Full transcript below:

Igor Temirov: Yes, good morning. My name is Igor Temirov. I am an expert in developing foreign markets and for the last 5 years, I’ve been in China helping several companies to enter the Chinese market. 

1. How can you test discount strategies in China?

Igor Temirov: So there are several methods. Of course, there is AB testing when you are testing in one location versus another location or one city versus another city, but the good thing is China has different online platforms, different offline platforms so you have high-end stores, you have medium-end stores and you have low-end stores. So, this would be pretty singular to other countries, but the good thing in China and I think my colleagues know this; pricing strategy in different regions of China should be and would be pretty much the same because the price level on the shelf is maintained in China quite well which is not the case in many other countries and also the online… I think my key message is that you have to maintain your price level and the most effective way in China is online because when you go to buyers of the biggest chains they immediately take their mobile phone and they take in what are the current prices. So, that’s why it is very important to maintain this level online and this is the biggest influence of online to offline.

2. Can you provide an example of the one to three most powerful discount strategies you have implemented with SPLAT in the Chinese market? How sales per category increased?

Igor Temirov: As I mentioned we managed to analyze the social listening for our category and our brand together with one of our leading market agencies in Shanghai so that we worked with and we identified these two weeks. So, then we prepared a compression; a very well-coordinated campaign and that campaign should always include some social media element which was Wechat. So, we had also a very good selection of the KOL’s which are absolutely key in the Chinese market and a third element; so it should be coordinated with your price discount strategy on your main online platform and main offline channels. So, our sales doubled as well as our spending in this campaign and the most interesting so that again, the after effect of this campaign went through even the 11/11 and Christmas and New Year so by discounting you should always think about the length of the campaign so we should not overkill it with too frequent discounts and too many campaigns. So, I think the most effective in China would be thinking about two annual campaigns which will be like national campaigns and they should be separated for probably 5-6 months from each other and probably 4-5 local or localized campaigns, but you will have the maximum reach of your consumers and the market coverage. 

Any questions? We will find an expert to answer them. Drop your questions in the comments or send us an e-mail at dx@daxueconsulting.com.

Daxue Talks is a show powered by daxue consulting, a china-based strategic market research company founded in 2010! With Daxue Talks, you will stay up to date with all the latest business updates in China.

This article Daxue Talks transcript #21: What do discounts mean for Chinese consumers? is the first one to appear on Daxue Consulting - Market Research China.

The questions:

• How can you test discount strategies in China?
• Can you provide an example of the one to three most powerful discount strategies you have implemented with SPLAT in the Chinese market? How sales per category increased?

Daxue Talks is a show powered by daxue consulting, a china-based strategic market research company founded in 2010! With Daxue Talks, you will stay up to date with all the latest business updates in China

This article Daxue Talks 21: An example of a successful discount strategy in the Chinese market is the first one to appear on Daxue Consulting - Market Research China.

Full transcript below:

Igor Temirov: Yes, good morning. My name is Igor Temirov. I am an expert in developing foreign markets and for the last 5 years, I have been in China helping several companies enter the Chinese market.

Interviewer: Are discount strategies in China a big thing? How do you manage a discount to protect your margin?

Igor Temirov: Yes pricing is a very special strategic point so a practical view you have to deal with two decisions; first at a strategy level. So, you are defining the way you want to price your product; low cost or medium-priced or upper medium-priced or the high-end strategy and you want to get the high prices for your products. So, sometimes you may choose the so-called sandwich pricing strategy when you have one product priced at a high level and the other product you have at the lower level ad you are squeezing your competitors in between. So there are many factors, but this decision about your strategic pricing product policy should be done at the initial stages when you are developing the strategy.

So, once you decide about your pricing in the market then you of course supply more operational pricing strategies and most of the companies follow three steps. So, at the first stage when they are entering the Chinese market or any other market they are trying to apply the same pricing policy as in their home markets or what worked for them in their home market. So, they assume that this could work in the other international markets and in most cases, it does not work. So, after several months they started hearing and listening to their local Chinese managers or local managers who are telling or had been telling them that their pricing should be different and then the second stage; this is the stage when they follow their crowd, so-called. So, by listening to their managers they are applying the same pricing strategies that they see from their competitors and the third stage which is the stage that I wish all the listeners to go as fast as possible. So, this is the stage when you are basing your pricing strategy on research on the understanding of your consumers and for this, you need to do several things.

First of all, you need to study your target audience; your customers. What are the drivers, what are the triggers for their decision-making process for when they’re buying a product? So, which pricing discounts can you know trigger their buying or purchasing behavior and the second thing; this was very successful for our company. It is pricing that is based on their so-called social listening. So, if you talk to your marketing agencies they normally follow all the brands; not only your brands, but they follow all the brands and social listening is a great thing. So, it shows what are the articles, what were people talking about, about your brand, about your category and during the whole year you can define periods of weeks when people actively start discussing your category, your product and this would be the most successful period for your price campaigns or marketing campaigns. This last one worked very well for our company. So, together with a marketing agency we analyzed and we found that in the two weeks of August suddenly customers and consumers started talking about oral care products; about this product and we did a campaign for two weeks. A good thing is that the after effect of the campaign followed up to the almost 11/11, okay?

So, talking about the specifics of pricing in China each country has its own level of discounts that trigger their consumer behavior and some countries, for example, European developed countries 3% discount for one of the most popular categories like coffee can move people to the stores and there will be excitement and a lot of purchasing and buying because it’s a very stable category. Within this level of discount; 3% will not surprise anybody in China. So, in each country, there are three steps of discounting. So, normally it’s like a normal discount then promotion level and then the more extraordinary discounts like New Year, Christmas; like national holidays. So, China also follows this three-step kind of approach to pricing, but the level of the pricing is much higher than in many other countries. So in European countries, if you are pricing or discounting at 50% so people will think, “This product is not good. It is outdated. There is something wrong with this product.” In China, there are a lot of cases when living brands and products are discounted at 50% so normally the pricing in China works this way.

