Chinese Consumer Report 2009 - Roland Berger Strategy Consultants

Roland Berger Strategy Consultants

Issue 06 09

Study In-depth knowledge for decision makers

ChinesE Consumer REPORT 2009

Roland Berger Strategy Consultants

Dear Reader, Over the past 20 years, Roland Berger has conducted more than 80,000 interviews in China with people from all walks of life, giving us unprecedented access to the way Chinese consumers see their world. We have found out about their preferences and dislikes, their hopes and fears, their aspirations and what they are happy with in the status quo.

Charles-Edouard Bouée, Regional Coordinator Asia, President & Managing Partner, Greater China

These interviews were mostly held in connection with one of the more than 200 assignments we work on in China each year, affording us unrivalled insight into the Chinese market. For at least 15% of these assignments we have used our Roland Berger Profiler tool to analyze the behavior of Chinese customers. To keep on top of developments in 2008/2009 we felt it was important to conduct a largescale survey to consolidate our knowledge of this exciting and still growing market. This study presents you with some of the results of this undertaking, which covered 12,000 Chinese consumers in 64 cities, ranging from the four megacities Shanghai, Guangzhou, Shenzhen and Beijing down to tier-3 cities. Ignatius Tong, Partner and Vice President, Consumer Goods and Retail in China, believes knowing the customer base is vital for any business striving to penetrate or survive in the Chinese market: "More than ever, it is critical for FMCG to be tailored to specific consumer needs. This requires a more insightful understanding of consumers that goes beyond mere demographics." John Shen, Partner in Automotive, agrees and points out how critical brand management has become: "Brand loyalty can only be nurtured and enhanced through the consistent delivery of brand values at every customer touch point. Brand strategy and brand management should be at the top of the agenda for every CEO." We are delighted to be able to include interviews with two CEOs of Western companies which have been operating successfully in China for many years: Paolo Gasparrini, CEO of L'Oreal China and Günter Butschek, President and CEO of Beijing Benz Daimler-Chrysler (BBDC). Their impressions about the future of the Chinese market will be of great interest to any reader working or investing in China. The following report is the first of what we're hoping will become an annual cornerstone of insight into the Chinese consumer market. In 2009 everybody will be looking to understand the unfolding domestic consumption in China as exports suffer due to the world economic crisis. In this environment we are looking forward to continuing to assist businesses in China in developing the domestic customer base and defining winning road-to-market strategies for our clients in this country.

ContentS

Study 3

A. Method and Scope

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B. The ChinesE Consumer

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1 SIx Recommendations

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2 Chinese Surprises

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3 Know your archetypes

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4 Sample Industries: The cosmetics market

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5 Sample Industries: The automotive industry

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6 Straight from the horse's mouth

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C. About... ... Roland Berger

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... Cic

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... L'oréal

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... BBDC

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D. Contacts

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A. Method and Scope

Roland Berger Strategy Consultants

Experience and empirical research: Getting to know the Chinese consumer Recently, Roland Berger conducted a survey to analyze Chinese consumers. Over the course of two months, over 12,000 individual interviews were conducted with consumers between the age of 18 and 64 in a representative study.

"Both emotional and rational benefits should be taken into account when defining brand positioning. We need to go beyond functional benefits and address the self-expressive needs of consumers as well, subtly symbolizing the life attitudes of the target group." John Shen, Partner (Automotive CC)

Of our respondents, 14% lived in one of the four Chinese megalopolies, 43% in a tier-1 city, 27% in a tier-2 city and 16% in a tier-3 city. Altogether we covered 64 cities in the country, ranging from Shanghai with 18 million inhabitants to small cities of about 1 million people. Consumers were asked questions regarding brand perception and differentiation, consumption behavior and purchase patterns as well as lifestyle. This method was in line with the basic methodology of the RB Profiler, developed and used internationally by Roland Berger Strategy Consultants. We added this latest research to the knowledge gained in over 20 years of working in China and a total of about 80,000 interviews. We can thus give you a real insight into the minds of your potential customers.

Study 5

Tailor your customer approach to their values When brand values and consumers' value systems converge, the consumer is likely to purchase the product. The RB Profiler helps you create such a fit. Every consumer has his or her own set of values, desires and aspirations to which he or she attaches varying degrees of importance (figure 1). This complex set of values, or value profile, influences how individuals make purchasing decisions. The link between the values and the concrete purchasing decision is formed by the brand's value proposition − the values it projects into the market via its logo, product design, communication, price, etc. At the moment of the buying decision, these two value systems come together. This is the "moment of truth." When a brand's value profile and a consumer's value profile converge, then the consumer perceives the brand as "his" or "hers" and is likely to purchase it.

A brand's value proposition thus needs to be aligned with the value profile of its target group. This is where the RB Profiler steps in. It helps you see the fit between consumers and brands, providing a way to measure and quantify the value systems of consumers and brands using the same methodology. The RB Profiler is a vehicle for values-based brand and marketing management and creates a lasting competitive advantage (figure 2).

HOW IT WORKS At the core of the RB Profiler are 20 fundamental values describing all aspects of an individual's consumption behavior. The axes of the matrix measure degrees of emotionality/rationality and of maximalism/minimalism. All the values are elicited from consumers using carefully developed attitudinal statements, and can be measured and validated quantitatively.

There are four main areas where the RB Profiler can be applied:   It measures brand perception from a consumer perspective, including comparisons with competitors or with other brands in a company's portfolio   It identifies consumer needs, defines consumer segments and evaluates their attractiveness. It helps in analyzing the brand projection in communication and at the point of sale and enables companies to compare the current situation with their own targets   Due to its intuitive nature and the fact that the results are statistically proven on a quantitative basis, it supports direct buy-in from your organization and easy implementation into the marketing mix   It helps with brand monitoring, tracking and controlling

Roland Berger Strategy Consultants

THE MEANING OF VALUES Fair: high ethical standards, social awareness, solidarity Nature: high ecological standards Purism: minimalism, understatement, reduction to essentials Tranquil: calmness, relaxation, harmony Prestige: status orientation, expressiveness, attention-seeking Vitality: mental and physical fitness, activity, independence Classic: timelessness, elegance, aesthetics, design orientation Security: averseness to risk, "safety first" Clanning: friends, family, team spirit Thrill & Entertainment: risk, adventure, having fun, enjoying life Carefree: easygoing, spontaneity, optimism Cool & Trendy: trendsetting, innovation, self-differentiation Pro-tech: high-tech, cold transactions Personal Efficiency: efficient performance, just-in-time, comfort, convenience Customized: individualization, exclusivity, flexibility, variety Service: clear information, uncomplicated fulfillment, competent advice, warm transactions Quality: longevity, reliability Proven: scientific proof, authority, traditional/tried and tested products Smart Shopping: bargain hunting, excellent value for money Total Cost: frugality, penny-pinching, price-defined buying decisions

Figure 1 Consumer value profiles The RB Profiler enables consumer and brand values to be visually represented in a value grid Peter

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Study 7

Figure 2 Understanding consumer behavior By matching the consumer and brand profiles, the RB Profiler makes it possible to predict consumer behavior Consumer PROFILES Peter "Kevin Gong"

BRAND PROFILES Brand A Brand A

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Kevin Gong is very performanceoriented – efficiency, innovation and quality are more important to him than a low price Kevin Gong chooses BRAND A – the brand is expensive, but stands for innovation and high quality

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Wendy Meng is a very responsible person – she cares about the environment and social issues

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B. The Chinese Consumer

Roland Berger Strategy Consultants

1 Six Recommendations It is well established that Chinese society is extremely intricate, complicated and dazzling in its complexity. The country and its people are fascinating and Western minds often struggle to make sense of the country's many facets. Anyone who wishes to do business in China is well advised to study the market carefully before venturing into such unknown territory. To sales and business development managers everywhere, the Chinese consumer seems a mysterious creature. Although China is the world's third largest economy, little is known about the preferences of its consumers – we are used to seeing the Chinese as producers rather than consumers. With China's economy expected to grow by roughly 7% even in these economically turbulent times, it's time to get to know the Chinese consumer a little better. To get you started, here are six points that we have distilled from the many insights that our survey affords us. These points can be seen as general recommendations for any business that is in China already or is planning to go there.  Don't disregard the smaller cities  Concentrate on under-40s  Strengthen your brand  Channels are critical  Go green

The difference between big and small China's four largest cities are Beijing, Guangzhou, Shenzhen and Shanghai. Together they have an astonishing 57 million inhabitants with a share in national GDP of around 14%. These port cities are traditionally more open to foreign ideas and steeped in a tradition of trading. Their

inhabitants form the most sophisticated consumer base in China and can be relied upon to be early adopters, willing to spend more on leisure and adept in the use of the Internet and other modern media. We use the term megacity for these four cities, meaning that they are the largest, most developed, and highest profile cities in the country. Besides the four megacities, China has what we call tier-1, tier-2 and tier-3 cities. An example of a tier-1 city is Chengdu, the capital of Sichuan province in the heart of the country. This city is a trading hub and its metropolitan area has over 10 million inhabitants. A China Daily survey recently listed Chengdu as the fourth most liveable city in China. Xiamen, another tier-1 city, is a much smaller coastal town with 2.6 million inhabitants. Cities are not necessarily defined by their number of inhabitants, but by their relative economic and social importance. Xiamen might be small, but in 1981 it was one of the first four special economic zones introduced by the Communist Party and today has a large industry base, making it an affluent city. Shaoxing and Datong are examples of tier-2 cities, with 4.3 million and 3.1 million inhabitants respectively. Datong in the northern Shanxi province is a coal-mining town with a history and economy closely tied to this industry. Shaoxing, the birthplace of Communist Party leader Zhou Enlai, today has a GDP of RMB 222.3 billion.

Study 9

Tier-3 cities are usually much smaller and their importance is mainly regional. Examples are Tongcheng situated in Anhui province, with roughly 744,000 inhabitants, and Fengcheng situated on the Yellow Sea coast in the southeast, with around 630,000 inhabitants.

