福建对外经济贸易职业技术学院案例对中国消费者的营销_国际市场营销实务.doc_大学文库

published August 24.2004 The worlds makers of shampoo.cosmetics.soft drinks,and ocher consumer goods have long coveted the Chinese market Now.with raped eoonomic growth,demand is taking off.Packaged foods already constitue a $47 billion category that is expanding by 8 pereent a year which pace rarely seen these days in developed markets,where sales of some types of consumer goods are stagnating or even shrinking(Exhibit1)】 Most foreign consumer goods companies position their products at the top of China's market pyramid.In effect,this approach imvolves building a premium hrand aimed the wealthiest to 10 percent of consumers.mainly concentrated in the biggest and most sophisticated markets,such as Beijing and Shanghai.A few global companies,including Coca-Cola Nesl?and Procter Gamble, have achieved billion-dollar sales with this strategy,but the rest have found it difficult to exceed $100 million in annual revenueto more than I to 2 percent of'their worldwide business Foreign companies will oontinue to slug it out in the premium segment because the market is still growing and margins are fat enough to earn a reasonable return.But whether foreign players have aready hit the $1 billion mark or are still striving for their first $100 million.most know that to see serious growth they will have to tap into the much larger middle-and lower-income segments which make up 90 percent (by volume)ofChina's entire consumer goods market. The question is how to execute such a strategy without cannibalizing sales of premium brands One answer would be to apply new approaches to marketing in China:stretching premium brands vertically to reach the mass market,for example.By tweaking product formulations and packaging while modifying manufacturing practices so that prices can be set at lower levels,acompany can make a premium brand appeall to a broader swath of customers. A large market with big differences Rapid economie growth is hringing a wide variety of goods within reach of a growing number of coesumers.Chind's per capita GDP was $1,300 in 2003,equivalent to $5,000 when adjusted for purchasing-power parity.By 2010.40 million houscholds will earn more than 48.000 renminbi (S6.000)a year,equivalent to $24,000 in terms of purchasing-power parity and enough to qualify a houschold as middle class by US standards Income varies widely,however.At $5,600,per capita GDP in Shanghai is more than five times higher than it is in Chongqing.in the interior of the country (Exhibit 2)Together with differences in comsumption.power.education.personal habits,and tastes

published : August 24, 2004 The world's makers of shampoo, cosmetics, soft drinks, and other consumer goods have long coveted the Chinese market. Now, with rapid economic growth, demand is taking off. Packaged foods already constitute a $47 billion category that is expanding by 8 percent a year which pace rarely seen these days in developed markets, where sales of some types of consumer goods are stagnating or even shrinking (Exhibit 1). Most foreign consumer goods companies position their products at the top of China's market pyramid. In effect, this approach involves building a premium brand aimed at the wealthiest 5 to 10 percent of consumers, mainly concentrated in the biggest and most sophisticated markets, such as Beijing and Shanghai. A few global companies, including Coca-Cola, Nestl? and Procter & Gamble, have achieved billion-dollar sales with this strategy, but the rest have found it difficult to exceed $100 million in annual revenueto more than 1 to 2 percent of their worldwide business. Foreign companies will continue to slug it out in the premium segment because the market is still growing and margins are fat enough to earn a reasonable return. But whether foreign players have already hit the $1 billion mark or are still striving for their first $100 million, most know that to see serious growth they will have to tap into the much larger middle- and lower-income segments, which make up 90 percent (by volume) of China's entire consumer goods market. The question is how to execute such a strategy without cannibalizing sales of premium brands. One answer would be to apply new approaches to marketing in China: stretching premium brands vertically to reach the mass market, for example. By tweaking product formulations and packaging while modifying manufacturing practices so that prices can be set at lower levels, a company can make a premium brand appeal to a broader swath of customers. A large market with big differences Rapid economic growth is bringing a wide variety of goods within reach of a growing number of consumers. China's per capita GDP was $1,300 in 2003, equivalent to $5,000 when adjusted for purchasing-power parity. By 2010, 40 million households will earn more than 48,000 renminbi ($6,000) a year, equivalent to $24,000 in terms of purchasing-power parity and enough to qualify a household as middle class by US standards. Income varies widely, however. At $5,600, per capita GDP in Shanghai is more than five times higher than it is in Chongqing, in the interior of the country (Exhibit 2). Together with differences in consumption, power, education, personal habits, and tastes