So, the moral price which is like a normal promotion is like a 20% discount during the so-called DM when you have a special place or focused place in a hypermarket or department store which would be 30% discount and twice a year or maybe three time, but companies try two times for Chinese New Year and for 11/11 or for their mid-autumn festival so you will go up to 50%. Saying that I want to mention one interesting thing, so ¾ years ago it was absolutely normal to see during 11/11 in China discounting at 50%. It was like a rule, okay, but probably starting from 2 years ago I think companies started calculating so the discounting at such a huge level does not add to your brand status or brand positioning because it can be very easily eroding the price and the perception of your product and the second thing is people just calculated that it doesn’t make sense and starting from 2 years ago; last year and this year so we can see most of the big brands and famous brands discounting at 30% at 11/11.

Any questions? We will find an expert to answer them. Drop your questions in the comments or send us an e-mail at dx@daxueconsulting.com.

Daxue Talks is a show powered by daxue consulting, a china-based strategic market research company founded in 2010! With Daxue Talks, you will stay up to date with all the latest business updates in China.

This article Daxue Talks transcript #20: How to offer discounts in China is the first one to appear on Daxue Consulting - Market Research China.

Question: Are discount strategies in China a big thing? How do you manage a discount to protect your margin?

Daxue Talks is a show powered by daxue consulting, a china-based strategic market research company founded in 2010! With Daxue Talks, you will stay up to date with all the latest business updates in China

This article Daxue Talks 20: How and when do stores use discounts in the Chinese market is the first one to appear on Daxue Consulting - Market Research China.

Programmatic advertising is buying digital advertising space automatically, with computers using data to decide which ads to buy and how much to pay for them. The programmatic advertising economy has experienced five key development nodes which embraces room for future growth.

How programmatic advertising works

Programmatic advertising is designed to replace human negotiations with machine learning and AI-optimization. The goal is to increase efficiency and transparency to both the advertiser and the publisher. In the early days, since the market had low awareness of programmatic ads, people mistakenly think that programmatic ads is DSP (demand side platform), or that programmatic ads is RTB (real-time bidding). Now, after seven years of development, the Chinese market has a more clear and in-depth understanding of programmatic ads as well as its relationship with DSP, AdX (ad exchange), RTB (real-time bidding) and Non-RTB (non-real-time bidding).

Programmatic vs. Traditional media buying

Compared to traditional media buying, programmatic advertising is faster, more efficient, and cheaper. Programmatic ads could be helpful for the consumption structure development in China by targeting the ads on the right group of people.

Programmatic advertising in China market overview

The selling point of programmatic advertising in China is more about precision and results than automation. China’s programmatic scene is packed with hybrid “one stop shops”: Ad Network + DSP, DSP + DMP, Private Exchange + DSP, etc. Along with these hybrids, there is greater conflict of interest for advertisers due to a lack of boundary/transparency across disciplines. However, advertisers can quickly experiment with programmatic advertising in China without a heavy investment/understanding in technology.

Industrial Chain in China

Despite the emergence of transparency, security and other issues, the budget investment from advertisers on Programmatic Buying has not been substantially reduced. Advertisers are actively seeking to apply private data to advertising optimization and some large advertisers even build their own DSPs.

For publishers, the Matthew effect is more obvious in the supply side. The social, content media and video products of media icons occupy more of users’ time, and more high-quality resources are provided to the Programmatic Buying market through the development of information flow and other advertising products.

The providers (third-party platforms) of programmatic creative received more attention from the market and more and more new independent data service providers entered the market. Due to the strategy adjustments of Baidu and Ali, BES and TANX are gradually turned to internal supply and gradually faded out of the market, which is a good opportunity for other third-party independent platforms.

BATT in programmatic advertising in China

China’s programmatic advertising marketplace has its own dominant players. Baidu, Alibaba,Tencent and Toutiao. They dominate rich search, e-commerce, social, and news and information, respectively.

Unlike in the west, where publishers plug in to a third-party technology vendors to manage the ad sales process, in China, publishers build their own programmatic ad technology. As BAT consists of the dominant publishers in China, they each have their own platform to control advertising, and they operate as silos independent of one another.

Market size of programmatic advertising in China

Programmatic advertising spending in China totaled 151.46 billion yuan in 2018, a 36.6% increase over 2017. It is estimated to reach 196.61 billion yuan in 2019, taking 69% of the total digital display ad spending. In the long run, China’s programmatic advertising market is still in the early stages of development and has a larger room for growth in the future, but its growth model will change from the past high-speed burst growth to medium- and high-speed steady growth.

Rising mobile programmatic advertising in China

Mobile programmatic advertising increased to 125.63 billion RMB in 2018, accounting for 83% of programmatic spending in China. From 2015-2018, the main driving force for programmatic advertising in China was mobile programmatic advertising.

Factors of rapid popularity of mobile programmatic advertising in China

The popularity of mobile programmatic buying in the past was jointly promoted by multiple factors including the rapid growth of traffic of the mobile end, budget restructuring of advertisers, Hero App’s strong demand for cashing and the upgrading of data application ability.

Rapid Growth of mobile devices– In the past four years the number of mobile internet users increased to 829 million from 688 million, with 98% of them accounting for mobile. The sharp growth of traffic became the base of the development of the mobile-end programmatic buying.

More budget from advertiser– Advertisers of APP promotion and e-business are the early advertisers in mobile advertising, and the budget of brand advertisers turned to mobile-end programmatic advertising as well, with the perfection of conditions in mobile-end monitoring.

