Reading the interactive design news I discovered W3C research, released for public view and feedback on October 29th, 2009. W3C created the first draft of the Emotion Markup Language 1.0, conceived as a “plug-in” language for use in three different areas: manual annotation of visual and audio material involving emotionality; automatic recognition of user behavior from sensors; and generation of emotion-related system responses. According to this document, EmotionML can be applied to numerous aspects of modern technology including sentiment analysis, monitoring, control for virtual worlds, social robots, expressive speech synthesis, emotion recognition, and support for people with disabilities. For example, in ambient assisted living systems, this language would measure simple satisfaction levels at mealtime for people with autism, as well as proactive response when things go wrong with elderly individuals, allowing for a more patient-centered rather than institutionally-centered system. Under normal circumstances - and prior to critical conditions - there is a sensation in the human body that, if recognized in time, allows the prevention of a fatal situation. Multimodal Interaction Working Group proposes a general emotional language for various applications, as well as providing default options.
Here is an example of a how simple emotion annotation might look like:
<emotion>
<dimensions set=”myFriendlinessDimension”>
<friendliness value=”-0.7”/><! — a pretty unfriendly person — >
</dimensions> </emotion>
New language provides new ways to describe emotional dimensions by valence, potency, arousal, intensity and unpredictability. Most language specifics require a deeper understanding of the scale values, but by just examining the code, I found it amusing, and bewildering, to see numbers assigned to something that consists of more than just physical aspects. Is it then possible to capture the subtlety of human emotion? There are primary emotions that are undoubtedly recognized during typical interactions, such as fear, joy, and happiness, but there are also a wide range of complex experiences that consist of moods, feelings, stances towards objects and people, etc., that are so multilayered, momentary, and fleeting, that it seems virtually impossible to recognize them - let alone put numbers on them.
We possess a well-developed sense of emotional encounters and we experience emotions consistently. Our emotions become an inseparable part of our communication, and of our relationship to the environment. So it only makes sense for current technology to create an environment where interactions are emotionally rewarding. The recent Milo demo from the Natal project demonstrates amazing character development; making it clear that the modeling of emotion is the next step in the advancement of human-machine communication.
I find it exciting imagining an emotion markup language 10 years from now. How much of what we experience as humans could be translated into a digital language? How would our emotions be affected when they are encountered with a virtual replica? Will we experience positive emotions with digital characters more so than with real people? And what would we prefer? I asked my friends about the meaning and expression of emotion in their daily lives. The passion I heard could only come from another human and I hope this language will never be forgotten: “Emotion is a flood of feelings - taken outside of a person’s body or heart; expressed from hands and breath as music, in words as poetry, in paintings as color, and in dance as movement. Emotions are like colors of blood in your veins that carry memories, both happy and sad, and when they flow past your heart, feelings are triggered. Emotions make us feel sick, happy, full of life, or longing for life. Without emotions the earth is colorless, and there is no one to see its variance and beauty.”
I got worked up in a tizzy recently and had to have a drink with international sex symbol Dennis Wixon. I told Dennis that some of our lab work (which includes protocol analysis and RITE method) can feel like administrative busy work, especially if the person doing that work is an outsider to the project team. The role becomes meeting organizer. Organize the meeting of target users and stakeholders. It’s possible to be brought in to projects without an understanding of the business goals, the target customers, the design requirements, the purpose of the product, and the design decisions that need to be made. Not knowing these things, doesn’t set up the person doing this work to make very good design recommendations. Do the designers want an outside perspective? Not really. They have enough opinions from others. Do they want a meeting organizer? Yes, but is there more?
Dennis reminded me that facilitation skills are essential. I didn’t like the answer at first, but he’s right. There are many stakeholders involved in problem identification and generating solutions. There are designers, janitors, product managers, cooks, engineers, testers, marketers, executives, accountant’s, receptionists, lawyers and their lawyers. Researchers can be good people to facilitate the formation of stakeholder’s interpretation and conclusions of user’s behavior. Researcher can know which verbal reports are useful and useless pieces of data. The good researchers know the important differences between a sequence of thoughts generated by users solving problems and social verbalizations used to commuicate through descriptions, justification and rationalization. It is the researcher’s job to get stakeholders looking at the best data. Lead them through their own analysis and interpretation of observations. Influence their conclusions. Faciliate the process of making good product design decisions.
I have not thought much about what it takes to be a good facilitator. Experimental psychologist, sociologist, anthropologists and other social scientists that research people aren’t necessarily educated in the art of facilitation any more than designers, engineers, marketers and business managers. Researchers that know how to facilitate a group of stakeholders to make the best decisions from good data will be highly regarded. It’s the researcher’s facilitation skills that can make the difference when dropped in to projects to coordinate the meetings between target users and stakeholders.
This article is not a primer on how to do business in China. The reality of doing business in China can be, well, pretty ugly. We will not go into the corruption and other non-niceties of conducting business there in detail. To summarize very briefly, China’s leading political ideology (if there is one) according to James McGregor, is enriching the country (and usually the political leadership and cadre’s families) in any way possible, without ever disrespecting or challenging the government’s structure, position, and authority.
In China, you pretty much have to play by their rules, show respect, and demonstrate how your objectives are not only good for your business but also good for China as a nation. You shall never criticize the government or proclaim what’s wrong with their politics. For more information on these topics and some of the more interesting anecdotes from the front lines, we highly recommend McGregor’s One Billion Customers: Lessons from the Front Lines of Doing Business in China. McGregor himself also recommends an excellent reference on the nuances and peculiarities of business culture and negotiation in China inLucian Pye’s work Chinese Negotiating Style.
Take the recent debacle between Google and China over censorship: the audacious Googlers violated the simple rule that you simply don’t ever question their rules. To be sure, China regularly censors sites and content, closes down search, social networking, and other sites, and spied on Google accounts. They may have done some other questionable things, but one must remember that China is not a democracy. In a way, it reminds me of the movie Fight Club, where the “first rule of fight club is you don’t talk about fight club” (that’s also the second rule of fight club, incidentally). In China, the first rule of China is you don’t question the rules of China. The second rule is you don’t disrespect the Communist party or the government. They shall not lose face. I’m trying to avoid taking political positions here, so be it. Google’s exit is, perhaps, Baidu’s gain.
But let us not digress further. Discussing the politics of China is not within our purview at Artefact, so better to leave that to the political pundits, freedom fighters, activists, and global political leadership. We might contend, however, that even by playing within China’s rules of censorship, progress can be slowly made and China’s citizenry can be empowered with technology, information, and the means of assembling and building communities, for they are a clever people with a lot of pent-up creative ingenuity. Revolution and political change is ultimately up to China’s people, not to foreign multinational corporations who want to sell their products and services in China’s markets.
Who is the Intended Audience?
The audience for this article is primarily professionals in product management and development, innovation, R&D, product and product portfolio planners, engineers, and executives who are responsible for designing and creating technology products (hardware, software, services). In particular, those of you people above who feel perhaps a bit less informed about China than you’d like to be.
What this article is intending to convey are some key insights, lessons, or realities you should know about if you intend to develop, design, and market consumer products for China. Among the many considerations you’ll need to make as a business interested in entering or further penetrating the Chinese market(s), learning how to work and communicate well with the right officials and rainmakers, being unbelievably persistent, and understanding the varying and even appalling levels of corruption that may be involved will consume much of your time and energy (and, perhaps, your soul). Your challenges will range from building the right win-win argument, establishing long-term relationships with the right Chinese business people, power brokers, and partners, all the while not defying the rules or causing anyone to lose face. Another significant challenge will be distribution, as getting your product in front of consumers in China is not quite how it works elsewhere in the world.
In the spirit of full disclosure: I myself have never traveled to China, though I was in Hong Kong for 10 days in 2007 and studied some Mandarin and Chinese history in college. In researching and writing this article, I owe a tremendous amount of debt to the market researchers, strategists, cultural translators, user researchers, and Chinese graduate students and other Chinese professionals whom I interviewed for this article (Elaine Ann, Ash Bhoopathy, Ravi Chhatpar, Ian Donahue, Anjali Kelkar, Shuang Li, Lin Lin, Fei Qi, Erin Sanders, Pinxia Ye, and Lisa Yong among them).
The Short Version: 10 Tips + 1 Caveat
If you are pressed for time, short on patience, or just generally not fond of my laborious prosaic style, here is the abbreviated version of all the main points I want to make. If you care for more details, please read beyond this section for additional details, anecdotes, charts, and statistics.
China consists of many markets and many unique customer segments. If you don’t know this by now, you really should. Therefore, you will have to do your share of ethnographic homework and market research to succeed. However, doing the above, particularly the ethnographies and user research, will be more difficult than you are used to. Add to that that most Chinese consumers still don’t really know what their needs are! Their world has changed so incredibly fast, and for many, they still are learning about what there is in the consumer marketplace beyond the basics of food, clothing, shelter, and the most basic consumer durables. Therefore, products cannot simply be “translated” into Chinese; they must take into consideration the cultural and social context, thought models, and unique behaviors of the many different types of Chinese people.
The Chinese have got their minds on their money, and their money on their minds. The Chinese mindset is, contrary to most Western perceptions, quite individualistic and in a country in which there is little to believe in, the primary directive is “to get gloriously rich.” In yuan they trust. Like the astute social commentators and fans of Chinese martial arts culture, The Wu-Tang Clan sang, “Cash Rules Everything Around Me. C.R.E.A.M. Get the money. Dolla dolla bill, y’all.”
Why? Because life in China is unstable and insecure. The government is no longer a provider of any form of safety net. So everyone must look out for themselves. Money is power, prestige, and respect in China. Hence, the Chinese are prone to flaunt it if they have it. Incomes in China have not necessarily kept pace with GDP growth over the past couple decades, and meanwhile the cost of living is rising. Foreign goods are also subject to high import tariffs, making them extraordinarily expensive by Western standards. The paradoxical thing with the Chinese, however, is that while they admire and strive for luxury and quality items, they are also traditionally very frugal and value-minded, particularly the older generations.
Chinese society can be partially understood in terms of social identity theory and notions of “ingroup” and “outgroup.” The Chinese will always be suspicious of outgroup individuals. This is not just a matter of Chinese citizen versus foreigner, but even within China between different regional or ethnic peoples, or to some extent even between social groups or “tribes.”
China’s youth generation aged 15-30 (nearly 330 million today), in particular the urban youth — sometimes known as the “rare generation” — are remarkably different from their elders. They are mostly only children, under tremendous familial pressure to perform and succeed in life, but they also want to enjoy their freedoms, the good life, consume a whole lot, and they want it right now! They are driven by the constant search for newness or novelty. They are optimistic about the future, yet very impatient. They are individualistic and self-expressive, yet they are incredibly “tribal,” in Seth Godin’s sense of the word (except, perhaps, in terms of having a clear “leader”). And because they are continuously experimenting with their own identities and new freedoms through fashion, style, food, and material goods, who they are and what they want is constantly shifting. They have a lot of purchasing power and will represent a major consumer force for China, yet they are curiously protean and one of the most demanding consumer segments in the world.
Because of these characteristics of ingroup bias and tribal behavior, Chinese consumers are especially drawn to products and brands that communicate a clear lifestyle, identity, and culture. The desire to be individualistic has its limits; Chinese consumers, especially the urban youth, want to fit in with the subcultures or tribes in which they want to be accepted. This means buying the same brands and products, following the same styles and trends, etc.
In contrast with the “rare generation,” China’s more senior consumers (aged 35 and older) tend to be very frugal, stubborn to adopt new things and technologies, and are extremely value-conscious (if they are middle class; the wealthy are a different story). Most are investing the majority of their time, energy, and income on providing the best of everything for their only children (the spoiled rotten ones are sometimes referred to as “Little Emperors”). However, in a world completely different from the world in which they were born and grew up, these Chinese adults are suddently bombarded with and overwhelmed by choices they’ve never had to make before. They need information and explanations of how new products will matter to their lives, otherwise they’ll simply rely on what they’ve always known and buy the cheapest, good-enough option.