these disparities lead many multinational companies to characterize China as one nation,but certainly not one national market.While overseas companies tend to concentrate on the premium market, China's domestie conmer goods companies still compete largely for middle-and low-income consumers.In this arena,the Chinese have certain strengths,including not only an understanding of their target segments tastes and hahits but also low prices as a result of lean cot structures Add to these several years of observing foreign companies and of hiring away their marketing and management talent,and it is no wonder that Chinese brands are rapidly gaining ground on the foreign competition In leading categories such as shampoo,laundry products and biscuits,their total share of the market increased from 2000 to 2002 (Exhibit 3) Until now,few foreign companies have made a serious play for the mass market,partly out of fear of cannibalizing the premium hrands they have worked so hard to build But they will not create truly large-scale consumer goods businesses in China without tackling the mass-market segmentsr without changing the way they manufacture and market produets Go vertical In developed markets,consumer goods companies stretch n hrand horizontally by offering.say. additional flavors ofa brand of earbonated drinks to amtract more of the targeted teenage segment But in China.where the aim is to appeal to a broad range of customers at boch high-and low-income levels,foreign consmer goods marketers should consider stretching brands vertically ffering different product benefits aimed at different income levels.all under a brand that has hitherto fooused entirely on the premium segment.Such an approach can create a double hazard,however,by diluting the brand image for consumers of the original premium products while the newer.lower-priced ones cannib过ize their sales Companies concerned about the potential impact of stretching a brand vertically could introduce anew hrand that offers benefits and features appealing to the middle.or lower-income conme segments and is priced accordingly.As in any ocher market,though

these disparities lead many multinational companies to characterize China as one nation, but certainly not one national market. While overseas companies tend to concentrate on the premium market, China's domestic consumer goods companies still compete largely for middle- and low-income consumers. In this arena, the Chinese have certain strengths, including not only an understanding of their target segments' tastes and habits but also low prices as a result of lean cost structures. Add to these several years of observing foreign companies and of hiring away their marketing and management talent, and it is no wonder that Chinese brands are rapidly gaining ground on the foreign competition. In leading categories, such as shampoo, laundry products, and biscuits, their total share of the market increased from 2000 to 2002 (Exhibit 3). Until now, few foreign companies have made a serious play for the mass market, partly out of fear of cannibalizing the premium brands they have worked so hard to build. But they will not create truly large-scale consumer goods businesses in China without tackling the mass-market segments 梠 r without changing the way they manufacture and market products. Go vertical In developed markets, consumer goods companies stretch a brand horizontally by offering, say, additional flavors of a brand of carbonated drinks to attract more of the targeted teenage segment. But in China, where the aim is to appeal to a broad range of customers at both high- and low-income levels, foreign consumer goods marketers should consider stretching brands vertically 梠 ffering different product benefits aimed at different income levels, all under a brand that has hitherto focused entirely on the premium segment. Such an approach can create a double hazard, however, by diluting the brand image for consumers of the original premium products while the newer, lower-priced ones cannibalize their sales. Companies concerned about the potential impact of stretching a brand vertically could introduce a new brand that offers benefits and features appealing to the middle- or lower-income consumer segments and is priced accordingly. As in any other market, though

customers from trading down,companies must make it possible for consumers to identify tangible variations in the taste,smell,packaging.or performance of products.Colgate-Palmolive uses relatively inexpensive flavorings for the cheaper varieties of its Colgate toothpaste and alters the packaging.for example.Procter Gamble uses a cotton covering (less abeorbent than the synthetic paper used in its core premium offerings)for the midpriced products in its Whisper sanitary-napkin category.In turn,a premium product may have to be differentiated further through promotions targeted only at people who might be likely to purchase it or througha packaging upgrade accompanied by a fractional price increase Differentiate at the point of sale To discourage cannibalization it is vital to manage distribution channels Channel differentiation can occur on many levels between geographie locations,between different retal channels (traditional mom-and-pop stores versus modern department stores or comvenience store chains,for example),and even between different shelves in a single store In stores where Johnson Johnson offers boch premium and midpriced variants of its feminine-protection product Carefree.for instance.it soes to it that they are positioned on different shelves.The result is a rate of cannibalization half that of the compamy's nearest competitor. Related Thinking from The McKinsey Qurterly. Understanding the Chinese consmer Brand building in emerging markets What exectives are asking abou China Piggyback on existing advertising campaigns One of the most compelling benefits of brand stretching is the chance to reap huge savings in the coet of advertising and promotions One of the most compelling benefits of brand stretching is the possibility of reaping enormous savings in the cost of advertising and promotions by leveraging awareness of an established brand to introduce new products.Our experience shows that launching product variants aimed at the middle market could cut advertising costs to no more than half of the 10 to 15 percent of sales anew brand would typically require.The degree to which a new product ean benefit depends however,on the strength of the existing premium brand.Where it enjoys relatively high awareness and a robust advertising share of voice,the costs involved in launching new,lower-priced products by

