THE STUDY OF HAIERS MARKETING STRATEGY OF HOUSEHOLD APPLIANCE GOING TO THE COUNTRYSIDE

By:
1) 2) 3)

KOO SUET YAN (JERRY) WONG HUI YEE (CHLOE) YAP ZIE TIENG (DENICE)

806665 806667 809530

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OVERVIEW OF ARTICLE

Financial crisis in September 2008 left companies with problems such as poor sales, decreasing corporate profits, declining production and increased of unemployment.

On February 19th 2009, China further emphasize on the policy of household appliance to the countryside. It extended its policy from 4 types to 8 types of household appliance to 4 province.
The policy implementation provides several significant impact such as below:

a)

promote the organic docking among household manufacturing, distributing and absorb excess capacity.

appliance

b)

improve rural residents spending power directly and start up domestic demand. Improve the convenience of exchange between urban and rural areas which narrow the gap between urban and rural areas. as a guidance to enterprise to enter the rural market which will change the urban-rural dual structure.

c)

d)

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ANALYSIS OF MARKET DEMAND FOR HOUSEHOLD APPLIANCE TO THE COUNTRYSIDE

Haier Group is Chinas most valuable brand. By responding to the government policy of household appliance going to the countryside, Haier promote one of their products, refrigerator to the rural areas. Their sales increase by about 80% in the rural market in 2008 and till today, Haiers after sale network can be found throughout the China countryside. Haier established more than 6000 packet-service contact station to ensure that there is sufficient products to support the policy and if any out-of-stock situation occur, Haier would open green channels from production, logistic to guarantee the rural residents that the products will arrive on time. In order to understand the customer, Haier conducted a random sampling survey, grouping questionnaire survey in whole countries and follow up survey by telephone to obtain information about the characteristics of market demand, competition status, consumer behaviour, channel network, way of promotions and other issues in the rural refrigerators market.

4 market survey was conducted within more than a year and household survey were used in different provinces within China with total of 88105 copies of questionnaires issued in 4 surveys, and 73797 were retrieved with 65845 copies of valid questionnaires. Haier processed and analyzed the survey data using the SPSS software and establishes a database specifically for the refrigerator market in the rural area. From the survey results, Haier developed a One to One strategy for their refrigerators. Through the results also, enable Haier to understand that the city market had matured and whoever first penetrate the rural market, will gain competitive advantage. Haier understand that in order to be successful, they need to fulfil the below requirements: ensure all products are suitable for the rural environment

a) b)

perfect logistics needed in order to deliver the products to the rural areas
understand the importance of after sales service the guarantee of smooth development and improvement of the products, ample of products supply and on time delivery

c) d)

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HAIERS PROMOTION STRATEGY IN RURAL AREAS

In recent years, Chinas per capita income in rural areas keep on growing. The rural residents savings is op to about 9000 billion Yuan with 800 billion Yuan cash in hand which tells that they have purchasing power. Therefore, Haiers objective are mainly on promoting the brand in the rural market, make rural consumers to accept and approve Haier refrigerator, search rural markets promotion and a new marketing mix strategies, develop new refrigerator products which are affordable and suitable for the rural consumers and lastly, to explore the rural refrigerator market. The promotion strategy adopted by Haier is close to rural residents and promoting in a farmer style. Promoting in a farmer style simply mean that the strategy needs to appeal to the people in the local area, specific products that people tend to need and the promotion strategy should emphasize on it. There are 4 promotional strategy implement by Haier which are:

a) b) c) d) e)

One-to-one marketing
Advertising Word-of-mouth publicity Non-business promoting Public relation strategy

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ONE-TO-ONE MARKETING

One-to-one marketing is a new variation of an old concept which depends on a customer relationship management strategy that focus on personal interaction and investing in personal communication. This type of strategy serves a number of important functions. Through communication, it let the potential consumers know that they had been noticed. It also provides easy access to the types of products that the consumers have expressed interest in which will increase the chances of sale. The consumer interactions and appreciation is also a key to deliver great customer service. The data that collected will helps company to profile their customer better in order to be more effective in meeting their needs. Haier had used this strategy when they tried to penetrate to the rural markets with their refrigerator. They hired one-to-one promoting staffs which main priorities is to introduce Haier refrigerator to the potential consumers at their doorsteps.

Besides, they also aim to introduce the refrigerators to consumers which with demand within six months in order to get the accurate information about their need, keeping track and promoting to consumers with demand within one year. They further develop the plan by reaching out to consumers with demand within two years. The one-to-one promoting staffs also responsible in in promoting Haiers culture and brand in any holidays and local customs activities to establish a good brand and product image.

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ADVERTISING

Advertising is a form of communication used to encourage or persuade the audience to continue or take some new action. In the Haier case, advertising plays an important role in the process of encouraging the rural consumers to notice, recognize, understand and finally buy their products. Through advertising, Haier is seeking to local conditions and innovate as the rural consumers have their own characteristics in cultural quality, living region and habitual way to access to the media. Haier choose to use television advertising because the survey that they conducted shows that about 17.3% of the existing refrigerators users were affected by the impact of television advertising and television is their most important sources of information. The television commercial is generally considered as the most effective mass-market advertising format The effectiveness of advertising also depends on the time and channel that the advertisement being advertised. For most of the rural area, the peak hours of watching television is from 19:00 to 22:00 and preference channel is CCTV1. Therefore, Haier advertise their refrigerators during that time period using Shandong cable television as advertising media, targeting at local news program where the rural consumers most concerned.

