Innovation – the key to win the heart of Chinese customers

 

In the past, there has been an interesting development within the Chinese market. Until recently, Chinese consumers rejected Chinese brands for one simple reason: Products from Chinese brands are often nothing but a copy of brands from abroad, but with worse quality for a cheaper price.

However, in the last few years, we notice that Chinese consumers talk more and more about local brands across all industries. No matter if it is automotive, FMCG or house appliances, the preference for brands from Germany, Japan, and the U.S. is decreasing.

So the question is: What makes Chinese brands more and more attractive?

First of all, the product quality is getting better and better, but the price remains still at a lower level than the one from imported brands. But Chinese brands have also noticed that a price war won’t make them win in the long run since there is always someone offering a cheaper price. So they started to search for a new way to be competitive. And they found the key for success in “innovation”.

A whole new product, such as the very first electric vehicle, is of course seen as a great innovation. But it is very difficult to make such innovations every few months, thus the Chinese brands start to focus on new user experiences for consumers. In the eye of a Chinese consumer this kind of development is also seen as an innovation.

Three examples from different industries show how innovations with a focus on new user experience should convince consumers:

1. Consumer service: An example of NIO in the automotive industry

NIO owners often claim with a twinkle in the eye: I bought a service package and I get an electric vehicle in my goodie bag.

With the NIO service package, car owners enjoy free services as long as they own the car:

• One-click Repair: Click the button and a repairer will visit you – wherever you are –  in a very short time (just a few hours) for all the services you need, such as tire repairing, filling the windshield fluid, taking your car to the repair shop, roadside assistance, etc.
• Charging/Battery Swap: This is one of the main reasons why consumers choose NIO over any other EV manufacturers. If you can’t find a battery swap station nearby, you can just call the service hotline and a “nanny car” will come to you with a new battery and exchange it. If you are driving a long distance, just make an appointment and the nanny car will be waiting for you at the chosen place and time.   

NIO, of course, has invested a lot of money in this kind of service and needs to have the costs under control. Thus it has started to offer “Service package lite”, but still, the service it offers is far beyond what its competitors are offering on the market, which Chinese consumers appreciate very much.

2. Connectivity and “the need to be seen” in social media: An example of Xiaomi in the house appliance industry

Over the last 10 years, baking western cakes and making desserts is one of the new hobbies of many modern young Chinese women. Western cakes and desserts are associated with the western lifestyle  of English afternoon tea. Those women who master the way of baking are seen as able to lead a modern western life. At the same time, women who bake have the need to share photos, and more importantly, to be seen on social media. For this reason all kind of photo editing Apps in China offer beauty filters for food. Xiaomi sees more potential in this user need and has introduced an oven with an integrated camera. It’s not only possible to take photos while the ingredients are being baked in the oven, the whole process can also be streamed through the app.

Since social media is playing such a dominant role in the daily life of Chinese, everyone feels they have the need to share, which produces a lot of information on the platform. Thus, it is even more important to produce “special” photo/video content, which increases the chance to be seen.

3. Happiness in small pockets of time: An example of Pop Mart and its “blind box” in the FMCG industry

The net profit of Pop Mart, a toy manufacturer in China,  increased by 300 times in the past two years. Its net profit hit the 500 million Yuan mark (65 million Euro) in 2019. Pop Mart makes its success by selling blind boxes with an opaquely packaging and collectable figurines inside. A “normal” blind box costs between 29 to 99 Yuan (4-13 Euro), a limited edition blind box costs about 1000 Yuan (125 Euro) and on the second-hand market 3000 Yuan ( 380 Euro).

Its consumers are mainly 19-29-year-old ones. Most of the time the joy of collecting starts with purchasing two or three boxes for fun. It continues by buying more of them whenever passing the Pop Mart shops or its Toy ATMs, driven by the non-stoppable desire to collect more of the figurines to have the whole collection.

The satisfaction of collecting is, of course, one of the reasons for purchasing, but an even bigger driver is the “small happiness in small pockets of time” – as Chinese, no matter how old they are, all live under enormous pressure. The achievement- and money-orientated society, which is full of competition, makes everyone exhausted. This is one of the main reasons why Chinese consumers especially like short videos (such as TikTok). In the eyes of Chinese consumers watching short videos brings immediate happiness in a very short time https://www.spiegel-institut.de/en/whatsnew/publications/entertainment-on-the-smartphone 

As the blind boxes are affordable, this kind of happiness is also easy to get. The joy of unboxing makes the user addicted. Unlike gambling, users know there is for sure an attractive surprise inside, so you will never be disappointed when purchasing a box. For this reason blind boxes can also be described as an oasis or harbor for the stressed Chinese who just need a short break from the daily life.

These examples from different industries illustrate that it is not always necessary to create a completely new innovation to convince consumers. It is the new consumer experience that impresses consumers and creates the desire for purchase.

For more cultural insights about Chinese consumers, please feel free to contact the Spiegel Institut. Besides Desk Research and Consumer Research, we also offer a Workshop about the Chinese Culture in Europe.

 

Author: Yue Liu, Spiegel Institut Mannheim