One important thing to understand is that the Chinese have a tremendous amount of national and cultural pride, stemming not just from thousands of years of being one of, if not, the most powerful civilization in the world, but also from three decades of tremendous economic progress. While they admire foreign, global products for their quality, technologies, and design, they also fully intend to build their own domestic brands to compete globally. They are looking to the West to learn from and borrow (or steal… it’s often true) their intellectual property, methods, and practices, so that they can catch up. But, it is critical to recognize that the Chinese want to modernize, not Westernize. They wish to be modern while retaining their Chinese essence. On the more pop cultural level, you see this in the form of so-called “China Style,” or fusion of traditional Chinese elements with Western styles, music, fashion, etc.
In addition to competition coming (eventually) from domestic brands, you must also recognize that right now you are engaged in fierce competition with shanzhai products (“knockoffs”). Regardless of the differences between the youth and their elders, most Chinese do recognize and appreciate quality and luxury. They just simply cannot afford it. They are drawn to the global brands and products that exude qualities like performance, luxury, beauty, style, and power. However, most Chinese who cannot afford the global branded products they aspire to own, are perfectly happy with fake alternatives, which are often as good as the real thing. In addition, theseshanzhai products will be manufactured and made available to consumers in more variations than you’ve ever dreamed of before your products will ever make it to market. You can count on that! Finally, the shanzhaiindustry should also be given some credit and recognition for the creative, entrepreneurial, DIY culture it is fostering, providing consumers with access to a high degree of personalized or customized items across a variety of product categories. In a country of 1.3 billion people, it’s difficult to differentiate oneself from the crowd, but shanzhai products (particularly electronics) introduce all sorts of novel variations, at remarkable product development cycle speeds, feeding into the Chinese thirst for anything new.
It’s worth noting a thing or two about the Chinese consumer retail environment and experience as well. While the retail environment is beginning to look a lot more like that of the West (modern shopping malls and hypermarkets are being built by the hundreds), there is still something very different and unique about how and where the Chinese shop, which is one reason you will really need to work hard on your distribution strategy. Shopping malls are more like lifesized catalogs for most of the middle class, where they can browse and take note of the latest high-end styles and products. But, more often than not, the middle class consumer will then head out to the street to the large marketplaces or bazaars (in areas like Zhongguancun in Beijing) where hundreds or thousands of small vendors will sell the same or shanzhai versions of many products (electronics, fashion, or media) at negotiable prices.
The Chinese have a well-justified distrust of media in general. However, in the Internet they trust. Bulletin board systems (BBS), forums, blogs, online communities, and social media are their most trusted sources of information. They do not generally believe advertisers’ claims. They seek out the advice, experiences, reviews, and feedback of their peers online before making purchase decisions. Chinese Internet users spend 18 hours per week online versus only 12 hours by their American counterparts.
Chinese consumers are also beginning to greatly increase the amount of shopping they do online, as credit card penetration has rapidly increased and other forms of online payment have emerged and gained consumer trust and confidence (like Alipay from Alibaba, which is more or less like Paypal). Also, the Internet simply offers a great variety of products to choose from, things which may not be available on the mainland. Today, most online shopping is transacted as cash-on-delivery, but that is likely to change in the coming years. And because mobile phone penetration in China is significantly higher than computer penetration, expect that consumers will begin using their phones and computers to shop more.
Despite the high value that most Chinese consumers place in peer-review of products, however, they are still suckers (like most of the rest of us) for the right celebrity product endorsement. So, don’t underestimate the influence of the right personality.
Chinese consumption to date has been primarily focused on goods (fashion, gadgets, etc.), but as consumers they are beginning to sophisticate and mature. Relatively speaking, the average Chinese consumer’s purchasing power is still but a fraction of that of the average American consumer. However, as incomes continue to rise, and for those already upper middle class and wealthy consumers, expect them to become more demanding for new services and experiences, in such areas as food, style, living, mobility, health and wellness, and finances.
ONE CAVEAT: Everything just stated above is, unfortunately, not carved in stone. Because of the incredible rate of progress and change occurring in China, anything you learn today may not be true a year or two from now. You are playing a frantic game chasing rapidly moving targets. Therefore, take our suggestions above to heart, but be willing to revisit them in the near future for further evaluation or validation.
WARNING: Stop here if you’ve had enough or are a lazy reader. Continue below the fold if you’d like to hear a lot more details. And also join in the conversation on our blog by commenting on, debating, or even contesting our claims. We hope to open up the conversation to all of our readers for our mutual enlightenment.
The Future Looks Red, but No Need to Panic (Yet)
Global GDP (nominal) was roughly US$61 trillion in 2008. According to the International Monetary Fund, the European Union collectively represented about 30.2% of the global economy, the United States 23.7%, Japan 8.1%, and China had the fourth largest economy representing 7.1% of global output. Ten years ago China represented only 3.9% of global GDP.
In the last 30 years, starting just before Deng Xiaoping initiated China’s economic reforms, the country’s GDP has grown more than 81-fold, while the US’s GDP grew only about 6.3-fold (not adjusted for inflation). This is truly awe-inspiring! But, make no mistake, China is still overall a relatively poor nation. Today, it is a country of relatively few haves and significantly many more have-nots. It has an emerging middle class, which depending on how you define “middle class,” is anywhere from 50-500 million people. The middle class and the rural poor have managed to more or less escape extreme poverty in these past three decades, and now are finally becoming a massive and legitimate consumer force in their own right.
Sources: US Bureau of Economic Analysis, National Bureau of Statistics of China
In Maoist China (1949-1979), key consumer possessions were a bicycle, a wristwatch, and a sewing machine. In the 1980s and 1990s, major consumer durables included color TVs, washing machines, refrigerators, and electric fans. In the past decade, key consumer possessions became mobile phones, computers, air conditioners (in urban areas), and showers. For the typical Chinese, the future decade will become about buying his/her first car and possibly owning a home.
Late last year, China passed the United States as the #1 automobile purchasing nation. They now manufacture more cars than we do too. They’ve all but acquired Volvo from Ford and bought the rights to technology platforms from Saab from GM. They have more Internet users (338 million) than the United States has people. They now have over 720 million mobile phone subscribers, and are still at only 54.5% penetration. With their strong and steady economic growth rate, predictions from a variety of experts and analysts — from the World Bank to the IMF to Goldman Sachs, Morgan Stanley, and Credit Suisse — indicate that Chinese GDP in purchasing power parity (PPP) may actually pass that of the United States in anywhere from 5 or 10 years (optimistically) to maybe 20 or 30 years (conservatively). The ever entertaining Swedish professor of international health and co-founder and Director of the Gapminder Foundation, Hans Rosling, has even predicted the very day that Chinese GDP per capita in PPP (and that of India) will pass that of the United States: July 27, 2048. Definitely check out his TED talk.
What is undeniable is that eventually China will have the largest economy in the world (though not necessarily the highest per capita wealth in the world).
Nobel laureate economist Robert Fogel recently raised a lot of eyebrows by declaring that in 30 years, China’s GDP will reach $123 trillion and represent 40% of the global economy, with the United States trailing in a distant second at 14% of global output, and the European Union at a measly 5% of global GDP.
Could this be what global economic hegemony will look like?
His critics arguments aside, the point here is that Chinese political leadership has made it clear that they no longer wish to be the factory for the world. They are proud, optimistic, and determined to attain superpower status. And, part of this road to global economic hegemony will include developing their own Chinese companies and brands that will themselves become global brand powerhouses. So, while today you may consider a Lenovo laptop or a Haier beverage cooler when you go to Best Buy or Home Depot, be prepared for an onslaught of other Chinese brands to become part of the American consumer landscape. Eventually. Maybe in a couple decades. Maybe more?
The good news is that this means there is still time for you, as an American or Western business, to still look to China as an important component of your global strategy. Chinese-made products are still beleaguered by a perception (and, perhaps still too often, a reality) of low quality, cheap and shoddy manufacturing, and questionable adherence to safety standards. China is still learning how to move up the global value chain, but it is doing so at an alarmingly rapid clip. Shaun Rein, Founder and Managing Director of China Market Research Group and a widely-recognized expert on strategy consulting in China, has even found through his own company’s studies that Chinese consumers are also leery of Chinese-made products (food, in particular) and willing to pay a 10-20% premium for foreign brands they believe will be safer. Moreover, he rejects a McKinsey report to suggest that Chinese trust levels in domestic brands are actually at an all time low. Good news for you!
So, stay positive and read in more detail about the 10 things you should know about designing products for the Chinese consumer. We know that these can’t possibly cover everything you’ll need to know to succeed, but these lessons should provide you a great start.
The Longer Version
Many markets, many customer segments.
Do your ethnographic homework and market research.
China is big. Really big. And things of that scale make eyeballs widen and mouths salivate. But one thing China most definitely is not is a homogeneous country of 1.3 billion identical customers. If there is one thing you should know about China by now, this is it. The myth of selling your product to 1.3 billion customers has long ago been busted.
When foreigners think of China, they often imagine unity, consistency, and regularity… a predilection toward the collective over the individual. The truth is, however, that China is a complex collection of provincial, local, cultural, and social sub-markets, where local politics and cultural practices create major differences. Furthermore, the Chinese are far more self-interested and individualistic than you may assume. For centuries, there have been vast differences between the rural and the urban, between one province and another, but since Deng Xiaoping’s economic reforms began around 1980, the country has diverged along multiple dimensions as economic development, planning of special economic zones, and new wealth have been distributed unevenly, unfairly, and at differing rates throughout the country.
As cultural translator and socio-cultural researcher Lisa Yong of Y Studios in San Francisco told me, “Beijing and Shanghai are not China. It’s just not true. Just like New York and L.A. are not America.”
You’ve probably heard about Tier-1, Tier-2, Tier-3, and so on cities. But, few users of this classification system are ever very specific or consistent about which cities fall into which buckets (particular Tier-3 and lower), and most global companies have tended to focus on the richest Tier-1 cities first, then work their way down. Clearly, the Tier-1 cities consist of Beijing, Shanghai, Guangzhou, and Shenzhen (Hong Kong too, if you want to include this Special Administrative Region, though it differs from the rest of China in many ways). The Tier-2 cities tend to consist of the provincial capitals. Nonetheless, if you look at GDP per capita figures for these Tier-1 and Tier-2 cities (based on data from the National Bureau of Statistics of China), they range quite strikingly from Nanning — a provincial capital whose key industry is mining — with a GDP per capita of 15,685 yuan in 2007 ($2,062 US), while Shenzhen — a major electronics, high tech, and manufacturing center — has the highest GDP per capita among China’s cities at 89,814 yuan in 2008 ($13,091 US). Due to the policies of these special economic development zones and different regional industries, even among these Tier-1 and Tier-2 markets the differences can be significant.
Source: Artefact (click to enlarge)
What has happened in China in the past 30 years has been that many people, usually well-connected to Communist Party officials, have used their positions and connections to amass their family fortunes as privatization increased. The early entrepreneurs and business people also capitalized on new business opportunities. Real estate developers and speculators became some of the richest of these entrepreneurs. Others, opening new businesses, found their fortunes increase almost overnight. As stock markets opened, many played the markets and capitalized on the boom. What this has led to is a tremendous inequity in the distribution of wealth. There are the super rich, the nouveau riche, the poor rural folks, and now a large and growing middle class or who are typically well-educated, white-collar professionals working for large companies. But, defining this middle class is somewhat controversial in China with no widely accepted answers, and the most typical estimates of the number of Chinese who are considered “middle class” ranges from 100 million to 250 million people. Some would go so far to say that the range might even be more like 50 million to 500 million.
One scheme for defining the East Asian Middle Class (EAMC) developed by Hsin-Huang Michael Hsiao and Alvin Y. So includes six classes in Chinese society, an elite capitalist class at the top, four classes representing the “middle,” and a lowest class of farmers and peasants:
An analysis conducted by Li Chunling of the Chinese Academy of Social Sciences, estimates that of the urban Chinese population in 2006 (577 million), 0.6% were in the Capitalist class, 18.8% in the New Middle class, 19.6% in the Old Middle class, 25.4% in the Marginal Middle class, and 35.7% in the Working Class. Presumably the remaining rural population (737 million) was lumped into the Farmer class. Again, one can see in the table below a tremendous range in incomes and distribution of wealth.
