It’s never been more important for brands to establish meaningful and valuable digital interactions with consumers. Before the COVID-19 crisis, the appeal of engaging digitally with China’s consumers was already very high. On a daily basis, 855 million Chinese consumers were spending an average of six hours on their phones–twice as much as digital consumers in the US–and buying $2 trillion worth of goods and services annually. Now, since China’s outbreak and subsequent lockdown, consumers have become even more digital, buying additional products on their phones, such as grocery items, that they previously would have purchased in stores.
It has also never been more challenging to reach China’s digital consumers. For one, it’s expensive. Before COVID-19, the cost of acquiring new Chinese customers and retaining existing ones was rising by 20 percent a year (for the past three years). When COVID-19 closed stores and cancelled public events, digital marketing costs went up further as virtually every brand doubled their efforts to reach Chinese consumers digitally, with some shifting their entire marketing budgets into digital.
And there is complexity. Brands have a staggering array of options for reaching consumers. The country’s mega platforms, such as Alibaba and Tencent, already powerful prior to the pandemic, have grown even more relevant, consolidating their reach across the Internet and touching everything from ecommerce and social media to video, gaming, music, maps, news, and digital payments. While this may sound like a recipe for simplicity, the trend has gone in the opposite direction. Major apps have splintered into hundreds of mini-apps and sub-channels, the popularity of new platforms like Douyin (TikTok) and Bilibili has exploded, and live- streaming has become widely adopted, all leading to what we call the ‘dustification’ of consumer attention, meaning that outlets for reaching consumers are hyper-fragmented.
Brands also have more options for generating private traffic–communications with consumers that brands have full control over, without the cost of third-party platforms. Tencent’s super-app WeChat–a combination of the functionality of Facebook, Instagram, Skype, and Whatsapp–has pioneered the use of mini-apps that allow brands to connect directly with consumers. This option, which other platforms are now developing, makes every consumer touchpoint trackable and usable, in contrast to “public” traffic from Tmall and JD, which retain ownership of consumer data.
Amid these considerable challenges, leading companies have excelled in generating valuable, revenue-generating traffic in China. When done effectively, digital marketing can increase the size of a brand’s target audience by 20 to 40 percent, boost click-through rates by 2-5X, raise marketing return on investment (MROI) by 20 to 30 percent, and grow average revenue per user by as much as 10 percent.
In this article, we highlight how brands can apply a systematic approach to navigate and prioritize a very complex marketplace, ultimately achieving their goals of cost effectively connecting with customers and driving considerable value.
The basics of marketing haven’t changed–find your target consumers and give them the right product and the right message, at the right place and the right time. The difference in the digital era is that marketing technology, or ‘martech’, allows brands to accelerate and maximize this basic endeavor at minimal cost (Exhibit 1).
Traffic pool selection: Lean into your strengths
To successfully navigate China’s cluttered digital marketplace and generate quality traffic, brands have to first take stock of their strengths. This means considering a brand’s maturity, the characteristics of the customer base, the investment appetite, and how much control a brand wants over assets such as customer data. Leading companies then use this strategic self-diagnosis to select a core pool of traffic, either public or private, commerce or non-commerce. Although the functionalities of these categories are merging, they are still useful distinctions. An archetype model of four different approaches can help brands think through this prioritization (Exhibit 2).
At the same time that successful brands drill down into their core traffic pool, they also need to invest along the edges in other pools in order to capture a broad range of opportunities and take advantage of trends. Creating impactful connections with Chinese consumers is an intricate balancing act that requires the right mix of public versus private and commerce versus non-commerce pools of traffic.
A precise traffic generation engine
Powerful traffic generation engines let brands automate and optimize the identification of the right people (customer profiling), the right product messaging (content management), and the right time and frequency of that messaging (customer management). They also enable the combination of these three elements (precision marketing) and the measurement and analytics of real-time results.
But doing high impact customer profiling, content management, customer management, and precision marketing means choosing among hundreds of possible initiatives, or use cases. To narrow this
down, we analyzed brands that excel in traffic generation and determined that between 15 and 20 uses cases is the right number. Collectively, these will cover all the major traffic pools and stages of the marketing funnel, with 5 or 6 of them homing in specifically on a brand’s core traffic pool with the goal of developing a competitive advantage (Exhibit 3).
A leading international beauty brand, for instance, taking a Performance First approach, wanted to identify the best marketing content for different consumer segments on its flagship store at Tmall. The company worked with an AI provider to instantly create thousands of layouts with different models, product photos, and colors. Each was dynamically
A/B tested with customers to identify those with the highest purchase rate. The result was an ROI boost of 20 percent and a 50 percent reduction in annual design costs.
