The Real China Revealed: An in-depth Consumer Survey of 2nd +ACY- 3rd Tier Cities

The Real China Revealed: An in-depth Consumer Survey of 2nd +ACY- 3rd Tier Cities

May 16, 2007

Research Finds Consumers in Smaller Cities Share Common
Social Attitudes, but Differ in Shopping Behaviors and
Media Consumption

MNCs Should Look for High-growth Opportunities+ADs- Chinese
Brands Face Growing Competition


    SHANGHAI, May 16 /Xinhua-PRNewswire/ -- Consumers in
China's smaller cities are surprisingly similar to their
big-city counterparts, with a significant percentage
describing themselves as self-confident, ambitious, risk
taking, and open to new experiences, according to new
research released today by Ogilvy China and MindShare
China. 

    +ACI-Tier 2 and 3 cities in China, where incomes are
rising rapidly, represent a huge potential market.  Many
multinational companies continue to focus their marketing
dollars on the Tier 1 cities, but only 33.5+ACU- of all
retail sales in China currently come from the 24 largest
cities.  And competition for consumer spending in those top
cities has become increasingly tough,+ACI- said project
designer Kunal Sinha, executive director of Ogilvy China's
Discovery research program.  

    Mr. Sinha presented his research at the 'Radical
Practical - China Marketing 2.0' conference in Shanghai,
co-sponsored by Ogilvy China and the China Business
Network.

    +ACI-The strong purchasing power in smaller towns will
become the engine for continuing market expansion.  But
there is very little brand, consumer or media data
available about this massive and critical market: this
project is one of the initiatives to dig deeper into China
and help address marketing issues,+ACI- said Arjun Ghosh,
National Director of MindShare Insights China, partners
with Ogilvy Discovery in executing this research.

    +ACI-The Real China Revealed+ACI- concluded that among
other important findings, Chinese consumers in Tier 2 and 3
cities are just as eager to experience new products and
brands as those in the wealthiest cities.  The research
suggests that consumers in smaller cities are more than
ready to try new products. 

    The research also found some foreign brands are making
significant headway in 2nd and 3rd tier cities.  While
Chinese brands are currently market leaders in these
cities, they should expect to face heavier competition from
multinationals as they step up marketing in these areas. 

    While revealing similarities, the survey also found
people in 2nd and 3rd tier cities differed in their
behaviors in areas such as in-store shopping practices,
media consumption, as well as future purchasing plans. 

    The Real China Revealed: Recommendations 

    What Brands Should Do

    The study provides valuable lessons for both Chinese
and multinational companies. 

    -- National versus local campaigns 

       Data suggest marketers can use a combination of a
national brand 
       campaign and tailored promotional activities at the
local level. 

       As the data show Chinese consumers are similar in
some of their key 
       social attitudes -- eg they are confident,
ambitious, risk-taking and 
       willing to try new things -- marketers can use this
knowledge to 
       develop national brand-building campaigns that tap
into these shared 
       values. 

       In addition, recognizing that consumers respond to
different influences 
       in-store, marketers can tailor their
retail/promotional techniques 
       according to tiers. 

    -- Multinational companies and multinational brands 

       It will be a tough challenge for MNCs: Our study
shows that lower tier 
       consumers are somewhat less willing to pay premium
for foreign brands.  
       But MNCs have the budgets and marketing +ACY- brand
building savvy to take 
       on the currently dominant Chinese brands in lower
tiers.  Many major 
       MNCs are gearing up or are already in action setting
up distribution 
       and staff (2 key challenges) in lower tier markets.

    -- Local companies and local brands 

       The data shows that in some categories (electronics,
mobile phones) 
       foreign brands have already made strong headway into
2nd and 3rd tier 
       markets and are beginning to take share in other
categories 
       (automobiles).  Therefore Chinese brands need to
plan strategically 
       about how to retain and build marketshare in these
cities.  Local 
       brands that look beyond the short term and invest
heavily in brand 
       building ahead of the curve will make it very
difficult for foreign 
       brands to challenge their home turf.

    About 'The Real China Revealed'

    'The Real China Revealed' is one of the most
comprehensive surveys of lower tier consumers ever
conducted in China.  The research was conducted over three
months in 22 cities in China, including in-depth interviews
in 3,419 household, at 295 retail outlets and 530 exit
interviews.  The research examined consumers' lifestyles,
attitudes, as well as preferences toward foreign and local
brands, future purchase plans, the influence of children on
buying decisions, use of TV, newspapers and the internet,
and other shopping habits.  The survey also surveyed
consumer behaviors for individual categories, such as
vehicles, durable goods, personal products, insurance and
banking services, and fast food brands. 

    About Ogilvy Group China

    Ogilvy Group China is the largest marketing
communications network in China.  It offers the full range
of marketing communication disciplines including
advertising, direct marketing, interactive media, database
management, public relations, graphic design, and related
marketing disciplines.  As Brand Stewards, the agency works
to leverage the brands of its clients by combining local
know-how with a worldwide network, creating powerful
campaigns that address local market needs while still
reinforcing the same universal brand identity.  Ogilvy
+ACY- Mather integrates these communications disciplines
using its proprietary 360 Degree Brand Stewardship process,
which holds that every point of contact builds the brand. 

    Ogilvy +ACY- Mather Worldwide ( http://www.ogilvy.com )
is one of the largest marketing communications network in
the world, operating 497 offices in 125 countries. Ogilvy
+ACY- Mather Worldwide is a member of WPP plc (Nasdaq:
WPPGY), one of the world's leading advertising and
communications services groups.

    About MindShare China 

    MindShare is the leading media investment and planning
agency in China.  Our company vision is to be a dynamic
community applying local insight, restless imagination and
global excellence to deliver and inspire.

    We help our clients to understand, navigate and manage
the evolving and fragmenting media landscape.

    Part of the WPP group, MindShare was created in 1997 as
the first truly global full-service media company.  It is
now a team of 5,300 people in 66 countries around the
world. In China, MindShare is the largest media agency
(RECMA July 2006) and operates out of 9 offices across the
nation and employs more than 700 media and communications
professionals.

    We offer core services in strategic media planning,
negotiation and execution.

    Our specialist services address the specific needs of
our clients, and include econometric modeling, research and
insights, digital solutions, sports and entertainment
sponsorship consultancy, and brand-driven creative
campaigns.

    MindShare has been recognised as the number 1 media
agency in the world (Advertising Age's Global Media Agency
of the Year for two years' running (2003 and 2004).  In
Asia Pacific region MindShare has also received Media
Magazines Media Agency of the Year Awards in 2004 +ACY-
2005, and also topped the R3 China Agency Image Study.


    For more information, contact: 

     Belinda Rabano 				
     Ogilvy +ACY- Mather Asia Pacific  		
     Tel:   [phone]
     Email: Belinda.rabano+AEA-ogilvy.com			
				
     Dalton Dorne
     Ogilvy +ACY- Mather China
     Tel:   [phone]
     Email: dalton.dorne+AEA-ogilvy.com

     Ina Zhao
     MindShare Insights
     Tel:   [phone]
     Email: Ina.Zhao+AEA-mindshareworld.com