customers from trading down, companies must make it possible for consumers to identify tangible variations in the taste, smell, packaging, or performance of products. Colgate-Palmolive uses relatively inexpensive flavorings for the cheaper varieties of its Colgate toothpaste and alters the packaging, for example. Procter & Gamble uses a cotton covering (less absorbent than the synthetic paper used in its core premium offerings) for the midpriced products in its Whisper sanitary-napkin category. In turn, a premium product may have to be differentiated further through promotions targeted only at people who might be likely to purchase it or through a packaging upgrade accompanied by a fractional price increase. Differentiate at the point of sale To discourage cannibalization, it is vital to manage distribution channels. Channel differentiation can occur on many levels: between geographic locations, between different retail channels (traditional mom-and-pop stores versus modern department stores or convenience store chains, for example), and even between different shelves in a single store. In stores where Johnson & Johnson offers both premium and midpriced variants of its feminine-protection product Carefree, for instance, it sees to it that they are positioned on different shelves. The result is a rate of cannibalization half that of the company's nearest competitor. Related Thinking from The McKinsey Quarterly ... Understanding the Chinese consumer Brand building in emerging markets What executives are asking about China Piggyback on existing advertising campaigns One of the most compelling benefits of brand stretching is the chance to reap huge savings in the cost of advertising and promotions One of the most compelling benefits of brand stretching is the possibility of reaping enormous savings in the cost of advertising and promotions by leveraging awareness of an established brand to introduce new products. Our experience shows that launching product variants aimed at the middle market could cut advertising costs to no more than half of the 10 to 15 percent of sales a new brand would typically require. The degree to which a new product can benefit depends, however, on the strength of the existing premium brand. Where it enjoys relatively high awareness and a robust advertising share of voice, the costs involved in launching new, lower-priced products by

piggybacking them on it can be substantially lower than usual.But launching new products on the hack of a weak brand might not generate the sales volume necessary to cover their fixed costs Brand stretching won't necessarily work for every brand or product category.nor will it be suitable for all companses.When it is done property.though is rewards can be substantial (see sidebar. "Brand stretching can work in China") Bringing down costs Targeting the middle-and lower-income consumer segments calls for products that are 30 to 50 percent less expensive than premium ones But unless costs can be brought down proportionately. gross profit margins will quickly turn south.Foreign companies in China can ill afford to increase their costs to launch a new brand aimed at the middle or lower tiers of the market;in fact,they will need to cut their costs substantially to turn a profit.All told,local companies enjoy a cost advantage of as much as 30 percent against their foreign competitors What should a foreign compary do to bring its costs in line with those of the locals? Less automation is one method Manufacturing costs account for much of the difference between the way foreign and local companies operate.Capital depreciation costs rank among the biggest factors.Multinationals serving premium markets in China abide by standards of equipment quality and efficiency similar to those at their plants in developed markets.They therefore imvest far more money in capital equipment than do Chinese companies.For a multinational that makes,sary.sanitary napkins,the cost of a single assembly line can run as high as $15 million,against a Chinese company's $500,000 or so Foreign manufacturers that really want to cut their costs to local levels should consider building less automated production lines Foreign manfacturers might think that their equipment gives them a worthwhile edge in productivity.Not so.Even adjusting for their efficiency gains,the Chinese company still comes out head.Although the line speed (and thus the production capacity)of an assembly line using advanced technology could be three times higher than that of a Chinese assembly line,the enormous gap in the cot of equipment means that the foreign company's capital depreciation expenses end up being six to seven times higher.A less advanced production line might require 20 people to operate,rather than 10 for the high-speed line,but low labor costs more than make up for this efficiency gap.Average wages for line workers in Chinese factories are 500 to 600 renminbi a month.even the most highly skilled