A baby formula brand, as a Vertical Professional player, organized its most important use cases around the development of a WeChat mini-program that built upon the brand’s strengths in community marketing and customer outreach. AI technology was embedded into the program to process data and further segment customers for a precision marketing approach. The conversion rate among existing customers rose from 8 percent at launch at the end of 2019 to 30 percent by the second quarter of 2020.
A lean technology and data infrastructure
Building out use cases and developing impactful traffic generation engines requires a broad assortment of tech and data tools and functionalities. Most brands will need 15 to 20 different functionalities across their application, analytics and data infrastructure. Some of these are core capabilities all brands will need, such as customer relationship management (CRM) and a data management platform (DMP). Others, roughly half, should be designed to drive impact and deliver a competitive advantage (Exhibit 4).
For example, a local upstart beauty brand, taking an Internet Celebrity approach, built a tag management system for the 6,000-plus KOLs and KOCs who promote or feature the company’s products on social platforms. The tool identifies and segments these social influencers into hundreds of mini KOL groups according to their location, fan base, age group, and channel, and then does real time performance monitoring, analysis, and adjustment. The company also utilizes a digital engagement
system and AI-powered chatbots to improve the efficiency of managing multiple group chatssimultaneously. As a result, the company boosted both its click through rate and conversions by 10 to 15 percent.
A sport fashion brand, on the other hand, as a Maverick brand, built market-leading big data and advanced analytics engines, such as a unified customer data platform (CDP) and campaign management platform (CMP), that leverage the customer data it captures on its own shopping, training, and running apps and on its WeChat group. The company used this data–amounting to 50 percent of its total customer purchasing data– to drive its strong ecommerce growth in 2019.
No brand can develop all their functionalities at once. Instead of a hefty, two-year roadmap, leading brands simplify their IT and data strategy by finding a mixture of quick wins and long-term goals. They drive real impact from a handful of core functionalities that are up and running within a year, then continue to iterate and build upon them to expand into other functionalities over a 2 to 3-year period.
A balanced vendor ecosystem
Whether outsourcing their tech and data capabilities or operating them in-house, brands will need to work with partners across the advertising value-chain and martech ecosystem. In China, no fewer than 5,000 different martech providers have lined up to provide help. So too have the large platforms. In fact, working with Alibaba’s Brand Data Bank and Uni Marketing desk, or the Tencent Marketing Solution and DMP, is now so widespread that it’s the ‘table stakes’ in digital marketing.
Leading brands go several steps further to partner with an array of point service providers. They use many off-the-shelf solutions, while also customizing capabilities that are core to the brand’s needs. For example, although some leading brands have partnered tightly with Alibaba, they also leverage third-party vendors for dynamic content technology and data lake infrastructure to ensure a rapid marketing technology adoption.
An agile organizational model
China’s digital landscape is constantly changing, sometimes with what seems like daily frequency. In such an unpredictable environment, brands need a flexible organizational model that will let them constantly monitor changes and adapt quickly to go after new opportunities. This means hiring not just people experienced in performance marketing, but those who can excel in new roles: a digital marketing leader who sits on the marketing strategy team alongside the marketing leader and brand general manager, a social marketer for social content marketing, a KOL/KOC developer, and a CRM activity designer to reactivate dormant customers.
An agile organizational model also means adopting a new mindset where nothing is ever final. Leading brands have embraced a test and learn attitude and are constantly looking at performance and measurement data to see when and where adjustments are needed. They often start by setting up war rooms where people from different functions and departments come together to collaborate and develop this shift in mindset (Exhibit 5).
Getting started
Generating high-quality traffic and impactful digital marketing can be broken down into a three- part journey. The first is prioritization. In this stage, brands conduct a self-diagnosis of strengths, adetermination of the size of the opportunity, and the creation of a broad, high-level vision. From there, brands can prioritize their key customer traffic pools and the traffic engine use-case that will drive the biggest impact in the least amount of time.
Stage two is about capturing quick wins. This will help build momentum and demonstrate the value of further effort and investment. It entails setting up a war-room, establishing vendor partnerships, building the solution, launching it over several weeks, and then continuously improving it in 1 to 2-week sprints. The goal is real impact within 12 weeks
After the first use case is up and running and traffic generation is accelerating, brands can step back and plan the full, mid-to-long-term transformation, including the next wave of use cases that will
drive real, measurable, and lasting impact on the customer journey and the company’s capabilities.
By ensuring a strategic focus, prioritizing use cases based on impact, launching ‘quick win’ sprints, building an ecosystem and developing partnerships, and–most importantly–building capabilities throughout the organization, companies can generate real impact throughout the Awareness- Interest-Purchase-Loyalty (AIPL) journey (Exhibit 6).
