The Convergence of Divergence
Jeff LoCastro, May 15. 2012
Founder & President, NCCREA
In China, what's the difference between a commercial real estate
developer, an Internet entrepreneur and a hair shampoo manufacturer?
Nothing. There are key differences between Western & Chinese
consumers that, if you are operating in China, requires that you
understand the marketing convergence of these previously divergent
First, all product benefits in China are externalized; Chinese egos are
huge, status is a social imperative. They demand societal
acknowledgement for their success and their contributions within
society. They are not individualistic in a Jeffersonian sense as are
Westerners, who respond, in many cases, to "internalized" benefits.
Luxury goods, for example, are a tool for career advancement in China.
In the West, they are often appreciated for their own intrinsic quality.
In hair shampoo, for example, the leading Western brands have "sensual
indulgence" as a core proposition. In the PRC, the key benefit is "an
energizing shower experience that helps me [the consumer] start the
day with a kick." Translation: it gives me a leg-up on the other guy. And
sometimes, this difference can be quite subtle. For example, Americans
go to spas to relax. Chinese go to recharge. Again, recharging so that
they can get ahead (or appear to be ahead) of the other guy.
Second, there is absolutely, positively no cynicism towards brands in
China. As mentioned, brands are vital tools of advancement. In a
constricted mass media environment and a society with a narrow
definition of success, brands are the most powerful badges of identity.
Brand communication is by far the freest form of expression and, for that
reason, beloved. But Chinese are suspicious shoppers -- they don't take
quality for granted in terms of both how well the product is made and
the impact of that quality (real or perceived) on image. But that isn't
cynicism. We have not yet in China even begun to approach a
post-modern communications era, and I doubt we will in my lifetime,
given the pivotal role brands play in consumers' identities. To lose
confidence in "brand" would require a fundamental paradigm shift of self
that the Chinese consumer is not prepared to make anytime soon.
It's also worth noting that the digital world differs here too. "Emotional
release" is a critical driver. Despite the growth of lifestyle alternatives
and the use of brands as a marker of individualism, the Chinese are
constricted when it comes to self-expression. In this respect, the
internet is a blank canvas on which to paint dreams. Certainly emotional
release is important in the west, but the internet's role in that release is
on a different scale here in China. Having been a member of the original
executive team of Classmates.com this is something I understand all too
well. Of course, e-commerce is also exploding in the PRC, just as it is
everywhere in the world. But, again, "transactional safety" must be
reinforced and in China most cash is usually exchanged only after
consumers have been given a chance to kick the tires of a product. This
alters the way e-commerce is delivered in China. This alteration is also
the result of an underdeveloped financial structure, an insecure
fulfillment system and general expectations of low quality (on non-name-
brand items). But it is also a function of just who they are. Many
e-comm sites are nothing more than online C.O.D catalogs where a
product is ordered, delivered and then payment is made in cash
at the consumers front door (after careful inspection by the customer).
Operating a business in China, no mater what the industry, must take
these fundamental differences into account. In the west, commercial
real estate development has generally been immune to "consumer
trends." But in China the commercial developer must understand basic
differences between various consumer groups just as much as the guy
manufacturing the latest tech widget . . . or even shampoo. If your
product is a 50-story high-rise in Shanghai the developer must
understand that there are core differences between the American and
Chinese tenant groups. After size, general location and potential utility
requirements are met, the Chinese consumer group and the Westerner
take divergent paths. In the US, the design and functionality of the
building rein supreme. That is, how does the building make me "feel"?
(as the tenant). Am I comfortable? Does the facility feel like we can
grow or prosper? Are there intuitive ingress and egress points so that I
can get home fast (decreased level of stress). It's internalized. For the
Chinese, such a decision is externalized. What's the name of the
building? Does it convey a sense of strength and good fortune to those
around me? If I rent here is there any "pop" I'm going to get in terms of
how "cool" this makes me look? How will this facility affect me and my
business in the eyes of my community, my social circle, and perhaps the
government? Simply put, "If I rent here how will I be perceived?"
Chinese developers, of course, understand these differences intuitively.
As most things foreign or international are perceived as having great
importance and status, they give their buildings names such as "World
Trade Tower", "Times Square" "Rock & Fellow Plaza", "Space Needle
Beijing", "TransChina Pyramid", "Uptown" "International Center",
"Eastern Empire State Plaza", "Broadway", "5th Avenue" and so on. On
one city block alone one may find ten buildings named "World Trade" in a
district called SOHO or Greenwich . . . and sometimes you'll even find
buildings called SOHO in SOHO district. Sometimes entire cites don a
handle evocative of externalized status: Shanghai - New York of the
East; Suzhou - Venice of the East, etc. The Chinese consumer doesn't
mind that others may have that moniker as long as their building, district
or city does.
I have spoken to many groups on the convergence of seemingly
divergent industries and the over-lap that must be considered in China.
For those that have spent decades hocking their industry's product not
just based on how different it is from it's competitors but also how
different it is from everything else, this convergence is a tough nut to
swallow; some seem to fight it tooth and nail. But for those with the
flexibility to alter their perspective the current marketplace offers
opportunities for a lot of open field running.
COPYRIGHT 2012 JEFF LOCASTRO
DISTRIBUTED BY NCCREA
CHANGZHI, SHANXI, PRC
Contact the author at: Jeff@NCCREA.com or Jeff@CaliforniaSecured.com
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