Multinational Marketers Move Into China’s ‘Smaller’ Cities
Demand for fast growth is driving multinational marketers into smaller and smaller cities — but in China, small is a relative term.
China has over 160 cities with a population above one million. The U.S., by comparison, has nine. Most foreign marketers start with Beijing, Shanghai and Guangzhou and then add provincial capitals, but those markets, known as the first and second- tier cities, cover just a sliver of China’s territory.
Today, companies are looking closely at China’s third- and fourth-tier cities and beyond, where the creation of new wealth, particularly through manufacturing and industries like mining, has led to tens of millions of consumers with spending power.
“These days, China’s economic excitement is in its smaller markets. Third and fourth-tier cities are booming,” said P.T. Black, Thoughtful China’s senior creative director.
Over the last few years, digital media has become an important game-changer, in terms of communication, entertainment and shopping, making it easier both for lower-tier consumers to learn about foreign brands and for marketers to reach those consumers.
“We’re seeing a digital evolution taking place,” Mr. Tan said. “Online video is huge in China. We’re seeing a lot of houses in lower tiers where they don’t actually have TV sets at home. A lot of people are saying, ‘My computer is now my TV.’”
Digital media isn’t just changing the way consumers absorb entertainment and brand messages, it is also changing the way they shop.
“Availability of brands is no longer dictated by just physical retail presence. A lot of people in tier three and tier four cities are buying things online…on [Alibaba Group's B2C e-commerce website] Taobao, and that is somehow changing the entire spectrum of what people can buy and where they buy things,” said Kunal Sinha, Ogilvy & Mather’s chief knowledge officer for China.
Luxury products are one of the fastest-growing categories, and the internet plays a role there, too, by sharing trends from first-tier cities and the West.
For instance, lower-tier consumers “regard themselves as just as fashionable as upper-tier people. It’s just that they have a different comprehension of [fashion tastes],” said Tim Schlick, DDB Group’s head of strategic planning for Greater China.
Lower-tier consumers do focus on value, a calculation based on price, quality, reputation and the ability to provide the all-important Chinese sense of “face,” Mr. Schlick said. “Lower-tier consumers tend to go the extra mile to find the brand that provides the most value. It doesn’t matter if it’s a local brand or international brand.”