High willingness of hero APP– With the huge demand for cashing ads without the historical burden, mobile APPs are more easily to accept and more willing to open to programmatic advertising.

Data application ability enhanced– The features of mobile-end provides programmatic advertising with a larger amount of data and richer data dimensions, which enhance the data application ability of Programmatic ads.

RTB vs. Programmatic Direct share in China

Programmatic advertising in China is transitioning from RTB to non-auction-based programmatic direct. However, when it comes to mobile programmatic buying though, RTB is more popular than programmatic direct. 

Advertisers prefer programmatic direct because media icons like BAT can prove high-quality resources as well as premium technology support.

Programmatic video advertising in China

Programmatic video is gaining popularity. In China, programmatic video represented 12.6% of the country’s overall programmatic spending. Some hero short-video APPs like Kuaishou and Douyin are successful in this area. These video ads are information-intensive and are good at attracting target audiences’ attention.

Buying methods– there are four methods for buying programmatic advertising. These four different methods are not competing, but complementary models designed to address the different needs of publisher and advertisers.

Transaction methods among different media and resource in China- In most recent cases in China, the media would cash the long tail traffic that is hard to be sold directly in the open market and sell the high-quality resources through the traditional direct customer channels.

What is Real-Time Bidding (RTB)?

RTB is an auction-based bidding protocol in which advertisers compete against each other to display ads to specific users. RTB offers a lot of capabilities and use of data, vast types of inventory. In China, RTB is gradually losing its position in the programmatic buying ecosystem by facing the pressure from closed ecosystem and media icons. These giants possess rich resources and more right to speak in the industrial chain.

How does RTB work?

When a user visits a page, the browser sends a corresponding bid request. Then the DSP bids on the ad request (impression). If the DSP wins the bid, then the ad is sent to the publisher and displayed to the user. Lastly, the publisher sends an ad request to the ad exchange via the SPP.

Benefits of RTB

Per-impression buying process– Real-time bidding allows brands to bid on individual impressions rather than agreeing to a predetermined fixed price. Buying in real time is cost-effective, reduces waste, and can prevent advertisers from overpaying for media.

Single dashboard- Advertisers and publishers use a single dashboard on their DSP or SSP to control their campaigns, rather than having multiple relationships with different partners.

Easy testing and adjusting– The impression-level data obtained allows advertisers to analyze the efficacy with certain consumers, context, and creativity. This can ultimately lead to a more adaptable strategy.

Insights– Publishers have real-time information about their best-performing segments and know which inventory is more coveted by advertisers.

Ability to sell remnant ad space- As RTB auctions are triggered automatically by the arrival of a target visitor, inventory that was previously unwanted and unsold can always be sold and “saved” from wasting.

What is Private Marketplace (PMP) and how does it work?

Private marketplace is an invite-only variation of the RTB model. It is an auction process in which just a handful of advertisers bid against one another to buy a publisher’s inventory. This method is typically offered by publishers with more premium inventory. PMP combines the advantages of traditional advertising purchasing and Programmatic Buying. Since advertisers in China would like to maximize their own interests, PMP is actively promoted.

Private Auctions (PA) vs. Preferred Deals (PD)

Within the realm of prove marketplaces, there are generally two types of deals in which an advertiser can participate: private auctions and preferred deals.

Benefits of PMP

Transparency on purchased inventory and pricing– The publisher and advertiser both have a very clear idea of what kind of inventory they are buying, what CPM needs to be paid, and the type of creative that is being displayed to users.

First look– PMP is a great way for advertisers to get the first opportunity to purchase inventory before it ends up on the open market.

Integrated buying– The PMP is operated within the RTB ecosystem, meaning campaign data sits alongside other RTB campaigns, giving a holistic view of campaign performance, as well as making global frequency capping and cleaner attribution possible.

Powerful targeting– The PMP can layer on additional targeting. While some publishers use private marketplace to essentially create private exchanges, by pulling their inventory off the open market, others use it as a way to bundle their inventory in novel ways.

What is Programmatic Direct Buy (PDB)

Programmatic direct is a one-to-one media-buying process much akin to the traditional method whereby salespeople met with advertisers in person to strike a deal. It is a very similar model to the private marketplace, with the exception that advertisers and publishers agree on specific inventory based on a fixed CPM. Ads sold through programmatic direct are often tied to premium publishers (think Forbes in west and China Daily in China) who reserve a certain percentage of their inventory they prefer not to sell on the open market because they can demand a premium price from advertisers, who get guaranteed ad space in return.

How does PDB work?

First, an advertiser browses through a shop-like catalogue of websites. They configure flight dates and volume of impressions, then places an order on the platform. Lastly, the publisher audits and verifies the campaign.

Benefits of PDB

1. The ability to automate insertion orders and ad-code configuration can help both publishers and advertisers to improve efficiency and eliminate human error in the entire process.
2. Both advertisers and publishers get more opportunities to control the process and outcome of media buying through real-time data stream.
3. All benefits of PDB make independent companies in China hard to compete with giants as well as get high quality resources

Adtech Platforms in RTB Transaction

What is Demand-side platform (DSP)?

A demand-side platform is a tool or software that allows advertisers to buy ad placements automatically. Main functions provided to media buyers consist of:

1. Create, run and manage many campaigns simultaneously across multiple SSPs and ad exchanges and control them from a single centralized user interface.
2. Auto-optimize (via algorithms) the campaigns to increase ROIs.
3. Use third-party data from DMPs to improve targeting.
4. Provide real-time reporting via advanced analytics.

How does DSP work?