China’s GDP per capita as a whole was 18,934 yuan in 2007 ($2,490 US). The differences between rural and urban China are considerable, as you can see in the table above. Rural China, representing 55% of the population of the country, has per capita net disposable income of 4,140 yuan ($603 US) versus 13,786 yuan ($2,009) for urban households. In other words, urban Chinese on average have 3.3 times as much income as their rural counterparts, the differences being even more pronounced in Tier-1 and Tier-2 cities.
Lisa Yong admits that the differences between all of these “tiers” of cities was and still isn’t entirely clear cut. She sees the development of China’s cities occurring more organically, with often some of the most interesting things often happening in the heartland or the most unexpected places. For example, she claims that Inner Mongolia has been successfully growing its own regional brands in the food and beverage industry. The lesson here is that you will be facing competition from the bottom-up who are more in tune with the currently most underserved consumers.
Then, there’s the whole consideration of segmenting these markets. The major difference, beyond regional differences and income-level, is without question age. The urban youth generation (15-30 years old) are markedly different from their parents and elders, earning them the nickname the “rare generation.” We’ll discuss some of these differences in more detail later. Beyond, the demographic differences, you’ll really need to get immersed in the culture and do more proper ethnographies and user research to understand the more psychographic, motivational, and behavioral difference among these age clusters.
Finally, if you thought the Tier system was already enough to wrap your head around, now McKinsey Insights Asia is suggesting a new framework around city “clusters,” which they believe overcome some of the limitations of the Tier system, which relied primarily on GDP per capita. In this approach, 22 “clusters” have been identified, recognizing the linkages between neighboring cities in terms of industrial composition, government policies, demographic characteristics, and consumer preferences. The clusters tend to include one or two large hub cities, with groups of smaller cities developing in their vicinity, as seen below. One advantage in this model is that one can begin to understand how the value chains between businesses and industries link neighboring cities together, thus influencing their economic development as well as the social and cultural customs and trends.
Source: McKinsey Insights Asia (click to download report)
Do your ethnographic homework and market research.
What all the aforementioned implies is that in order to succeed in China, your business will have to invest continuously and intelligently in user research activities and ethnographies to understand the various segments you might wish to target. And, this won’t be easy. The Chinese people, in general, are less comfortable with the notion of user research and ethnography, especially when conducted by foreigners. Culturally, there is a suspicion of foreigners and their motives, ingrained for centuries as Western imperial powers tried and tried to open China up to trade, started the Opium Wars, and found numerous other was to offend, anger, and oppress a proud civilization. Certain topics (money, marriage, politics, etc.) may be taboo or considered rude or too personal for user interviews.
Experienced design researchers in Asia, like Elaine Ann from strategic innovation consultancy Kaizor in Hong Kong, says that many of the methods of user research taught in the West, at places like Carnegie Mellon or the IIT Institute of Design, don’t always work that well in China. Her advice is to approach things in a more personal way, by taking the time to establish a real relationship first. In other words, you’ll have to invest more time for many Chinese people to feel comfortable. And, because the Chinese are very concerned with how they are perceived by others, it can be disastrous to conduct ethnographies or research where people are being viewed by strangers or other “outgroup” individuals.
The best advice, of course, is to go there for yourself and really get immersed. See it with your own eyes. Have patience and work with locals to help build rapport with the people you want to research. Learn Mandarin (or putonghua) too.
You also want to make sure to research the right people. This might be confusing to some Chinese, who expect that you’d want to interview and observe the most senior people in an organization, say, as opposed to someone who works on the warehouse floor.
Knowing your customers and their needs is, of course, a basic principle of smart business. In China, the challenge is that the consumers are very different from place to place, by age, by income level, outlook on life, and by education level. Furthermore, Chinese consumers are still learning about their own needs and wants as consumers. So much has happened so quickly that they may not even know what want. And, what they like today might be different tomorrow.
Ian Donahue, a market research consultant at Anovax in Shanghai, explains some of the other unique challenges with understanding Chinese consumers. For example, language ability is not enough. Social identity theory is an important frame for understanding Chinese notions of ingroup and outgroup. Though fluent in Mandarin, he never moderates an interview because he is viewed as an outsider. He suggests further that even regional differences are critical.
“Always use local moderators, if possible from the same city,” he explains.
For example, going into a home in Shanghai for an ethnography with a Beijing moderator can be a problem. Like Elaine Ann suggested, one should also expect to invest more time conducting ethnographies than what might be needed in the West. As Donahue broke it down, the first hour will consist of a lot of resistance, confusion, and discomfort. “Why are you here?!” the participants will be wondering. However, with a skilled and charming moderator, possessing a good personality, and adept at building rapport, those barriers can be overcome in the second and third hour of an interview. At this point, participants will be more likely to open up.
Other tips from Donahue include using small teams for in-home studies. Chinese homes are small and space is a concern. Try to limit yourself to three people: a moderator, an observer/notetaker, and a videographer.
When interviewing younger people (age 15-29), expect their parents and grandparents to hover by closely and suspiciously. These children of the one-child policy — often called “Little Emperors” as they are the single pride and hope of their families — tend to be very spoiled and pampered. Their families are very cautious and protective of them. Therefore, make sure to show respect toward other family members. Allow them to sit in and participate, but respectfully try to keep the focus on the participant.
Although in complete agreement with the sentiments of Ann and Donahue, design research consultant Anjali Kelkar from the Studio for Design Research in Hong Kong, believes that with many younger, urban Chinese, it can be a little bit easier to make the connection that is critical to a good ethnographic interview. She bases this on her experience that many of these young folk are very curious, chatty, and eager to talk to foreign people and share their experiences. Admittedly, though, this sometimes requires either being or being accompanied by someone who is part of that right ingroup, someone who “belongs.”
Shuang Li, Principal UI Designer at Intuit, has many years of experience and perspective doing user research in China, as well as trying to import and teach good UI/UX and design practices for companies like Sina.com. She corroborates the general truth that the Chinese are somewhat taken aback when people want to know what they think. It is typical for a Chinese research participant to try to guess what they think you the interviewer want to hear rather than be open and honest. But, as she points out, this isn’t too different from conducting research in the United States, especially when getting paid for one’s participation is a primary motivator.
In addition, the fields of user-centered design and ethnographic research are still relatively new in China, and as a result, many of the local partners with whom you might work may not be as skilled or experienced as you might hope. It will be a challenge for you to keep protocols straight, practice good interviewing techniques, and impress upon your Chinese research partners to not view the interviews as unstructured conversations. Emphasize sticking to protocol, asking questions about why people behave as they do, not interjecting one’s own opinion, and so on. Finally, data are not always viewed by the Chinese as inviolable nuggets of truth. Culturally, there is a deeply-rooted history of manipulation of data in day-to-day life, government, and elsewhere. So, emphasize the importance of quality, objective data.
As Li puts it, usually “people don’t take them (data) seriously.”
For another perspective on the fudging of data and cooking the books, check out this piece from Shanghai-based business journalist, Jordan Calinoff. And, check out Thomas Friedman’s latest columns where he suggests that China could be the next Enron(note: I intimated something along those very lines in an off-hand Facebook status update on December 29, 2009, two weeks before Friedman’s column… just saying…).
To get rich is glorious.
The “proverb” above is a loose adaptation of Deng Xiaoping’s exhortation to his country to “let some people get rich first.” The Chinese have always been a mercantile society full of entrepreneurial spirit. After the devastation of their economy under Mao Zedong’s Great Leap Forward and Cultural Revolution, with Deng opening the country up to economic reforms, it became evident that the only leading ideology for the country as a whole was to “enrich itself,” as James McGregor points out in One Billion Customers. As China’s government policy shifted from wealth repudiation to wealth creation, the dismantling of much of the socialist safety net also left the average citizen with nothing left to trust in. Except for cash money.
Photo by: Evan Osnos, Artist: Tao Hongjing, Source: The New Yorker
Cash money and the support of family are truly the only safety net the Chinese have. Despite decades of continuous strong economic growth, most Chinese feel less secure than before, as they are no longer guaranteed jobs, housing, and a pension. Consequently, as a society, overall, the Chinese are very thrifty, saving reportedly 40% of their income on average. The older generations are known for their frugality and extraordinarily high savings rate in order to provide for their child. Education is also no longer free, so parents who want their children to succeed in life must save as much as they can to invest in the child’s future and development, hoping they’ll turn out an exceptional individual. Meanwhile, the cost of living is increasing. Foreign goods are also subject to high import tariffs, making the shanzhai products even more attractive bargains. The “Little Emperors” are known to be spoiled rotten and be the “me me me” generation. They are crafty at getting money from parents and grandparents to spend on fashion, gadgets, and whatever else they desire. After all, they symbolize the singular hope for carrying on the family name.
Money and wealth and the material goods they afford translate to status and respect from others. This explains why many Chinese who have “arrived” like to flaunt their fashions, cars, or gadgets. For Chinese youth, the mobile phone is the largest consumer purchase they typically make. It is for them their most important symbol of status and freedom.
As credit card penetration continues to expand, we might expect the hallmark frugality of the Chinese consumer to change, with younger people, more optimistic about the future and their prospects, choosing to buy on credit and accumulate more debt in order to obtain the material goods they desire.
Sources: National Bureau of Statistics of China, company websites, and other (click to enlarge)
Donahue describes every subway station in major cities having makeshift “kiosks” set up to get young Chinese to sign up for the newest credit cards. He describes these kiosks as regularly surrounded by dozens of young people, who are often enticed with a free gift as well.
As the chart above also shows, other forms of payment are taking off. While China is still primarily a cash society, Alibaba’s equivalent of Paypal, called Alipay, has increased its membership dramatically in the past few years. The Chinese have not always felt comfortable with the security of making transactions online, hence most e-commerce today is transacted as cash-on-delivery. But, Alipay seems to have garnered the young consumer’s trust, with accounts now exceeding 250 million. That makes buying things on Alibaba’s other property, Taobao (China’s version of eBay), a snap.
Shaun Rein firmly believes that e-commerce will continue to explode in China thanks to the proliferation of credit cards, Alipay, and the ability of consumers to shop not only from their computers, but from their Internet-enabled mobile phones as well. This phenomenon, however, will most surely be limited to the young, urban Chinese who are comfortable with this type of consumer behavior.
In sum, the young Chinese consumer is still single-mindedly optimistic about making it rich. Along the way, he/she is also becoming more sophisticated in the new ways of transacting commerce. The desire to flaunt one’s arrival will continue, and I would suspect that many young people (or their parents) will be soon learning the dangers of abusing credit limits. Already, a New York Times article cites that “about 11 percent of Chinese parents have paid credit card debts for children 22 to 27 years old, a group that has become accustomed to the good life but has found it difficult to pay for, according to a survey by the Beijing Youth Daily newspaper.”
Nonetheless, the emerging Chinese middle class mindset may now be that after letting some of the people get rich first, as Deng suggested, now the masses would like to “eat the emperor’s grain” too. Taking a page from American hip-hop culture, emcees from the growing hip-hop scene in China understand the brutal reality of an increasingly materialistic world. Wang Li, a 24-year-old rapper from Dongbei, says in a New York Times article that, “All people care about is money. If you don’t have money, you’re treated like garbage. And if you’re not local to the city you live in, people discriminate against you; they give you the worst jobs to do.”
Ingroup and outgroup /
Youth tribes and their elders /
Identity, lifestyle, and culture /
Seeking the good life
The challenge with the Chinese consumer is that there are so many different segments to consider. We think two of the most valuable distinctions to make are 1) between rural and urban Chinese, and 2) between the youth and their elders. However, below we will tend to focus the discussion on the latter: the differences between the “rare generation” and their parents and elders. What is their middle class dream? What do they want? How are they different? What is the good life that they are seeking?
