Over the next five years China plans to import more than US$10 trillion worth of goods and services. This rise in imports, driven by growing consumer demands is providing huge opportunities for foreign companies like those in Australia and New Zealand.
While the growth is coming from across the country, it is particularly driven by the lower tier cities, which account for nearly three-quarters (73%) of China’s population and more than half (59%) of its GDP.
While many companies entering the China market tend to focus on tier 1 cities such as Shanghai, Beijing, Guangzhou and Shenzhen, the opportunities in lower-tier cities are increasing.
A report by Morgan Stanley estimates lower tier cities, which will account for more than two-thirds of China’s increased consumption by 2030.
Robin Xing, Chief China Economist at Morgan Stanley, said, “While investors perceive larger cities as offering the most important consumer base, we believe that lower-tier cities will be bigger, wealthier and more eager to spend, and could contribute two-thirds of incremental growth in national private consumption toward 2030.”
Consumers living in China’s lower tier cities are benefiting from government investment in infrastructure and public resources, more affordable housing, greater penetration of technology and increasing disposable income. The convergence of all these factors is creating a strong consumer market which is becoming increasingly attractive to brands and marketers.
So how can marketers tap into these audiences?
1. Know your audience
Like any market, understanding who you are targeting is crucial to success. China is a huge and diverse country populated by vastly different regions of consumers, so companies need to do their research before jumping in to new markets. While there is a tendency to treat all tiered cities the same, brands that do their research and select specific cities based on analysis and trends are more likely to succeed.
2. Take a local approach
Chinese consumers like a brand that displays knowledge and understanding of the consumers and their local areas and this approach can be invaluable for brands. Time and again big multinational companies such as P&G or Unilever have struggled to gain traction in lower-tier cities while local brands have flourished. Companies wanting to connect with consumers need to think and act locally in order to succeed.
3. Work with local experts
When it comes to engaging locals it is best to work with local digital media and KOLs. Turning to experts in each of the lower tier cities ensures your marketing is not only cost effective but also highly targeted when compared to the broad base of national media, digital media platforms and KOLs. Also, by engaging local KOLs, your brands will benefit from the association and alignment with local influencers.
4. Take an integrated approach to your marketing
While many brands focus on digital marketing channels, taking an integrated approach to the lower tier cities is a useful way to ensure cut-through and engagement in these emerging markets. An O2O approach, which combines online and offline activities can be a highly effective technique for consumer brands, especially with activity centred around busy areas such as shopping malls and business centres. Incorporating PR and sponsorship can also provide more opportunities to engage with consumers and provide positive associations for brands within local areas.
While there is no denying the opportunities that China’s lower tier cities present for foreign companies their brands and products, it is important to understand the markets and consumers you are targeting and work with local experts to ensure you get it right.
As one of China’s leading digital marketing agencies, UMS can help your company connect your brands and services with Chinese consumers in lower-tier cities. Contact us to find out more.