An advertiser signs up with a DSP, that in turn is connected to an ad exchange. DMP collects and manages web browser cookies and help to make buying decisions. When the advertiser reaches the website, an auction signal us sent to the exchange. The exchange then asks the DSP if the advertiser has any ads that might fit the placement. If it does, the DSP sends a signal to enter RTB auction.

How does targeting work in a DSP?

There are several ways an advertiser can run targeted ad campaigns with a DSP, but at the heart of it all is data. The DSP would sync cookies with the DMP to exchange user data, which can then be used for targeting. The DSP could help advertisers to target users based on this data:

Behavioral data- Includes information about the user’s behavior and interests, such as websites they’ve visited, what products they’ve purchased, which ads they’ve interacted with, etc.

Contextual data- Includes information about the website or mobile app, such as USL, categories, and the content on the page.

Demographic data- Includes information about the user’s location, age, job title, gender, and so on.

What advantages do DSPs offer media buyers?

Wide and efficient audience targeting- The DSP provide opportunity to media buyers to reach audiences on a lateral and bilateral basis, so they can reach their target audience more effectively plus reach a wider audience.

More inventory accessibility- The ability to access a larger amount of available inventory and display their ad on a larger number of websites by connecting to a variety of ad exchanges and SSPs.

Free to optimize- Media buyers can manage and optimize the efficiency of their campaigns by adjusting the settings.

Real-time reaction- The ability to react in real-time to certain outside conditions such as weather, news, stock market activity, allowing the media buyer to serv the most relevant advert to the user.

Data integration- The option to integrate third-party data brokers and data management platforms into the DSP to allow media buyers to further optimize their audience targeting capabilities.

The DSP market in China

The self-built Programmatic Advertising platform by media can promote the overall market and the third-party DSPs still have its unique value. Third-party DSPs’ core existing value is to provide cross-media and cross-platform solutions for the advertisers. Part of independent DSPs set transparent transaction as the main focus and improve marketing service capability with differentiated services.

Self-built platforms have stronger control private high-quality ads and traffic resource, and rich accumulation of user data. Part of media programmatic platforms with large traffic consumption and fast growth also began to access external, traffic resources when consuming their own ones.

Main DSP players in China

The top integration platforms in China are:

• YOYI Digital: specializes in the research and development of online precision targeting technology and internet marketing services. It provides both impression-based and performance-based advertising solutions and has developed a network of top publishers in China.
• iPinYou: Beijing iPinYou Information Technologies Co., Ltd is now China’s largest DSP. It has built world class RTB technology and algorithm, proprietary cloud computing platform and patented audience profiling technology. It is established as a leading provider of audience based programmatic advertising technology
• AdSame: AdSame is a digital marketing agency offering advertising, data insight, and publishing solutions. It helps customers to be more concise and efficient in digital marketing. It has extended the business chain to mobile internet advertising and established a corresponding relationship between PC and Mobile users’ data.

The top mobile-focused platforms in China are:

• Limei: Beijing Limei Advertising Co. Ltd. is a provider of mobile marketing solutions in China. It’s targeting capabilities include location, device model, device OS, user Tags, Operators, Wi-Fi, etc. It has also invested in seven professional mobile internet technology development companies.
• Lomark: Media Lomark point is China’s leading local mobile advertising platform. It mainly focuses on the local market, with big data analytics, cloud computing, behavioral targeting technology, crowd recognition technology and other cutting-edge technology model.
• Domob: Domob Network Technology (Beijing)Co., Ltd. is a Chinese advertising platform for smartphones. It devotes to promoting products on the smartphone platform and providing efficient services for branded advertisers. It also provides application developers with product promotion services and benefits.

What is Ad Exchange and how does it work?

An ad exchange is a technological platform that allows the buying and selling of digital inventory. It functions much like the trading floor of a stock market, but for digital display advertising. First, visit the website. Exchange will then announce available bid, evaluating available bidders (advertisers). Real-time auction of all bids occurs. Then the winning bid displayed on website.

The ad exchange market in China

Public and private are two typical types of ad exchange.

The value of the ad exchange platform

Ad exchange makes advertising transactions more efficient. For advertisers, it provides:

• massive, cost-effective media resources and delivery options
• accurate control of ad space and target audience
• single payment source increases efficiency and reduces transaction costs
• flexible price with high transparency

For publishers:

• connects buyers from different industries with various needs
• improve profitability by having better capability on traffic monetization
• improves operations efficiency of trade platforms
• better control of advertisers, ads format, and bid types.

Main Ad Exchange players in China

The top integration and mobile-focused platforms in China are:

• Baidu Exchange Service: Baidu Exchange Service (BES) is a ad transaction platform based on Real Time-Biding protocol, which covers rich resources and targets on wide range of audience. BES provides multidimensional data support for agency companies and DSP platforms
• Tencent AdExchange: AdinALL has been focusing on creating an intelligent and efficient ad-traffic exchange platform that allows advertisers and developers to trade multiple ways for each impression and click. Advertisers can buy inventory in real time from a wide range of media, while developers can get more favorable price and rich ad filled with global brand and performance advertisers.
• Mobvista: Mobvista is a leading global mobile ad network dedicated to helping advertisers, publishers and affiliates achieve goals and maximize revenue. It is specialized in mobile advertising and game publishing. •It operates a worldwide mobile ad network, integrates ad spots from apps and websites covering 236countries.

What is Supply-side platform (SSP) and how does it work?

A supply-side platform is a tool or software that allows publishers to manage, sell and optimize available inventory (aka ad space) automatically. A publisher wants to sell its display space, SSP connects to several different ad exchanges and tells them what kind of inventory is available, and through real time-bidding, inventory is automatically auctioned off to the highest bidder.

Currently, there is few purely independent companies representing the interests of the publisher in the Chinese market. In the domestic market, the boundaries between SSP and ADX are becoming increasingly blurred.

