The right way to appeal to the masses
International packaged goods companies have been falling over each other pitching products to affluent Chinese consumers.
ADVERTISEMENT
Some, such as Coca-Cola, Nestlé and Procter & Gamble, move more than $1bn in merchandise a year in China. But most - pushing deodorants, drinks, detergents and other consumer goods - have failed to break $100m in annual revenues.
By targeting the wealthiest consumers, most foreign companies are neglecting 90 per cent of the market - more than 700m people. If they hope to become large-scale businesses in China, foreign companies will have to address the low and middle-income segments. They must change the way they approach the market while reducing costs.
One way is to launch a new, down-market brand at lower prices. But building a brand from scratch can be expensive. Chinese consumers are bombarded with advertisements and companies launching a brand will have to invest heavily to be heard above the roar.
Consumer goods companies eyeing the mass market should consider stretching their premium brands vertically. This would be a departure from the usual strategy in developed markets, where companies tend to stretch their brands horizontally. This involves product variations such as new snack food flavours, or a move into new product categories (from, say, tobacco to clothing), while focusing on the same group of consumers.
By contrast, vertical brand stretching involves a change in product formulae, packaging and pricing to reach a wider range of customers. The downside is brand dilution, where a premium brand loses lustre because a larger number of consumers are using it. Another danger is loss of revenues from high-income customers who might be tempted to switch to cheaper products - known as cannibalisation.
There are measures to minimise these risks. One is to make sure customers can distinguish between the original product and its new variants.
Products aimed at different income segments should have a recognisable taste, smell, packaging, performance and price. Price differentials alone are not enough, because this would lead many high-income customers to switch to the cheaper products.
Procter & Gamble's Crest toothpaste is a case in point. In an effort to expand into the Chinese mid-income market, the company changed the brand's formulation and packaging to emphasise cavity prevention, a generic benefit. Properties and claims related to whiter teeth were reserved for the premium Crest products.
Companies can minimise cannibalisation by managing distribution channelseffectively. These strategies focus on geography (cities versus the poorer countryside), outlets (department stores versus mom-and-pop shops), and shelf space (eye level versus floor level).
In stores where Johnson & Johnson offers both premium and mid-priced variants of its feminine-protection product Carefree, the company is seeking to ensure they are positioned on different shelves. As a result, its rate of product cannibalisation is 50 per cent lower than that of its nearest competitor.
Yet vying for the attention of mid- and low-income customers requires more than changing product formulations or tweaking distribution strategies.
To compete with low-cost Chinese companies, multinational consumer goods companies must find ways to reduce their costs enough to offer variations that are priced 30-50 per cent lower than their premium products, while still turning a profit.
One way of achieving this is to leverage advertising campaigns for existing brands. Advertising expenses for product variants are typically 50 per cent lower than those for new brands. Meanwhile, changes in formulations and performance standards might allow companies to switch to cheaper ingredients or eliminate some ingredients altogether from mid-ranged products.
Companies also need to find new ways of manufacturing and delivering goods. This might involve China's low-cost labour rather than expensive machines, or relocating factories so they enjoy the lower costs associated with shipping over water rather than land.
Foreign companies will continue to target China's affluent consumer segments, since margins remain good and the market continues to grow.
But to capture the potential of China, they must turn their attention to the low and mid-income consumers. Gross margins will not be as attractive, but the move will allow companies to grow faster in China, reaping increases in revenue and profit.
如何让你的产品吸引大众眼球
一直以来，国际品牌公司在争先恐后地向富裕的中国消费者推销其产品。
一些公司，如可口可乐(Coca-Cola)、雀巢(Nestle)和宝洁(Procter Gamble)，每年向中国销售逾10亿美元商品。但大多数生产除臭剂、饮料、清洁剂和其它消费品的公司，年销售收入很难突破1亿美元。
大多数外国公司瞄准中国最有钱的消费阶层，却忽略了90%的中国市场，这部分市场基数为7亿多人口。如果外国公司希望成为中国境内的大型企业，那它们就得涉足低收入和中等收入人群的细分市场。在降低成本的同时，它们必须改变向市场进军的策略。
方法之一是，推出一个新的、面向低收入人群市场的廉价品牌。但从头开始创建品牌可能代价高昂。中国消费者被强烈的广告攻势所包围，公司要想推出新品牌，非得进行大量投资，才能让消费者知道自己的品牌。
关注大众市场的消费品公司，应考虑纵向延伸其高档品牌。这与发达市场中常见的策略不同。在发达市场里，公司倾向于横向延伸自己的品牌，包括进行产品变异（product variations），例如推出新口味的快餐，或转入新产品类别（例如从烟草转向服装），但在做改变的同时，专注于同样的消费者群体。
相反，纵向品牌延伸包括改变产品的配方、包装和定价，以接近更多顾客。不利之处是会造成品牌稀释，即高档品牌会因更多消费者使用而失去光彩。另一个危险是失去来自高收入消费者的销售收入，因为他们可能受到诱惑，转而购买价格较低的产品，这被称作“同类相食”。
但是，我们可以采取一些措施令风险降到最低。其一是确保消费者能区分原始产品及其变异品种。
针对不同收入细分市场的产品应该能让消费者意识到，它们的口味、气味、包装、性能和价格都不相同。单单在价格上有差异是不够的，因为这会导致许多高收入消费者转而使用较廉价的产品。
宝洁的佳洁士(Crest)牙膏就能说明问题。为了向中国的中等收入市场拓展，公司改变了该品牌的配方和包装，强调其品牌能够防止蛀牙，这是一般牙膏的功效。而高档佳洁士产品除了一般的功效外，还有增白牙齿的特点。
通过有效地管理经销渠道，公司能将同类相食现象降至最小程度。这些策略注重地域（城市―较贫困的乡村)、销售点（百货商场―夫妻店）和货架空间(视平线―地平线)。
在一些商店，强生提供高档及中等价位的女性保健用品娇爽(Carefree)，并力求确保这两种不同价位的“娇爽”放在不同的架子上，结果其产品的“同类相食”概率较其最大的竞争者低了50%。
然而，要想争得中、低收入消费者的注意，仅仅改变产品配方或调整经销策略是不够的。
为了与低成本的中国企业竞争，跨国消费品公司必须设法降低成本，足以提供比其高档产品价格低30%至50%的变体产品，同时仍能获利。
要做到这一点，方法之一是利用现有品牌的广告宣传。变体产品的广告费用通常要比新品牌低50%。同时，通过改变配方和性能标准，公司或许得以转而采用更廉价的成分，或在中档产品中把某些成分统统去掉。
公司还需要找到新的制造和交货方法。这可能涉及到利用中国的廉价劳动力，而不是使用昂贵的机器，或者搬迁工厂，公司能够用水路运输取代陆路运输，从而降低相关成本。
由于利润率始终不错，且市场持续增长，因此外国公司将继续瞄准中国富足消费者这个细分市场。
但是，要想获得中国的潜力，它们必须把注意力转向中低收入消费者。一旦采取这个举措，毛利率可能不会像现在那么丰厚，但公司将得以在中国更快地增长，营收与利润将会提高。