piggybacking them on it can be substantially lower than usual. But launching new products on the back of a weak brand might not generate the sales volume necessary to cover their fixed costs. Brand stretching won't necessarily work for every brand or product category, nor will it be suitable for all companies. When it is done properly, though, its rewards can be substantial (see sidebar, "Brand stretching can work in China"). Bringing down costs Targeting the middle- and lower-income consumer segments calls for products that are 30 to 50 percent less expensive than premium ones. But unless costs can be brought down proportionately, gross profit margins will quickly turn south. Foreign companies in China can ill afford to increase their costs to launch a new brand aimed at the middle or lower tiers of the market; in fact, they will need to cut their costs substantially to turn a profit. All told, local companies enjoy a cost advantage of as much as 30 percent against their foreign competitors. What should a foreign company do to bring its costs in line with those of the locals? Less automation is one method Manufacturing costs account for much of the difference between the way foreign and local companies operate. Capital depreciation costs rank among the biggest factors. Multinationals serving premium markets in China abide by standards of equipment quality and efficiency similar to those at their plants in developed markets. They therefore invest far more money in capital equipment than do Chinese companies. For a multinational that makes, say, sanitary napkins, the cost of a single assembly line can run as high as $15 million, against a Chinese company's $500,000 or so. Foreign manufacturers that really want to cut their costs to local levels should consider building less automated production lines Foreign manufacturers might think that their equipment gives them a worthwhile edge in productivity. Not so. Even adjusting for their efficiency gains, the Chinese company still comes out ahead. Although the line speed (and thus the production capacity) of an assembly line using advanced technology could be three times higher than that of a Chinese assembly line, the enormous gap in the cost of equipment means that the foreign company's capital depreciation expenses end up being six to seven times higher. A less advanced production line might require 20 people to operate, rather than 10 for the high-speed line, but low labor costs more than make up for this efficiency gap. Average wages for line workers in Chinese factories are 500 to 600 renminbi a month; even the most highly skilled

workers receive no more than 2.000 renminbi So the pocential savings in capital costs from using less advanced equipment far outweigh ary incremental labor cot. Faster machines also reduce flexibility.When a company wants to change the product made on an advanced assembly line,two hours might be needed to change the equipment on it.partly because of the number and complexity of the parts and partly because it will be necessary to clear many semifinished goods on the line at the time of stoppage Some of them could end up being serapped if they are at a sensitive point of production.By contrast a Chinese company,with its slower assembly lines and higher ratio of labor,might not have to stop work at all,so it can manufacture a wider variety of products on a given line,with little wastage.We estimate that the material serap rate of multinational companies could run as high as ten times that of local ones In the case of a multinational sanitary-napkin producer,the scrap rate runs at about 3 percent,against an average of 0.3 percent for Chinese manufacturers The quickest way to replace high-end capital equipment with a more labor-imensive model would be to outsource the production of new,less expersive products to low-cost local manufacturers, as Procter Gamble and Johnson&Joheson have done in the past.Finding an appropriate local manufacturer and maraging the quality of its output without assuming direet control over its manufacturing operations can be problematic.however.If foreign manufacturers are serious about reducing their costs to local levels.they should consider building their own less atomated production lines This approach,though not yet widely adopted,isn't entirely new For several years afer Procter Gamble launched Safeguard soap in China.the company held down costs by relying heavily on manual labor to pack soap into paper cartons (Todary,with 30 to 40 percent of the sop market,P&G has shifted toward a more automated system because it can amortize capital costs across a much larger production volume )Colgate-Palmolive uses the labor-intensive manufacturing facilities it aoquired from alocal toothbrush maker,Shamou Samxiao Industry,to supply a large chunk of the worldwide demand for its toothhrushes Designing products to cost targets Materials are another huge expense for consumer goods makers Procter&Gamble is among the handful of foreign companies that have reached sufficient scale and purchasing power in China to reap savings of 20 to 30 pereent in this area.The rest can't count on negotiating favorable purchasing terms

workers receive no more than 2,000 renminbi. So the potential savings in capital costs from using less advanced equipment far outweigh any incremental labor cost. Faster machines also reduce flexibility. When a company wants to change the product made on an advanced assembly line, two hours might be needed to change the equipment on it, partly because of the number and complexity of the parts and partly because it will be necessary to clear many semifinished goods on the line at the time of stoppage. Some of them could end up being scrapped if they are at a sensitive point of production. By contrast, a Chinese company, with its slower assembly lines and higher ratio of labor, might not have to stop work at all, so it can manufacture a wider variety of products on a given line, with little wastage. We estimate that the material scrap rate of multinational companies could run as high as ten times that of local ones. In the case of a multinational sanitary-napkin producer, the scrap rate runs at about 3 percent, against an average of 0.3 percent for Chinese manufacturers. The quickest way to replace high-end capital equipment with a more labor-intensive model would be to outsource the production of new, less expensive products to low-cost local manufacturers, as Procter & Gamble and Johnson & Johnson have done in the past. Finding an appropriate local manufacturer and managing the quality of its output without assuming direct control over its manufacturing operations can be problematic, however. If foreign manufacturers are serious about reducing their costs to local levels, they should consider building their own less automated production lines. This approach, though not yet widely adopted, isn't entirely new. For several years after Procter & Gamble launched Safeguard soap in China, the company held down costs by relying heavily on manual labor to pack soap into paper cartons. (Today, with 30 to 40 percent of the soap market, P&G has shifted toward a more automated system because it can amortize capital costs across a much larger production volume.) Colgate-Palmolive uses the labor-intensive manufacturing facilities it acquired from a local toothbrush maker, Shantou Sanxiao Industry, to supply a large chunk of the worldwide demand for itstoothbrushes. Designing products to cost targets Materials are another huge expense for consumer goods makers. Procter & Gamble is among the handful of foreign companies that have reached sufficient scale and purchasing power in China to reap savings of 20 to 30 percent in this area. The rest can't count on negotiating favorable purchasing terms