What advantages do SSPs provide publishers?

Automated selling of inventory- SSPs help streamline the process of selling and buying inventory by completely removing manual work from the process, thus publishers can sell all of their inventory to advertisers automatically.

Detailed reporting- The ability to offer deeper insights about the value of their inventory for particular advertisers by giving publishers details on who is bidding, how much their inventory is being bought for, and how much individual advertisers are buying.

Aggregation of multiple networks- The ability to help achieve better yield by connecting to multiple networks, ad exchanges, and DSPs to allow more buyers to take part in the real-time bidding process.

Yield optimization with price floors- SSPs allow publishers to offer their inventory to more buyers and give them better control of pricing by price floors to ensure that their inventory is not sold under certain prices.

Brand safety- SSPs offer better brand safety for publishers by blocking unwanted ads from showing on their website.

Main SSP players in China

Top integration platforms are:

• Tanx SSP : Tanx SSP provides a full range of display promotion services. It provides real-time bidding technology, promotion content controlling, promotion resource management and precise targeting. It has a high-yield product called Window Promotion. It is based on the real-time bidding market and uses the real-time bidding CPM as the billing model.
• AdView : AdView is a leading mobile SSP & exchange headquartered in China. •It has a mobile ad network exchange center and big data computing platform. It supports various mobile advertising forms, RTB real-time bidding, PMP private transactions, and has a database of behavior characteristics of mobile advertising users.
• Adin SSP : Adin SSP is a high-quality supplier side platform in China. It integrates high-quality media resources, and conducts data processing of traffic category definition, media ad space optimization, and inventory orientation distribution. It optimizes diversified inventory to more suitable demanders or puts them in the traffic exchange market for programmatic RTB sales.

Top mobile-focused platforms are:

• Mintegral : Mintegral is the leading mobile advertising platform in Asia. It is powered by AI technology and provides user acquisition, monetization and innovative creative solutions to advertisers and mobile developers worldwide. It has exclusive high-quality APAC traffic resources to help developers grow their mobile app business in APAC.
• PremiumMad : PremiumMad is a mobile advertising management platform with focus on high quality traffic. It provides rich original advertising forms, one-stop inventory management, global and domestic premium brand advertisers and the best quality mobile media resources.
• Yumimobi : Yumimobi is a one-stop ad monetization platform. It provides top demand resources by collaborating with top ad networkers, DSPs, exchanges and direct buyers to provide high fill rates. It provides automatic optimization by multidimensional algorithm to ensure ads income.

What is Data management platform (DMP) and how does it work?

A data-management platform is a technology platform that collects data from a range of different sources, classifies and categorizes it, puts it into different groups (segments), and then uses those segments to achieve certain goals. DMP collects first- party, second party and third-party data from different sources including online and offline data sources. DSP groups certain pieces of data together based on similarities and then uses the segments to target different audiences. DMP activates data and puts in into work.

Who needs a DMP and why?

A data-management platform can be used by advertisers, marketers, and agencies to optimize their media buying processes. Even companies that don’t operate directly in the online advertising space can still greatly benefit from a data management platform.

Ad campaigns Management- Manage online advertising campaigns that involve connecting with other ad-tech platforms (e.g. ad networks, DSPs, ad exchanges, and SSPs, etc).

Conversion rate improvement- Want to increase conversion rates, improve the user experience on their website or apps, and increase brand recognition and conversion rates.

ROI maximization- Want to lower advertising costs and improve campaign ROI across display, mobile, video, and social. 

Personalized Content Delivering- Want to personalize messages and content shown to customers through advertising, remarketing, and other brand interactions to increase engagement.

User information learning- Want to learn more about their existing users and customers to help shape product offers and services.

SCV creation- Want to connect offline data with online data to create a Single Customer View (SCV).

DMPs are growing in importance in China

Getting a DMP in place has become critical for marketers in China. A quarter said having one was a priority, and an additional 62% called it “very important”.  One major reason is to glean product-related information. Advertisers were interested in deriving such data from a DMP.

Main DMP players in China

The top integration platforms are:

• AdMaster : AdMaster is a third-party provider of solutions for marketing massive data in China. It aims at helping advertisers to realize the monitoring and optimization of digital marketing effect as well as improving the overall marketing ROI by technology-driven massive data perception research.
• Miaozhen Systems : Miaozhen Systems is the leading third-party advertising technology company  in China. It has the exclusive Moment Tracking Technology to help advertisers, agencies and publishers in efficiently measuring online campaign impact, and enhance their online advertising returns.
• DAMOPAN :   DAMOPAN is a data management cooperation platform. It realizes insight and analysis of various users and establishes personalized user segmentation and precision marketing. It provides supporting data access, data integration and management solutions. It uses massive data to provide customized services to meet personalized marketing needs.

Top mobile-focused platforms are:

• TalkingData : TalkingData is China’s largest independent Big Data service platform with focus on the mobile Internet. It offers the best-in-class Big Data products. It has advanced data statistics and analytic software to provide the most data-rich, reliable and profound market reports that have powerful insights into the Chinese Mobile Internet market.
• Umeng+ : Umeng+ is a leading third-party provider of universal data in China which provides mobile application analytics solutions. It is focused on providing professional mobile-applied statistics analysis tools, utility components, and promotion services for developers in China.
• More Than Data : More Than Data is a third-party platform with focus on mobile data monitoring and analysis. It has a third-party advertising effect tracking and monitoring platform called Tracking IO. It helps advertisers with mobile advertisements attribution, full process monitoring of promotion activities and anti-cheat system to improve ROI.

Case study: International players in China

iPinYou

iPinYou is an overseas expansion limestone. It is China’s largest DSP with real-time bidding, cloud computing, and audience profiling technology solutions.

