Banking can be this sexy, .... in China

"Designed in a stylish vertical layout. Hot red or calm blue, the bright colours are to decorate every youthful heart.""Dots scatter on the card ... and the two cards make a perfect heart shape." "The red card carries a speacial fragrance and makes it a must for a charming girl."

When you read these exerpts, what do you think the product is being marketed? A lady's accessory from a trendy fashion brand? An executive membership card? It's actually a credit card.

RenRen is the Facebook equivalent of China. By end of June 2011, it had 124 million active uers, or a quarter of Chinese netizens, and the number grows by 2 million a month. Although not so clear about its revenue drivers, fairly clear is its user segment - young generation. Renamed to RenRen, meaning everyone, it started in 2005 as XiaoNei, meaning on campus, which apparently links to its focus on college students.

As young as RenRen's users is the credit card industry in China. Even though Bank of China issued the first credit card back in 1980s, the sector did not really kick start until early - mid 2000s. According to a 2009 Mickensey study, credit card has only 6% share in personal expenditure by payment method, and penetration to the population is a nominal 5%, comparing to 60% in US. On the flip side, growth is phenomenal. Between 2004 and 2008, total cards issued soared at an average annual rate of 84% and spending growth was at 63%.

Young and educated consumers form the common base for the proliferation of both social network and credit cards, which makes it logical for marketers in both sectors to partner with each other.

The credit card shown on top of the page is the "RenRen Card" issued by China Merchant Bank, which could be linked to the RenRen social network account and the reward program of which gives you RenRen points to be redeemed for VIP services in the virtual community.

For quite a few years I have observed that any business offering functionality features in China can barely make a sound profit. Two ways to stand out are either making yourself a premium brand, e.g. Pizza Hut as a luxury restaurant brand offering high end Chinese consumers a large variety of pizzas unheard of in North America at a price level that easily doubles what it charges in US, or making your business fun. Now it is quite interesting to observe the 'fun' business model has been forwarded that much to get even banks on board.

Relatively loose regulatory environment leaves so much room for marketers in China. Customers there have to be excited by businesses not every month or not even every day, but every moment they are awake. When Canadian businesses in almost every sector believe that immigrants, a lot from China, are going to be the new source of their customer base, are they really making efforts to understand and excite their new customers?

Is China going to be LinkedIn?

Yesterday and today LinkedIn stock price went up significantly and more than recovered from the drop earlier this week following an analyst comment that claimed its newly boosted price had already priced in growth for the next couple of years. The reason, if there is one, that drives this round of increase, is the vague combo of news + guess of "possible deal to enter China". I said it's news + guess, and actually it is more guess than news. News gave only very limited information. LinkedIn founder Reid Hoffman met with a bunch of .com executives of China. That's the news, completely irrelevant to its entry to China market. None of those people would have a say about the "deal". Even if LinkedIn entered China, these folks are more of its competitors than partners.

Okay. Let's just assume LinkedIn already stepped into this 'potential' market. Then what? I could almost see its failure in China. The rationale can not be any simpler - In the business world in China, people link to each other in pubs and at dinner tables, not through internet.

I did a quick experiment. CIBC, ranked fifth in the big five Canadian banks, has "more than 42,000 employees". In LinkedIn, I typed "CIBC" in the people search box and got 41,727 results. On the equivalent side, wealink.com, the largest Chinese professional social networking site, gave me 226 results for the search “工商银行”, or ICBC, the largest bank in the world with 386,723 employees as of 2009. Nortel, the bankrupted telecom giant, returned 149,946 results in LinkedIn, while "华为" or Huawei, the fastest growing manufacturer in this sector, with 65,179 employees, gave me only 109 users on wealink.com.

TREFIS did a breakdown of LinkedIn stock price. Nearly half (45.2%) comes from job postings and recruitment services. Strong local brands have built their reputation and huge network in the mass recruiting market, while headhunters have taken their shares in the specialized segments. The other two components of LinkedIn revenue, premium subcriptions and ads, apparently relies on the popularity of the site. The depth of relationship it could build with its ad clients is a function of the depth of relationship its members could build with each other, through this network.

Having said that, I believe LinkedIn is going to be a tremendous success in the next decade. But not in China.

During the past 20~30 years, so many multinationals entered China betting on its adorable market size. Some succeeded, some failed, some still try to survive. How successfuly they could be simply depends on the level of its localization. Not just wrapping itself with a successful translation, but the deepest localization from the core of its corporate culture. I'll have more on this topic.