Chinese youth and young adults under 30, to put it bluntly, are fundamentally different from their elders. They are typically only children (born under the one-child policy) who’ve grown up without experiencing major political turmoil (the Tiananmen Square Massacre perhaps one exception) during times of continuous economic growth and having relatively more freedom to make personal and professional choices. They are the pride of their families, often overindulged and spoiled rotten (“Little Emperors”), given the best of everything their families can give them, because their parents are investing all of their hope in the future success of their one child who will carry on their family name. These youth are ambitious, energetic, modern, individualistic, creative, and optimistic. They have attitude and personality, are savvy and complex, are proud to be Chinese, and are constantly experimenting with self-expression and identity through consumer choices. They have no instinctive aversion to borrowing or accumulating debt, like their elders. They are obsessed with the latest fashions and gadgets. Newness and novelty are important values to them as they want to keep up with styles. This means they can’t always wait to save up their money to buy the things they want. They have to buy them now, before it’s too late and they’ve gone out of vogue!
While highly individualistic and self-expressive, their desire to be “different” is not quite the same as in the West. As Ian Donahue explained it, Chinese youth socially tend to resemble the American high school clique culture. Social acceptance to a group, or tribe as I might call it, is critical. Being an independent renegade or loner is not desirable. Remember, these are also mostly only children, and to a certain extent there is a high degree of loneliness or isolation as they have grown up without siblings. They seek acceptance and companionship from others.
Influenced heavily by Korean and Japanese trends, as well as American products and styles, you will witness many different types of groups or tribes forming. Donahue mentions the two most apparent ones as the “Party and Club” group of youngsters and the “Young Professional” as another major group. The former tends to work just enough to pay for their night time lifestyle. They care about fashion, clubs, music, and socializing. They might convince their parents to buy them a nice car, or hit up grandma and grandpa for cash. They are not thinking a whole lot about their future and are not very responsible with their money. The Young Professionals, on the other hand, follow their parents wishes much more closely, focusing on making the right choices in school, career, etc. They are incredibly hardworking and have very limited social time. They work on the weekends if they need to, tend to be bottom-rung workers in large companies, and aspire to higher salaries which will eventually enable them to buy the luxury items they can display as symbols of their success.
But, some Chinese youth don’t necessarily view these young professionals in the most positive light. Qi Fei, a 25 year old graduate student from Dalian, says that a lot of people think that these members of the are an “embarrassment.” They work very hard at large companies, but are at the bottom of the hierarchy, and don’t have much money compared to the entrepreneurs or people with their own companies. To make matters worse, they have very little time for much of a personal life.
Of course, there are many other youth segments to consider, including the Sporty/Jock types for example, who might embrace an entire culture around sports and a brand like Nike, which invests heavily in creating and marketing a culture around their brand and products in China.
Another popular word in Chinese is , meaning “petit bourgeois.” If you ask a Chinese to describe such a person, you will almost universally hear them described as young, single, urban women under 30, fond of Starbucks coffee and Häagen-Dazs ice cream, who typically spend 1/3 of their income on bars and restaurants, 1/3 on shopping for brand-named clothing, have an aversion to saving money at all, love watching European art performances and listening to Italian violin, and have Van Gogh paintings hanging on the walls of their apartments. They appreciate the value of design and lust after the latest trendy foreign products (iPod, Miss Sixty jeans, Gucci, Chanel), but have to save up for some time to be able to afford one or two of these luxury items. These women seem to enjoy the experience and atmosphere of being out and about in expensive clothing, sipping coffees, and view themselves as rather elegant. But, the term is also used somewhat disparagingly by other Chinese youth.
Yu, Chan, and Ireland’s identification of four “personas” among the urban youth of China (from China’s New Culture of Cool), included: 1) Ding Li, The Playgirl, 2) Wang Liang, The Striver, 3) Chen Hong, The Modern Conservative, and 4) Li Hua Min, The Rule Breaker or those who are sometimes called the or “hooligans.”
There are some clear consistencies between Donahue’s more general assessment of the youth market and the Cheskin team’s four personas. The Playgirl and Rule Breaker tend to cluster with the Party and Club-going tribe, though the Playgirl tends to be a younger teenager, working a low-end job in something like retail, interested in friends, boys, fashion and shopping. She aspires for luxury items in her life eventually, though she doesn’t think a whole lot about the future yet. The Rule Breaker is usually older, perhaps not having succeeded in entrance exams for the university, and now leads more of a hardcore party lifestyle at night, drinking, dancing, listening to deejays, etc. He gets money from his family to support his lifestyle. He might look more like a “street punk,” with dyed hair, tattoos, and piercings. He sleeps in late and gets up in the afternoon to hang out until he parties the rest of the night. Both of these groups/tribes/personas are similar in that they will have a unique set of preferences, styles, brands, and definitions of what’s “cool” or fashionable.
The Striver and the Modern Conservative might cluster together into the Young Professional segment described by Donahue. The Striver is a young professional, very hardworking, ambitious, and aggressive. He is driven by attaining fame, power, and money. He wants a cool car to reflect his status and is passionate about technology and gadgets. He spends a lot of his free time on his computer, watching movies and listening to music (mostly free or bought on pirate discs on the street), playing games, and reading about and engaging socially online in his passions. His mobile phone, as with all the other young people in China, is his most essential tool and symbol of status when away from home. He strives for the good life that he believes is possible through the formula below for achieving success (primarily among those in the Tier-1 and Tier-2 cities):
The Wu Zi (“5 Zi”): Aspirational motivators for the Chinese middle class (typically, male) dream, Source: Anovax
As you can see, this is clearly the more male perspective on what constitutes the good life. In a country where there are 40 million more men than women, these young men are actually in serious competition to achieve their version of the Chinese dream. Many feel a great amount of pressure to earn enough income, own a nice car, and have a house before being considered eligible or desirable for marriage.
The parallels between this perspective from American hip-hop artists to the new Chinese hip-hop artists is incredible. The perceived keys to male middle class (heterosexual) success are seemingly identical. Compare Young MC’s lyric from his popular hit “Bust a Move” to the freestyle rap of Wang Li of Dongbei, mentioned earlier:
“Got no money and got no car, then you got no woman and there you are.”
— Young MC
“If you don’t have a nice car or cash
You won’t get no honeys
Don’t you know China is only a heaven for rich old men
You know this world is full of corruption
Babies die from drinking milk.”
— Wang Li
On the flip side, there is also a growing trend of female empowerment in China. Many of these young women are interested in savoring life and the things you can buy and not particularly interested in having children.
The Modern Conservative is similar to The Striver in terms of her desire to achieve professional success. She is socially more conservative and reserved, and possibly more likely to be one of the so-called “Little Emperors.” She is under tremendous pressure to please her parents and live up to their standards, but though she studies and works hard, she may not want to be competing to the be the very best. She wants to live a rich and fulfilling life, which she defines differently from her parents, where she seeks more balance, though she may be too reserved to admit this to them. She follows the rules and tries not to stand out too much, but she values her personal freedom to choose a career and eventually choose to live however she likes. She is less likely to want to have children, though she’d like to be married and lead a life of balance between work and personal leisure and travel.
These are just some of the few segments beginning to describe the large and complex group of 327 million young people in China. These “tribes” form their own unique social cultures, where the products, fashions, and styles they strive for tend to be more consistent within the ingroup. However, as a rule of thumb, brand loyalty within these tribes is very low in China, because all brands are new. And since the young Chinese especially are constantly searching for the next new thing, they can change their loyalties very quickly.
Yong warns that the challenges of defining and segmenting your customers will be a real challenge. ”There’s so much gray area, so you need to put a lot of effort in,” she says. She says that the labels are nice but hard to do well. The boundaries are blurry and everything is becoming more and more interconnected within China and between China and the rest of the world. As she puts it, “Some parts of China are looking more and more like Hong Kong, Taiwan, or Japan even. So, where is the real China now?”
Again, the message is clear: you can’t really know and understand China and its people until you go there and see it and them for yourself.
Ancient Chinese proverb
The one thing that is true for all of these young people we’ve been discussing, however, is that they are on a continuous quest for identity and self-expression. They are young adults still figuring things out and are changing rapidly. They are all hungry for novelty and increasing their exposure to the rest of the world. With this group, you can’t, for example, sell them into a 2-year contract for a mobile phone (which Apple is learning the hard way), because none of them can imagine keeping a phone for that long, not to mention that culturally the Chinese prefer pay-as-you-go methods for service and data to monthly subscription plans. Incidentally, the Chinese are also known to save up and spend a lot of money on a fancy mobile device, but they can be quite cheap when it comes to paying for texting and data plans.
As an aside, you often hear about the amount of texting and IM/chat that the Chinese do, but do not be fooled when you hear all the big numbers. Our analysis below shows that Americans are far more prolific texters than the Chinese. Why? Most likely because we are more inclined to purchase unlimited text and data plans. The Chinese generally seek to avoid paying for services like that as much as possible. And they are accustomed to finding ways to evade paying for things that can be gotten through pirated means or through cheaper alternatives. Hence, they are much more prolific users of IM/chat, like QQ, than they are of text messaging.
Sources: CNNIC, National Bureau of Statistics of China, CTIA, and US Census Bureau
I think we can all agree then, at this point, that China’s urban youth (15-30) are and will become a unique and transformative force, vital to spurring consumption in the Chinese economy. And, in doing so they will also lead social and cultural changes as they exercise their significant collective purchasing power. The key to success, according to Donahue, is that these young consumers need to be able to understand how the products marketed to them are beneficial to and fit into their lives and the lifestyles they want to lead. Otherwise, they will just be passing fads.
So what about their elders? The older generation of Chinese consumer (35 and up) remember a time when they had next to nothing and few if any choices. While they are excited with the quantities and varieties of foods they may find at a hypermarket, they are generally struggling to understand all the new products and brands which they’ve never had a need for before. Consequently, they are very resistant to change or experimentation with new products. They feel that their lives are good enough, and their interests are in providing for their child. Raising a child has become more expensive, college tuition is expensive, and their child has many wants and needs. They may wish to spend extra money on developing a talent in that child (music, sport, etc.) in the hopes of making him/her a more exceptional student who will succeed in entrance exams and pursue and education leading to a good career. Children in college rarely get part-time jobs, and if they do, they tend to be low paying ones. Entry level jobs after graduation also are low paying, so parents frequently support their child with housing costs, and especially for a male child by buying him a car. The net result is that this older middle class demographic is extremely challenging to market to.
Qi Fei, the graduate student from Dalian, says her father is not at all tech-savvy and is frequently overwhelmed with technology. When she left Dalian to go to graduate school in Chicago, she strived to teach him to use MSN, video chat, email, and the computer in general so that they could communicate. But, today he still struggles with these technology products and wouldn’t dream of buying something online. On the other hand, his generation is very happy about the options they now have in clothing, shoes, and accessories.
As Qi explained, “Almost all technology products are geared toward young people. I don’t believe manufacturers are doing a good job at selling to people like my dad and providing them support. They always feel frustrated so they don’t use these things actively.”
For many of the older generations of Chinese, now confronted with more consumer choices than ever before in more areas of life than ever before, they are simply poorly equipped for making confident decisions in the face of overwhelming options. This is a potential source of stress and confusion that product developers and marketers should be sensitive to. For example, consumer advocacy, information resources, and peer review and filtering resources could be of tremendous value to these consumers. That is, if they are willing to adopt the technologies that offer such resources.
On the other hand, another graduate student from Beijing, Ye Pinxia, says that it’s easy for the older generations to make choices: they just compare prices and get the cheapest one. She shared with me another story about how she and her mom went to the big electronics marketplace to get her a new mp3 player because the CD player she’d been using for 8 years had broken. While Ye urged her mom to get something cool and fancy, her mother was unmoved by the thousands of choices, features, and designs. She wanted something that played mp3s, had a radio, and was cheap. End of story. After comparing prices among many vendors, she got a non-descript device for 140 yuan (about $20). Ye is pretty certain it’s a shanzhai product too.
As we mentioned before, traditional Chinese attitudes toward saving are deeply ingrained. Among the older generation, who are used to using cash almost exclusively, you always save first and then spend. Qi feels that the notion of buying on credit is actually quite foreign to many older Chinese, in fact, and that too many people have limited knowledge of how credit cards work. She knows people who have used credit cards for a few months and then cancelled them after too many unexpected charges. Chinese banks in general have not been very customer-centric, and there may still be a lot of mistrust among consumers when it comes to credit and other banking products.