InMobi

InMobi is a domestic expansion limestone. It is the world’s leading mobile marketing and advertising platform provider.

What’s next for programmatic advertising in China?

Intelligent marketing will emerge soon

Cloud computing, big data and artificial intelligence has been promoting the development of intelligent marketing. Blockchain technology has begun to solve the transparency and security issues in marketing. With the maturity of technology related to Internet of things, in the environment of intelligent perception, marketing will be more ubiquitous accompanied by the changes in scenes.

Local and medium and small advertisers become a new growth point

With the general decrease in Internet users and channels, local, medium, and small advertisers will become a new growth point of demanders in the programmatic buying market. In the long term, this momentum will not stop. However, in the short term, it still faces the challenges of multiple factors such as the imbalance of regional economic development and the low degree of awareness of advertisers.

Marketing cloud possibility in China

The essence of Mar-Tech is data driving marketing activities, depending on the artificial intelligence, large data and cloud computing supports at the bottom. Mar-Tech‘s rapid development will promote the realization of marketing cloud. The realization of the organic combination of six management modules is an important direction for the future development of the marketing cloud.

Key takeaways of programmatic advertising in China

1. Think mobile, a majority of entertainment is consumed through mobile phones in China. From e-sports to watching movies or reading the news, China’s programmatic advertising ecosystem is catering to mobile advertising.
2. Video advertisements are in. On top of the mobile environment, an increasing amount of content is absorbed through video, such as Douyin (TikTok), or any video watching platforms like Youku, AiQiyi, and Bilibili.
3. Closed advertising ecosystem, Baidu, Alibaba, Tencent and Toutiao operate as silos independent of one another and there is little to no exchange of data laterally.
4. It is just the beginning for automated ads in China. AI and block chain technology will take years to mature in China’s programmatic advertising ecosystem.

Author: Shyaiah Mitchell

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This article The Programmatic Advertising Ecosystem in China | Daxue Consulting is the first one to appear on Daxue Consulting - Market Research China.

However, selling its products to Chinese consumers requires some adjustments and a specific marketing strategy for cross-border e-commerce in China. The first choice that every retailer must make is, therefore: selling via my own e-commerce website in China or via Chinese online marketplaces?

Retail e-commerce in China: the Eldorado for international retailers

The incredible phenomenon of e-commerce and mobile commerce in China

China is by far the largest e-retail market in the world and surpassed the biggest players like the United States in 2013. Thus, in 2018, online retail sales in China totaled over 9.00 trillion yuan (around 1.33 trillion USD). This is an increase of 23,90% from 2017.

Such a performance makes China a must-go market since it accounts for 55.8% of global online retail sales.

A common misconception is that Chinese online marketplaces are full of poor quality and counterfeit goods. The reality is quite different: all types of consumers buy products every day on these platforms, from food, care, and cosmetic products, clothing, to cars, household appliances, and high-tech equipment. Any international retailer has to be aware of that. According to a recent study by Nielsen in 2018, 39% of Chinese consumers are willing to “buy products of better quality with relatively higher prices.”

You should also take into account the hegemony of Mobile Commerce in China (m-commerce). The omnipresence of mobile phones in China is a reoccuring concept in our research. Indeed, in February 2019, about 1.58 billion phone subscriptions were registered in China. As for online shopping, 592 million of the 610 million online shoppers in China make online purchases via their phones.

200 million consumers willing to buy foreign products on online marketplaces in China

In recent years, cross border e-commerce in China has grown faster than overall e-commerce, creating big opportunities for international retailers. The platform Tmall Global introduced 122% more overseas brands last year, over 80% of which entered the Chinese market for the first time.

China cross-border e-commerce grew to a 16.86 billion USD market at the end of 2018. The number of Chinese consumers who buy foreign products online is estimated to exceed 200 million by 2020.

In 2018, 55% of online shoppers in China reported buying foreign food in the year, 49% are personal care or beauty products and 48% are fashion accessories or clothing.

Because this phenomenon is already happening, the country is now working towards lowering barriers to facilitate Cross Border e-commerce in China.

Choosing the right Chinese online marketplace for your brand

A marketplace is an online platform whose objective is to connect sellers and buyers to offer consumers a wide choice of products and services. In the West, a majority of brands sell their products on their brand.com website but in China, it is less popular. The majority of brands sell their products via a shop on these Chinese online marketplaces.

China has dozens and dozens of marketplaces but 6 of them dominate the market:

But since the Chinese ecosystem is complicated, how do you choose among all the existing platforms? Which platforms are best for which targets? What is the trendy platform in 2019?

How to distribute your products online among Chinese consumers: The battle of the giants

In China, Alibaba, which owns Taobao and Tmall, is constantly at war with JD.com, partly owned by the giant Tencent. Together, they account for more than 70% of the retail e-commerce market in China.

Taobao & Tmall: what are the differences?

Taobao is probably one of the best known Chinese online marketplaces abroad, especially because it sells just about anything and everything.

It partly owes its success to the fact that it offers free registration for its users. Indeed, small businesses and entrepreneurs particularly like this platform for its ease of use. Sellers can sell their products at auction or through the fixed price. The platform is also in partnership with Chinese social networks such as Sohu, Sina Weibo, and many Chinese television programs, which increases its promotional power.

However, Taobao requires a presence in China; a registration of your brand in China, which is not the case for Tmall.

This is why many international brands are turning to Tmall instead.

Tmall is the favorite Chinese online marketplace among foreign brands to reach Chinese consumers in all industries. Important brands have opened shops on Tmall such as Adidas, Ray-Ban, Gucci, GAP, Calvin Klein, Samsung, Burberry, and many others. From a general point of view, the platform does everything to be more premium than Taobao by pushing international brands with a specific program allowing direct purchases from Europe, the United States, Hong Kong or Australia. Additionally, sellers have to put guarantee deposits to prove the authenticity of their products.