Figure 3 Comparison of overall consumption patterns in different tier cities Mega City

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With China being as big and confusing as it is, it is easy to concentrate sales and marketing efforts on the four biggest and best-known cities. This, however, would be a fatal mistake. Whilst potential customers in smaller cities might have different preferences and spending patterns, they are certainly as interested in consuming as their fellow nationals in bigger cities and they also have an increasing amount of disposable income. The smaller cities might well be home to your best customers. 2

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See figure 3 to get an idea of the comparative overall consumption profiles for the different city tiers.

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Roland Berger Strategy Consultants

Figure 4 The person behind the profile A possible translation of our average consumption profiles

Susan Gan from Ghuangzhou Single, 35

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Neil Zheng from TIER-3 city Married, 43, one child

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Works as a systems administrator for a major Chinese company  Main source of news: Internet  Newspaper: national daily  Credit cards owned: two  Use of credit card: several times a week   Travels for leisure: twice a year  Clothes shopping: once a week   Preferred grocery shopping: mall   Accommodation: One bedroom flat near the city center   Hours spent watching TV a day: 1   Hours spent using the Internet a day: 3   Likes: risk-taking, innovative things, trendy features, just-in-time, pricedefined buying decisions

Runs a small stationery shop  Main source of news: TV  Newspaper: local daily  Credit cards owned: none  Use of credit card: never   Travels for leisure: once every three years  Clothes shopping: twice a year   Preferred grocery shopping: supermarket and own plot to grow vegetables   Accommodation: Small house in the suburbs  Hours spent watching TV a day: 3   Hours spent on the Internet a week: 1   Likes: fitness, family, elegance

Study 11

To show you what these profiles could translate into, we have developed two prototype customers, one from one of China's four largest cities (Susan Gan) and one from a tier-3 town (Neil Zheng). For easy reference we have juxtaposed their typical behavior, showcasing the development of the Chinese consumer across the board (see figure 4). The notable differences between the two are obvious at first glance. For example, "Innovation and Pro-Tech" are of very little interest to tier-3 cities. Tier-1 types on the other hand attach great importance to "Vitality" and "Clanning". Looking at the color distribution of these prototype city dwellers, it is clear that their preferences and interests are often diametrically opposed. Note the sensitivity to "Total Cost" which is high in tier-1 cities, but neutral in tier-3 cities. Instinctively we would assume big city tiers to be big spenders. However, it turns out that China is good for a surprise here – it's the people in smaller cities who are more relaxed about price-benefit ratios and their saving accounts.

Roland Berger Strategy Consultants

Figure 5 The person behind the profile A possible translation of our average consumption profiles

Laura Hua, 32

Consumer profile: age 30-39

Consumer profile: age 30-39

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  Buys skin care products in a specialized shop   Pays more attention to brand than price  Uses the Internet for shopping  Uses teleshopping or mail order   Likes: innovative products, new features, just-in-time

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Shi Zhi, 48

Consumer profile: age 40-49

Consumer profile: age 40-49

Clothes shopping: twice yearly

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  Buys skin care products in a supermarket   Pays more attention to price than brand   Uses the Internet for some shopping   Does not use teleshopping or mail order  Likes: comfort, convenience, bargains, independence

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Study 13

Age is more than a number Our data shows clearly that the age of 40 denotes a threshold in consumer behavior in China. There are many reasons for this. One of the most important is that people under 40 have spent all of their adult life in a time of market-oriented reforms which began under Deng Xiaoping in the early 1980s. To highlight the main differences between someone in the 30-39 age group and someone in the 40-49 age group, we have used our research to construct two more prototype consumers: Laura Hua, 32, from Guangzhou and Shi Zhi, 48, from Beijing. Figure 5 shows the RB Profiler blueprints and possible examples from both age groups. Consumers aged between 30-39 are the most important target market at the moment. They are more open to innovations than their elders and have more disposable income than those younger than they. Companies need to watch the developments in younger age segments if they want to benefit from future high-income consumers. Trends are likely to echo those of earlier young consumer generations in more advanced economies.

Brands do matter The Chinese are extremely interested in brands and attach a lot of importance to which brand they buy. Any product or service intended to penetrate the Chinese market needs to establish a strong brand.

Regardless of geographical location, age or economic circumstance, 90% of those surveyed say that they have "confidence in products made by well established and experienced suppliers". In any event, most brands that are trusted in China are Chinese; indeed it is often stated that local brands cater better to customers' taste and needs. Age is also a factor for brand importance. Younger people pay more attention to brands. Geography does not seem to matter all that much: People in Beijing and people in small towns think of themselves as roughly equally knowledgeable regarding fashion. On the surface, brand loyalty seems to be driven by nationalistic considerations, with people assuming they can trust Chinese or local brands more than foreign ones. However, it turns out that some of the most trusted brands mentioned by respondents are in fact foreign, especially in Western China; the respondents think of them as Chinese, just because they are known to be good. This goes to show that Chinese consumers will base their brand loyalty also on quality and price rather than just on whether something is "made in China". Consumers in the highest segment, with an annual income of RMB 250,000 and above, are most interested in Western brands and have a clear understanding of what's Western and what's not. These segments also show the highest interest in Western culture and are, either through economic ability or intellectual interest, more open to foreign influence and ideas in general.

Figure 6 I pay more attention to brand than to price 35%

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Many multinational brand manufacturers have adapted their logos for China

Roland Berger Strategy Consultants

Critical channels In China, as everywhere else, there are traditional sales channels such as shops and markets, and new channels such as the Internet and TV. Unsurprisingly, young customers are those most likely to use the Internet, with 7% of 18- to 24-yearolds preferring to shop for clothes on the Internet as opposed to only 1% of over 40-year-olds. To get a product to the customer, the right choice of channel is critical. Whilst customers in the four largest cities prefer the mall for grocery shopping, only 20% of tier-3 city inhabitants do the same. Mall preference is strongly influenced by city size – more than by income. Western retailers that have been active in China since the 1980s have been quite successful in penetrating the market, particularly the French supermarket chain Carrefour. On January 9, 2009 the chain opened its 134th hypermarket in China, this time in Beijing. Their American rival, Wal-Mart, has also been successful, recently opening its 100th store. Wal-Mart China President and CEO Ed Chan has stated that his company is committed to bringing its superstores to tier-2 and tier-3 cities throughout the country. Mall or free-standing superstore? Which channel is best depends more on geography than income, as figure 7 clearly shows. Carrefour and Wal-Mart are using both channels, but their superstores are frequently so large that they are standalone rather than attached to a mall.

Malls are not only popular with the expected groups: some provinces such as Chongqing have also declared a clear preference for malls.

Figure 7 People's preference for malls is more influenced by size of city than by income

With 250 million users in China, the Internet certainly is a force to be reckoned with. Younger users and those in the top four cities are more likely to use it for shopping, whereas the older generation and those in provincial towns are more TV- focused.

Named "mall" as a preferred channel for household grocery shopping 63%

54% 34% 21%

Apart from a pure sales channel, the Internet should be viewed as an essential PR tool when it comes to reaching the younger and more affluent parts of society. Chinese bloggers have considerable influence in a country which still suffers from censorship, and companies that are in their bad books can suffer significantly. The devastating earthquake in China in early 2008 is a case in point. Dior Group was forced to drop actress Sharon Stone from their advertising in China after she claimed the disaster was "karmic retribution" for China's treatment of Tibetans. Bloggers immediately called for a boycott of Dior's products. Similarly, when Chinese Paralympic athlete Jin Jing was attacked in Paris during the Olympic torch relay, Carrefour, normally strong in China, suffered from a customer boycott started by bloggers. Equally, the Web can be exploited to improve a company's image; companies like GE or Wal-Mart that gave generously after the earthquake received an immediate positive echo in the blogs around the country.

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Malls given as a preferred channel for household grocery shopping 31% 21%

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Study 15

Go green Figure 8 Preference for green products within different consumer segments I do not buy products produced by companies that harm the environment (agree to some extent or strongly agree) 85%

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Surprising as it may seem, concern for the environment is equally widespread across all types of consumers in China, at least when it comes to shopping. Young or old, province or big city, large or small income, between 84% and 88% of respondents said they try to avoid companies that harm the environment and professed a preference for green products. The green market in China is still extremely underserved. This is not surprising in a country that has so much catching up to do in economic development terms. Now that China has overtaken Germany as the world's third largest economy, more and more Chinese can afford to put their money where their mouth is.

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I would choose green products 92%

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Companies should leverage this new green consciousness. Some are already doing so: In January 2009, Wal-Mart China announced a push towards sustainability, which includes opening new stores that use 40% less energy, reducing plastic bag use by 80% and increasing water efficiency by 50%. The ambitious targets were announced on the company's website – an indicator of the importance attached to the message. Wal-Mart is also addressing another factor: While pushing their green credentials, they are continuing to stress their policy of offering high-quality products at the best price. The Chinese are still cost-sensitive and the premium put on being green is not quite as high as in Western countries. However, environmental concerns will

grow in the future, and companies should not underestimate green issues as a powerful marketing tool. The car market is a case in point. To date, there are hardly any hybrid cars in China: yet the Chinese car market is expected to overtake the US as the world's biggest within the next decade. Shanghai General Motors is testing the market with its first locally produced hybrid model, which is priced slightly higher than the standard model but is 15% more efficient in terms of fuel consumption. With 1.3 billion people, China could have more than 100 million cars on the road if the market expands at the average global level of 10%. China has to take a lead in alternative technologies: the world simply doesn't have the energy resources to sustain such growth with conventional technology. The Chinese are generally not yet as concerned about climate change and a deteriorating environment as Westerners are. But environmental concerns are sure to increase, and companies would do well to prepare for this eventuality now.