In terms of associating products with particular lifestyles or cultures, the older generation are less likely to be swayed by the designs of modern global brands, which younger generations tend to associate as being cool and different. For Ye Pinxia, a Macbook or Apple product is cool, not just for its design but because so few people in China have them. Even with her cell phone, she does research on which stickers her friends have placed on their phones to make sure she doesn’t end up getting the same stickers. However, for Ye’s mom, she finds the products which appeal to more traditional Chinese styles more appealing. Mom recently told her that an HP laptop skin designed by a Hong Kong designer with a huge Chinese flower and lots of red and gold ornaments was her favorite.
In the end, China’s urban youth tend to be more interested in brands and products that project a lifestyle or image they’d like to identify with or aspire to, something new and exciting, and not necessarily purely about traditional luxury or status-oriented brands. With the older generation, the traditional values, colors, designs, and brands with strong reputations tend to be more appealing. But for all, being a savvy shopper will become an essential life skill.
When all is said and done, though, each type of consumer will have his/her unique set of preferences and needs. As the ancient Chinese proverb goes:
Ancient Chinese proverb
Competition: national pride and national brands + the shanzhai industry
At its core, Chinese society is all about self-interest. It is very strong on competition but very weak on cooperation. Despite its admission to the WTO in 2001, China still hasn’t quite gotten its act together in terms of respecting intellectual property rights. Historically and culturally, they just have never had major qualms about stealing ideas.
Commenting on the current situation with Google and the Chinese government, Oded Shenkar, a professor of business management at The Ohio State University and author of The Chinese Century, stated in a New York Times piece that, “The U.S. is the world’s greatest innovator and China is the world’s greatest imitator.”
Shuang Li has witnessed in the past 8 years that Chinese companies are taking the influences of product design from Japan, Britain, France, and other countries, but starting to design their own unique versions and takes on them to better suit the tastes of traditional Chinese culture. However, in the realm of software and user interface design, she feels they are still mainly imitators with a lot to learn. Her experience trying to instill good human-computer interaction (HCI) principles at Sina.com was frustrating. ”People here like these things, the cartoons, small animations, lots of blinking… but in the past few years they are picking up and starting to build serious applications, for banks and real estate companies, and they are drastically improving.” Nonetheless, she says if you compare two bookstore websites like Amazon.com with Dangdang.com, you’ll see many violations of basic HCI principles in the latter. It will take time for the domestic brands to learn.
In James McGregor’s book, he also is pretty brutal about the fact that your technology, trade secrets, designs, and know-how will be stolen and/or copied (and probably even get to market first). Guaranteed. China, he says, is not the legalistic society that typifies the West. If a Chinese wants to do something, he will find a way to skirt the rules or laws.
Any technology company doing business in China should assume that its designs and products are being copied. China’s tech sector is built on reverse engineering foreign products.
— James McGregor
But, don’t forget lesson #7 about the tremendous national pride of the Chinese. They do not wish to be the world’s factory any longer. They do not want their consumers to embrace and adopt only global brands. As they learn and modernize and their economic power continues to grow, China is fully intent on building and growing its own national brands to compete globally. Few are well known at this point, besides Lenovo and Haier. But there are major competitors growing domestically in China, like Huawei which is beginning to rival Cisco. And China has been working hard to create their own microprocessors to feed their tremendous demand for computing power.
In other industries, China is even taking a lead, like new, clean energy technologies, for example. There’s an excellent piece by Evan Osnos on their 863 Program in a recent New Yorker article.
Another rising domestic brand in China is Li Ning, a sporting equipment and apparel company that is taking on Nike. In my conversation with Ian Donahue from Anovax, he explained their successful strategy of targeting the lower tier cities first by offering products with styling and looks reminiscent of global brands like Nike but at a fraction of the cost. They are now one of China’s most well known and well regarded brands, working their way up from the lower-end consumers and now hoping to challenge Nike head-to-head in some Tier-1 and Tier-2 cities.
Of course, Nike’s response or approach is to do what they always have done: emphasize their technological advancements and superior features which distinguish their product, and do a heck of a job marketing themselves. But, Nikes are affordable only to the richest of the Chinese consumers. Nevertheless, they’ve done a remarkable job of creating a community and a culture around their brand. And, as mentioned in lesson #5 above, Chinese youth are drawn to aspirational products and brands that they can identify with, products that evoke a lifestyle, culture, and identity.
Will more Chinese brands become dominant global players? Yong believes that the Chinese are confident that there will be a “homegrown Apple or Microsoft eventually.”
The fact remains, however, that the Chinese consumer on average, is still relatively poor by Western standards. Based on the National Bureau of Statistics of China’s 2008 Yearbook, this is what the breakdown of urban household consumption was per capita in 2007. The data are broken out into 7 groups: the poorest 10%, the second poorest 10%, the 2nd quintile, the 3rd quintile, the 4th quintile, the second wealthiest 10%, and the wealthiest 10%. Keep in mind, also, that the average urban citizen earned 2.6 times as much as the average rural citizen, while consuming 3.6 times as much on personal household expenditures. As a result, the amount of consumption by rural folks on many of these consumer categories are incredibly low. I’ve converted to US dollars to give you a better sense of the relative difference with American citizens.
Source: National Bureau of Statistics of China, Analysis by Artefact (click to enlarge)
Since we at Artefact are particularly interested in technology products, we then broke out the “transportation and communications” category for urban households. Keep in mind that as of 2007, automobile ownership was quite low overall for China with about 6 cars for every 100 urban households. For the high income urban households in the 9th decile, there were nearly 12 cars per 100 households. For the highest income urban households (10th decile), there were slightly more than 25 cars per 100 households. We were unable to break down the data in the “transportation and communications” category to any more granularity, but let’s see how the numbers turned out:
Source: National Bureau of Statistics of China, Analysis by Artefact
As you can probably conclude from the chart above, the average Chinese urban consumer is not currently spending a whole lot of money per year on transportation and communication products or goods. Cars and electric bikes aside, even mobile phones are hard to come buy for $131 if you are in the middle class. Mobile phones in China are not subsidized by carriers; consumers must pay full retail prices. Suddenly it becomes a little easier to understand why buying a $300 or even $500 mobile phone is a major expense.
And, thus, shanzhai products come in to fill a market need for more affordable technology products (or fashion, shoes, etc.). Get something that looks more or less the same, works more or less the same, has the same features, but costs half the price or less.
Literally, “mountain stronghold,” but it has come to mean the pirated or knockoff goods, especially electronics, made by those who operate far from official control.
For the aspiring middle class consumers, fake products are just fine. Sometimes they’re even better than the real thing. Li describes the typical Chinese consumer decision-making process as follows:
Is someone else using it?
Can I afford the full price one?
Is the fake alternative available and being used by lots of people?
If so, I can get a fake one and not lose face since so many other people have them.
Finally, for small electronics, phones, and watches, often the more features there are, the better. Because, culturally, people like to show off the bells and whistles.
Another reason why Chinese consumers are generally okay with shanzhai products is that “getting a good deal is important in the culture. It shows you are an intelligent, savvy, smart shopper.”
So, Chinese consumers do not have big hangups about pirated or fake products. And fake everything is available around every corner, in more styles and variations than you can possibly imagine.
According to Shaun Rein’s firm, CMR, they estimate that as many as 3.5 million Chinese consumers have at one point owned an iPhone. He contends that 2 million real jailbroken iPhones were smuggled into China before China Unicom’s debut of the phone on October 30, 2009. Many of the real ones already resold on the secondhand markets. Meanwhile, China Unicom’s predictions of 5 million handset sales in the first few years is looking unlikely, as supposedly only 5,000 have been sold. The reasons for this have been explained above, but basically can be summarized as Apple and China Unicom didn’t really understand their target consumers and their needs and preferences.
But besides the jailbroken iPhones in China, there are the HiPhones, iPones, iPhone Airs, iPone Airs, and hordes of other shanzhai phones trying to capitalize on the appeal of the Apple brand and product, with some estimates as high as 10-13 million so-called “iPhones.” Here’s a gallery of a small sampling of fake iPhones and other shanzhai phones. Or someone proudly showing off her “shanzhai iPhone and iMac”(sic).
And, it only takes a small workshop with 5-10 people to produce these devices. They’re all over Shenzhen, within 100 miles of all of the suppliers the “real” phone companies are using. So, they just buy the same parts and assemble and modify them into all kinds of strange frankengadgets. By avoiding taxes, these little enterprises can sell shanzhai devices very cheaply and still make a handsome profit.
Gartner estimates that more than 20% of phone sales in China are shanzhai devices. So, not only are these products competing with foreign global brands, but with legitimate domestic Chinese brands as well.
Moreover, the shanzhai industry is exporting their wares too, in large numbers. Their biggest destination is India, but they also export to developing countries in Eastern Africa, Asia, and Latin America. iSuppli estimates on the number of “gray market wireless handset shipments” have grown from 37 million units globally in 2005 to 145 million units in 2009, with growth expected to continue. They anticipate 192 million fake phones shipping worldwide in 2012. If you combine those figures with Gartner’s figures on global handset shipments, you’ll discover that 4.53% of all mobile handset shipments in 2005 were shanzhai phones. In 2008, the proportion increased to 8.64%.
That means that all together, shanzhai phones had about the same market share as LG or Sony-Ericsson!
And, it’s not just phones, laptops, purses, or sneakers. According to the Annovax website, Microsoft estimated that 82% of their Windows operating systems being used in China in 2007 were pirated. Counterfeit products are produced in every product category, from engine lubricants to mobile phones to food and beverage. Even shanzhai tissues… for your nose.
The better your reputation, the more likely you are to have your products counterfeited.
Of course, to look on the positive side, one interesting aspect of the shanzhai industry is the entrepreneurial spirit and creativity of young Chinese individuals or small groups of individuals. It makes one wonder if they could potentially take their DIY approach and legitimize it and cater to more demanding niche audiences making customized or bespoke gadgets? Think the Long Tail.
Lisa Yong, in fact, believes this is the next logical step for the smart and progressive entrepreneur. To evolve their design process into one that becomes a highly customizable experience for the brand or the product. ”Not unlike the modding scene in the US for computers, laptops, or cars,” she says. The beauty of all of this, she believes, is that it is all happening organically, from the street, the bottom-up, with these small workshops in Shenzhen or with other entrepreneurial business people who want to co-opt what’s out there and make it uniquely their own.
Bottom line for you: your stuff will be stolen, copied, imitated, and possibly even improved on. And, that’s not likely to change any time soon in China.
In the Internet, They Trust
As mentioned in the short version, the Chinese have a general distrust of media. To most, government media and ad-supported media channels simply lack integrity. Every advertiser claims that the product they are pitching is cool and fashionable. But this can’t possibly be, so the Chinese consumer has been for years relying on the Internet as a primary source of trustworthy information.
In fact, the China Internet Network Information Center (CNNIC), in their 24th Statistical Report, indicate that trust in the Internet is high: “84.3% of Internet users believed the Internet to be the most important information channel.”
Because the government monitors Internet sites and frequently censors or shuts down sites (check out if your website is blocked by the Great Firewall of China), most Chinese are leery of sharing too much about their identity online. For this reason, good old bulletin board systems (BBS) have been the tried and true forum for people to connect and share information with one another. It is estimated that there are more than 3 billion user accounts on BBSs in China, with 338 million Internet users. That’s almost 9 accounts for every user. The popularity of BBSs stems from the fact that most accounts can be created anonymously.
Ye Pinxia says that she is constantly on the Internet. When she wanted a new mobile phone, she went online and read several articles where people described their experiences. She cared about a good user experience, a device that was user-friendly, had good build quality, and an acceptable price. Her typical search begins on Google or Baidu, then she narrows down by price range, and then begins to drill down on specific models, reading reviews. After sufficient research, she decided on a Motorola model, headed over to Zhongguancun in Beijing, visited several vendors to compare prices and bought what she had decided on, without any problems at all.
Her experience is probably typical of most young, urban Chinese consumers, however, Ye says her parents’ generation doesn’t do much research online for product information. They simply don’t have the know-how. Qi Fei also adds that most young people don’t pay attention to TV commercials, but their parents’ generation relies on TV advertisements a lot more as source of information. Both young women say they don’t care much for newspapers as sources of information on consumer products, but magazines can be excellent sources of information and images for inspiration, for things like fashion. However, as much of that content is moving online, they are more likely to seek such content on the Internet.
