November 2011

The Asia Pacific region, along with Latin America, was the world’s most optimistic region in the third quarter of 2011, according to the latest online consumer confidence findings from Nielsen, a leading global provider of insights and analytics into what consumers watch and buy. The region also continued to dominate the list of most optimistic countries globally – seven of the top 10 highest consumer confidence scores hailed from this region (India, Indonesia, Philippines, Thailand, China, Hong Kong and Malaysia).

On average, the Asia Pacific consumer confidence index declined one point quarter-on-quarter to a score of 97, representing the second consecutive quarterly decline in 2011.

Of the 14 markets measured in the region in the third quarter, 10 posted quarter-on-quarter declines (Singapore and Malaysia had the biggest drops of 9 points each), while 4 posted gains (Thailand, Indonesia, New Zealand and Japan).

“Asia Pacific remains the most confident region in the third quarter, even as consumers here are signaling the start of a potential recessionary mindset – 1 in 2 consumers in the region now believe their country is in a recession. This mindset will set the stage for more careful discretionary spending by consumers until there is more clarity on the economic fortunes of countries in Europe and the US,” said Therese Glennon, Nielsen’s Managing Director (Consumer Insights and Innovation) in Asia Pacific, Middle East and Africa.

Globally, consumer confidence fell 1 point to an index of 88, the seventh consecutive quarter of decline. Confidence scores also dropped in 31 of 56 global markets measured. Consumer Confidence Index levels above and below a baseline of 100 indicate degrees of optimism and pessimism.

In this latest study, Nielsen polled over 28,000 online consumers in 56 countries (more than 7,000 in the Asia Pacific region) about their outlook on jobs, the economy and readiness to spend. The key highlights for the Asia Pacific region are discussed below:

Spending likely to be restrained over coming year:

Retailers and manufacturers are set for a more difficult time over the next 12 months, as consumers show more reluctance to spend in the third quarter. Nielsen’s analysis shows that 62 percent of consumers in Asia Pacific believe the next 12 months will not a good time /will be a bad time to buy the things they want and need. This is an increase of 3 percentage points over Q2, and 5 percentage points over Q1 2011.

“Not only will consumers exercise more restraint over their wallets and purses when it comes to spending, they will also look for more value when purchasing everyday items such as groceries.

In a climate where the economic outlook is making consumers nervous, the winners will be those retailers and manufacturers that are able to offer innovation and value to meet the needs of consumers,” said Glennon.

Consumers are also just beginning to adopt a recessionary mindset – 50 percent of consumers in Asia Pacific believe their countries are now in recession (up 5 percentage points and 13 percentage points over Q2 and Q1 2011 respectively).

Consumers in Asia Pacific continue to be big savers and “bullish” on investing

The region boasts the largest percentage of savers globally. Of those with spare cash, 61 percent (up 2 percentage points over Q2) indicated they plan to put some spare cash into savings, making savings the most popular use of spare cash. In contrast, the global average was 46 percent.

1 in 3 (33%) consumers also said they plan to invest in mutual funds/stocks, almost double the global average of 18 percent.

Consumers in Asia Pacific still the most positive about job prospects

For consumers in Asia Pacific, the perception of job prospects over the next 12 months did not change significantly compared to the second quarter. 1 in 2 (56%, down 1 point from previous quarter) Asia Pacific consumers described their job prospects in the next 12 months as “excellent/ good”.

In contrast, consumers in other regions are significantly less positive. 47 percent of consumers in Latin America believe their job prospects are “excellent / good”, while the percentage in Middle East/Africa, North America and Europe is 45 percent, 28 percent and 26 percent respectively.

The economy became consumers’ biggest concern in the Asia Pacific – local companies well positioned to offer value

Rising food prices, work-life balance and the economy were the top 3 concerns during the second quarter of 2011. However, the economy replaced rising food prices as the biggest concern in the third quarter, with work-life balance remaining in second place.