Coffee War, or something else ...

There are two segments of coffee drinkers in my office, the Starbucks segment and the Tim Hortons segment. Not by value to price, not by demographics, and apparently not by how much time they are willing to spend waiting (as everyone could see waiting in front of either counter is equally time consuming :), these two groups are simply defined by how strong they prefer the coffee to taste (or to be). Shelley only goes to Starbucks once a while when she decides to reward herself with a latte or cappuccino. But never the regular coffee, as it's going to keep her up at night. A few seats away, Chris goes to Starbucks every morning. If she had to brew a cup from the coffee maker in the office kitchen, her compaint never changes - it's too light.

No overlap between the two segments, ever.

But it does not mean a coffee shop can not capture both segments. At least that's what Starbucks is trying to do. "If you haven’t tried our lighter roast yet, now’s the time."

Where does the growth come from? It's a serious question, particularly when you are the only or one of a handful of leaders in your segment. The most straight forward answer is crossing the fence and getting into a neighbor's backyard.

Believe it or not, Timmy's is doing the same thing. If you saw the Starbucks Blonde commercial, I bet you have seen the Tim Hortons latte commercial as well, because they almost run hand in hand.

Beyond coffee, this eating someone else's lunch game has been all over the places during the past couple of years. MacDonald's can't get more aggressive in pushing its coffee, while Tim Hortons strives to expand its lunch menu (btw, personally I like its Chili combo). While Wal-Mart has a larger home improvement section now than a few years ago, Rona has put gums and the like at cashier lines betting on impulse purchase.

Even in the regulated sectors. Although banks are not allowed to sell insurance products (other than creditor protection plans) in the bank, nothing stops RBC from opening insurance offices a (glass) wall away from its banking branches. On the other hand, when I selected that I need advice on "banking" on its website, Manulife gave me 15 Financial Advisors within 5KM of my post code.

While waiting to see RBC setting up its bank machines in Shoppers Drug Mart stores, I won't be surprised if I go to a Rogers store tomorrow and see a sales rep handing me a brochure of Rogers Bank mobile credit card app which I can use right on site to buy a cup of coke flavored tea from a Second Cup kiosk sharing store space.

Groupon: To be or not to be

Today is really an interesting day in the history of the ... emerging and proliferating and maturing and consolidating and ... someone probably arguing dimishing or even demolishing ... industry. I mean, the daily deal industry.

Early in the morning, Ipsos Reid released results of its most recent Canadian study with a title that would catch any marketer's eyes, "Ipsos Study Shows Online Group Coupons Can Help Build Brand Loyalty". The numbers found in the survey are quite encouraging. However, unfortunately, investors don't seem quite encouraged. In response to Groupon's Q4 results released late yesterday, its stock price today dropped as much as stockholders' heartbeats speed up. Question being asked is not just where Groupon heads, but whether daily deal is marketer's new weapon or another money burning firepit.

How do they make money? Consumers buy vouchers from Groupon at 50% off. The price they are paying is shared between Groupon and the merchant, usually at 50-50 split.

What are the costs? Not reading from the annual report, but understanding from the business model, Groupon relies on a large sales force everywhere they have 'local' deals. Someone has to negotiate those deals with the neighborhood restaurants and mom and pop stores.

Are they making money? Apparently, no. People invest in Groupon because they believe in its future.

Is there a future? Ipsos Reid says yes, or maybe, while Forrester sort of disagree. If merchants give up deep discounts to buy customer loyalty, Canadian businesses must be luckier than their counterparts south of the border. Ipsos Canadian research says 62% of those who had bought an online coupon have then gone back to make a full priced purchase. In US, a Nov 2011 Forrester research shows that consumers have been trained to search for deals before purchasing and become not willing to buy at full price. In addition, 82% in Ipsos survey said they bought coupons to try something that they would not have otherwise. Foresster shows over half people said they would have bought any ways even without the discount.

How should marketers action? No matter if marketers are achieving the client acquisition and loyalty goals they set, online daily deals are becoming a consumer routine, at least for a consumer segment. It's not a question about whether to use it or not, but more of how to leverage it as a new marketing tool. One thing nobody could question is that this is a pay per performance tool. If 75% off is too big a cost for small merchants, it is much more affordable for larger retailers, as this could be just a very insignificant portion of their marketing budget that they are already considering how to reallocate from traditional media to more measurable vehicles.