Roland Berger Strategy Consultants

Improve your definition Using the RB Profiler, we can distill the brand image of specific companies. We did so for a number of different product areas:

Figure 9 Brand manufacturers often lack a clear brand positioning

 Beer  TV sets  Cell phones  Cars  Skin care products  Credit cards

Ford

The overall impression from our analysis is that in some industries, brand manufacturers lack a clear brand image. Improvements in positioning are urgently required to build a more solid and welldefined customer base.

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In VW's case, the product itself is seen as representing a modern, performancedriven brand. Customers think that the brand is expensive, but they value the brand image above cost considerations. In Dongfeng's case, it is the company that is perceived as representing these values, not the product itself. There is a solid value proposition at the corporate level owing to the company's JVs. Assuming the ability to develop the necessary R&D capacity, this might allow Dongfeng to eventually launch its own sub-brands with some success.

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Dongfeng Figure 9 clearly shows that Volkswagen and Dongfeng are the only brands that benefit from even an approximation of a brand image. However, Dongfeng has joint ventures with Nissan, Honda and PSA, which makes the Dongfeng profile a corporate profile rather than a product profile.

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Study 17

Figure 10 Weak brand image is also found for some TV manufacturers Samsung

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A similar picture emerges for the makers of TV sets. Two foreign brands have managed to establish a clear reputation for quality and modernity; the others, regardless of their origin, are weak in comparison. TV makers should heed the same recommendations as for automakers: A clear brand image is the first step towards surviving in a more difficult and sophisticated market. 6

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Fair

Ford and Toyota, on the other hand, suffer from a very weak brand image. Their customer base is ill-defined, making a positioning decision difficult if not impossible. If the Chinese auto market slows down for whatever reason, this could mean serious trouble. Foreign manufacturers also have to prepare themselves for strong Chinese brands emerging from successful JVs that have produced strong corporate profiles, as in the case of Dongfeng. To brace themselves against such difficulties, automakers are well advised to reinforce their brand image, find their specific customer base and cultivate their preferred channels.

Foreign companies need to invest a great deal of time in learning about the Chinese customer. They need a strong local management team in place to adapt to a rapidly developing market − one that is poised to become the world's largest and most important. 19

Roland Berger Strategy Consultants

2 Chinese Surprises China is unique among the nations of our planet. It is home to the world's largest population, it is governed by the Communist Party and it has experienced unprecedented economic growth over the past 30 years. Even now, with the global economy in the doldrums, China still expects roughly 7% growth for 2009. Most companies have very little or no experience in such a market, making it doubly important to invest in extensive research before venturing into China. Western companies that have so far been successful in the country have usually spent years planning their market entry before going there. In China more than elsewhere, unexpected tendencies in the general development need to be taken into consideration at all times. It is not enough to trust your feelings or base your judgment on Western market circumstances. We identify four critical factors that need investigating by any company wishing to establish a clear brand image in China:   Regardless of city tier, leisure spending remains roughly equal – it's the frequency of leisure pursuits which differs   Average family size is connected to income rather than geography   People consider themselves to be fashionable in most parts of the country, regardless of city tier   Interest in Western culture is evenly spread among all of society

leisure habits The most costly and time-consuming leisure activity is travel. We therefore looked at the travel habits of our respondents. Companies in China have been quick to react to the newfound taste for leisure spending in their country. Ctrip, a fullservice online travel booking service established in 1999, has been experiencing a 50% growth rate for the past few years. Some 30% of trips taken are package tours and about 25% of trips are beach holidays.

Figure 11 Differences by age group Number of trips per year 1.5 1.5 1.2 1.0

0.8 1.2

18-24 25-29 30-39 40-49 50-64 (age)

Differences by city tier Trips per year

The general leisure trends are not unlike those found in Europe or the US. But companies have to be careful to use the right channel in the right region, as preferences differ widely. The Internet is certainly a big medium in China, but access in remote provinces can be poor.

It's income, not geography One might expect to find most families living under one roof outside the large cities and in the more remote provinces. However, this is not the case. In fact, income is the defining component for demographic factors such as household size and number of children. Traditionally, families in China are closer-knit than in the West, with many older parents living with their grown-up children and grandchildren under one roof. But the higher the income, the less likely such an arrangement is. Several reasons for this are possible:

1.8

1.1

1.1

1.0 1.2

Mega Tier-1 Tier-2 Tier-3

Spending per trip (RMB) 3,364 3,859 3,516 3,781

Mega Tier-1 Tier-2 Tier-3

Length of trip 4.3

4.7

4.5

4.5

Mega Tier-1 Tier-2 Tier-3

Study 19

 Higher income makes it easier to rent more than one apartment  Young high-flyers may delay or forgo having a family  Many Chinese aspire to Western-style family arrangements Geography, on the other hand, has a markedly weaker effect on the number of people living in one household. Those parts of Northwest China which are still least touched by the economic and social development of the past 30 years have an average of fever than three persons per household, whilst some more affluent and developed provinces such as Guangdong, Fujian or Hebei show an average of 3.4 persons per household. One must also distinguish between the general tendency in cities to live in smaller households and specific tendencies in the different provinces. What does this teach us? Easy assumptions often fail to reflect the reality of demographics in China. To understand the market, you need to look closely at your potential customer base.

Fashion sells everywhere We asked people whether they had a good knowledge of what was fashionable and what was not. Surprisingly, the number of people saying they did was similar in the different types of cities and across provinces (figures 13 & 14). This widespread regard for fashion is somewhat puzzling. Consumption behavior and cultural environments differ greatly from Shanghai to Sichuan. However, modern media are able to penetrate all areas of the country, bringing the same ideas about style and fashionableness to all sorts of different consumer groups. This is clearly having an impact. Contrary to what one might expect, people in the four richest provinces consider themselves to be less fashionable than those in provinces such as Tianjin or Anhui. And the picture is even more complicated when it comes to price sensibility: Some areas show up as both price- and fashionconscious, with respondents claiming to be more concerned about price than brand. When it comes to fashion items of any kind, intensive research into local markets is needed to find the right mix of pricing and branding.

Figure 12 Persons per household according to income (RMB/year) 3.3

3.1

3.1

3.1

3.0

<5,000 5,000- 50,000- 100,000- 150,000- >250,000 49,999 99,999 150,000 250,000

Number of children according to income (RMB/year) 1.4

<5,000

1.2

1.0

1.0

1.0

1.0

5,000- 50,000- 100,000- 150,000- >250,000 49,999 99,999 150,000 250,000

Figure 13 I have a good knowledge of what is fashionable and what is not 67%

Here, as with demographics, China is good for some surprises.

3.2

67%

67% 65%

Mega Tier-1 Tier-2 Tier-3

Roland Berger Strategy Consultants

Welcoming the West Although China has an ancient culture of its own, its people are open to Western culture such as classical music, literature and painting.

Figure 14 Consumers everywhere claim a good knowledge of fashion

This interest is evenly spread across the eastern provinces. Only in the remote areas of Western China is it found for under 60% of people. Regardless of city tier, roughly 63% of respondents claim to enjoy Western culture, with Beijing at around 75%. Unsurprisingly, it is the young who are most interested in all things Western. This is probably connected with their use of the Internet, which is a great spreader of influence and ideas. With the right marketing strategy, Western brands have a good chance of capturing the Chinese imagination, especially in the critical younger and affluent markets. But even the average Chinese shows some interest in things Western. Deng's policy of opening up the country has affected all provinces and the new influences have had a lasting effect. It stands to reason that in time, even the people of the northern and western provinces will reach the level of interest in Western culture professed by those in the south and east.

60% <...< 70% 70% <...< 80% I have a good knowledge of what is fashionable and what is not (agree to some extent or strongly agree)

Figure 15 Western culture appeals to consumers of all regions 67%

63%

62%

64%

Mega Tier-1 Tier-2 Tier-3 I enjoy Western culture, including Western classical music, literature and painting (agree to some extent or strongly agree)

Study 21

3 Know your archetypes In the previous two sections we described China's customer base and presented some surprising insights culled from our research. The question now is: What do you do with this information? How do you know if your strategy in China is correct and your customer fit accurate? This is where the RB Profiler can help. We have already seen how it facilitates the development of value-based marketing strategies. In this section we present the different archetypes used to define customer bases and show how this helps with actual cases. To segment the market into useful sections, we have defined eight archetypes or types of consumer. Together, these archetypes cover most of the spectrum. The eight archetypes allow you to define a customized brand and marketing strategy. However, in China strong regional differences in consumer attitudes also have to be taken into consideration. We outline these differences below.

Roland Berger Strategy Consultants

Figure 16 Eight archetypes The percentage figure denotes the proportion of respondents in each category. BLUE areas are more important to the consumer type, RED areas less important (compared to the average/population) and WHITE areas neutral. Conformists E Classic

Nature Purism

Security Smart Shopping

Carefree

Clanning

Tranquil

–

Vitality

Cool& Trendyy

Service

Quality

Total Cost

+

Innovation & Protech Personal Efficiency

Proven

E

The Conformist (7.9%)

Thrill & Entertainment

Prestige

Fair

Traditionalists

Conformists like to live a quiet life, have a clear sense of what they see as value for money and adhere to social rules and conventions. They care a lot about the environment and little about fashion. Conformists tend to be older and female.

Purism

Security Smart Shopping

Vitality

Carefree

Clanning

Tranquil

–

Cool& Trendyy

Service

Quality

Customized

R

Source: Roland Berger; International Research 2008, n = 11,100

+

Innovation & Protech Personal Efficiency

Proven

Total Cost

Customized

R

Classic

Nature

The Traditionalist (9.4%)

Thrill & Entertainment

Prestige

Fair

Traditionalists place great importance on sharing their life with family and friends, pursuing their long-term goals in a quiet, steady fashion. Although usually to be found in the middle-income range, they are not particularly price-sensitive, preferring quality and timeless products to a cheaper alternatives.

