Marketing cell phones in an emerging market:China - Report Example

Marketing Cell Phones in an Emerging Market: CHINA BY YOU YOUR ACADEMIC ORGANIZATION HERE HERE HERE Marketing Cell Phones in an Emerging Market: CHINA Executive Summary The market for mobile phones in China is a highly saturated, competitive environment with multiple domestic and international cell phone companies looking for innovative and unique ways to market their individual products. China is, currently, the largest mobile phone market across the globe, with more and more consumers adopting mobile technologies annually, thus offering significant market potential for new companies. Additionally, consumer attitudes in this region in relation to mobile technologies are considerably positive, with consumers utilizing cell phones to conduct both personal socialization and professional business in a variety of active lifestyles. This report identifies the key success factors for marketing cell phones in China as well as the different competitive marketing efforts which are being utilized for finding profit success in this emerging market. The Market Environment China is, today, the world’s largest consumer market for mobile technologies, with international mobile phone importation levels reaching over 134 million units, an increase of 34.5 percent each and every year (Fu, 2007). Chinese mobile technology users, additionally, delivered nearly 200 billion text messages in 2004, with increases in consumer texting expected to increase by 50 billion annually (Johnson, 2005). Subscriber rates for cellular service included over 480 million consumers in 2008, a measurable increase in active cell phone holders of 20 million since 2007 (Fu). Thus, what this represents is a considerably large market opportunity for new entrants looking to market cell phone technologies in this emerging market environment. In a country where there are over 1 billion citizens of multiple, differing demographics, it is likely that new entrants can find an appropriate target market who is willing and able to purchase cellular technologies through the use of creative and innovative positioning strategies and promotion. The Competitive Environment Unfortunately, as the Chinese infrastructure for cellular support technologies becomes more pronounced and developed, this has opened the proverbial doors for multiple domestic and international competitors to saturate the marketplace with their own product offerings. For example, large-scale competition such as Apple recently partnered with a domestic company, China Unicom, to sell contemporary iPhone 3G products in a three-year retail agreement (knowledge.wharton.upenn.edu, 2009). Coupled with growth in other international players such as Verizon Wireless, China’s cell phone competitive environment is only expected to grow exponentially which can also be a detriment to new market entrants who have not yet developed a sound or practical marketing model in terms of promotion or product positioning. Other competition such as Nokia and Motorola consistently spend large-scale dollars on advertising and branding campaigns (Wang, 2005), thus competing with larger competitor advertising will be a considerable concern for the budget-conscious market entrant. The Marketing Mix New market entrants must be concerned, as part of the marketing mix, with issues of the product itself. With the aforementioned high volume of competition in China, development and launch of innovative products, based on features, designs and services must be considered carefully. The current market environment has had competition steering away from promoting technological features and services of cell phones with a shift toward “design and aesthetics in the pursuit of new unique selling points” (Wang, 2005, p.4). The largest consumer demographic is the youth market, driven by young adults and teenagers who are interested and excited about the different animations and games as well as aesthetic design features (Wang). Therefore, when considering what varieties of products to develop and launch, a new market entrant should actively scan the external competitive environment to analyze what types of design features are currently available on the market and develop unique gaming technologies to appeal to a diverse, somewhat fickle youth consumer market. Pricing, as an additional element of the marketing mix, is one of the most important factors to consider when determining an appropriate consumer cost. “Chinese consumers are notoriously price sensitive”, with a recent consumer survey identifying that over 80 percent of Chinese respondents cited price as the most important factor they consider when choosing between alternative, competing products (Suessmuth-Dyckerhoff, Hexter and St-Maurice, 2008, p.1). Most Chinese consumers have made it clear that they will be willing to abandon one company in favor of another in the event of only marginal increases in price, such as a 5 percent cost increase (Suessmuth-Dyckerhoff, et al). This is a major consideration for a new market entrant, as when setting an appropriate pricing policy, business expectations for profitability must be analyzed along with ensuring that all costs of manufacture, distribution, retailing and marketing are absorbed without sacrificing consumer sentiment. As part of a comprehensive environmental analysis, the new cell phone market entrant must be consistently aware of the competitive pricing policies of other cell phone marketers and set a price which is in-line with consumer expectations as well. This is a tremendous business risk, in this fickle, price sensitive market, as setting too low of a price can jeopardize profitability. Promotion, also as part of the marketing mix, is likely the most fundamental aspect of ensuring that a new market entrant can achieve competitive advantage and satisfy consumer beliefs regarding cellular technology purchases. As with most industries, the cell phone marketer must understand their target consumer audiences in terms of buying behaviors and the level to which they express brand loyalty to specific, competing cell phone brands. Holleyman (2006) offers that public opinion polls are not commonplace in the Chinese markets, therefore domestic consumer focus groups and other quantitative/qualitative studies about consumer attitudes are not something the Chinese consumer is familiar with. Thus, there is a noticeable lack of research information available about Chinese consumer attitudes related to cell phone marketing which represents both a risk and an opportunity for a new market entrant as part of a comprehensive SWOT Analysis. It appears that most international cell phone companies are acting on both instinct and previous experience when catering to the price-conscious Chinese consumer in most of their promotional and advertising efforts, therefore a new market entrant maintains the opportunity to develop a sound research methodology, such as surveying or focus groups, to uncover real-time attitudes and values for specific target markets. In this region, such efforts would be an innovative practice which could, in a best case scenario, give consumers the impression that a new market entrant takes their needs seriously and is willing to deliver on their lifestyle and professional demands for quality cell phone service. Using innovative positioning strategies which focus on the consumer (based on researched consumer behavior studies), it seems that a new market entrant can make their product stand out from competition by promoting their focus on customer service as a top priority when