2.3 WORD OF MOUTH PUBLICITY

WHAT anyone says become fact after people around them echo the same often enough. Researcher says individual are more inclined to believe WOM than formal forms of promotion methods because the receiver of WOM referrals believe the communicator is unlikely to have an ulterior motive. Survey done by Haier proves and shows that 20.4% of existing rural users got introduction and recommendation from their relatives and friends. Majority rural buyers made their decision based solely on influence of the people they trust.

Therefore promotion staff grasp key consumers and existing users, utilize trust of their relatives, friends and neighbour to enhance the word of mouth image of Haier.

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NON-BUSINESS PROMOTION

Non-business promotion can secure consumer buying behavior efficiently and increase sales in a certain period of time. There is a typical plotting with off season and peak season in rural refrigerator market, the Spring Festival Eve and the fall and winter seasons which are peak time for wedding are peak seasons. Survey showed the time rural families purchase refrigerators is mainly in May to June and October to December. Based on this characteristics in off season and peak season, Haier has developed different non-business promotion method , gave full play to the role of non-business promotion, seized the opportunity to increase the market share.

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PUBLIC RELATIONS STRATEGY

Public relations is an organizations communications with its various publics, such as customers, vendors, news media, employees, stockholders, government, and the general public. Rural consumers is a sentimental group with clear sense of love and hatred. If Haier is able to leave a good impression, they will continue touched their hearts, gain good opinion from this group, and they will continue to be loyal supporter to the company. Therefore, Haier need s to establish good public relations and create a good public image when carrying out one-to one promotion with the rural residents.

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RESEARCH POTENTIAL

There are presently 34,400 townships and 614,000 villages in China. How to satisfy such a huge market may be the next hotspot for different enterprises. This is spurred by the home appliances going to the countryside policy by China government, the countryside market is now opening its gate. However, it is not easy to have a foothold at the countryside market. The rural consumer may not take the effective urban promotion and sales strategies. Corporations must humbly study the necessities and consuming psychology of countryside consumers. Development of the advertising of ones industry in the countryside will not be easy. Although rural residents constitute two-thirds of the total population, their income is currently only one-third of that of urban residents. Since Chinas Open Door policy in late 1978, the annual capita net income of Chinas rural residents has increased at an average 7.2% per annum. It nevertheless remains very low, resulting in low levels of consumption in the countryside.

In urban areas TVs, refrigerators, washing machines and computers are commonplace in every household. But in the countryside it is still a tough challenge to solve electricity supply problems due to limited power output and/or high production costs. It will be some time before there is any substantial demand for electrical appliances. Although rural areas represent a huge potential market, mass marketing will not work in the countryside. Enterprises cannot just move into the countryside and expect to sell commodities that are unmarketable in urban areas. The current rural market is typically at the functional demand stage, which means that the basic requirement is for goods that are useful and cheap. Development of the advertising industry in the countryside requires more than extending the urban market. It needs a different mind-set. Another challenge concerns the creation of marketing channels. Instead of living close together, rural residents are scattered over a considerable area with poor transport links and many marketing terminals. Goods are sold primarily in local grocery stores or mini supermarkets. Different distribution strategies are required here.

The information imbalance between town and countryside poses considerable challenges and severely hinders the circulation of goods and capital in these markets. The limited economic and cultural conditions, coupled with poor infrastructure, mean underdeveloped utilization of information in rural areas. These challenges suggest that the advertising for ones industry as a whole must carry out thorough research before formulating strategies for penetration of the rural markets. As with any new brand or new client, the first step towards identifying and creating opportunities must be research and understanding of the existing situation.

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COMMENTS

The Central Governments campaign to redress the balance between rural and urban areas creates a golden opportunity - along with many challenges - for the retail industries. It is not enough for the industry just to forecast a promising future: it should also look at the small print. In Haier successful case,1st they have their R&D going to the country side to find out demand and integrate technology, 2nd Haier has their service to go to the countryside to layout networks widely and pay attention to details, 3rd Haiers brand also going to the countryside to guarantee quality and build word of mouth. If they carry out in-depth research into the rural market, understand rural residents needs, grasp the inherent characteristics of rural consumption and, ultimately, develop suitable channels for disseminating information and spreading the word about their services and products. Then advertising and marketing can reach their full potential in the green fields of the opportunities (rural market) offered by Chinas newly-opening countryside.

Precisely speaking, targeted advertising and marketing strategies must be based on solid investigation and in-depth research in rural areas.
Conventional advertising strategies will not work. We must find the appropriate way to promote advertising in rural areas. Advertisements can direct rural consumption to a considerable extent, but word of mouth is also critical. From the angle of communication theory, in rural areas it is advisable to concentrate on infiltration advertising promotion like its done by Haier.