Source: Roland Berger; International Research 2008, n = 11,100

8

Progressive maximalists E Classic

Nature Purism

–

Security

Total Cost

Vitality

Service

Quality Proven

R

Cool& Trendyy

+

Innovation & Protech Personal Efficiency Customized

E

The Progressive Maximalist (11.1%)

Carefree

Clanning

Tranquil

Smart Shopping

Modern performers

Thrill & Entertainment

Prestige

Fair

7

Usually at home in the wealthiest consumer segment, Progressive Maximalists are ruthless rule breakers, determined to reach their goal, unconcerned about either cost or environmental issues. Extroverts who like to show their success, these consumers are still quite young (34 years old on average) and mostly male.

Classic

Nature Purism

–

Security Smart Shopping Total Cost

Carefree

Service

Quality Proven

R

Source: Roland Berger; International Research 2008, n = 11,100

Vitality

Clanning

Tranquil

The Modern Performer (11.5%)

Thrill & Entertainment

Prestige

Fair

Cool& Trendyy

+

Innovation & Protech Personal Efficiency Customized

A more serious type, Modern Performers ask for nothing less than the highest possible quality, both in their own performance and in the products and services they buy. They are prepared to pay more if this will get them what they require. Fun and fancy trends are low on their list of priorities.

Source: Roland Berger; International Research 2008, n = 11,100

6

5

Study 23

Hedonists

Minimalists E Classic

Nature Purism

Security Smart Shopping

Carefree

Clanning

Tranquil

–

Vitality

Cool& Trendyy

Service

Quality

Total Cost

+

Innovation & Protech Personal Efficiency

Proven

Customized

R

E

The Hedonist (15.11%)

Thrill & Entertainment

Prestige

Fair

Unsurprisingly, Hedonists are driven by pleasure. Having fun is high on their list of priorities and they gladly accept cheaper products and services as long as they are new and trendy. They care little about the social impact of their actions, usually have a mid-range income.

Classic

Nature Purism

–

Security Smart Shopping

Vitality

Carefree

Clanning

Tranquil

Cool& Trendyy

Service

Quality

Customized

R

Source: Roland Berger; International Research 2008, n = 11,100

+

Innovation & Protech Personal Efficiency

Proven

Total Cost

The Minimalist (11.8%)

Thrill & Entertainment

Prestige

Fair

Mostly female (57%), Minimalists are careful people who avoid risk and do not care about new technology or aggressive career goals. They seek out the best price/quality ratio products and only buy what they really need. Peace, privacy and purity rank high on their scale of values.

Source: Roland Berger; International Research 2008, n = 11,100

2

Traditionalist maximalists E Classic

Nature Purism

–

Security Smart Shopping Total Cost

Vitality

Service

Quality Proven

R

Cool& Trendyy

+

Innovation & Protech Personal Efficiency Customized

E

The Traditional Maximalist (12.0%)

Carefree

Clanning

Tranquil

Self-centered

Thrill & Entertainment

Prestige

Fair

4

Combining a traditional mindset with maximalist consumption behavior, this consumer segment is very young (30 years old on average) and despite their relatively low income, cost is not a major factor for them. Their buying decisions are strongly influenced by their values but they still like to show their status and have fun.

Classic

Nature Purism

–

Security Smart Shopping Total Cost

Carefree

Service

Quality Proven

R

Source: Roland Berger; International Research 2008, n = 11,100

Vitality

Clanning

Tranquil

The Self-centered (21.3%)

Thrill & Entertainment

Prestige

Fair

Cool& Trendyy

+

Innovation & Protech Personal Efficiency Customized

Easily the largest consumer segment, this type of consumer is on average 37 years old, rejects traditional values and is an early adopter. More egocentric but also more eccentric than the average, they care little about the environment or ethical issues, have a higher income than most and are prone to unusual or provocative behavior.

Source: Roland Berger; International Research 2008, n = 11,100

3

1

Roland Berger Strategy Consultants

Don't forget the regions Figure 17 Value-profiles in selected Chinese provinces: dark = more modern

Our eight archetypes cannot be applied to the Chinese market in a meaningful way unless the regional differences of the country are taken into consideration. Average consumer preferences vary widely from province to province. As China continues to develop, these regional differences can be expected to widen. Figure 17 shows a selection of profiles for different provinces. Note how different the preferences can be in different geographical locations.

Chongqing

Heilongjiang

Shanxi Sichuan

Jilin

Guangdong Beijing Henan

Yunnan

Guangxi

Liaoning

Shanxi Hubei

Jiangxi

Shanxi Population: 35 million, average income: RMB 21,000 p.a. The people of this province are very traditional, showing a high concern for the Shanghai environment and placing less importance on innovation and fashion. Grounded Hunan in a strong ethical framework, Shanxi people have a similar, but softer, profile compared to other northern provinces. Zhejiang

Guangdong

Fujian

Guangdong Population: 93 million, average income: RMB 43,000 p.a. A thoroughly modern mindset prevails in this province. Entertainment, innovation and improving personal efficiency are high on the list of values. Even though this is a rich province, people are highly cost-sensitive, attaching less importance to quality.

Study 25

Hebei

Tianjin

Hebei

Tianjin

Beijing

Shandong

Beijing Beijing

Shandong

Population 16 million, average income: RMB 46,000 p.a. Shaanxihave a modern profile, similar to Shanghai and Guangdong. Jiangsu Beijing residents The Shaanxi Jiangsu capital is home to many Hedonist and Self-centered types, making the province in general a good target for customized and luxury products. Henan

Anhui

Henan

Anhui

Henan Population: 94 million, average income: RMB 23,000 p.a. People from the Henan province tend to be traditional rather than modern and have little interest in the latest technologies and trends. Environmental concerns and a strong set of values complement this rather neutral profile.

Figure 18

City-tier indicator

Regional indicator

  Credit card use   Frequency of travel   Day-to-day expenses

 Clothes shopping   Restaurant selection   Desire for security

Choosing the right channels for each province is critical for an optimized sales strategy. A thorough analysis of regional preferences, differences between city tiers and consumer archetypes prevalent in a given region is essential to achieve a successful marketing strategy. It helps to view some consumer preferences as being defined by city tier and others by region. Figure 18 gives an idea of how the preferences might be split.

Roland Berger Strategy Consultants

The RB Profiler in action Figure 19 ABC ABC's current brand positioning E

Thrill & Entertainment

Prestige

Fair

Classic

Nature

–

Carefree

Clanning

Tranquil

Purism

Vitality

Security Smart Shopping

Service

Quality

+

Innovation & Protech Personal Efficiency

Proven

Total Cost

Cool& Trendyy

Customized

R 1) n = 213 vs. n = 5,859

Figure 20 Joint space analysis for selected beer brands TRA

MPE H TMX

ABC Company

F

MPE

PMX

B

HD C

X

A G

TRA MIN

E I SCF

CON

HED

Consumer/ target groups; size of circle = size of Archetype

F

PE

HA

= BrandCompany profiles ABC

= Archetypes, size of bubble TRA

represents segment size; see figure 16 (e.g. CON = Conformist)

X

G B ABC Company E D

G

C

E

CON

Brands

I SCF

CON

MIN

I SCF

MIN

HED

mer/ target groups;HED size of circle = size of Archetype

oups; size of circle = size of Archetype

To illustrate how the RB Profiler works, let's look at a sample case built around a national beer manufacturer, which we will call ABC. Beer consumers in China are interested in entertainment, want to be seen as cool and trendy and often feel freer than the average consumer. They value innovation and see themselves as modern. Not the quiet type, they like to live life to the full. Chinese beer manufacturers often lack clear target customers and need to improve their brand image in order to grow. This also applies to company ABC, which has never managed to build a strong brand in China. 1

Using the RB Profiler, we are able to analyze ABC's branding position more closely. The result, shown in figure 19, reveals a typical weak brand with no clearly defined customer base. We now need to find out where in the market ABC should move to attract new customers. In order to do this, we execute a joint space analysis. Figure 20 shows that ABC's most likely customers are to be found in the Traditional Maximalist segment of the market, where apart from brand F there is no competition. 2

Following the analysis, beer manufacturer ABC was advised to reshape its brand image so as to meet the preferences of the identified target group, Traditional Maximalists. These are consumers who:  Like to hang out with family and friends  Have relatively low income  Like shopping for fashion items and the latest technical gadgets  Make buying decisions that are strongly influenced by values  Are young (30 years old on average)

Study 27

Next, a TV advertisement was created, featuring young people enjoying themselves at a rock concert holding bottles of ABC beer. The ad was geared toward a young audience and complemented by a print and radio campaign featuring testimonials by the rock star seen in the ad.

The branding effort focused on the status and values embodied by the beer. This needed to be strongly communicated in all the media used. The label on the bottle made it clear that the beer had been brewed with pure spring water and without additives, reflecting the target customer group's appreciation of traditional values.

Roland Berger Strategy Consultants

4 Sample Industries: The cosmetics market The use of cosmetics and skin care products is relatively new in China – a phenomenon that largely coincides with the opening up of the Chinese economy. Growth has been breathtaking − 15% per annum over the last ten years − reflecting a rise in disposable income and a willingness to spend on beauty products. With such opportunity comes intense competition: The market is inundated with brands of every conceivable hue, from Chinese brands to brands from Japan, Korea and the West, all vying for a slice of the RMB 75 billion market. Unlocking this market requires excellence in three areas: 1.  Product innovation 2.  Route-to-market 3. Brand image-building In this section, we examine the latter two areas in detail.

Monthly income

Modern Retail

Department Stores

Specialized shop

Under RMB 3,000

75%

24%

20%

RMB 3,000-4,999

28%

47%

64%

Over RMB 10,000

17%

54%

50%

Choose the right channel ... Chinese consumers face a wide variety of channel choices when it comes to shopping for beauty products, from corner pharmacies to luxury department stores. The rise of so-called "modern retail" − supermarkets and hypermarkets − is an oftcited development. However, aside from hair care products, these retail newcomers play second fiddle to department stores, especially for mid- to high-end skin care products. Two important factors underpin the rise of cosmetic sales: consumers' need for service and the match between products and channel. After all, it is difficult to sell a RMB 300 jar of face cream amid a sea of special offers or in an environment dominated by diapers and detergents.