developing and launching new product varieties. Place, based on research information, does not seem to be as much of a factor when determining which retail organizations or other vendors would give the new market entrant more visibility in China. The retail infrastructure in China grows exponentially each year and China maintains more than 160 large cities which carry populations of over one million each, and at least 10 major cities which carry populations of over 10 million (Cooper, 2007). Thus, in this market, there is always going to be reputable, large-scale retailer opportunities which cater to diverse, mass market audiences. Additional Considerations There is one notable disadvantage to entering the Chinese market today, as this market maintains the potential to lose considerable domestic business as other, nearby, developing nations begin construction of quality cell phone infrastructures. India, as one example, offers its one billion citizens cellular service which is priced, sometimes, at marginal pricing of only $4 to $7 per month (Kanellos, 2005). India is a developing marketplace and maintains the potential to offer cellular service to non-domestic clients at a price which is much more attractive than what is currently being offered in China. By extending their service to international clients, as many U.S.-based companies currently pursue, this could take away from Chinese domestic sales as the price-conscious consumer begins exploring alternative cell phone service offered by Indian (or other) cellular companies. Defection from domestic to foreign service providers is a significant business risk which will likely impact pricing and promotion in just a few years as developing markets create more workable cell phone infrastructures for both service and support. As part of a further environmental analysis, the political environment in China must be considered in relation to the importation of U.S.-based products and the restrictions which exist regarding new market entrants. Lawson (2007) offers that there are now more freedoms than ever before in relation to achieving governmental support for private enterprise development and the country leadership has removed many of their previous tariffs and taxations associated with imported products. This is a significant benefit for the new market entrant as the costs of physical transportation of domestic-produced goods is now without considerable added costs for importation. Additionally, for the more budget-conscious new market entrant, this lifting of government-imposed fees for importation can avoid the need to develop a Chinese manufacturing facility for the physical production of new cell phone technologies, thus avoiding the operational costs associated with labor, building development, equipment costs, and other operations expenses related to procuring a Chinese domestic production facility. The lift on tariffs and other taxations can give domestic producers a new advantage in terms of overall cost savings for marketing and production as well. Advertising Promotion Strategies The new cell phone market entrant must make considerations about what type of promotions are both relevant to Chinese consumer values and can undercut competition for unique selling edge. China maintains, today, 234 million Internet users (Guo, 2009), thus cell phone companies are already taking advantage of this new media and marketing exposure opportunity. A new market entrant will need to create a unique, custom-tailored website for promotion which is written not in English, but Chinese as Chinese is still the region’s foremost, dominant language with mass market audiences speaking, communicating, and reading in Chinese as the preferred language (Guo). This, too, can be a business risk for U.S.-based companies entering this market for the first time as they may not have the knowledge and expertise within their professional staff to create Chinese websites. However, for the business willing to invest the time and energy into creating promotional websites or other relevant advertising in the virtual environment in Chinese language, the opportunities for further brand exposure are increased significantly. Competing promotion also strongly exhibits to the Chinese consumer that their phone offerings are custom-tailored to meet domestic client lifestyles and values, with handsets being designed uniquely for mass market audiences in the China market (Weaver, 2004). Additionally, Chinese consumers have the highest ratio for replacement of existing cell phone technologies as they demand faster upgrades to existing technologies and more advanced features (Weaver). What this means to the new market entrant is that the life cycle of products newly-launched in China are relatively short-lived, reaching maturity in just a matter of a year or two before consumers abandon their current phones for more advanced, technologically-superior alternatives. New market entrants will need to devote a considerable amount of their resources toward ongoing research and development, again by assessing competitor features and benefits, and trying to come up with innovative product offerings which make their brand stand out from other cell phones in multiple Chinese market environments. Thus, when a new market entrant does remain focused on routine research and development, they will have to consider whether they have the production capabilities to meet with consumers’ rapid replacement behaviors and also satisfy budget restrictions in the process. Consumers in China are entertainment-driven as well when it comes to replacing existing cell phones and there have been recent trends toward demanding celebrity screen savers, cartoons and other video shorts as desired selling features when selecting products (Johnson). Therefore, celebrity endorsements might be a strong consideration for marketing success in China which can be promoted using a variety of online, television or print media channels depending on budget capability. Conclusion Clearly, in terms of the volume of available target consumers, China is a leader in population demographics who have both the financial means and the interest to make purchases of a variety of cell phone technologies. Having such a large volume of citizens, geographically-dispersed across China with large-scale populations, can allow a new market entrant to achieve both mass market and tightly-targeted segmentation for top-quality marketing success. With the growth of other technological infrastructures, such as the consumer use of the online environment, it gives new market entrants much more media exposure and opportunities to expand brand presence and, in a best case scenario, build brand loyalty in the process. It seems the key success factors for marketing cell phones in China is a heavy concentration of promotion (especially advertisement) and maintaining a constant focus on examining competitor actions to develop a more attractive product offering. With consumers being so tightly focused on pricing, price wars in the cell phone marketplace would likely not bring significant profit success. It would be a key success measure to conduct new research on what drives consumer values and then use differentiation and positioning strategies, by promoting innovations in service, design and features, to gain the most consumer interest. By in large, China has many more advantages for new cell phone market territory than drawbacks. 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Arizona State University West. Retrieved 4 Oct 2009 from http://www.newporttechnologies.biz/nov2004.pdf. Read More