“The Asia Pacific region is still global manufacturers’ best growth bet as pressures continue to mount in the US and parts of Europe. At the same time, these global companies will face increasing competition from strong local and regional manufacturers who are less exposed to the global economic conditions and who are learning to innovate at a faster pace while offering value. More than ever, providing relevance and value-add will be key to capturing consumers’ discretionary spending,” Glennon said.

November 2011

Nielsen, a leading global provider of insights and analytics into what consumers watch and buy, released a new report that shows consumers across the Asia Pacific region want good value for money more than just low prices when it comes to shopping. In its 2011 Global Shopping and Saving Strategies Survey of more than 6,500 Internet respondents in 13 Asia Pacific countries, 59 percent rated “good value” over “low price” (56%) as the key factor influencing what and where they buy from.

“At the end of the second quarter of 2011, Nielsen recorded a 14 percent increase in sales value for consumer goods products compared to the previous year, with 50 percent of this growth coming from price increases. Consumers, who are faced with almost uniform pricing across all consumer goods retailers, are trying to maximize their shopping experience by finding non-price factors that will give them added value to the money they have to spend,” said Peter Gale, Managing Director of Retailer Services at Nielsen APMEA.

Nielsen’s analysis shows that price increase is increasingly driving the growth in sales value since the third quarter of last year. This has forced consumers to be more cautious in their spending and to be smarter in selecting where to shop. During this tough time, non-price factors such as good value, convenient location (57%), stock availability (50%) and variability (48%) are regarded by consumers in Asia Pacific as desirable factors as they decide on where to shop.

Low prices, though still influential, are no longer regarded as the most important for the majority of consumers in Asia Pacific countries, with only consumers in Indonesia (69%) and Malaysia (63%) considering this factor as the most influential reason when choosing a store. Countries like Australia and New Zealand consider stock availability as important with 60% and 55% consumers, respectively, claiming this factor as the most influential reason. Saving Strategies: Sales Sail, Usage of Coupons Increases “The uncertain economic outlook this year has prompted nearly all consumers to take actions to save their household expenses. Even though non-price attributes are becoming more important, great sales and promotions play a very influential role in driving shoppers to make a trip to a particular store, especially during this time when rising prices are casting a shadow over household budgets,” said Gale.

Consumers in eleven of thirteen Asia Pacific countries have elected to buy items on sale as their preferred strategy when it comes to saving on household expenses. In particular, Malaysian consumers are the most prolific sale-seekers, followed by New Zealanders, Vietnamese, Australians and Singaporeans.

The use of coupons is increasingly popular among Asia Pacific consumers, with 55 percent of consumers opting for this saving alternative, an increase of nine percentage points from 2010. Coupons are popular with consumers in China, with two-thirds of Chinese consumers choosing to use coupons. Across the region, more consumers are also purchasing larger value packs (increasing eight percentage points to 44 percent this year), with Indian consumers the strongest proponent (46%).

Besides price and value, shoppers want flexible formats Consumers in Asia Pacific are more likely to try new flexible and convenient shopping formats to enhance their shopping experience, compared to other regions of the world. These formats are: online shopping (with four variations) and using handheld scanners in-store to avoid checkout lines.

More than three-quarters of (77%) consumers in the region indicated they would take advantage of the online shopping/home delivery format, compared to one-fifth of North Americans and

one-third of Europeans. This format is especially popular with consumers in nine Asia Pacific countries including China (88%), Vietnam (81%) and Taiwan (71%).

Sixty percent of Asia Pacific consumers said they would like to use hand-held scanners to avoid queuing at check-out lines, making it the second most-favored option for convenient shopping among the five presented. In particular, consumers in Australia (48%), New Zealand (54%) and Singapore (58%) were most inclined to use these scanners. “Asia Pacific consumers are already the some of the most prolific online shoppers in the world, particularly the Koreans. The growing number of digitally-connected consumers in the region certainly provides fertile ground for online formats. Both online formats and the use of hand-held scanners are opportunities for retailers to differentiate their shopping propositions beyond price and promotions,” said Gale.