The Chinese are also big bloggers, even finding the courage to express themselves somewhat freely online. According to some slightly dated statistics from CNNIC, by the end of November 2007, there were 47 million bloggers and 72.82 million blogs in China, which represented nearly 25% of all the Internet users in China at that time.
Social media usage has been on the rise as well. Facebook has been regularly shut down in China and user numbers are dropping to 1-1.5 million. However, Renren.com (formerly Xiaonei) is a Facebook clone with 40 million users. Kaixin001 has 30 million users. 51.com has 130 million users. And Baidu (search engine) is used by 110 million people.
Twitter has been completely blocked. However, there are plenty of Twitter clones: Taotao from QQ has over 50 million users. Fanfou, Jiwai.de, and Digu are also popular. However, these microblogging services have also been prone to being shut-down by the government.
Despite the regularly shutdowns and censorship, Shaun Rein sees consumers being increasingly influenced by digital and social media marketing as a trend for 2010 and beyond. This is a critical consideration for your marketing budget, particularly because, as mentioned before, the average Chinese person uses the Internet 18 hours a week versus only 12 hour a week by the average American. The young Chinese consumer is not generally interested in TV or print, like American consumers.
For the average Chinese person, the Internet has opened up their world (when not censored) immensely to discover infinite new things, people, products, cultures, and news.
Despite all the positive benefits of Internet access in China, Anjali Kelkar also points out that use of the Internet as a way to alleviate social isolation and loneliness is becoming a concern for some of the only children of China. These children rarely have cousins even, since their parents were also only children. They spend vast amounts of time online, seeking companionship and friendship, frequently through online multiplayer gaming, chatting, or other social media. While certainly not a problem unique to China, there are some who are concerned with the amount of isolation and time spent online, and the possibility of it eventually leading to future social and psychological problems among very active users.
Finally, Shuang Li doesn’t necessarily believe that all people invest all their faith in the Internet. In her view, China is “still very much a word-of-mouth society from those you can trust.” In that regard, however, she believes that blogs and other social media tools can help amplify this word-of-mouth effect.
Transitioning from Goods to Services and Experiences:
Food / Style / Living / Mobility / and more…
If you are familiar with The Experience Economy, by Pine and Gilmore, they introduce the notion of a pyramid of economic value creation, that they believe is evolving because technology, increased competition, and increasing expectations of consumers has led products (in the generic sense) to become commoditized. For the most part, in the West, they would argue that we are experiencing the evolution from a service economy to an experience economy, where consumers demand more than just someone else delivering the goods/services they want to them at a reasonable price. They are now demanding entertainment, education, engagement, or enlightenment from their consumer experiences.
The Economic Pyramid, Source: The Experience Economy, by Pine and Gilmore
China has rapidly moved in the last three decades from a commodities and goods economy to the beginnings of a service and experience economy. As consumers’ incomes increase, they will evolve up this pyramid in terms of the “products” they will want and expect. According to Bureau of Economic Analysis data from 2008, personal consumption by Americans is split about 33.6% on goods and 66.4% on services. In China, the distribution is more or less the opposite; they still have relatively low incomes so most of their spending is on basic needs like food, clothing, shelter, etc. National Bureau of Statistics of China reported 9.33 trillion yuan of total household consumption in 2007. It is somewhat difficult to break out how the expenditures were distributed between goods and services, but our best estimate shows an overall split of 86.3% on goods and just 13.7% on services.
Of course, the rising middle class and wealthy urban consumers are not just buying luxury and expensive goods and products, but they are now beginning to pay for services and new experiences. This will be an area of tremendous economic development for the Chinese economy.
In terms of the product landscape in China, Qi Fei believes that Chinese manufacturers still have a long way to go in terms of service and support for their products, one of the reasons why she tends to prefer American or European products.
Yu, Chan, and Ireland, in China’s New Culture of Cool, identified four key areas where the upwardly mobile young Chinese consumer will be evolving his/her consumption. It is in these four opportunity areas that the demand for new services and experiences will be experiencing some of the most rapid changes and developments. These four areas are in: style, food, living, and mobility.
Four domains of opportunity for the young, urban Chinese consumer Source: China’s New Culture of Cool, by LiAnne Yu, Cynthia Chan, and Christopher Ireland
I would add that health, wellness, and financial management will also be areas of opportunity for these upwardly mobile young consumers. Of course, one could easily include these in the Cheskin folks’ categories of food and living.
What are some examples of these new services and experiences that young Chinese consumers are demanding?
In “style,” beyond the fashion and accessories are services like beauty salons, beauty consultations, cosmetic surgery, grooming and personal care services, and spas.
In “food,” the big thing is people eating out. Food is a central focus of Chinese culture. Now, with the exposure to cuisines and influences from the outside world, consumers are curious about experimenting with new flavors, ingredients, and eating experiences. Of course, entrepreneurial Chinese are also taking this influences and fusing them with traditional Chinese elements to create new types of cuisines (part of the larger “China Style” trend). In addition to restaurants, there are coffee shops, bars, and quick convenience food destinations or carts. Restaurants are places to be seen and to people watch, much like shopping malls. China’s social life is expanding beyond just the street.
In “living,” as China’s citizens have transitioned away from government provided housing to having to rent or buy their own properties, there has been an explosion in the home furnishings and decorating industries. Unlike the U.S., homes in China are typically bare when purchased, just empty shells awaiting the owner to provide the flooring, lighting, appliances, wall treatments, etc. As home ownership increases and home-owners seek ways to personalize and individualize their own environments, retail sales of appliances, materials, tools, furnishings, and other home-related goods are booming. But, along with that there should be increased service offerings around interior decorating, home repairs, contracting, plumbing, home theater installations, and other maintenance. Cable/satellite TV and Internet services will increase. And other aspect of living, outside the home, will boom, including exercise, gym memberships, yoga, adventure seeking, travelling, entertainment, and other types of leisure activities.
In “mobility,” the two primary objects around which mobility revolves are the automobile and the mobile phone, both of which provide personal freedom. Auto owners are enthusiastically joining driving clubs and communities around particular vehicles or brands. Auto repair and customization services should be expected to grow. Other forms of mobility taking off (besides the ubiquitous bicycle) are electric bikes, some of which are low or no emissions vehicles. Travel and adventure are another new opportunity for Chinese consumers, who are more easily able to leave their own province and explore the rest of China, or leave China entirely to see the world. In terms of the other key object representing mobility, the mobile phone has become a prerequisite device for China’s youth, enabling them social freedom, entertainment, or even business or productivity needs. Laptops are also fairly ubiquitous among university students, though computer penetration overall in China is still relatively low. Because mobile phones, however, are rapidly penetrating the population, they are becoming the conduit to the Internet and new opportunities for entertainment, services, and communication needs.
Another important area of future development of services and experiences will be around all matters financial. As the Chinese consumer’s income continues to rise, as home ownership increases, as credit cards begin to further penetrate the population, and as the current excitement over spending on goods wanes and consumers mature, young Chinese and old alike will be increasingly looking to financial, insurance, and investment products to help them manage their money and plan their futures, and the futures of their children if they choose to have them.
Currently, most Chinese consumers have a fairly low knowledge of finances, investments, banking, credit cards, insurance, etc. They will need to be educated as they become more sophisticated and wealthier consumers. Smart businesses offering these services will also need to understand their distinct customer segments and their needs and concerns well, in order to develop the products, services, experiences, and communications that consumers will identify with and understand how to incorporate into their lives.
Conclusion
Trying to summarize China’s development and emergence as a superpower and consumer powerhouse is a daunting task. There’s simply too much to cover. You’ll probably note that we omitted many trends and issues that are by no means any less relevant than those presented above. For example:
the aging population and declining birth rate leading to a potential demographic crisis decades ahead
the environmental catastrophes that have resulted from a belated rush through industrialization with little regulation or concern for ecological consequences
possibly looming credit and housing bubble crises
new lust for automobiles
music and pop culture
politics
the fact that China is soon to be the largest luxury market (their wealthy consumers really love their Gucci, Louis Vuitton, etc.)
rapid urbanization and the potential social problems inherent in large numbers of less educated migrants shifting en masse to urban centers looking for work, how they will adapt, communicate with family back home, etc. (check out some of McKinsey Global Institute’s many fine reports on the subject area, including their prediction of 1 billion urban people by 2030)
an increasing rich-poor gap
education in China: is it still too rote-memorization modeled? will they produce the great designers and innovators of the future?
Nevertheless, we think the 10 subject areas we presented above, in both the more digestible and the more bloated forms, should provide American and Western business leaders, designers, product developers, and anyone else interested in the Chinese markets with some useful background, guidance, and things to think about.
One of the challenges inherent in trying to capture insights about the Chinese market and its consumers is that anything you learn today may not be true a year or two from now. But, don’t let that deter you. It should be an exciting opportunity for continuously learning and facing new challenges.
In addition, don’t forget the “heartland” of China beyond the Tier-1 and Tier-2 cities. These are cities where people have less purchasing power, but are also eager to strive for the quality, empowering, and well-reputed products of the West. It is in these smaller cities and towns where you’ll really face the competition with China’s rising domestic brands.
It’s going to be an exciting decade to come for China, that’s for sure. You’ll see global companies try to bring innovative products to the growing consumer class, but they will need to shed a lot of their assumptions, put in their due diligence, truly immerse themselves in the country, the people, and the cultures, and adapt to one of the most rapidly changing and exciting markets in the world.
Simultaneously, you’ll witness innovation and new ideas and products emerge from China itself, from the bottom-up especially and maybe even from the top-down. Global manufacturers need to think about how they can help empower Chinese consumers, harness their creative drive and entrepreneurial spirit, develop product platforms and remixable/mashable elements that consumers can use to customize, personalize, and make their own, to add their own Chinese essence to.
They should also be thinking about how to improve customer and user experiences as their marketplaces become overwhelmed with products and services ranging from the totally crappy to the totally genius. Consumer-empowering tools and online community-based product reviews and peer-filtering tools across many product categories (cars, technology, home furnishings, fashion, personal care products, music, etc.) will be vital to equipping the Chinese consumers, old and young alike, with better decisions and choices about the products and services they incorporate into their lifestyles. These are likely to be online tools and services, accessible via mobile Internet devices, and other types of products that are currently on the cutting-edge, but they will need to be adapted to the unique customs, cultures, and needs of a dynamic and diverse populace.
And, of course, the Chinese are keenly aware of the ascendance of design as a key differentiator in many product categories, including electronics, fashion, shoes, financial management software and applications, life management tools, health monitoring devices, products providing food and medicine safety information, products for the elderly, credit cards, and more.
If you actually made it this far, congratulations! Please be kind enough to share you comments, thoughts, and criticisms with us, as we hope to continue expanding our knowledge on this most fascinating topic. Cheers!
If you missed the live webcast/webinar/stream by Masuma and Martijn on Designing Products for Emerging Markets, you can now download the video file for your own viewing pleasure at mydesignshop.com
Here’s the description of what you’ll receive:
Drawing from their experience designing technology experiences for these users, they dispel common misconceptions and reveal practical insights and methods for undergoing this design process. Specifically, they explain how to conduct the discovery phase, including the planning and execution of fieldwork, remote data collection, and concept generation in the field. They also demonstrate how to make sense of fieldwork results and how to choose the most relevant concepts to pursue further. They’ll highlight examples of successful and failed products, discuss the reasons for these outcomes, and show examples of their recent work in this exciting space.
We are constantly learning about how we want to gain people’s attention through better SEO strategies or by participating in “the” conversation though 140 character impressions, but there is another half: the sticky strategy. In a recent study, we listened to Massively Multiplayer Online (MMO) game players talk about their recent change from one game to our client’s game. From this study, we learned about how this particular group of people coped with changes in game-play-mechanics and culture as well as three factors that went into making it a successful transition. Those three factors were providing a place for people to get started, to become advanced users and a place to show off. We’ll also discuss why those factors are important for any business, especially in the e-commerce world.
