Picking Your Channels in China

Posted on Harvard Business Review: June 18, 2010 10:21 AM

Ask marketing executives in China what their biggest challenge today is and they'll all agree it's TV advertising. The country has over 3,000 national, regional, and local channels, which makes it the world's most fragmented market. Chinese consumers don't rush to buy things they see on prime time, but our surveys show that they trust brands that advertise on TV; won't consider those they haven't seen on the air; and believe that brands that can afford to advertize on TV must be backed by successful companies.

Most companies in China lavish money on CCTV (China Central TV), the national broadcaster, whose 19 channels capture a third of viewers' time. It charges the most, but with nationwide coverage and huge ratings, it is also cost effective. For instance, CCTV caters to an audience 10 to 20 times larger than that of local TV stations at only 2 to 4 times the price the latter charge, making its cost per thousand viewers 5 to 10 times lower than that of the locals.

Some regional satellite TV stations that broadcast to a national audience pose an alternative. For instance, in Changsha, Hunan Satellite TV's share equals the combined share of CCTV's 19 channels. From 2008 to 2009, Unilever's Dove brand of personal care products sponsored the Chinese version of the comedy, Ugly Betty, on the channel. The show racked up 73 million viewers on average per episode, boosting Dove's market presence.

Still, national TV isn't the only medium you should use. Many consumers prefer to watch regional and local TV. For instance, close to 60% of Shanghai's viewers watch one of Shanghai Media Group's 16 channels. Viewers in Suzhou, an hour's drive away, spend half their time watching one of six local channels. In cities like Guanghzou, where the local dialect dominates, CCTV's share drops to less than 5%.

One novel marketing approach is to use a lot of local TV and to complement it with national advertising—as consumer companies such as Procter & Gamble do. Ads on CCTV may reach only half the target audience in, say, Shanghai, but you will save 40% by using it instead of relying entirely on local channels.

Another innovative idea is to use your ad budget to guide geographic expansion. For instance, companies could focus their media budgets on places where they can establish a dominant share of voice inexpensively before moving into cities such as Shanghai and Guangzhou, where the cost of reaching a thousand viewers is two to ten times higher. For example, Carlsberg doubled its share of the premium beer segment, from 3% to 6%, by focusing on clusters of cities surrounding metropolitan hubs in western China such as Chengdu and Xian. It has caught up with brands like Heineken and Tiger, which generate most of their sales in the intensely competitive coastal areas. That will enable Carlsberg to expand in future into more competitive regions and cities. In China, picking the battles you want to fight is almost as important as choosing the TV channels on which you want to advertize.

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