Life After iPhone (part 2)

Further to my previous post, my iPhone-less cold turkey experience lasted just 3 weeks!

Yesterday, I relented and so I am now the proud owner of an iPhone 3GS (because I don't like the design of the iPhone 4).

I heard last week from an expert during a research group that "anyone can get addicted to anything that gives pleasure". It seems I was addicted to my iPhone.

If I am not alone in this, then Apple's future commercial success is a psychological and medical certainty.

Life After iPhone

Do you remember when phones were phones?

If you picked up your phone it was because you wanted to speak to someone and your mind became focussed on the job in hand.

The trouble with the iPhone is that it does so many things that it encourages a constant state of partial engagement. Every time you pick it up, you have infinite choices of whether you want to talk, read, socialise, play, calculate, muse, listen, watch or create.

Following an unfortunate event at the weekend involving a sailing boat, a surprisingly rough lake and rather gusty winds, my trusty, well worn and well loved iPhone Mk. 1 no longer functions and I have been forced to resurrect my faithful old Nokia. But in the space of 24 hours I have moved from a state of "How will I cope without my iPhone!" to one of "Will I bother to replace it?". My iPad Mk. 1 does all of the distracting fun things that the iPhone used to do, and does them much better. The only exception is phone calls, which the iPhone was never very good at anyway.

So maybe I am setting a new retro trend: Ditch your iPhone, and go back to using technology that is optimised for a single purpose...

Phone = Phone.
iPad = Fun

Insights or Sampling?

Tibet 5100 is a Chinese brand of supposedly premium bottled spring water. It's brand credentials are compelling, being bottled at source in the purity of the Tibetan Himalayas - the highest source of spring water in the world.

So, what innovative marketing strategy is the company using to highlight the unique attributes of this aspiring Chinese brand to compete effectively with the more established French brands?

Yes - you guessed it...Supermarket sampling of the water, served in a plastic cup.

Despite what appears to be a considerable marketing budget, the company behind Tibet 5100 seems to have forgotten to get a planner involved in their marketing thinking. So, whereas Evian, for example, are selling health and well being with their insightful LIVE YOUNG positioning, Tibet 5100 are instead selling WATER.

Money down the drain.

RETAIL LOYALTY IN CHINA (OR NOT)

A research paper published this month by Kantar has highlighted that grocery shoppers in China are some of the least loyal in the world.

Whilst the research explores deep analysis to try to explain the reasons why, I believe there are three key things that modern trade retailers in China could do to improve the loyalty of their shoppers:


1. STOP FOCUSSING ON PRICE ALONE
Yes, the Chinese are incredibly value conscious. But this is culturally ingrained and so is simply a hygiene factor for success in this market. The major grocery retailers, however, appear to only focus/ communicate this aspect of their proposition. But low prices alone cannot drive loyalty if everyone is following the same strategy.


2. ENHANCE THE SHOPPING EXPERIENCE
Very little attention is paid to the shopping environment and the training of store staff in China. But low prices result in low margins making it very difficult for retailers to invest in the soft stuff that can enhance the shopping experience and so make someone leave the store having enjoyed a positive experience and with the intention of returning again. Whilst the International brands have the best global credentials to be able to own this space, they are also faced with shareholder pressure for profitability that may reduce their ability to implement these initiatives. Best Buy is a clear example of an international retailer who tried, and ultimately failed, to sustain an enhanced customer shopping experience in China for these reasons. Unfortunately, it appears that it may not yet be economically viable to "Surprise and Delight" shoppers in China.


3. STAND FOR SOMETHING THAT PEOPLE CARE ABOUT
The retailers need to become more shopper-centric, and this could be achieved by simply listening to their shoppers. If they were to ask shoppers in China what the single most important factor was in their choice of groceries, the answer would almost certainly be food safety/quality. However, no retailer has yet been brave enough to make this their stated mission.

With China's ineffective quality standards enforcement, a "food quality" brand positioning would certainly be very difficult to deliver. But maybe Private Label could become this differentiator?