November 2011

By Darlene Lee, Synovate

The emergence of an increasingly sophisticated consumer class in the world’s most populous market has created a unique playing field for the globe’s premier brands. The centrality of food and drink to China’s 1.3billion people has created a market of extremes. On one hand, the rapid adoption into everyday life of previously foreign tastes (think pizza) demonstrates an adventurous and open-minded palate. On the other hand, a continuing spate of food quality scandals has raised levels of cynicism and doubt among Chinese consumers. Yet despite that, the increasing consumption of previously unknown tastes and flavors appears to continue unabated.

Despite rising food costs globally, the appetite of China for the world’s food continues to increase. According to China Customs statistics, in the first 5 months of 2011, China’s food import & export value totaled USD 35.09 billion, up 36.2% year-on-year. At a commodity level, food imported into China continues its steep rise. China is now forecast to be the top market for U.S. agricultural exports by the end of 2011 at USD 20 billion, surpassing Canada at USD 18.5 billion. China accounts for almost 60 percent of world soybean imports, 40 percent of world cotton imports and about 20 percent of total soybean oil imports. These three commodities accounted for about three quarters of total US agricultural exports to China in 2010.

Within this general trend is the increasing consumption of western food and drink products by Chinese consumers. This is driven in part by the increasingly easy access to imported food and drink products, often via internationally branded supermarkets and groceries. For example, France-based supermarket chain Carrefour plans to open 22-25 new stores in China by the end of this year 2011. The company currently has 182 supermarkets in 47 cities in China and achieved revenue of RMB 42 billion last year. Walmart as of May 2011 has 338 shops in 124 Chinese cities, with 90,000 employees and annual sales of some US$7 billion.

Increasing Focus on Healthier Food Among China’s Middle Class

On-going food safety issues coupled with rising wealth seems to have boosted a relatively rapid development of health consciousness among Chinese consumers. From sufficient caloric intake just a generation ago, concerns around food have shifted to nutrition and health. The rise of organic has been particularly impressive, considering the “luxury” cost levels of organic food compared to the still relatively modest average incomes in China (USD7,600 which ranks China number 125 in the world). This means consumers are increasingly able and also seem to be more willing, to put their money where their mouth is – as long as the taste component is acceptable – to pony up more for healthier alternatives.

According to a survey by Global Intelligence Alliance (GIA) amongst 67 Asian consumer and retail industry professionals in China, India and South East Asia in November 2010, 70% said consumers in China have become more willing to pay more for better quality food and beverage over the last 12-18 months. While some speculation ensued that the temporary shock in demand would subside, two years after the infant formula melamine scandal, consumer preferences seem to have permanently switch to international and premium local brands over cheaper local options.

Western Flavors in Chinese Diets against this backdrop

China has seen a phenomenal proliferation of western fast food brands, most notably KFC (which opened first in Beijing in 1987) followed shortly by McDonald’s. Although local fast food brands like Kungfu, Yonghe King, Da Niang Dumpling, etc still dominate the sector with 70% market share, western brands are catching up. By the end of 2010, KFC operated over 3,000 restaurants in China compared to only 400 from Kungfu. McDonald’s announced that it would open 1,000 new restaurants in China by 2013.

With rapid expansion far beyond the Tier 1 cities in China, the leading western fast food brands are effectively bringing western tastes to Chinese palates on an unprecedented scale. They are aided in their efforts by the profusion of American and European food and drink manufacturers, who are also getting a much broader range of tastes and flavors within easy reach of Chinese consumers.

Developing Sweet tooth

China is definitely developing a sweet tooth, having seen a 48% increase in per capita sugar consumption in China over the last decade (according to the USDA). As in other countries, sweet beverages are a significan and growing source of sugar consumption.

Data from Swire Pacific, a major soft drink distributor, show that soft drink sales in its sales areas rose five-fold on average between 1999 and 2009 compared to a 7% growth in the US over the same period.

