [2]. Bilibili, the fastest-growing video website in China, which achieved 93million MAUs (Monthly Active Users) in the fourth quarter of 2018, points out that Generation Z (people born from 1990 to 2009) represents the future of online entertainment [3].
The most important style of content emerging in 2019 in China is the vlog, which is the video form of an online blog. Vlogs are well-established content style in the west which grew in tandem with YouTube and other platforms. The contents of vlogs are often simply a documentary of daily life. The popularity of vlogs might puzzle those who are not familiar with this new form of entertainment. However, since 2018, the volume of vloggers and vlogs in China has surged with total views of vlogs cementing its position as a legitimate and growing force in Chinese media. It is not uncommon for the vlogs of famous stars to generate huge view counts with one notable example receiving 200 million views in just 3 months [4]. Bilibili and TikTok, the top two video platforms in China, also encourage ordinary users to share their lives by publishing traffic support plans.
A collection of vlogs recording the normal life
Several reasons leading to growth in Chinese vlogging:
Vlogging represents a unique way for Chinese youth to express themselves and speak to the world, which is a rare opportunity in China’s modern hectic environment.
The innovation lag phenomenon. Vlogs have already proven to be hugely popular in western cultures. It was just a matter of time before China followed suit.
Vloggers will dig out and share the highlights of their daily life, which will also deliver some inspiration to the audience [4].
Modern people in China are under heavy work pressure and have to tolerate long working hours. The lack of social time leads to a lack of connection with others. Watching vlogs is an easy way to build connections with others and the world.
Implications for brands: Harnessing the digital Vox populi
Based on the diversified hobbies and needs of people, subcultures, forums, and fan communities have also grown in China. Take Bilibili for example, content on Bilibili’s websites are divided into several sections including pop culture, pets, domestic anime, foodie, and even product evaluation.
The diversified contents on the Bilibili website [5]
Brands can leverage these emerging online subgroups to stay abreast of the latest trends, gauge consumer sentiment, and rapidly respond to newly emerging demand. Bilibili operates using a pyramid-shaped system as illustrated below.
The Bilibili Story[5]
The commercialization of Bilibili is based on two important dimensions, content and community, which stem from the ever-growing supply of user-generated contents and make the users highly engaged and more likely to return. The feedback loop between these cornerstones keeps the cogs of Billibili’s corporate engine in perpetual motion and driving towards continued growth. As long as Bilibili’s content still interests its users, Bilibili can expect to maintain its current upward trajectory.
A Thousand Ways of Marketing
Traditional advertisements are designed to convey the most information in the most appealing way within the time or space constraints imposed by the medium used, be it TV, radio or magazines, etc. Vlogging and other forms of new media allow a much more nuanced approach to advertisement and promotion. The refinement allows marketers to cater to the massive diversity seen in consumer needs. As pointed out by Deloitte, for post-00s, the impact of an advertisement depends on the degree of congruence between their particular taste and the content of the advertisement. The feedback loop that exists between content consumption and data generation allows marketers to really appreciate the nuances in personal taste, spot patterns in demand and rapidly address these demand through the creation of new content. This overriding principle has given rise to numerous highly effective marketing strategies which we will discuss below.
► KOL Marketing
The rise of internet famous celebrities has given rise to the phenomenon of KOL marketing in which certain brands use internet stars and other famous people to create online content either directly or indirectly advertising their products. Top tier KOLs have high traffic volume and high public recognition and generally generate millions of views and millions of followers. The vertical KOLs or vloggers have high popularity in specific niche areas and have a strong connection with a niche of loyal followers but generally, lack universal appeal.
The different types of KOL(quoted from R3)[6]
The value of vertical or niche KOLs is also growing. These niche bloggers tend to have fewer than 100,000 followers which tend to be more loyal. Generally, their audience attributes a high degree of reliability and credibility to these vloggers.
► AR & VR Marketing
The marketing battleground has expanded significantly in recent years with the development of new interactive technologies, such as AR(Augmented Reality) and VR(Virtual Reality) technologies, which allow consumers to immerse themselves in content.
Colorful Advertisements
Take AR technology as an example, how do brands incorporate the use of new technology to strengthen the interaction between the customers and products? Let's look at how Luckin Coffee answered this question. Luckin Coffee is a new entrant to China’s fiercely competitive café and coffee sector which is currently dominated by Starbucks. Supported by the artificial intelligence team at Netease (a technology company), Luckin Coffee designed an interactive game that would allow consumers to scan the logo on their paper coffee cup using their mobile phone. This then opened an AR interface that would allow the consumer to interact with the environment using their mobile phone and generate dynamic moving content such as deer and ancient buildings in real time that responded to the movement of the consumer and their mobile.
An interactive advertisement that using AR technology
► Experience marketing
Oreo has been leading brand innovation for the past 3 years using customized products
Experience marketing is another example of an emerging marketing tool which leverages China’s new retail concept to combine both online and offline retail, new technologies and similar. Experience marketing can be seen in malls all across China and can be as simple as a QR code vending machine that allows consumers to scan a QR code and get a sample of the latest products for free. Experience marketing can also be elaborate stalls, stands and events in malls which involve competitions, spot prizes, famous stars, etc. Basically, the concept is all about consumers interacting with the brand and having a good time.
KFC launched a set of toys associated with The Legend of Sealed Book, a traditional animation popular with the youngsters
Some high profile companies are using experience marketing extremely successfully in China. Lancôme sets up vending cabinets full of samples of newly-released products and allowed passersby to get samples, interact with promotions and similar all through their mobile phones. Tmall also designed a series of “1 cent new products” in addition to a national campaign of offline activities in malls all across China, and who can forget their hugely successful 618 and 11-11 events in malls all across the country.
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