Currently, Private Label is virtually non-existent in China, arguably because no retailer has sufficiently invested in their brand to make any product bearing that brand name credible. But perhaps the answer in China is to approach Private Label not as a low cost option, but as a premium option. Tesco Finest in the UK is an example of how high levels of consumer trust in the Tesco brand name enabled the creation of a super-premium range of products selling at prices higher than the established brands. A secondary benefit of the Tesco Finest launch was a halo effect, further enhancing the consumer perception of the Tesco brand.

If Tesco (or any other retailer in China) was able to launch a marketing-supported premium private label brand that guaranteed 100% control of the supply chain from farm to shelf, and therefore of the quality of the product, they would most likely kill three birds with one stone:
• They would credibly be able to position themselves as China's highest quality grocery retailer
• They would secure a meaningful differentiation that would be very difficult for competitors to quickly copy
• They would enhance their profitablity through the sale of higher margin goods, enabling them to invest in the previously unaffordable soft stuff


I don't mean to take anything away from the obvious rigour that has gone into Kantar's (very interesting) research paper. But like many things in China, the answer to the issue may not be that complex. But, as with almost everything in China, actually taking the necessary steps to address and resolve the issue may prove very difficult.

SNAKES & LADDERS

I have come to the conclusion that the main issue with doing business in China is that there are too many Snakes, and not enough Ladders.

A friend of mine has been negotiating for weeks for a deal, and at every step of the way the Chinese buyer has thrown up another "Snake" which could potentially kill the deal. Every Snake brings with it additional costs, additional process and additional time to renegotiate the deal price. All the while, the deal becomes more and more marginal for the seller until such point that one of two things happen:

(a) The seller gives up, and walks away vowing never to trade with the Chinese again

(b) The deal happens, but the seller is so frustrated with the outcome that he vows never to trade with the Chinese again

So if you are seriously contemplating selling something in China that is not luxury goods or exclusive cars, be prepared to lose your sanity, your temper, your patience and your hair.

Only the lucky few find the Ladders.

Five things you need to know about China's inflation

1. It will not go away quickly. China has maintained a relaxed fiscal policy for a number of years with lax lending criteria combined with massive state investment in infrastructure. China's 12th five year plan announced in March shows little sign of any change, with seven strategic emerging industries identified to receive an incredible US$2.1 trillion of investment over the next few years. With this much money in the system, combined with a stated intent to dramatically raise the minimum wage every year, Chinese inflation is here to stay.

2. China's 'Big stick' approach to the problem will not work. As was witnessed by Unilever's about turn last week on planned price rises following their "little chat" with the Chinese National Development and Reform Commission, China is trying to artificially hold down prices. But this control mechanism will only work in the short term before the growing pressure it creates builds to a critical point.

3. It will affect marketing budgets. In the meantime, international companies that market price-sensitive or consumer commodity goods will be forced to look for savings elsewhere to maintain their profitability in China. Marketing budgets are likely to be the first to be reviewed, and so we should all be braced for some belt-tightening in the next few months as the effects feed through to agency and media partners.

4. It will affect product quality. Ultimately, everyone in business needs to make money, and if profits cannot be made at one end of the supply chain, the pressure for cost savings will be pushed down to the suppliers. We know from the Melamine milk scandal in 2008 that raw material suppliers in China can find ways to enhance their profits through the supply of substandard goods - no matter the consequences. It is an economic reality that manufacturers will not continue making unprofitable goods indefinitely and so something will have to give.

5. It will force China to allow the RMB to rise against the US$. For every dollar of trade that China does with the rest of the world, it has to print a corresponding amount of RMB. This ever-increasing liquidity in the system stokes the inflationary fires that can only be reduced by allowing the RMB to rise. While China has resisted the pressure over the last few years due to concerns about exports, increasing domestic demand and a stated intention to focus future investment into higher value-add industries will diminish this argument. It is therefore likely that inflation reduction will become a higher priority for the Chinese government economists rather than export growth, with a resulting assent of the RMB.

Copyright © Campaign Asia-Pacific 2011

Big Stick Update: Unilever postpones price rises

The Chinese National Development and Reform Commission of the Chinese Government has "had a word" with Unilever who have announced the postponement of their price rises.

Now, there's a surprise...