Although at first glance, the two websites seem to look alike, when starting looking for products or special offers, the interfaces differ. On the screenshots below, we can see that Tmall has a simplified interface, more neutral and more organized products to give itself a more premium side and to look less like an old market.

JD.com

JD.com is Alibaba’s main competitor. The platform sells all types of products and has an English version. JD Mall’s cross-border service, JD Worldwide, allows international merchants to sell directly to Chinese consumers without a physical presence in China.

JD.com is also the leading company in terms of high tech, AI delivery through drones, robots, and autonomous technologies worldwide.

Choosing to go to JD.com or Tmall will depend on many factors including your marketing strategy for the Chinese market. If you want to develop a strong social media strategy, JD.com is surely a better choice. This will optimize your Wechat performance. If you prefer to have the greatest possible visibility and work on your SEO directly on Chinese online marketplaces, then Tmall is more powerful. Its search engine and referencing system are quite simple to use.

Each Chinese online marketplace has its own specificity

Suning, known for electrical goods

Suning is one of the former market players, owning many malls across China, the brand also launched its E-Commerce platform in 2014 with a focus on electrical appliances.

It features roughly 300 foreign storefronts and offers store operator and financial support services.

Kaola.com, known for reliable and genuine products

Kaola.com is a cross-border platform selling hundreds of western brands. It lets sellers showcase their products across many online forums, portals, and marketing channels. It is mainly known for offering reliable and genuine products, especially from Japan. This trust from customers on Kaola comes from the fact that it is owned by Netease, which has come up with a business reputation for 20 years.

Merchants from roughly 40 countries sell their products on the Kaola platform.

Pinduoduo, known for its offers at derisory prices

Pinduoduo is today an undisputed leader in e-commerce in China with more than 418 million buyers in 2018. This Chinese online marketplace, which offers low-cost offers, has understood the requirements of the new Chinese market, i.e., the Tier-3 and Tier-4 cities in China.

The app is specialized in bulk or grouped purchases at very low prices. It is prevalent among the players in the farming industry in China.

Vipshop.com, known for flash sales and promotions

VIPShop is the largest flash sale website in China. Founded in 2008, the company has partnered with more than 1,000 brands to bring certain amounts of items at a lower price. The site mainly covers clothing and electronics. For the first quarter of 2019, Vipshop’s number of active customers was close to 30 million.

Xiao hong shu or RED, known for its social side and young users

Xiao hong shu is not a classic marketplace but a mix between a social network and an e-commerce website. It is like a forum where users post their opinions on products, trends and the best brands. It has, therefore, become the best place to learn about products or services and buy them directly online. Today the platform has a search engine to find product information, reviews, ratings, and online shops. Xiao hong shu can be considered the future of Chinese online marketplaces.

Why you should no longer hesitate: The advantages of selling on Chinese online marketplaces

Brand.com website :Save time and money

Opening a shop on a Chinese online marketplace will be much faster than creating your own e-commerce website or brand.com website in China. Especially since you have to take into account that it has to be optimized for smartphones, that you will need to get an ICP license, to buy a ‘‘.cn’’ domain name, etc.

Indeed, online marketplaces in China have dedicated teams that are able to build seamless and user-friendly mobile apps. They often provide technical support and marketing guidance to merchants. Solutions like Tmall Global allow foreign businesses to set up an online shop without the need to establish anything in China (not even an inventory!)

On your own e-commerce website, you will also need to develop a local SEO strategy by adapting to Chinese market codes. You will need to leverage Chinese platforms like Baidu or Weibo to drive Chinese traffic to your new website.

And finally, Chinese online marketplaces have another advantage for brands’ distribution strategy, which is logistics. In terms of import fees, warehouse renting, delivery team, it is much easier to sell via local marketplaces that can set up everything for you.

Chinese consumers daily habits: That’s where the traffic is

This is the first reason why it is highly interesting to sell on these platforms: this is where the Chinese spend the most time. Unlike in Europe or the United States, where consumers tend to value the brand’s website more, in China it is the opposite.

Indeed, stand-alone websites in China are generating only 10% of the total e-commerce sales. It means that if your brand awareness in China is low, it will unfortunately drown in the Internet Ocean!

Moreover, even to search for information, Chinese Internet users do not use traditional search engines like Baidu but go directly to these Chinese online marketplaces.

The Leading Chinese online marketplaces that have won the hearts of Chinese consumers

Chinese consumers crave assurance when shopping on Chinese online marketplaces. Leaders have developed product authentication systems and communication campaigns based on trust, to position themselves as the safest and most legitimate sources of products.

For example, two years ago, Tmall launched a campaign for 11.11 to show the authenticity of international brands on its platform. Each iconic brand used its own visual identity and Tmall’s visual identity logo to show their authenticity.

Customers also have high confidence in customer service where, for example, their payments are held in escrow until they have received and are satisfied with the goods.  

These efforts to ensure quality and authenticity are particularly visible in the strategies put in place to attract luxury brands to these platforms. Chinese online marketplaces are today fighting the market of counterfeit goods and trying to attract international luxury brands. For instance, Alibaba has recently launched its Luxury Pavilion, a by-invitation-only platform dedicated to premium brands and JD.com has created its white-glove delivery service with delivery staff dressed in black suits.

However, there is still a long way to go. According to the global consultancy KPMG, only 24% of luxury labels are today on Tmall and 10% on JD.com.

To attract foreign brands, these cross-border e-commerce platforms make your life easier!

