Jenni Romaniuk: Is word-of-mouth more powerful in China?

by |May 26, 2016

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By Jenni Romaniuk
Executive Director (International) at the Ehrenberg-Bass Institute for Marketing Science

The sheer size and increasing wealth of the Chinese population makes China an attractive target market. There is no doubt that Chinese culture and history differs from the western world, but how do these differences translate into differences in Chinese buyer behaviour? And are there differences that should affect a brand’s growth strategy? This is a question we examine in How Brands Grow: Part 2. Here I briefly discuss a topical area: word-of-mouth (WOM).

Given the importance of family, relationships and social networks in the lives of the Chinese people, there is frequent speculation that WOM will have more influence on Chinese buyers. This can lead marketers to invest in more WOM-generation activities in China, at the expense of mass advertising. Two factors determine the usefulness of any media: reach and impact. WOM has limited reach, but might have more impact on those reached. We tackle the assumption that Chinese buyers are more affected by WOM than buyers in the USA.

Professor Robert East (co-author of Chapter 7: Word-of-Mouth Facts Worth Talking About) highlights that to determine the relative influence of any received brand advice, you need to know the starting point, i.e. how likely they were to buy the brand prior to receiving the WOM. Buyers vary in their brand purchase propensities – some get WOM about a brand they are already highly likely to buy, while others get WOM about a brand where they have little initial interest.

East and colleagues found WOM is more influential when it reaches people with less chance of buying the brand initially and is less influential on those with a higher probability of buying a brand. This is important when researching WOM in China, and comparing results to other countries.

For example, when we compared the influence of WOM in the automobile market in China versus the USA, we found that China has a less mature automobile market. This means more buyers have a lower benchmark probability of buying a brand of automobile before they receive any WOM, compared to a similar sample of car owners from the USA. The graph below illustrates that the majority of category buyers from China have a benchmark probability of 40–60%, and three times as many people from the USA have a benchmark probability of over 90%. These differences affect aggregate assessments of impact.

Romaniuk

One way to see if WOM really has a greater influence on Chinese buyers, compared to those in the USA, is to look at people who have a similar benchmark probability in the same category. So we compared buyers in each country with a benchmark probability of 50% chance of buying the brand. The result showed no evidence that WOM is more influential on the Chinese. So it would be misguided to invest a lot in WOM generation activities in China thinking that it would have a substantially higher impact. It might be that WOM has greater reach, or cut through, and these are possible reasons for investing in WOM (they of course need similar testing), but we don’t see any evidence of WOM’s higher impact.

How Brands Grow: Part 2 has other examples from China, covering diverse areas such as loyalty, brand competition, brand associations, attitudes and cross media exposure. Our approach is to test established knowledge and see if that holds as a first point of action. Our evidence is that much of the empirical knowledge from western markets also holds in China. When it comes to the laws of growth, China is a different country, not a different planet!

This doesn’t mean that important differences between China and western markets don’t exist. It’s just that we need to be careful to disentangle real differences in buyers from transient differences in factors such as category experience/maturity. Otherwise, you risk being caught out when the market does mature, as is happening in many packaged goods categories in China.

On a final note, just because the strategic path to growth might be similar in China, it doesn’t mean marketers can just roll out a ‘one size fits all’ marketing plan. China does have some major differences that will influence tactical choices, as do India, Indonesia, Brazil and other emerging markets. Whether your global brand is just getting started or is well established and looking to fight off competitors, the chapters in How Brands Grow: Part 2 on building mental and physical availability, as well as launching a new brand, are there to help you to prioritise smartly and avoid the common pitfalls of assuming there are big differences rather than relying on the evidence.

Originally posted by Oxford University Press Australia.

 

How Brands Grow: Part 2by Jenni Romaniuk, Byron Sharp

How Brands Grow: Part 2

Emerging Markets, Services, Durables, New and Luxury Brands

by Jenni Romaniuk, Byron Sharp

Following the success of international bestseller How Brands Grow: what marketer's don't know comes a new book that takes readers further on a journey to smarter, evidence-based marketing. How Brands Grow Part 2, by Jenni Romaniuk and Byron Sharp, is about fundamentals of buying behaviour and brand performance - fundamentals that provide a consistent roadmap for brand growth, and improved marketing productivity. Ride the next wave of marketing knowledge with insights such as how to build Mental Availability, metrics to assess the strength of your brand's Distinctive Assets and a framework to underpin your brand's Physical Availability strategy ...

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