Modern retail, needless to say, is a significant channel for hair care products. It is also the channel of preference for lower-income consumers. Particularly relevant in tier-3 or smaller cities, such outlets – especially hypermarkets – are de facto department stores, exhibiting similar traffic patterns and consumer perception. The shift toward modern retail is somewhat inevitable according to many industry veterans, even for mid-level products. The real issue is: What products can unlock the spending potential for cosmetics and skin care products in this environment? At what price point? Within which sub-category? Companies that are mindful of the product/ channel match and systematically explore opportunities along this axis will likely tap into a significant stream of growth in the coming years.

Study 29

Good research and dedication to Chinese needs lie at the heart of success in this market

L'Oréal China CEO Paolo Gasparrini

Ignatius Tong, Partner in the Roland Berger Shanghai office, talked to L'Oréal China CEO Paolo Gasparrini in the Greater China headquarters in Shanghai about the company's success in China.1 I.T.: Tell us about L'Oréal's beginnings in China. P.G.: We started in 1996/97. Our first task was to create a Chinese name: "Ou lai ya". At the time we were only allowed to do PR, no business as such. We spent the first year explaining to people who we were and what we were about. In 1996 we acquired Maybelline and discovered they already had a plant in Suzhou. Eventually we managed to receive a trading license and now we have 16 brands in the country. I.T.: In your opinion, what is the key for converting Chinese customers to Western products?

P.G.: It's certainly a challenge. The Chinese consider themselves to be very different, not only culturally but also physically. Their hair, their skin − they're different from what we know in the West. It was a big challenge for us to show the Chinese that we are confident in what we're doing. Before we came to China we had already spent a lot of time in Paris on trial runs, trying to understand the Chinese customers, their culture and traditions. So we weren't unprepared. A couple of years ago we bought Yue Sai. Now nobody doubts our capacity to produce products for the Chinese. We're performing especially well with products specific to the Asian market, such as whitening products. I.T.: How did you accelerate L'Oréal's growth in the past few years? And how do you manage to keep the success going? P.G.: The success of our brand and products is first of all based on research. We consider our products to be high-tech; if we cannot perform better than the competition, we don't launch the product. We have 3,000 scientists working in Paris. In China we have local R&D to develop new formulas. For example, the Yue Sai products are developed entirely in China. When we launched "Empower" for YS it was a fantastic success. There is also collaboration between the Paris laboratories and our local R&D. Approval by the latter is one reason for our success. Chinese women thus have the advantage of using a global brand that's been formulated to suit their needs.

I.T.: Mininurse, like Yue Sai, is a Chinese brand developed by a Chinese entrepreneur, purchased and transformed by L'Oréal. In your opinion, how can Chinese brands reach out beyond their borders in the future? P.G.: As was the case with Yue Sai, Chinese brands often have very interesting expertise and market knowledge, but lack the funds and tools to develop further. This is where L'Oréal comes in. We guarantee development, new brands, new formulas. It's a fantastic opportunity for consumers who like to use Western brands but want to stay true to their own cultures. There are also many Chinese living overseas who want to use brands that allow them to follow beauty trends regardless of location. This principle is very successful. I.T.: How has the financial crisis of the past months impacted your business? P.G.: As far as I'm concerned, there is no crisis. Foreign financial difficulties are being felt in China, but the government is reacting very well. It is promoting internal consumption to prevent a possible crisis in the country. And though there might be challenging times ahead for Chinese exports, the internal market is very underdeveloped. Huge reserves of consumption can still be activated. We feel very positive. For detailed information on L'Oréal, see page 44 1

Roland Berger Strategy Consultants

... and then support it at each point Consumer choices in any given channel can easily be sabotaged by a lack of execution at the point of sale. It is difficult to recover any trust lost as a result of such failure. So it's not enough simply to be present in a particular channel: success requires consistent excellence from product inception right through to product sale. This is no easy feat. Consumers expect a high level of service and have certain requirements when it comes to cosmetic and skin care products. Training for frontline sales personnel is important. The wide variety of products and constant innovation complicate this. There's also a seemingly inevitable high employee turnover rate in this industry. Companies have to seek solutions beyond the traditional high pay/high turnover trade-off. Distributors can substantially impact field performance. Many distributors in China play a role beyond that of mere last-mile logistics cash collection, warehousing, bundling, HR management, etc. The starting point for a successful brand/distributor relationship must be to keep the distributors' role clearly defined.

Figure 21 Dabao: A Chinese brand with a distinctive profile1) Cherry Dabao E

Thrill & Entertainment

Prestige

Fair

Classic

Nature Purism

Carefree

Clanning

Tranquil

–

Vitality

Security Smart Shopping

Cool& Trendyy

Service

Quality

Personal Efficiency

Proven

Total Cost

+

Innovation & Protech

Customized

R

Sample Dabao product

1) n = 1,419 vs. n = 9,682

Figure 22 Olay: Successful despite a weak brand profile1) Olay Olay E

–

+

R Sample Olay product

1) n = 1,127 vs. n = 9,974

Figure 23 L'Oréal: A Western brand with a distinctive profile1) Toyota L'Oréal E

Thrill & Entertainment

Prestige

Fair

Classic

Nature Purism

–

Vitality

Security Smart Shopping Total Cost

Carefree

Clanning

Tranquil

Service

Quality Proven

R 1) n = 421 vs. n = 10,680

Cool& Trendyy

+

Innovation & Protech Personal Efficiency Customized

Sample L'Oréal product

Study 31

Key areas to focus on are:  Ensuring distributors' compensation is in line with their roles  Establishing clear geographical regions for different distributors  Focusing not just on sales, but other areas too (such as POS)  Having an ordering mechanism that avoids "loading"  Installing an expense reimbursement mechanism that preserves field flexibility whilst minimizing "gray" money Distributor margins are high. Cutting out the distributor can mean better control of the points of sale and stronger relationships with customers. But don't underestimate the risks and costs of going direct, especially if your product portfolio skews toward mid- to high-end cosmetics and skin care products. In particular, going direct means:  Credit terms with retailers must be renegotiated  Additional headcount has to be absorbed  Returns and bad goods have to be dealt with  The RDC footprint will be visible

The beauty sector exhibits substantial channel complexity along product lines, geography, channel choice and service models. The market must be addressed not as a whole, but at a segmented level. In other words, companies must align their

field capability and product portfolio with the channel and consumer requirements of each sub-segment. In China, such capability, once internalized, will form the foundation for a successful franchise.

Roland Berger Strategy Consultants

WHO'S BUYING? The skin care market in China is extremely fragmented. Local brands such as Dabao are increasingly coming under pressure from international brands such as Olay and L'Oréal. Analyzing these players with the RB Profiler produces some interesting results. Dabao has a clear brand profile, whereas Olay's strength in the market cannot be attributed to a clear brand image. This weakness is partly because the Olay brand stretches across a vast price spectrum – which also goes some way toward explaining the brand's success. The Dabao profile (figure 21) shows a reflection of traditional values, tranquility and security. It does not represent a trendy, progressive lifestyle but rather a calmer, practical approach. As such, it appeals to a large segment of the population, particularly in tier-3 cities, while it struggles in the tier-1 cities.

Olay's profile (figure 22) is much less well defined. At best, it stands for technical innovation and tried and tested products. The lack of a distinct image makes Olay's success in China all the more remarkable, although P&G's effective field sales organization and consistent investment in IT technology no doubt play a role. L'Oréal, another successful foreign player, has a strong image as a stylish and innovative brand. Perceived as trendy and exciting, L'Oréal products appeal to the Progressive Maximalist and Traditionalist archetypes, who are less concerned with price. Most brands have not yet succeeded in establishing a clear brand image. They may well suffer as the market becomes more competitive and consolidated. Skin care products are generally targeted at Maximalists, and competition for such consumers is fierce. This applies particularly to foreign brands, which appeal more to Maximalists than traditional consumers.

Despite the current economic downturn, the Chinese beauty product sector is likely to continue growing, albeit at a slower pace than in recent years. Among high-income residents of tier-1 and tier-2 cities, cosmetics and skin care products are increasingly seen as a necessity or affordable luxury compared to, say, cars or jewelry. Among the broader consumer base in the tier-3 cities, the adoption rate is high, while consumption intensity remains low. This creates a fantastic growth opportunity for companies. The key to capturing a slice of this vast market is finding the right combination of product, value, channel and service.

Study 33

5 SAMPLE INDUSTRIES: THE AUTOMOTIVE INDUSTRY Three facts summarize the Chinese automotive industry:   Only 1.5% of Chinese people own a private car. However, if trends continue there could soon be 100 million vehicles on Chinese roads   China currently has over 100 different automakers   A 25% tariff is paid on all cars imported into the country Clearly, the Chinese car market is still in its infancy. This makes it an extremely interesting market for manufacturers. In times of crisis for automakers everywhere, the Chinese market looks like it might be the light at the end of the tunnel. However, the environmental impact of exponential growth in car ownership is also an important issue, especially given finite fossil fuel reserves. Some analysts think that this could cause China to become a leader in green auto technology, or at least in green auto consumption – an unlikely assertion given Chinese car owners' current preferences. Certainly for now, the priority lies with reducing dependency on imported fuels, and reducing emissions is a secondary consideration. The German automaker Volkswagen leads the Chinese market, with a 19% market share (figure 24). This includes sales by VW's two joint ventures in China (SVW and FAW-VW) plus imports. The only Chinese make in the top five is Chery, in fifth position. Typical customers for cars in China are people who enjoy an above-average income. They are reaping the fruits of China's opening up to market forces.