In March 2019, Tmall Global announced two new initiatives to boost cross-border e-commerce in China: Centralized Import Procurement (CIP) and Tmall Overseas Fulfillment (TOF). Tmall Global currently hosts more than 20,000 brands in over 4,000 categories from 77 countries and regions and wants to expand this number even further.

CIP is a program that sources products for all of Alibaba’s channels. Using Alibaba’s procurement centers around the world, it will be easier for foreign brands to export their products to be sold directly on Alibaba’s various platforms.

TOF is a low-cost and low-risk solution for smaller brands to test the market potential in China before fully entering the market. It means brands will receive marketing advice and tools to help boost awareness. For the moment, TOF is only available in the U.S., Japan, South Korea, but it will expand into Europe later this year.

Disadvantages: Why having your own e-commerce website in China may be the right solution

Legislations and fees

In China, the platform fees can be significant. With a brand.com website you may experience lower per-transaction costs as you are not required to pay commissions to the marketplace operator.

*All prices are in RMB

In addition, VAT in China is not as low as people might think. The standard VAT payer status is 6-17%.

As far as regulation is concerned, some steps can become very distrupting when selling on Chinese online marketplaces. First, new product listings require approval from the operator, which can take weeks or even months.  Also, in most cases, it is much easier to have a legal presence in China. The key to success in this challenge is to establish relationships with local partners you can trust for local operations like domestic warehousing, national delivery service, Chinese speaking customer service and return policy referenced to a local Chinese address.

Minimal control

In terms of collecting data on your buyers, it is much more difficult to access it through a Chinese online marketplace. The rules on personal data in China are much stricter than we think!

You will also not control returns, exchange requests, and will not have access to all feedback, which can be a significant disadvantage, especially if you are entering the Chinese market. Indeed, Chinese online marketplaces do not allow you to manage your customer service yourself.

As Mike Vinkenborg, project leader at Daxue Consulting said:

‘‘With your own e-commerce website in China, it is easier to manage your distribution network, interact with physical stores to manage stocks, references and create in-store events or promotions for your customers.’’

Towards a hybrid approach: How to leverage both a Chinese online marketplace and your brand website in China?

According to Mike Vinkenborg, the best e-commerce strategy in China is to couple your brand.com website with a presence on the Chinese online marketplaces. But what are the benefits of this hybrid approach?

Having a store on Chinese online marketplaces is the best option to get in front of as many consumers as possible and get sales, and a stand-alone website is excellent for brand awareness. Setting up a store on a well-established platform will allow your brand to be part of the Chinese shopper’s journey of discovery. Indeed, online shoppers in China like to log into their favorite shopping platform to see the latest trends and promotions. But then, if you want to build a sharp brand image, your online store on Tmall or JD.com may not be enough. Having your brand website in China will let you create the experience you want for your customers. However, to maintain logic and consistency, you must keep the same prices and promotions on all your channels.

For example, Addidas uses this approach in China. As you can see below, their brand.com website is more focused on brand identity, values, and story, and their Tmall shop is more about sales and products.

Shoppers who go to a brand’s e-commerce website in China are are already not only like the products but also the values the brand conveys. On the contrary, consumers who only go to their Tmall store are more likely to be simple buyers of the products they like for their quality or because they are trendy. That is why it is a relevant e-commerce strategy in China to multiply your channels to reach different audiences.

Finally, to further optimize your customer journey in China, use social messaging commerce. It is easy to link your website to your Wechat account to offer a Wechat store to your customers. It gives your brand the opportunity to push content through articles, HTML 5 pages and provide added value services. You can also create a WeChat Shop which is perfectly embedded into the platform thanks to the one-click-payment.

Thus, having both your brand website in China, linked to a Wechat store, and a customized store on one or several Chinese online marketplaces will allow you to maintain control over your brand’s identity, customer service, and customer data while remaining in the middle of the Chinese ecosystem. You can then allocate your products and services over different platforms, owned and paid. The perfect strategy will, of course, depend on your objectives, resources, and size.  

Mike Vinkenborg concludes that e-commerce in China has evolved very quickly in recent years, faster than anywhere else in the world:

‘‘Xiao hong shu and Wechat mini-programs were nothing two years ago. This shows how fast online e-commerce is developing in China.’’

If you have any questions or would like to discuss your e-commerce strategy in China, feel free to contact our project managers at dx@daxueconsulting.com

Author: Steffi Noël

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This article How to choose the right distribution channel in China: Chinese online marketplaces vs. Your own E-Commerce Website | Daxue Consulting is the first one to appear on Daxue Consulting - Market Research China.

As an example, methodologies include a comprehensive price audit of the product categories, both through store checks and online marketplace and e-commerce scrapping.

Benchmarking metrics of key market players, along with brands from different sectors but offering similar revenue generation model in China.

End-consumer research through focus groups, and in-depth interviews with local professionals.

What else? … Let’s see!

Among all the aspects, pricing plays a vital role in the success of a company. How ticket revenue of London 2012 Olympic Games exceeds that of the preceding three Olympic Games (Beijing, Athens, and Sydney) combined is a spectacular example illustrating the powerful role a sophisticated pricing strategy can play. Do you want to know how Paul Williamson, who was responsible for managing the ticket program in the London 2012 Olympic Games, used prices not only as an effective revenue and profit driver as a powerful communications tool?

All foreign companies want to know how to increase profit in the Chinese market. Here a proper pricing strategy can answer this question, while Daxue Consulting is able to help with the creation of such pricing strategy and answer all your question.

Daxue Consulting gives an effective understanding of Chinese and Asian markets to deliver better results for our clients and partners. For more information about the pricing strategy in China do not hesitate to contact us at dx@daxueconsulting.com.

This article Is pricing strategy a key to the success of your product in the Chinese market? is the first one to appear on Daxue Consulting - Market Research China.