with suppliers Such companies can,however,reduce the cost of the materials they use by keeping specific cost targets in mind when they design products It might be necessary,for example,to use cheaper ingredients or to remowe certain ingredients from a product formulation.For many foreign companies, this stralegy will involve a significan shift from the one they pursue with premium products importing designs and formulas directly from developed markets. Market research may be required to help companies develop product designs and formulations that satisfy their cost targets as well as consumer preferences Procter&Gamble operates a Beijing research institute that designs products with both sets of requirements in mind. Reconfiguring the supply chain Foreign companies in China usaly have higher logistics and supply chain cos than their Chinese counterparts do.Mamy of the foreigners rely on long-haul trucking.an expensive option in China considering its underdeveloped roods and high intraprovincial customs fees What's more,a recent government crackdown on the common practice of overloading trucks by 50 to 100 percent of their capacity means that costs will increase,since trucking companies will have to invest in more vehicles and drivers to move a given quantity of goods Shipping by ocean or river can halve the cost of transportation.This explains why Chinese companies tend to congregate near rivers and coastal areas Locating factories in coustal regions or close to the Yangtze River,which flows through several big inland cities.therefore makes considerable sense.In deciding between these two possibilities. companies should consider labor costs:average wages in an inland city such as Wuhan are up to 60 percent lower than wages in Guangzhou.which is near the coast.Ifa factory must be located close to a port facility in a coastal area,a city such as Ningho can offer labor costs that are half those of Shanghai.Unilever recently moved the manufacture of its houshold and personal-care goods from Shanghai to a new facility in Anhui province.where labor oosts are lower.The mary other foreign companies with factories in Shanghai should contemplate following this example. Targeting customer segments in the middle and lower price levels might depress gross-margin ratios but it could also enable foreign cosmer goods companies to scale up their business in China more rapedly and to increase their total revenues and profits dramatically.Companies that go down this road must not only give careful thought to the design and marketing of their products but also cut

with suppliers. Such companies can, however, reduce the cost of the materials they use by keeping specific cost targets in mind when they design products. It might be necessary, for example, to use cheaper ingredients or to remove certain ingredients from a product formulation. For many foreign companies, this strategy will involve a significant shift from the one they pursue with premium products: importing designs and formulas directly from developed markets. Market research may be required to help companies develop product designs and formulations that satisfy their cost targets as well as consumer preferences. Procter & Gamble operates a Beijing research institute that designs products with both sets of requirements in mind. Reconfiguring the supply chain Foreign companies in China usually have higher logistics and supply chain costs than their Chinese counterparts do. Many of the foreigners rely on long-haul trucking, an expensive option in China considering its underdeveloped roads and high intraprovincial customs fees. What's more, a recent government crackdown on the common practice of overloading trucks by 50 to 100 percent of their capacity means that costs will increase, since trucking companies will have to invest in more vehicles and drivers to move a given quantity of goods. Shipping by ocean or river can halve the cost of transportation. This explains why Chinese companies tend to congregate near rivers and coastal areas. Locating factories in coastal regions or close to the Yangtze River, which flows through several big inland cities, therefore makes considerable sense. In deciding between these two possibilities, companies should consider labor costs: average wages in an inland city such as Wuhan are up to 60 percent lower than wages in Guangzhou, which is near the coast. If a factory must be located close to a port facility in a coastal area, a city such as Ningbo can offer labor costs that are half those of Shanghai. Unilever recently moved the manufacture of its household and personal-care goods from Shanghai to a new facility in Anhui province, where labor costs are lower. The many other foreign companies with factories in Shanghai should contemplate following this example. Targeting customer segments in the middle and lower price levels might depress gross-margin ratios, but it could also enable foreign consumer goods companies to scale up their business in China more rapidly and to increase their total revenues and profits dramatically. Companies that go down this road must not only give careful thought to the design and marketing of their products but also cut

福建对外经济贸易职业技术学院 案例 对中国消费者的营销_国际市场营销实务

福建对外经济贸易职业技术学院案例对中国消费者的营销_国际市场营销实务