Thirty years ago, most of China’s citizens had never even tasted chocolate. Many still haven’t. But that is changing quickly. Synovate’s Media Atlas China study found that nearly 40% of consumers in Tier 1 cities consumed chocolate at least once a month or more. That number climbed to nearly 60% for consumers aged 15 to 24 year olds living in Tier 1 cities. A whopping 54.5% of females aged 20-40 consumed chocolate once a month or more. The differences between patterns of chocolate consumption between total population versus the young is an illustrative example of how quickly China’s consumers have taken to exotic, foreign tastes.

Despite a 35% share increase in the global chocolate market (USD975m in 2010 compared to USD 633m in 2008), that still only accounts for less than one percent – indicating the huge potential for more chocolate consumption in China.10 This did not go unnoticed. Nestlé, the Swiss foods group, has invested US$1.7bn into Hsu Fu Chi, the Chinese sweets company in 2011, one of China’s largest foreign investments.

In Chocolate Fortunes: The Battle for the Hearts, Minds, and Wallets of China’s Consumers, Lawrence L. Allen tells the story of how Hershey, Nestle, Cadbury, Mars, and Ferrero Rocher have fought to create (and then corner) China’s vast potential chocolate market. A former executive for Hershey and Nestle, Allen spent seven years in China working to bring chocolate to the region. Allen tells us, for example, how Ferrero Rocher, the family-owned Italian company responsible for bringing us Nutella, carved out a niche in China by combining tight quality control with dense distribution and maintaining high price points to protect its premium positioning.

Mars seems to have done best, with 39% share of the China retail chocolate market. Their secret seems to have been commitment to quality and freshness, taking it step by step instead of over-reaching, highly flexible in response to consumer needs as well as consistently spending more on advertising and in-store promotion than its competitors. Mars also seems to have developed the strongest local management team, managing unheard of rates of retention of local senior staff.

Other manufacturers were not as fortunate. Cadbury overestimated demand and how much was a normalserving to Chinese consumers. As of 2008, Cadbury’s China branch accounted for only 0.5% of its worldwide sales. Hershey squandered an early lead and has virtually disappeared from China’s shelves.” Yet with all this activity, Chinese only consume a fraction of the chocolate that Westerners do – 146 million pounds of chocolate per year – which comes to slightly less than 2 ounces per person. With China’s potential chocolate market (people living in major cities) being estimated at 100 million people, or 8% of the population, there’s along way to go before this market is even close to be saturated.

Coffee as an indicator of internationalized tastes China’s demand for coffee grows an estimated 15 to 20% a year (the world average is around 2%), and is expected to reach 300,000 tonnes annually by 2020. Coffee sales currently account for a little over 20% of the hot drinks market in China, compared to around 70% for tea.14 According to Synovate’s Media Atlas China survey (MAC), Nearly 1 in 10 Chinese consumers in Tier 1 cities have visited a coffee shop at least once a month or more. This has been helped by both international and regional brands expanding rapidly in the market.

From its first store in 1999, Starbucks now operates 450 stores in China itself and plans to triple that number to 1,500 by 2015.  In 2009, the company introduced to its customers a coffee blend that includes beans grown in Yunnan, “South of the Clouds.”

At home, Chinese consumers are more likely to add hot water or milk to a packet of instant coffee (often with powdered milk and sugar already added) instead of brewing from ground beans. According to Synovate’s Media Atlas China survey (MAC), one in 5 Chinese consumers drink instant coffee at least once a month or more in Tier 1 cities with that proportion rising to 24.9% for Chinese consumers aged 15-24 living in Tier 1 cities.

