A marketing delusion
The myth of Chinese marketing has very little to do with China. It could also be called the myth of “India” marketing or “Indonesian” marketing! The myth of Chinese marketing is the idea that there are so many Chinese people (presently 1.4 billion) that the only thing a business needs to do is sell a product to many Chinese for a meager price, say just USD 1.
The argument used is that:
- USD 1 is such a small amount
- It is so easy to sell something cheaply
- There are so many Chinese people that even if just 10% of China’s population bought this cheap item – you make USD 140 million.
This is a false marketing strategy – it is a myth. Just because there are so many people in a country and you have something cheap to sell does not mean that people will buy your product or service. This is such a laughable delusion that you might think no respectable business would ever try and follow this advice. Yet, in reality, thousands of companies and want-to-be entrepreneurs create business plans based primarily on big potential markets.
In India, this marketing myth is sold to FDI investors in terms of the “mouth-watering” size of the Indian “middle class.” A headline of an article called this the “golden egg for global companies.” India is estimated to have between 70 to 100 million middle-class people. Start-ups and sophisticated global companies use this fact as evidence that they have a great business plan for India. However, the challenges are creating a product or service that people want and need and will pay for.
Two related marketing blunders are:
- Forgetting that profitability matters as much as the top line. It is easy to sell at a low price something that people want. But eventually, one has to make a profit to sustain and grow a business. Selling something people want for USD 1 may be possible, but what if it costs you USD 50 to manufacture?
- Just because you are “giving away” a toy for USD 1 does not mean many people will buy or accept this. People will buy what they need and desire. You cannot just dump items onto people at a low price
Size is not enough
Entrepreneurs and companies often say, “India and China are so big, we have to be present in these markets.” But size is not the main criterion for making such strategic decisions. Do you have something of value? Can you provide this at a price point that makes you a healthy margin and that sustains your business?
A positive example is Apple. It makes phones and computers that are high quality and sell worldwide at relatively high prices. Therefore, it is better to look at Apple as an exemplar rather than succumb to the myth of Chinese marketing.
© Kaikhushru Taraporevala