Iphone in China can succeed. Here's how...

So Iphone entered China early September. And thus far, no more than a few thousand sales have been registered. Where did Apple go wrong?

The problem isn’t due to the Iphone’s popularity, as there is a huge demand for Iphone’s in China. One can see black-market Iphones all over the place, which sell for anywhere from 4000 RMB to 6000RMB (about $600 to $875 dollars).  It also isn’t the fact that there aren’t enough cell phone users. A China news agency report printed early May 2009 showed that after introduction of 3G technology, mobile users grew to a total of 670 million people. That’s almost twice the population of the U.S.. Also, it isn’t that people don’t want a new phone since they already have one, most people I met there change their phones on a frequent basis. So, shouldn’t Iphone be making a huge blast in China?

A recent Forbes article by Shaun Rein on why Apple is Failing in China outlines some interesting  points. Here are some of my observations and commentary to his article:

1. Apple entered the market assuming China is the same as the U.S.
   • Anyone who’s been in China knows how easy it is to get a pre-paid phone number and keep that as long as one wishes. Iphone is making Chinese consumers lock in to an expensive phone plan without realizing that model, although it works for the U.S., has never been popular in China. Chinese like to change phone numbers quickly and easily, although most don’t. And imiting their “options” isn’t going to win over any new customers, considering they can get a black market iphone for around the same price that doesn’t do that.
2. Apple didn’t understand consumer spending
   • Chinese usually prefer to buy cheaper plans, although they will go all out on getting a phone. They prefer texting over calls, etc. So by having them lock into expensive call plans, they are turning off customers. No pun intended.
3. Apple didn’t understand the competitive marketplace and partnered up incorrectly
   • Partnering up with a telecom (Unicom) that sells to a least wealthy consumer and has lower number registered users was a mistake.
   • Most people believe this company to have worst signal, and most people don’t want to change carriers, let alone change phone numbers.
4. Apple took too long to enter China
   • If you are not in China quickly, then the black market for your products will start becoming the main market and it’ll be harder to get back in when u decide to.

So what can Apple do? They are locked into a contract with Unicom, but have to make the best of it.

• Spend time doing more market research to understand what people want out of a phone.
• Find a way to address needs, such as: being able to keep existing phone numbers, working with Unicom to change the people’s perceptions of their service (ie providing better coverage, affordability, etc)
• Reach out to other businesses and educating them on the power of developing great apps.
• Chinese people don’t want “convenience” through the internet, as much as Americans. They are more interested in developing connections, playing games, and keeping informed, learning English, etc etc . So Apple should develop free apps that work as English dictionaries, news feeds, as well as reviews of restaurants, entertainment, and others. (those would attract the cosmopolitan crowds at least)

The lesson here is find good partners, do your due diligence, and plenty of market research, or partner up with people who understand the market.

Starting in the 1980s, China developed it’s 1-Child policy as a means of population control – meaning most families, especially in cities, could only have 1 child. This has had a deep effect on the psyche of the Chinese youth. Understanding this change in the mentality in China is crucial to understanding how to market to these youth, as well as how to lead them, work with them and interact with them.

From the 1980s on, this policy marked a new generation of Chinese who were often referred to as “Little Emperors.” Most youth tended to be the only child with several grandparents and parents often fighting for their attention. Thus many of these youth developed an attitude that they were the center of the world. There are several other problems this policy created, as well as some other solutions. However, one thing is certain, starting from the 80s generation (referred to in Chinese as the 80? ba – ling- ho) the youth in China have developed a completely new attitude towards life.

Some of the obvious attitudes are a need for self-expression, individuality, patriotism, as well as westernization – ie. love of basketball, soccer, F1, Tennis, etc etc. In Beijing and Shanghai this also means a higher English ability than even their Chinese teachers. (In 2nd tier cities, the English level is still fairly low, but with an influx of “foreign experts” give it time before the overall English level as a nation becomes highly proficient).

Some other attitudes and believes can be seen on this report: China Youth Trends and Business Implications, which separates major groups of Youth into categories. Some of the observations are obvious, and some speak of only a small minority of groups (Check them out since I will not re-state the opinions of their findings). Of particular interest to businesses are the following views which I disagree with or add comments to:

1. Social Participation:
   • Pertains to big events, such as the Sichuan Earthquake, or the Olympics. But it’s still rare to see much social involvement besides posting on blogs or forwarding “chain letters” amongst the majority of youth. Community service is all but non-existent in the way we know it in the west. Charity is still seen as “suspicious.” Probably due to the idea that “people who do favors for you, will surely want something in return.”
2. Searching for meaning:
   • Chinese youth, are often confused about the world and sometimes feel “lost.” Having grown up their whole life listening to their teachers and taught to memorize and not encouraged much to develop critical thinking skills (Seen not only in adults and mid-managers, but also in the youth) means that those businesses that can create a vision in the youth, and can appeal to their philosophical searches will attract more and more business.
3. Action:
   • Chinese youth are taking more and more action, that is true. If by action we mean posting on forums, and boards, and talking about things on QQ (chinese ICQ) or MSN, then yes, Chinese youth are more action than “talk.” However, those that take real “action” is still a small minority of the Chinese.
   • What this means to your business? You need to show the youth the action they talk about. Your companies actions should include those topics which the youth flock about on the blogs, forums, etc. So investing on a web 2.0 specialist is a good idea to work with your branding and PR team.
4. Identity:
   • Chinese youth are searching for their unique voices, talents, etc. The 90s generation is moving away from the “Brand names” shopping binge of the 80s generation towards a more “unique-centered” idea which showcases their individuality.
   • What this means for your business: Encourage individuality not in your products, but in the uniqueness it will create for them.
5. Pride in Chinese Identity:
   • While, the Chinese are very proud of their country, I would not go as far to say that young people have started to be more interested in traditional culture. In fact, more and more youth are becoming more and more westernized. It is a small minority of those who practice Chinese Martial arts, enjoy Chinese Opera, or enjoy any of the other cultural traditional aspects that China provides. What we’re seeing here in China is more and more youth-oriented westernization while resonating the words “we love china.”

One thing is certain:

1. Expression of one’s opinions and the use of the Internet is becoming more and more prevalent, which is a good thing for businesses, so long as they are willing to make the connections with them. Whenever a scandal props up, or a political view, Chinese youth are known to mobilize and post on forums, blogs, etc. Samples can be seen of the time a CNN spokesperson insulted government officials in China and it ignited an online war against CNN. More and more youth use blogs, Instant Messaging as daily communications, most are on MSN or QQ (Chinese ICQ) during work, or at their dorms. So viral campaigns with strong messages get across quite rapidly
2. What this means:
   1) Stay away from political arguments and disagreements.
   2) Feed into their “patriotism” much the way Adidas did during their promotional campaign for the Olympics, showing 1.3 billion people standing behind every athlete
   3) Encourage social media activities, such as blog postings, reward with incentives by creating a community.
   4) Communicate social action and the ways you are empowering Green Energy, Youth, etc
   5) Branding  and Marketing Campaigns should focus on the gains of the individual in terms of self-respect. Gaining admiration by fellow youths, creating a “unique” experience for each customer, customization of products to fit each customer’s needs, etc etc.

Below you may find slides from the presentation from China Youthology Consulting.

China Youth Trends And Biz Implications

View more Microsoft Word documents from chinayouthology.