This actually highlights another unique trend in China, the growing demand among domestic consumers for coffee has created a concurrent demand for locally sourced coffee beans to such an extent that farmers inChina’s southwest are switching from growing tea to growing coffee. Much of the coffee processed at Nestle’sinstant coffee factory in Dongguan comes from Yunnan, and the company has been instrumental in training coffee farmers in best practice techniques, opening an experimental and demonstration farm in 1997.16

“Yunnan arabica now accounts for 95% of China’s coffee production, and plantation coverage has more thanquintupled to around 23,000 hectares,” explains Stuart Eunson, whose Beijing and Shanghai-based company,

Arabica Coffee Roasters, now sources 20% of its beans from Yunnan. With a further 20,000 hectares of land considered suitable for coffee cultivation, there’s certainly room for further growth.

How could we think about food and drink without mentioning one of the fastest growing categories in China: wine. Although having enjoyed a healthy domestic production industry, a taste for imported wines has accompanied the meteoric rise of incomes, particularly among China’s newly wealthy. A recent study conducted by VisaCard Worldwide based on a survey of 1,800 respondents with an annual income exceeding $16,000 in Beijing, Shanghai and Guangzhou, confirmed that 80.7% think French wine is best, followed by Italian then Chinese brands (ahead of Spanish, Australian and German wines).

This phenomenon is not confined to the wealthy. According to Meininger’s Wine Business International, Chinese wine consumption overall is predicted to increase by 70% by 2011, making China the eighth biggest consumer of wine in the world by 2012. According to the China Brewing Association, China wine sales have seen an average increase of 20% over the past years, against an international growth rate of just 1%~2%. As China’s consumers start to acquire a taste for the finer things in life, enjoying a glass of wine with food tops the list of new lifestyle habits forming in China.

Similar to the production trends for coffee, China is now one of the biggest producers of wine in the world – ranking 7th in 2010, according to a study by the International Wine and Spirit Record (IWSR) for Vinexpo, the wine fair that takes place in Bordeaux and in Hong Kong. Until 2007, China did not even appear among the 10 biggest producers in the world. China is forecast to experience the biggest growth spurt yet in wine production – a whopping 77% from 2010 to 2014.20

Conclusions & Implications

As a nation of consumers already widely omnivorous and relatively unburdened by consistent and homogenous strictures resulting in a narrowly prescribed menu, tastes have been unfettered by both increased access to new and exotic flavours as well as the purchasing power to try them. Combined with a relatively open mind to try new things, the development of the Chinese palate has been more prone than in other markets to be influenced by marketing communications campaigns across China.

This means enormous flexibility in terms of Chinese consumers picking up new habits and lifestyle changes, particularly in Tier 1 cities – and simultaneously an open field in terms of what marketers can create and communicate. The scale of new product and category adoption in China is truly unprecedented, and although pitfalls are many, getting the right information about consumers remains the key to any successful strategy in China.

November 2011

Rapid technological developments, including high-speed internet access and WiFi, and increasing ownership of connected devices such as smartphones and tablets are revolutionizing digital media usage in Southeast Asia, with internet usage in some markets surpassing time spent on traditional media such as television, radio or print, according to a new study released today by leading global information and measurement company, Nielsen.

The inaugural Nielsen Southeast Asia Digital Consumer Report, which examined the digital media habits and attitudes of Southeast Asian consumers, revealed that Singaporean digital consumers were the heaviest internet users in the region, averaging 25 hours online per week, followed closely by digital consumers in the Philippines and Malaysia who averaged 21.5 hours and 19.8 hours online per week, respectively. Digital consumers in Indonesia trailed the region for time spent online, averaging 14 hours per week.

According to the Nielsen report, increasing numbers of Southeast Asian consumers are getting online via internet capable mobile devices, and rapid growth in ownership of internet capable devices, namely smartphones and tablet computers, is expected in 2012. In four of the six Southeast Asian nations, ownership of an internet capable mobile device is equal to or greater than ownership of a desktop computer – in Indonesia alone, ownership of an internet capable mobile phone (78%) is more than double that of a desktop PC (31%) or notebook computer (29%).