These consumers tend to be Progressive and Traditional Maximalist types who can afford to own a private car. Foreign cars carry the most kudos, with German luxury automakers leading the pack. Overall, Audi enjoys the biggest share of the luxury car market. The Mercedes S-class has the highest share of the top-end of the market, with the BMW 7 series and Audi A8 close behind. Around 1,000 S-classes are imported into China each month; these are then sold at a very high price that includes the 25% import tariff.

Figure 24 VW is the clear market leader in China Market shares

Volkswagen 19% Other brands 31% Honda 11% FAW 2% Dongfeng 3% Tianjin 3% Toyota 4% Ford 5%

GM 10% Hyundai 7% Chery 6%

OVERCOMING THE BARRIERS Foreign OEMs are trying to establish manufacturing bases in China. This would enable them to avoid import duties and give them a local foothold in the market once it really takes off. There are obstacles to be overcome, however. The only way for foreign automakers to manufacture in China is via a joint venture, in which they may hold a maximum share of 50%. This policy aims to enable technology and know-how transfer from foreign manufacturers to Chinese companies without giving foreign manufacturers an independent foothold in China. Examples are the Shanghai Automotive Industry Corp (SAIC), which has JVs with GM (Shanghai-GM) and VW (Shanghai-VW). SAIC also produces its own brand of cars, using the valuable knowledge gained from its JVs with GM and VW. However, so far this strategy has not been successful for SAIC's own vehicles.

Volkswagen Santana

Chery

Roland Berger Strategy Consultants

Companies that have overcome these barriers, patiently building up their business in China, are slowly reaping the rewards. Market leader VW was the first to enter into a JV with SAIC in 1985. Audi, part of the VW group, is now a player in the top league of the premium segment. It is able to rely on a strong base of local suppliers, which makes it easier for it to adapt its products for the Chinese market. Adapting models for the Chinese market often means providing a long wheel base (not only for top-end makes but also for the VW Passat Lingyu, for example, developed in China for China) or offering a beige interior. The Chinese love of technological gadgets is apparent in local preferences for Bluetooth connectivity, DVD players and built-in refrigerators. These preferences are naturally those of people with more money than average. It remains difficult to tell what the average Chinese person will want from his or her car. Some local manufacturers such as BYD (Build Your Dream) are copying various parts from Western makes and combining them in new models. If this is an indication of Chinese taste in cars, Western companies clearly still have a lot to learn. More recently, Chinese OEMs have shown that they are capable of considerable innovative capability. Besides building eccentric cars, BYD is the world's largest battery manufacturer. It has launched several electric vehicles, putting it ahead of its foreign rivals should this really turn out to be the future of transportation.

Figure 25 Little brand differentiation between car manufacturers Volkswagen

General Motors

Volkswagen 161 vs. 1667 E Classic

Nature Purism

–

Security Smart Shopping

Vitality

Cool& Trendyy

Service

Quality

Innovation & Protech

Classic

Vitality

Cool& Trendyy

Service

Purism

–

Classic

Smart Shopping Total Cost

Customized

E

Thrill & Entertainment

Vitality

Service

Quality Proven

Cool& Trendyy

Classic

Nature Purism

+

Innovation & Protech Personal Efficiency Customized

n = 11,100 Source: Roland Berger Strategy Consultants, 2008

Thrill & Entertainment

Prestige

Fair

Carefree

Clanning

R

Personal Efficiency

Proven

Toyota

E

Security

+

Innovation & Protech

Toyota 32 vs.796

Prestige

Purism

Cool& Trendyy

Service

R

Honda

Tranquil

Carefree

Quality

Total Cost

Honda 91 vs. 737

Nature

Smart Shopping

Customized

R

Fair

Security

Innovation & Protech

Vitality

Clanning

Tranquil

–

Personal Efficiency

Proven

Classic

Nature

+

Thrill & Entertainment

Prestige

Fair

Carefree

Quality

Total Cost

Customized

E

Thrill & Entertainment

Clanning

Security Smart Shopping

Personal Efficiency

Proven

Hyundai

E

Purism

+

Innovation & Protech

Hyundai 59 vs. 769

Prestige

–

Service

R

Cherry

Tranquil

Cool& Trendyy

Quality

Total Cost

Chery 46 vs. 782

Nature

Smart Shopping

Customized

R

Fair

Security

Personal Efficiency

Proven

Total Cost

Purism

Carefree

Clanning

Tranquil

–

Vitality

Classic

Nature

+

Thrill & Entertainment

Prestige

Fair

Carefree

Clanning

Tranquil

E

Thrill & Entertainment

Prestige

Fair

GM 82 vs. 746

–

Security

Total Cost

Carefree

Clanning

Tranquil

Smart Shopping

Vitality

Service

Quality Proven

R

Cool& Trendyy

+

Innovation & Protech Personal Efficiency Customized

Study 35

WEAK BRANDS In China, most OEMs differentiate their brand image through sub-brands or product-line brands rather than an overall company brand. Few major companies have managed to establish a distinctive brand identity. Even Volkswagen, far and away the market leader, is no exception here. Figure 25 gives profiles of the six major brands in the country. Looking at the brands in detail, it is clear that most OEMs have diversified their customer base by means of various subbrands and product-line brands.

Volkswagen Volkswagen drivers are less cost-sensitive than average, less concerned about being trendy, and somewhat traditional. Even these characteristics are only tendencies, however: the profile picture is too weak to make firm statements. Probably by virtue of being the first foreign automaker to enter China, VW has been able to establish its position as market leader. An analysis of the VW customer base shows that Progressive Maximalists and Traditionalists are most strongly

attracted to the brand, followed by Modern Performers and Self-centered types. This reflects the market leadership of the brand. VW appeals least to Conservatives and Minimalists.

General Motors GM is not clearly differentiated from other brands. However, the company makes a success of its umbrella brand strategy and manages to achieve some brand differentiation through its sub-brands of Chevrolet, Buick and Cadillac. Most of GM's customers in China are Modern Performers, followed by Selfcentered types. The brand is least popular with Traditional Maximalists and Hedonists.

Chery The only local brand to make it into the top 5, Chery also suffers from a weak brand profile. Chery is a national brand and as such might be expected to benefit from some local pride. However, its brand image is no stronger than those of the other automakers analyzed. There may be a very slight tendency toward buying proven

products and a relaxed attitude toward innovation and technology apparent in Chery customers, but it is hardly strong enough to warrant any bold statements. The biggest consumer group interested in Chery are Progressive Maximalists, followed by Modern Performers. The brand appeals least to Conformists and Minimalists. Unsurprisingly, it turns out that all auto brands show a clear tendency toward the Progressive archetypes. These consumers are high earners and more open to new ideas, technological advance and progress in general. When it comes to branding, OEMs are still pursuing a strategy of sub-brand identity diversification. They are relatively weak in terms of building their overall company brand. The strongest automakers have a slightly clearer positioning than the others. This fact suggests that as the Chinese market develops, strong branding will be the key to gaining a solid foothold in this vast and tricky market.

Roland Berger Strategy Consultants

In China, consumers achieve differentiation – via brand and type of car B.T.: Is consumer behavior in China changing? G.B.: Chinese consumers certainly are extremely knowledgeable about what they are buying and expect a lot of technical information about their car. So far, there is no brand loyalty. Whilst in the past consumers simply bought a car, they now also buy service and entertainment.

Roland Berger Senior Consultant Benjamin Thoma talked to Beijing Benz DaimlerChrysler (BBDC) President and CEO Günter Butschek about the Chinese car market.1 B.T.: What do you think is the biggest difference between Western and Chinese car consumers? G.B.: In the West, individualization is important. Western consumers act according to the pull principle. In China, on the other hand, consumers achieve differentiation via brand and type of car. B.T.: Is there a perceptible evolution in consumer behaviour? If so, how? G.B.: Chinese consumers are certainly extremely knowledgeable about what they are buying and expect a lot of technical information about their car. There is no brand loyalty at present. In the past, consumers simply bought a car; they now also buy service and entertainment.

B.T.: Has the financial crisis had an impact on your business already?

G.B.: Our new C-class is built entirely in China and is expected to attract young customers who want dynamic handling as well as many comfort and safety features. We are also preparing to launch the new E-Class with a long wheel base, in recognition of the fact that many of our clients have a driver and therefore sit in the rear of the vehicle.

G.B.: China is less dependent on other financial systems, so the impact of the financial crisis has been much less than in the West. The stimulus package launched by the government will have a positive impact. But the drop in GDP growth from 12% in 2008 to 8% in 2009 is putting us under a lot of pressure. Q4 2008 was very volatile for us, with C-Class sales down 25% in November but gaining ground again in December. Competition is getting tougher. Many dealers have had problems securing loans to finance their showrooms, but new financing options will emerge.

B.T.: How does your marketing and branding strategy in China differ from elsewhere?

B.T.: In your opinion, what will be the next big thing to hit the Chinese automotive market?

G.B.: In principle, the image and marketing mix of the Mercedes-Benz brand in China is the same as in our global campaigns. Of course, our marketing programs are tailored to the Chinese market, but we communicate the same brand values.

G.B.: Definitely alternative power technologies. Government subsidies and policies are supporting this development. There will also be further growth in the luxury segment, as well as in the small vehicle segment with displacements below one liter. The recently introduced fuel consumption tax based on displacement has triggered a general trend toward reduced displacement.

B.T.: How do you adapt to the evolving tastes and behavior of your customers? Beijing Benz Daimler-Chrysler (BBDC) President and CEO Günter Butschek

prices prior to visiting a dealership. We also make sure our dealers are aware of all the product features and are ready to answer technical questions from customers.