Why did our participants, like one whom I shall name Andrew, make the switch? The most common reason was because Andrew’s sister made the recommendation. The recommendation and trust from the type of relationship they shared was enough of a reason to try something different. As Neilsen reports, friends and family members largely influence a shopper’s decision making process. We see the same thing happening here with Andrew and his sister. Andrew is a young man who lives independently and enjoys spending his free time playing MMO games and watching movies through Netflix. Like all the other participants, he invests a great deal of time with the characters he has developed within the MMO game making them a very important part of his life. His characters embodies a lot of the values he believes in from aesthetics to game-play style to accomplishments earned. Similarly, it’s the same way any other person might invest their time and effort in customizing their new car or decorating the interior of their living room. Andrew is also close to family and has periodic phone conversations with them. One evening, after the usual conversation with his sister about the kids and work, they changed subjects to our client’s game that she has been playing that also interested Andrew. Without too much convincing, Andrew was sold on the game and soon found himself trying it out. Because he trusted his sister’s point of view, and also the fact that they shared similar preferences in games, the transition happened swiftly. Not only was he getting a significant recommendation, he knew that going into it, his sister would be there for help. [1]
The interesting part is that there is comfort in knowing that Andrew’s sister will be there for support and company. The question for you is, do your new customers feel the same when they make the switch?
So how can your e-commerce business create and foster an emotional solace when trying something new? Well after interviewing more participants, it comes down to the company to provide an official “forum.” I say forum with the meaning of a place where people can gather and exchange information freely. It’s your e-commerce site that provides the destination for this type of interaction and support to flourish. There will be arterial sites and channels that will exist, but a primary home base is the very core where the rest of the community stems from. We’ve talked about using blogs, Twitter accounts and Facebook pages to be part of your arsenal of communication channels and means to check the pulse of your living business. The benefits of having a home base though, is that your customers will have an official place that they can go to for relevant information whether it’s related to new promotions, new support information or product announcements from a reliable, authoritative source. It also shows that the company cares about their community and provides them a place for community members to interact with each other. This type of direct interaction let’s people share their experiences and drives excitement and participation. Even if you don’t have a fully fledged system in place that facilitates a community, there are resources out there that can help. Get Satisfaction, a web based support and community service allow businesses, both small, medium and large to field complaints and questions about products or services that can be integrated into your own domain. It even allows you as a company to designate influential customers as ambassadors of your brand who represent your company and help out for the sake of being helpful. But enough of a plug, there is a way and there are options.
There were three factors observed that made the switch easier for our participants: A place for people getting started, a place for people to become advanced users and finally a place to show off.
A place for people to get started
Otherwise known as the “Out-of-Box-Experience,” new or advanced players need help getting started with a new game. Even though the game is the same genre - lots of people playing at once together in an immersive environment - the mechanics will be different and require some degree of retraining. A place to “get started” can provide information that covers the whole range of experience from identifying what each control does, what labels mean and the different skills that are available to your player. For players who were playing our client’s game, they had access to a lot of this information online. Players like Andrew benefited greatly from getting started guides when we talked about how they got started. There was a lot of fear for new players that the advanced players would brush them off as completely useless and incapable of doing their own research. It’s a significant emotional barrier. But having “getting started” guides made the transition easier and allowed both new and advanced players to proceed with less abrasion. The information can also go so far as to describe best use cases or best practices during game play. Finally, having this information available in bit sized pieces makes it much more approachable as well compared to thick user manuals that is hard to search or thumb through.
A place for people to become advanced users
Otherwise known as “tips and tricks,” the community of existing players may have experienced unique ways of applying your character outside of the typical scenarios initially imagined. Unlike “getting started,” these tips and tricks might introduce the community to new ways of playing the game never previously imagined. Use cases emerged from exploits in the game served as a form of inspiration on how to evolve your product. Additionally, this place can also host more fluid discussions that further the development of these new and emerging behaviors. It becomes a much more organic and relevant form of communication much different than getting started guides. For instance, getting started information will be less likely to change in terms of content because the game is what it is (for the most part), but new character skill combinations and team dynamics might bring out a tip that others want to apply as well. Products and services in general all have use cases and you can’t deny the fact that some of your customers will use your product in ways you didn’t imagine. Allow your customers to share their insights and allow them to help each other become savvier.
A place to show off
Our participants weren’t necessarily proud of the game they purchased, instead it was more about the characters and adventures they experience from playing it. Products and services, like games, are only tools that help people serve a much more meaningful part of their life. While some might idolize their shiny new gadget, it’s the function it carries that makes using it worth while. Our participants had a community as an audience to celebrate their character’s accomplishments. This encouragement made the experience much more rewarding and compelling to continue playing. Even as an audience member themselves, celebrating other’s successes was just as gratifying. These intrinsic rewards are much harder to facilitate compared to extrinsic rewards like monetary benefits. Being able to create that kind of experience is a greater differentiator and one that is harder to replicate. Doing this can make your business much stickier.
How was all this accomplished? Well this community was completely hosted by two web technologies that are widely available today: discussion forums and wikis. These are technologies that have existed for quite some time now and can be easily deployed through your own web hosting provider. While they may not be next generation technologies, they are tools that facilitate next generation behaviors in consumption and peer to peer interactivity on the Web. The great thing about these tools is that they enable knowledgeable people within the community to provide most of the content. As long as these channels are moderated, it’s possible to “crowd source” the community to enable a semi-self sustaining system. Getting started guides can easily be generated through wikis, while discussion forums promote new tips and tricks which can then be added to the wiki as well. Finally, forums also serve as a way to allow people to share their stories and have people celebrate their achievements through comments, similar stories and even questions. Especially for veteran players, their comments have far more impact and weight than those who are just getting started. The time they have invested in the game affords them a level of respect and authority that is compelling for many players. As a result, tying in an identity system like profiles, or in game player names in this example, will be an important component towards their experience.
This community which not only supports new players (or customers) but also encourages continued use makes switching less dramatic. For Andrew, trying out the game and finding a flourishing community that provided resources to him at his finger tips made the switch harmless and almost enjoyable in some ways. He now finds himself helping others and even offered to help me get started if I decided to start playing. That’s the level of stickiness that I’m talking about. While e-commerce companies continue to strategize news ways to increase their SEO and improve their search capabilities, the human aspect which rewards participation and continued use will make a meaningful impact that factor greatly in buying decisions, retention and repeat customers. People begin to form a much larger source for recommendations that extend well beyond close friends and family given a healthy community.
Businesses are getting closer to people’s lives and people are demanding that business respect the way they choose to live it. Our client has recognized that there’s a significant amount of activity outside the actual playing time in game that’s equally as important and has applied the use of certain communication tools to successfully accommodate their behaviors. You can do the same too.
[1] Now, I’d also like to point out that in this case, it’s easier to try a new product when it’s “free.” The game we were evaluating had a one time, upfront cost, whereas the competitors were requiring a monthly subscription fee. That difference allowed people to try out the game without facing additional costs like they had experienced before, which was very appealing. Also, it’s easier for people to try something different when it doesn’t impact critical business operations. Our participants were evaluating games, an entertainment product, so we didn’t have any additional insights about operations. However, if you’re selling goods or services that may have significant ramifications, then you know better than anyone else the additional challenges you face with convincing new customers.
If we had to attempt to reduce the entire two-day conference into one sentence, we’d summarize the DRC this way:
To remain relevant and to overcome commoditization, design researchers in the future must learn to influence organizations and their intentions using emotionally charged story telling with diagrams to reveal deeper insights through measurable testing using prototypes on an ongoing basis with real, breathing, feeling humans to create new ideas that solve real problems.
Whew. Now for the details.
Major themes
Changing Role of Design and Design Researchers
If anything stood out the most to us, coming from our technophilic enclave in the Pacific Northwest, it was the focus – for the most part – on people. Understanding different types of people, telling their stories, and making a difference in their lives. This isn’t limited solely to the end-users of the products/solutions that we design; in addition, we need to understand the people (clients) whom we are working with or for.
One of the biggest themes at DRC09 – in speaker presentations, the panel discussion, and in the workshop we attended – was around the role we must play as designers and design researchers. Specifically, it was the exhortation that we move beyond gaining user understanding and designing solutions to actually changing and influencing the organizations (e.g., our clients) delivering the solutions. In other words…
half of our job is to gain insights into end users’ lives, their needs, aspirations, etc. and then successfully synthesize those insights into viable solutions; the other half is about making organizational impact, by communicating the users’ situation and building alignment and buy-in from the organization, in order to catalyze and mobilize action.
Marc Rettig, principal of Fit Associates, talked about this as a journey of change, one that is both personal and collective, and deeply emotional. Kim Goodwin of Cooper advocated the value of storytelling, both as a way to extract rich information from end users during ethnographic studies and as a tool for communicating in a compelling and visceral way those insights from the field back to the organization and the interdisciplinary design team.
Sometimes the client organizations will be slow or stubborn to change. Our job in making this impact and influencing organizational alignment may require us to “go slow to go fast,” as Ben Jacobsen of Conifer Research nicely put it.
The Outlook for Design Research is Good (and Bad)
Another theme was the outlook for design research, both in a world currently in an economic downturn and a world of rapid commoditization. Robert Fabricant and Jon Kolko of frog design presented complementary talks where they outlined some things we can do to remain relevant. Fabricant began his talk by outlining the explosive growth in spending on design research and ethnography services in the economy, with the sudden acceleration in the curve occurring around the same time that Nokia’s Jan Chipchase began his famous design research globetrotting and blogumentation on his future perfect blog. He seemed to be suggesting an imminent bursting of the proverbial bubble. Sharing his “top 5 myths of design research” (see below), the outlook was painted in somber hues… unless, he advised, we do a number of things:
move beyond the search for insights to having more extended conversations in the communities we serve
translate the insights we do gain into meaningful and actionable ideas
make these ideas tangible quickly and push them out into communities to initiate the feedback process faster
remain engaged and immersed in these communities and activate/motivate change
Kolko added, somewhat tongue-in-cheek, that short of moving to Asia, giving away our services for free (nothing wrong with social design!), or making it really really really expensive, in order to remain relevant we need to:
make meaning out of data (the challenge, for many of us practitioners, resides in the challenge of sensemaking and synthesis)
build frameworks for emotional experiences
have empathy
draw more diagrams
Conifer’s Jacobson was more optimistic in the panel discussion. Smart organizations, he argued, will double their R&D spending during economic downturns in order to have new products ready to be launched as soon as economic conditions turn for the better.
Fuzzy Wuzzies: The Everlasting Quest to Define What We Do
Patrick Whitney, the dean of the IIT Institute of Design, in his opening remarks at the conference, mentioned the problematic confusion and ambiguity that continues to trouble our industry and those that might benefit from what we do around the meaning of “design.” This issue of language and the struggle with ambiguous definitions resurfaced during the lunchtime roundtable discussion that Artefact hosted on the second day of the conference.
Our topic for the informal conversation was in which other industries or fields does design research have the greatest opportunities to be used, and design thinking applied. Three of the participants in our discussion were approaching design research from “the outside,” specifically from the worlds of government, the fine arts, and advertising/marketing. There was some discernible discomfort and struggle apparent in the confusion over terminology and the use of loosely defined terms (e.g., “design,” “design thinking,” “experience,” etc.).
It seems that we still have a long ways to go to address this seemingly persistent, vexing problem around clarifying what design is and how its methodologies can be applied to a broader set of arenas to solve complex problems.
But Of Course, It’s Still About Empathy. Deeper, Longer, More Immersive Empathy
Empathy and deep immersion into the communities and lives of those for whom we design was, of course, a major theme as it is one of our most fundamental approaches to user-centered design. Richard Saul Wurman – though not exactly advocating empathy! – repeatedly reminded the audience of the importance of “listening” to each other, and that “understanding is power.” Rettig impressed upon us the importance of diving deep in order to cause a “sea change.” Goodwin advocated storytelling and narratives as a way to identify with user pain.
But, the most captivating appeal came from social anthropologist Stokes Jones, Principal of Lodestar, who passionately presented how ethnographic fieldwork helps uncover the embedded innovation that is always and continuously brewing from the bottom up. Leveraging the “knowledgeability” of users and communities helped him and his team innovate in ways no one else on the Vicks VapoRub team would have imagined. After visiting 12 – a mysterious, empirically successful magical number – homes in South African townships, Stokes discovered a mortar and pestle sharing shelf space with the collection of medicine. To these families, “healing” possessed two specific properties: action and sensation. Their “knowledgeability” about medicine led to this DIY approach of combining not only the appropriate active ingredient, but also a component that allowed the patient to feel the medicine. Proctor and Gamble used this knowledge to create products that satisfied both the feeling and effects produced from the observed DIY approach for the South Africa market.