“The increasing availability and up-take of internet capable devices is driving usage of digital media across the region and bringing about considerable changes in the way media is consumed, in particular fuelling media multi tasking behaviours amongst Southeast Asian consumers,” notes Melanie Ingrey, Nielsen’s APMEA Region Research Director. “More and more we are seeing

consumers accessing multiple media platforms simultaneously, especially accessing the internet whilst watching television which many consumers are doing several times per week.”

The most popular activity being undertaken online varies across the region – email remains the most popular activity in Malaysia, Philippines, Singapore and Thailand, whilst news tops the list in Vietnam, and in Indonesia, digital media consumption is being driven by social networking. In all markets except Vietnam social networking ranks amongst the top five most popular online activities.

Nielsen’s report identified Facebook as the dominating social media site in the region, with a massive 90 percent of digital consumers in Indonesia maintaining an active profile on Facebook, 81 percent in the Philippines and 78 percent in Malaysia. In Thailand and Vietnam, Facebook does not enjoy such dominance, with social competitors 4Shared (Thailand) and Zing (Vietnam) holding significant market share. YouTube enjoys widespread popularity in Southeast Asia, ranking as the second or third most popular social networking site in all six Southeast Asian markets.

Social networking sites are becoming increasingly popular amongst Southeast Asian digital consumers as a means of engaging with organisations – almost two thirds of Philippines digital consumers (65%) have connected or interacted with brands, products or companies via social media in the past year, as have 60 percent of digital consumers in Malaysia and 56 percent in Singapore.

“Social media platforms offer myriad opportunities for organisations to engage with consumers, and social media is becoming an increasingly critical means of influencing consumer decision making,” emphasises Ingrey. “As Southeast Asian digital consumers are becoming more familiar and comfortable using social media, their level of participation is also increasing. A significant proportion of consumers visit online discussion forums at least monthly and many are now beginning to take an active role in these online discussions, voicing their opinions and sharing their experiences about brands, products or services.”

November 2011

Today’s era of digital revolution is bringing forth endless array of hitech products which are welcomed and embraced by consumers all over the world. Consumers worldwide are spending more and more on technical goods each year as manufacturers continue to introduce new and innovative gadgets. According to leading global market research company GfK, value of the global tech industry is forecasted to grow by six percent to hit over 668 billion euros in 2011.

In Asia, the consumer technology industry is expected to sustain its good performance, fuelled by high demands for key driving products like tablets, DVD players/recorders, smartphones, Blu-ray audio home systems and the new generation TVs, which all registered over two-fold value growth in their respective segments in the first half of this year compared to the same period last year.

“Tech savvy consumers all over the world have been spurring the growth of the industry by eagerly adopting all the latest technology,” commented Mr. Benedict Hong, Regional Account Director at GfK Asia. “The TV front for instance has undergone substantial developments in the past few years with the introduction of ongoing technological improvements that have changed the landscape of digital TV.” Mr. Hong shared these and other insights at the Broadcast and Media Tech conference held in Vietnam where he presented the topic ‘Digital TV In-Roads into Asia’.

In Southeast Asia alone, the evolution of digital television have been growing consumer demand for television sets with digital tuners, which in the first 8 months of this year, achieved over USD2.42 billion in sales, according to GfK retail tracking. The developing countries of Thailand and Indonesia reported the highest volume sales, with consumers in each respective countries snapping up over one million units during this period.

“The transition from analog to digital technology will enable consumers to enjoy enhanced TV viewing experience,” commented Mr. Hong. “With the current availability of digital TV technology and infrastructure terminals, Asia is poised for new growth in the digital TV sector,” he concluded.

November 2011

Global market research firm Synovate today released the latest findings from Media Atlas China, the most extensive syndicated cross-media study conducted in China to date surveying 66,000 consumers across 88 tier 1 to tier 5 cities and rural areas across mainland China. The latest results show over half of mainland China’s urban population (56.4%) aged 15 to 64 now has access to the internet, becoming one of the most powerful online consumer groups in the world. Internet access in tier 5 cities now stands at 53%, not far behind the 61% figure in tier 1 cities. A quarter of the population has gone online using their mobile in the past month.