B.T: What channels do you use to communicate with existing and potential clients? G.B.: Naturally we use new media, such as the Internet, especially as Chinese consumers spend a long time looking online for information about product features and

For detailed information on BBDC, see page 45 1

Study 37

6 STRAIGHT FROM THE HORSE'S MOUTH Many analysts feel that traditional market research can only go so far in exploring the psyche of potential customers. In a survey, respondents might be influenced by the way that questions are asked or give the answers that they think are expected of them. One way to circumvent these difficulties is to analyze what consumers have to say when they are outside the survey environment. The Internet, especially where usercreated content is concerned, has made such research much easier. In Bulletin Board Systems (BBS), chat rooms and blogs, people freely express their opinions and swap experiences about brands, products and services in massive numbers. This phenomenon is called Internet Word of Mouth (IWOM). Figure 26 shows the difference in active Internet use in the United States and China. Of special importance to marketers in China are the highly popular Bulletin Board Systems (BBS). Since their creation in 1994, BBS have formed the heart of the Internet community architecture. More than 91 million1 Chinese use BBS to discuss topics such as automobiles, sharing their experiences, suggestions and queries. Figure 27 explains what people use them for most; figure 28 shows a screenshot of a typical BBS site.

Figure 26 Participation in the Internet community in China is more active and vibrant than in the West United States

China

"I have expressed personal opinions and/or written about myself online"1)

56%

72%

"Online I feel free to say and do things I wouldn't do or say offline"1)

32%

73%

User-generated content (consumer reviews, rating sites, forums, discussion boards, blogs, etc.) influences purchase decisions2)

19%

58%

Percentage of broadband users commenting on blogs, listserves, in chat rooms and forums2)

28%

47%

1) 2)

IAC and JWT, China Leads the US in Digital Self-expression, November 2007 Netpop, Chinese Surpass Americans in Web 2.0 Use, November 2007

Figure 27 Motivation for participating in BBS (%) 72.7

Share opinions 49.8

Seek help

43.2

Help others 20.3

Stay in touch with others 9.5

Attract others' attention Other Data basis: 315 valid responses Source: CIC Efluencer Survey, Q3 2008

0.6

Roland Berger Strategy Consultants

The method Roland Berger asked CIC, China's leading IWOM research and consulting firm, to provide insights into the Chinese automotive industry. CIC does not conduct surveys; instead, it analyzes the data created by China's 298 million Internet users, the largest Internet community in the world.1 Using its proprietary data collection and text mining technology, the company derives insights and actionable intelligence from tens of millions of monthly consumer conversations about a wide variety of industries, including automotive, cosmetics/beauty and consumer electronics. For this study, CIC concentrated on the automotive industry, tracking 19,471,305 messages in Q4 2008 from automobilerelated BBS. These messages were categorized and mined according to a library of terms (including Internet slang) representing 441 models, 81 manufacturers, 16 attributes (categories) and 200 subattributes (sub-categories) customized for mainland China. Figure 29 gives an idea of how the system works.

1 The 23rd Statistical Survey Report on the Internet Development in China by CNNIC, January 2009

Figure 28 BBS screenshot

Figure 29 The CIC Automotive IWOM Practice Automotive Industry Term Library Industry Coverage   81 manufacturers   441 models   16 attributes (categories)   200 sub-attributes (sub-categories)   Product and attribute sentiments

Sample CHARACTERISTICS OF CIC CHINESE TEXT MINING   Industry attribute terms: (gearbox): gearbox   Exceptional key terms: A4 = A4 (A4 paper)   Spelling variation: (Sagitar): Sagitar   Chinese word segmentation: (heavy) vs. (important)   Internet language/slang: (Focus): FKS FCS

Study 39

The results Figure 30 Most discussed auto attributes, Q4 2008

Volkswagen, in its joint-venture incarnations SVW and FAW-VW, was the most discussed brand in Q4 2008, with a 15.2% "share of voice" (figure 32). SVW had an 8.3% share of voice at brand level, with 540,247 posts, and FAW-VW had a 6.9% share, with 453,669 posts. Ford Focus was the most discussed model, with 214,416 posts or 4.1% of the total share of voice at the model level.

Other Safety systems

10%

Distributors Transmission systems

Power systems

5%

24%

6% 7%

Interior equipment

15%

8%

Price

Power systems were the most discussed topic on BBS sites, cropping up in 24% of all posts mentioning specific topics. This was followed by price (15%) and appearance (15%). Such findings provide an understanding of what consumers are most concerned about, which can in turn inform product marketing messages (figure 30).

8% 15%

Exterior equipment

Appearance Data basis: Total attribute-related posts, Q4 2008 = 2,323,560 Source: CIC Automotive IWOM Practice

To help manufacturers understand how consumers feel about their brands, CIC also produces an "IWOM Health Matrix." This analyzes a particular make's online reputation by splitting its online appearance into two categories: "buzz volume" and "sentiment" (figure 31).

Figure 31 IWOM profile of models IWOM Health Matrix for five compact models, Q4 2008 High

II

Bora Excelle STD

NSR

Chery A3

Focus Sagitar

Low

III Low

Buzz volume

NSR is as follows: (positive-negative)/(positive+negative) x100% Data basis: Total model-related posts = 5,210,948 Source: CIC Automotive IWOM Practice

High

Roland Berger Strategy Consultants

Figure 32 Manufacturer buzz

Figure 33 Trends in manufacturer buzz

Top 10 discussed auto manufacturers, Q4 2008 (no. of posts)

Buzz for four manufacturers, Q4 2008 (no. of posts)

FAW-VW SVW

SVW

453,669

SGM

4S retailer assaulting consumer scandal

423,600

CA Ford

130,000

359,479

Shenlong

CA Ford Mazda

311,992

FAW-Toyota

100,000

242,395

DF Nissan

GZ Honda DF Nissan

223,049

Chery

189,549

70,000 OCT

136,662

Note: Manufacturer posts include brand, series and model posts Data basis: Total manufacturer-related posts = 6,518,352 Source : CIC Automotive IWOM Practice

Buick

9.3%

Ford

9.2%

VW

Quotes   The fuel consumption of American cars is definitely higher than Japanese ones.

6.3%

Honda

NOV

Data basis: Total posts for four auto manufacturers, Q4 2008 = 1,348,189 Source : CIC Automotive IWOM Practice

Figure 34 Contribution of fuel economy to buzz volume for five brands, Q4 2008

Toyota

Launch of new CITY model

348,514

GZ Honda

DF Honda

160,000

540,247

5.3% 4.4%

Notes: Only includes domestic models Data basis: Total number of attribute-related posts, Q4 2008 VW = 51,503; Toyota = 197,185; Honda = 205,943; Ford = 106,904; Buick = 109,281 Source: CIC Automotive IWOM Practice

  American cars are not fuel-efficient. Even my Sail SRV used 8 l/100 km 8

DEC

Study 41

Looking at recent data trends, we see that while SVW's discussion curve is stable, Chang'an Ford Mazda (CA Ford Mazda) and Guangzhou Honda (GZ Honda) experienced a sharp rise in discussion around December 2008 (figure 33). In the case of CA Ford Mazda, much of the spike can be attributed to the buzz following a heated argument and shoving match between a Ford dealership employee and a group of customers who had organized themselves online in order to receive a group purchase discount (a not unusual practice in China). The incident was discussed in BBS forums, recorded and uploaded to video-sharing sites similar to YouTube, and reported on by the media. GZ Honda, on the other hand, generated a buzz with the launch of its new CITY model in late December. CIC further investigated perceptions of fuel economy for different manufacturers – particularly relevant given the worsening economic situation (figure 34). Their analysis shows that 9.3% of all mentions of the Buick brand or its models refer to fuel economy, as do 9.2% of all mentions of Ford or its models. By comparison, Honda and Toyota are less often mentioned in association with fuel economy, with 6.3% and 5.3% of brand or model messages mentioning the issue respectively. Most of these mentions are negative, suggesting that rightly or wrongly, there is a strong perception that American cars are not as fuel-efficient as Japanese and other brands.

It is essential for manufacturers to listen to the issues being discussed by Internet users. But they also need to understand the specific online culture in China. Organizing group purchases is one important feature of online automotive communities. Another is the so-called "homework" post, in which Internet users request (or share) detailed experiences with a particular car or feature. For example, a potential buyer may ask community members to give their impressions of driving the SVW Polo. Such discussions from "people like you and me" can have a very strong impact on potential buyers' opinions.

The implications Thanks to BBS sites, many Chinese car buyers have already made up their mind about which car to buy before they even enter the showroom. They base their decisions almost exclusively on IWOM. New members of the Chinese middle class are often the first of their friends or family to buy a car, so they lack any "offline" word of mouth to help them in their buying decisions. It is only natural that car retailers should want to influence these online discussions. Text mining technology such as that used by CIC can identify the 20% of BBS contributors who create 80% of the content about particular topics or models. These so-called "efluencers" can serve as the basis for new kinds of CRM and PR engagement programs. Some retailers have begun directly engaging within the auto expert

communities. Others have set up their own communities or social networks, including SVW (mysvw.com) and Honda Fit (ifitclub. com.cn). By systematically tracking and analyzing IWOM, manufacturers can learn how their brands are perceived by potential customers. In particular, they can track consumer sentiment and spot any issues that might have an impact on their reputation. They can also identify influential communities and opinion leaders, and target them with digital PR. And they can identify trends and interests, both as a source of inspiration for their own marketing campaigns and as a way of measuring their subsequent impact.

Roland Berger Strategy Consultants

... Roland Berger Strategy Consultants Worldwide Roland Berger Strategy Consultants, founded in 1967, is one of the world's leading strategy consultancies. With 36 offices in 25 countries, the company has successful operations in all major international markets. In 2008, it generated more than EUR 670 million in revenues with 2,100 employees. The strategy consultancy is an independent partnership exclusively owned by about 180 Partners. Roland Berger supports leading international corporations, non-profit organizations and public institutions in all management issues – ranging from strategic alignment and introducing new business models and processes to organizational structures and IT strategy. Roland Berger is based on global Competence Centers that are organized along functional and industry lines. This allows us to offer tailor-made solutions devised by our interdisciplinary teams of experts.