Fabricant’s call to design researchers was to get truly immersed in communities, observe emergent behavior, participate in conversations, and create rapid experiments which are pushed out into these communities for iterative feedback. Fabricant once asked Chipchase about how to keep those connections alive and strong between his team and those research subjects who turned out to be absolute gems of insight. Chipchase responded, “You just hire them.”
Prototyping Faster, Smarter, Earlier
In addition to maintaining extended conversations with communities, the importance of producing tangible artifacts quickly and putting them out there was stressed.
Start producing tangible things (e.g., solutions, parts of solutions) quickly in order to speed up the end-user feedback process. Prototype and experiment quickly. Learn and iterate. Robert Fabricant and, to some degree, Jason Fried of 37signals touched on these principles of consistent, early feedback.
When Fried and his colleagues were building Basecamp, they started off with just one line of text as a way to communicate. Then they added in titles to messages to allow disambiguation with each message. Slowly, they would roll out features that were absolutely necessary to complete a task. Each build would be tested and iterated fully before the next feature would even be considered.
Marc Rettig also shared a fairly typical “eureka” moment during his workshop when he asked some developers to create paper prototypes of their ideas and present them to their significant others when they got home at night. After 3 nights, the developers received the feedback they needed to build the system confidently.
People to People: Service Design is a Huge Opportunity
Just as the IDSA conference closed with Jeneanne Rae citing the size and dominance of the services sector of our economy versus the product sector, the DRC was capped by Ryan Armbruster’s presentation on the business value of service design, where he also cited our economy as consisting of roughly 78% services (note: actual, according to BEA NIPA data, it’s actually about 68% of personal consumption expenditure that is spent on services in the last quarter). Armbruster’s inspiring keynote was all about his experience and dedication to the improvement and design of services in the healthcare field, informed largely through design research and ethnography.
In Conclusion
To summarize, the speakers at DRC09 addressed the critical importance of designers and design researchers wearing more and more “hats” going forward. You have to be many things in order to stay relevant and add value:
a listener
an observer
an analyzer
a translator
a synthesizer
a curator (learn to say “no”)
a storyteller
a mobilizer
a tweet-oholic (this is still up for debate)
Musings & Miscellany
The conference was mostly good, with only a couple duds. The entertainment factor was high this year, as the organizers brought in a wide range of speakers, from the rambling and misanthropic – but brilliant and hilarious – curmudgeon, Richard Saul Wurman, to the well-known and oft-reviled founder of 37 signals, Jason Fried, as well as the stoked oratory of social anthropologist Stokes Jones. Here are some of our unofficial awards:
Most Unapologetic: tie between RSW and Jason Fried
Most F-bomb Droppings: RSW
Most Unusual Usage of Vicks VapoRub Cited: Stokes Jones
Most Inspiring Reminder that We Need to Think More About People Interacting with People: Ryan Armbruster
Most Low-key Yet Profound Purveyor of Pithy Quotes: Ben Jacobsen (“Sometimes, you have to go slow to go fast.”)
Most Snarky Tweet: Jon Kolko (“#drc09 Jason fried speaking about his software dev fundamentals; no wonder basecamp is such a piece of garbage”)
Thank Yous
Tal Shay and Kate Pemberton for organizing a great event
IIT Institute of Design for teaching design research, innovation, design thinking, and producing great future leaders
Spertus Institute for providing a great venue for the event
The Wieners Circle for the late-night entertainment and artery-busting char dogs
David Armano (@Armano) for the photo above of us Tweeting the hell out of #DRC09
The gaming industry is missing the boat. Kids are super engaged with video games, but their excitement and expertise hasn’t been leveraged to help acquire new audiences or influence parents to buy more games.
Let’s consider these data from a recent survey we fielded with about 50 kids ages 7-13:
Kids learn technology faster than anyone in their house. Both parents and kids agree: 64% of kids said they learn faster while 59% of parents said kids do too.
Although both kids and parents admit that parents know more about technology overall, they also agree that parents and kids know unique things about technology. Kids know more about entertainment type technology like playing games, working game consoles (Wii, Xbox 360), using iTunes, iPods, and iPhones, and social networking using Twitter, Facebook, MySpace, and cell phone texting. Parents know more about things for work like email and word processing, financial things like buying stuff online and banking, and how to fix the computer when it is broken.
Observing kids teach their parents new technologies also shows that kids can be good teachers too. This video shows Ronan, a 7 year old, employing known educational psychology teaching methods to teach his mom how to play the Wii.
So, given all this, why hasn’t the gaming industry leveraged kids’ knowledge about gaming, ability to learn fast, and teach gaming to capture new audiences or influence parents to buy new games? To capture parent audiences, game makers could:
Create teaching modes within games that would help kids teach their parents how to play in a fun environment
To influence new games purchases game makers could:
Allow kids to get trial versions of games so they can learn them quickly and then use what they’ve learned to ‘demo’ the benefits to friends and family.
Kids could review games online, make recommendations to friends and even recommend ones their parents would enjoy.
Think: “Most Valued Player” programs for kid gamers. Think: converting users into spokespeople and trainers. Think: ka-ching.
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China consists of many markets and many unique customer segments. If you don’t know this by now, you really should. Therefore, you will have to do your share of ethnographic homework and market research to succeed. However, doing the above, particularly the ethnographies and user research, will be more difficult than you are used to. Add to that that most Chinese consumers still don’t really know what their needs are! Their world has changed so incredibly fast, and for many, they still are learning about what there is in the consumer marketplace beyond the basics of food, clothing, shelter, and the most basic consumer durables. Therefore, products cannot simply be “translated” into Chinese; they must take into consideration the cultural and social context, thought models, and unique behaviors of the many different types of Chinese people.
The Chinese have got their minds on their money, and their money on their minds. The Chinese mindset is, contrary to most Western perceptions, quite individualistic and in a country in which there is little to believe in, the primary directive is “to get gloriously rich.” In yuan they trust. Like the astute social commentators and fans of Chinese martial arts culture, 
Chinese society can be partially understood in terms of 
China’s youth generation aged 15-30 (nearly 330 million today), in particular the urban youth — sometimes known as the “rare generation” — are remarkably different from their elders. They are mostly only children, under tremendous familial pressure to perform and succeed in life, but they also want to enjoy their freedoms, the good life, consume a whole lot, and they want it right now! They are driven by the constant search for newness or novelty. They are optimistic about the future, yet very impatient. They are individualistic and self-expressive, yet they are incredibly “tribal,” in 
Because of these characteristics of ingroup bias and tribal behavior, Chinese consumers are especially drawn to products and brands that communicate a clear lifestyle, identity, and culture. The desire to be individualistic has its limits; Chinese consumers, especially the urban youth, want to fit in with the subcultures or tribes in which they want to be accepted. This means buying the same brands and products, following the same styles and trends, etc.
In contrast with the “rare generation,” China’s more senior consumers (aged 35 and older) tend to be very frugal, stubborn to adopt new things and technologies, and are extremely value-conscious (if they are middle class; the wealthy are a different story). Most are investing the majority of their time, energy, and income on providing the best of everything for their only children (the spoiled rotten ones are sometimes referred to as 
One important thing to understand is that the Chinese have a tremendous amount of national and cultural pride, stemming not just from thousands of years of being one of, if not, the most powerful civilization in the world, but also from three decades of tremendous economic progress. While they admire foreign, global products for their quality, technologies, and design, they also fully intend to build their own domestic brands to compete globally. They are looking to the West to learn from and borrow (or steal… it’s often true) their intellectual property, methods, and practices, so that they can catch up. But, it is critical to recognize that the Chinese want to modernize, not Westernize. They wish to be modern while retaining their Chinese essence. On the more pop cultural level, you see this in the form of so-called “China Style,” or fusion of traditional Chinese elements with Western styles, music, fashion, etc.
In addition to competition coming (eventually) from domestic brands, you must also recognize that right now you are engaged in fierce competition with shanzhai products (“knockoffs”). Regardless of the differences between the youth and their elders, most Chinese do recognize and appreciate quality and luxury. They just simply cannot afford it. They are drawn to the global brands and products that exude qualities like performance, luxury, beauty, style, and power. However, most Chinese who cannot afford the global branded products they aspire to own, are perfectly happy with fake alternatives, which are often as good as the real thing. In addition, these shanzhai products will be manufactured and made available to consumers in more variations than you’ve ever dreamed of before your products will ever make it to market. You can count on that! Finally, the shanzhai industry should also be given some credit and recognition for the creative, entrepreneurial, DIY culture it is fostering, providing consumers with access to a high degree of personalized or customized items across a variety of product categories. In a country of 1.3 billion people, it’s difficult to differentiate oneself from the crowd, but shanzhai products (particularly electronics) introduce all sorts of novel variations, at remarkable product development cycle speeds, feeding into the Chinese thirst for anything new.
The Chinese have a well-justified distrust of media in general. However, in the Internet they trust. Bulletin board systems (BBS), forums, blogs, online communities, and social media are their most trusted sources of information. They do not generally believe advertisers’ claims. They seek out the advice, experiences, reviews, and feedback of their peers online before making purchase decisions. 
Chinese consumption to date has been primarily focused on goods (fashion, gadgets, etc.), but as consumers they are beginning to sophisticate and mature. Relatively speaking, the average Chinese consumer’s purchasing power is still but a fraction of that of the average American consumer. However, as incomes continue to rise, and for those already upper middle class and wealthy consumers, expect them to become more demanding for new services and experiences, in such areas as food, style, living, mobility, health and wellness, and finances.
ONE CAVEAT: Everything just stated above is, unfortunately, not carved in stone. Because of the incredible rate of progress and change occurring in China, anything you learn today may not be true a year or two from now. You are playing a frantic game chasing rapidly moving targets. Therefore, take our suggestions above to heart, but be willing to revisit them in the near future for further evaluation or validation.
who are typically well-educated, white-collar professionals working for large companies. But, defining this middle class is somewhat controversial in China with no widely accepted answers, and the most typical estimates of the number of Chinese who are considered “middle class” ranges from 100 million to 250 million people. Some would go so far to say that the range might even be more like 50 million to 500 million.
and the support of family are truly the only safety net the Chinese have. Despite decades of continuous strong economic growth, most Chinese feel less secure than before, as they are no longer guaranteed jobs, housing, and a pension. Consequently, as a society, overall, the Chinese are very thrifty, saving reportedly 40% of their income on average. The older generations are known for their frugality and extraordinarily high savings rate in order to provide for their child. Education is also no longer free, so parents who want their children to succeed in life must save as much as they can to invest in the child’s future and development, hoping they’ll turn out an exceptional individual. Meanwhile, the cost of living is increasing. Foreign goods are also subject to high import tariffs, making the shanzhai products even more attractive bargains. The “Little Emperors” are known to be spoiled rotten and be the “me me me” generation. They are crafty at getting money from parents and grandparents to spend on fashion, gadgets, and whatever else they desire. After all, they symbolize the singular hope for carrying on the family name.
, meaning “petit bourgeois.” If you ask a Chinese to describe such a person, you will almost universally hear them described as young, single, urban women under 30, fond of Starbucks coffee and Häagen-Dazs ice cream, who typically spend 1/3 of their income on bars and restaurants, 1/3 on shopping for brand-named clothing, have an aversion to saving money at all, love watching European art performances and listening to Italian violin, and have Van Gogh paintings hanging on the walls of their apartments. They appreciate the value of design and lust after the latest trendy foreign products (iPod, Miss Sixty jeans, Gucci, Chanel), but have to save up for some time to be able to afford one or two of these luxury items. These women seem to enjoy the experience and atmosphere of being out and about in expensive clothing, sipping coffees, and view themselves as rather elegant. But, the term is also used somewhat disparagingly by other Chinese youth.
or “hooligans.”
Photo by: onion83, 
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