Steve Garton, Global Head of Media and Managing Director, Media – Greater China at Synovate, said: “Media Atlas China is designed to the highest international standards, revealing in-depth insights on the lifestyles, habits, product ownership, digital and media consumption of mainland Chinese consumers. Since the launch of the study in April 2010, it has been quickly adopted by many major marketers and media agencies as one of the most accurate sources for up-to-date information on the China market.”

“The latest findings from Media Atlas China show the strength in number and the sophistication of mainland Chinese consumers in their digital habits, a nation of increasingly online and on-the-go people.”

Vast regional difference in internet consumption, with some tier 5 cities overtaking those of tier 1

The Synovate Media Engagement Index measures the level of attitudinal engagement or desire to use different media by consumers. It is an index score that statistically combines various elements of a media’s emotional equity, such as personal meaning, integration into lifestyle, advocacy, and other related aspects. The latest index shows internet overtook all other media as the most engaging. It has the highest engagement score of 77, followed by television with an index score of 73, and mobile with the score of 68.

Jessica Liu, Media Research Director of Synovate in China, commented: “We see that the internet is a highly engaging medium in terms of time spent and interactivity. However, psychological engagement, turning a potential customer on to a brand idea, and the surrounding context fitting the ads and brand information are all important. This is what the Synovate Media Engagement Index can answer in combination with behavioural information. When we analyze the findings by city tiers, the engagement index of tier 1 consumers is 82 for internet versus 77 for TV, while tier 5 consumers indicated index scores of 76 for internet and 73 for TV.”

The average time spent on the internet is close to 3 hours a day (163 minutes). Respondents in tier 1 cities spend 2.6 hours a day browsing online, with 44% doing so daily. In tier 5 cities, 27% go online daily, spending around 1.4 hours.

Said Liu: “Internet consumption figures for lower tier cities seem to be lower than those seen in tier 1 cities on average, however the true picture is there are vast regional differences by tiers and cities. For example, Puning, a tier 5 city in Guangdong province, is very strong in online mobile (51%) and internet consumption (61%), even higher than that of tier 1 cities (25% and 51% respectively). Mianyang, a tier 4 city in Sichuan province, is also very strong in internet consumption (50%) with the reach above that of Chengdu (48%), the capital city of Sichuan.”

Continued Garton: “This demonstrates a research study needs to be able to go deep into each city, surveying each demographic segment with a large enough sample collected through rigorous methods, in order to paint an accurate picture of the lifestyle and consumption of consumers in China. This is imperative information which marketers and media owners rely on to help them make multi-million dollar investments on business development and expansion strategies.”

On the go on Weibo

One in four Chinese urbanites aged 15 to 64 are now on Weibo.

Particularly, the younger generation of 15 to 24-years-old show rapid adoption of new technology and media applications, embracing them with open arms.

Said Liu: “Almost half (45%) of the younger generation in tier 1, 2 and 3 cities use Weibo, while one in three youngsters in lower tier cities are already there. About 20% in tier 1, 2, and 3 cities and 10% in lower tiers go online using their smartphones, which is double that of the total population.”

In terms of overall online social networking activities, one in three consumers (30%) from tier 1 cities has visited a social networking site (SNS) in the past month, while 18% and 10% have done so in tier 5 cities and rural areas of China.

Garton commented: “Tier 1 figures might be above those of tier 5, but when looking at the overall numbers of users participating in social networking sites, 48% of those are in fact from tier 5 cities, 12% from tier 4, 17% from tier 3, 15% from tier 2, and 8% from tier 1. There are 494 tier 5 cities, representing 56% of mainland China’s urban population. As these cities continue to develop, the opportunities for marketers are tremendous.”

Having on the go accessibility to Weibo and other online social networking sites (SNS) further advances the popularity of these platforms.

Close to one in three (28%) respondents in tier 5 cities accessed the internet with their mobiles in the past month, which is even higher than those in tier 1 cities (24%). The highest is in tier 3 with 38% having gone online using their mobile phones.