C. About...

At Roland Berger we develop customized, creative strategies together with our clients. Providing support in the implementation phase is particularly important to us. In so doing, we create value for our clients. That's why our approach is based on the entrepreneurial character and individuality of our consultants – "It's character that creates impact." All employees at Roland Berger Strategy Consultants strive to adhere to our three core values: excellence, entrepreneurship and partnership.

... Roland Berger Strategy Consultants Greater China The Chinese market is a key pillar of Roland Berger Strategy Consultants' international expansion. Since our entry into the China market in 1984, the consultancy has grown rapidly: The four Chinese offices (Shanghai, Beijing, Hong Kong and Taipei) now have over 200 people dedicated to working extensively with leading Chinese and international companies. With the motto "Client and quality first," we offer consulting services in fields of industry such as automotive, electronics, telecommunications, consumer goods and retail, engineered products and high tech, transportation, financial services, chemicals and oil, building materials, and real estate. Our services are focused mainly on strategic and operational consulting involving every aspect from M&As, corporate development strategy to marketing as well as supply chain management. Currently, Chinese clients account for more than 70% of our total revenue in Greater China. Through in-depth understanding of the Chinese business environment and dedication to forward-looking, creative, targeted and practical solutions for clients, Roland Berger has gained a very strong reputation in the Chinese market. We offer tailor-made solutions according to the individual needs of each client in response to current Chinese market development trends.

Study 43

As the only consulting firm of European origin among the Top 3 in Greater China, Roland Berger Strategy Consultants has built its expertise on its extensive experience working with clients worldwide on complex business cases for 40 years. Outstanding strategic analysis and in-depth knowledge of implementation are the strengths of the company's consulting approach. Roland Berger consultants combine their analytical and strategic know-how within a diverse company setting to help clients in Greater China successfully master their unique challenges.

... CIC CIC is the leading Internet Word of Mouth (IWOM) research and consulting firm in China. Since 2004, CIC has pioneered the concept of distilling insight from Chinese blogs, message boards and social networks with its team of IWOM analysts supported by proprietary Chinese language-based technology for text mining (patent pending), data processing and data visualization. As the only firm in China that helps Fortune 500 retainer clients utilize IWOM for highlevel strategic planning and marketing communication, CIC's continual development and evolution is driven by a unique, powerful and open mindset and learning culture that at its core continually seeks to help clients understand how the Internet and IW0M are redefining the relationship between brands and consumers. CIC is committed to both providing objective third-party strategic advice to clients and to promoting the healthy development of the Internet community in China. For a comprehensive analysis of what consumers are saying online about the automotive category, CIC provides customized reports, a powerful dashboard as well as a newly released syndicated IWOM insight TM Automotive Industry Report. For more information, please visit www.cicdata.com (CIC website), www.seeisee.com (Chinese blog) and ww.seeisee.com/sam (English blog).

... Sam Flemming Sam Flemming is co-founder and CEO of CIC. Sam has been a participant of China's digital evolution for more than a decade, first with Chinapay.com, the original online payment platform in China, and now with CIC. CIC is at the forefront of exploring Chinese digital culture, helping leading brands in China such as Pepsi and Nike understand how IWOM is impacting and can be used to impact marketing communications, product research and development, reputation monitoring, and public relations. Sam holds a Master's degree in Teaching English to Speakers of Other Languages from Monterey Institute of International Studies in Monterey, CA, and a BA in Sociology and Religion from Rhodes College in Memphis, TN. He is a native speaker of English, speaks Mandarin Chinese and has lived in Shanghai for 10 years.

Roland Berger Strategy Consultants

... L'Oréal Worldwide L'Oréal, a Fortune 500 company, was founded in 1907 by chemist Eugene Schueller who invented the first synthetic hair colorant. Over the last hundred years, L'Oréal has developed from a small home business to the no.1 cosmetic company in the world. Thanks to its outstanding performance, L'Oréal now ranks among the world's 100 most sustainable corporations. With operations in over 130 countries and regions worldwide, the company possesses 63,000 employees and 40 plants. Sales revenues were EUR 17.5 billion in 2008. The Group is also one of the world's most successful businesses ever, having recently reported its 18th consecutive year of double-digit growth. L'Oréal markets an impressive portfolio of more than 25 international brands, sold in 130 countries, including L'Oréal Paris, L'Oréal Professionnel, Maybelline, Garnier, Redken, Kiehl's, Shu Uemura, Biotherm, Helena Rubinstein, Lancôme as well as Giorgio Armani and Ralph Lauren perfumes. L'Oréal is active in all segments of the cosmetics market, including hair care, perfumes, makeup, skin care and dermatology. L'Oréal's century-long history is marked by major successes. With its strong R&D capability, innovation and pursuit of excellence, L'Oréal offers women new ways and means to enhance their beauty.

... L'Oréal in China In 1996, L'Oréal entered the Chinese market. Thanks to its outstanding business performance and good citizenship activities during the past 12 years, L'Oréal China is now one of the most prestigious multinational enterprises in China. In 2008, L'Oréal China reported its eighth consecutive year of double-digit growth with sales of RMB 6.95 billion, a 27.7% increase on the previous year. L'Oréal China is among the top 10 players globally and the biggest player in the Asia-Pacific region. L'Oréal China markets an impressive portfolio of 16 international brands, including L'Oréal Paris, Maybelline, Garnier, Kiehl's, Shu Uemura, Biotherm, Lancôme, Helena Rubinstein, Biotherm, Giorgio Armani, Ralph Lauren perfumes, Kérastase, L'Oréal Professionnel, Matrix, Vichy, La Roche-Posay and two local brands, Yue Sai and Mininurse. Its high-quality products are available in all distribution channels, including department stores, hair salons, hyper- and supermarkets, pharmacies and direct mail order. L'Oréal has built a Research & Development Center in Shanghai to investigate Chinese consumers' needs and expectations, and three plants in Shanghai, Suzhou and Yichang to provide better service and products, not only to China, but to the whole of Asia.

Study 45

L'Oréal China also emphasizes the recruitment and development of new talent. A new Management Development Center was founded in 1995 in Shanghai. L'Oréal China shows its long-term commitment to Chinese society by supporting culture, education, science, environmental protection and the arts. As a good corporate citizen, the company is involved in a number of initiatives, such as the China Young Women in Science Fellowship, Charity Sales, Green Cup and Hairdressers Against Aids. L'Oréal China has been recognized as the most successful and respected international company in China.

... BBDC Established on August 8, 2005, Beijing Benz-Daimler Chrysler Automotive Co., Ltd. (BBDC) is a joint venture founded by Beijing Automotive Industry Holding Co., Ltd, Daimler AG and Daimler North East Asia Ltd. The Chinese shareholder owns 50% of the total shares.   BBDC's new plant is located in the Beijing Economic & Technological Development Area (BDA) and boasts an annual production capacity of 100,000 units. BBDC's manufacturing philosophy is based on criteria such as state-of-the-art techniques, outstanding products, strict quality control, a strong emphasis on sustainable and environmentally friendly processes and well-trained technical workers.     BBDC currently produces vehicles such as the world-famous Mercedes-Benz E-Class/ C-Class, Chrysler 300C and Chrysler Borui.   BBDC has devoted itself to providing high-quality professional services to its customers. An adequate supply of parts, efficient technical support and long-distance and on-site training have guaranteed the continuous progress of our First Fix Visit (FFV). The company continually strives to make its service even faster, more comfortable and customeroriented.   BBDC's mission statement is "We Enhance Mobility and Quality of Life." Its aim is to become the top-performing player in the Chinese market. The products and services provided to its customers are of the same high-quality as those of DAG worldwide. In so doing BBDC is creating a new epoch for the auto industry and the Chinese market.

D. Contacts

Roland Berger Strategy Consultants

Charles-Edouard Bouée Regional Coordinator, Asia President & Managing Partner, Greater China Roland Berger Strategy Consultants 23rd Floor Kerry Center, 1515 Nanjing West Road Shanghai 200040, China E-mail: [email protected] Phone: +86 21 5298 6677-821

Qi Wu Senior Partner & Vice President for Greater China Roland Berger Strategy Consultants Suites D&E, 20th Floor, Tower A, Gateway Plaza 18 Xiaguangli, East Third Ring North Road Beijing  100027, China E-mail: [email protected] Phone: +86 10 8440 0088-619

John Shen Partner Automotive Competence Center, Leader Greater China Roland Berger Strategy Consultants 23rd Floor Kerry Center, 1515 Nanjing West Road Shanghai 200040, China E-mail: [email protected] Phone: +86 21 5298 6677-890

Ignatius Tong Partner Consumer Goods & Retail Competence Center, Leader Greater China Roland Berger Strategy Consultants 23rd Floor Kerry Center, 1515 Nanjing West Road Shanghai 200040, China E-mail: [email protected] Phone: +86 21 5298 6677-850

Study 47

Rainer Balensiefer Principal, Head of RB Profiler Marketing & Sales Competence Center Roland Berger Strategy Consultants Karl-Arnold-Platz 1 40474 Düsseldorf, Germany E-mail: [email protected] Phone: +49 211 4389-2158

Susanne Gamers Senior Consultant Consumer Goods & Retail Competence Center Roland Berger Strategy Consultants 23rd Floor Kerry Center, 1515 Nanjing West Road Shanghai 200040, China E-mail: [email protected] Phone: +86 21 5298 6677-142

Please contact us if you have further questions: Phone: +86-21 5298 6677-176 Fax: +86-21-5298 6655 E-mail: [email protected]

think:act STUDY Publisher: Roland Berger Strategy Consultants Responsibility: Torsten Oltmanns Roland Berger Strategy Consultants 23rd Floor Kerry Center, 1515 Nanjing West Road Shanghai 200040, China © Roland Berger Strategy Consultants All rights reserved

Roland Berger Strategy Consultants