Window shopping and buying – Online style

Overall, one in seven (14%) Chinese urbanites has shopped online in the past month, while 11% in tier 5 cities have done so. Given the vast number of tier 5 cities and their population, this translated to a 49% market share of online shopping by consumers in tier 5 cities alone.

Top items purchased online in the past six months:

1. Clothes/ fashion products/ shoes/ accessories – 69%: Highest purchase in tier 2 cities (75%); and 64% in tier 1 and 66% in tier 5 cities

2. Personal digital products – 26%: Highest in tier 3 (30%); 29% in tier 1 and 24% in tier 5

3. Personal care products – 23%: Highest in tier 1 and 3 (both 27%), 20% in tier 5

4. Books/ newspapers/ magazines – 22.4%: Highest in tier 1 (32%), 19% in tier 5

5. Home arts & crafts – 15.8%: Highest in tier 2 (20%); 14% in tier 1, 16% in tier 5

Commented Liu: “Our latest findings show the internet is in fact the overall number one media in calling people to action. After seeing something on the internet, 37% would search for more information through search engines, 25% would visit the website and 8% would write an email to the address provided, all prompt to actions were above other media. Not too far behind television, 29% would talk with others once seeing a product or service online, compared to 31% after seeing something on TV; and 15% would purchase a product after seeing it on the internet, close behind TV’s 17%.”

Media Atlas China: Beyond Digital

“It is well known how rapidly China’s middle classes are emerging as the economy continues a strong growth path. But you can’t just knock on their doors to interview them anymore, because they have security measures such as gates or keypads which stop people – including market researchers. We can and do reach them via phone interviews, together with face-to-face methods to cover the balance of Chinese society. This uniquely sets apart the Media Atlas China study. Not conducting phone interviews, it can be said, would be to exclude large segments of China’s middle class. We let the results speak for themselves and encourage all marketers to see just how much larger their audiences and opportunities in China really are,” said Garton.

November 2011

Consumers demand for smartphones in Southeast Asia is proving to be insatiable and showing no signs of slowing down. The smartphone industry across the key Southeast Asian markets of Singapore, Malaysia, Thailand, Indonesia, Vietnam, Cambodia, and Philippines continues to expand with third quarter findings from leading global market research company GfK reporting more than 4.7 million units worth nearly USD 1.5 billion being sold in July to September 2011. This is a reflection of volume and value growth by 9 percent and 6 percent respectively over quarter two, and over two fold increment when compared to the same period last year, at 120 percent and 109 percent.

As the industry continues to enjoy boom, competition among the various smartphone operating systems (OS) intensifies further with a new hot favorite among consumers emerging in the latest quarter. According to recent findings from GfK Asia, sales volume of Android smartphones, which have been seeing a steady upward trend in Southeast Asia, has climbed two spots over the last two quarters to seize the top smartphone OS standing.

“GfK Asia’s retail tracking reveals consistently healthy sales performance of Android phones—the only smartphone OS which has been registering unwavering month-on-month growth over the last twelve months,” noted Mr. Benedict Hong, Regional Account Director for Telecommunications. “Compared to the third quarter a year ago, sales volumes of Android smartphones has grown exponentially by over 1,000 percent!”

Share of volume sales for smartphones running on Android OS have been rising over the last two quarters to reach nearly 40 percent, translating to two in every five smartphones sold being an Android phone. Along with RIM OS and Symbian OS, they make up the three top smartphone operating systems in Southeast Asia with combined shares totaling nearly 90 percent.

“However, it is interesting to note that some variation in popularity of smartphone OS exist in a couple of markets in this region. For instance, in Southeast Asia’s biggest smartphone market of Indonesia, RIM OS has been leading by a substantial margin for at least the last five consecutive quarters even as rivals struggle to make inroads,” observed Mr. Hong. “Another country in Southeast Asia which is also bucking the general trend is Vietnam, where Symbian has always been and still is the ruling smartphone OS today.”

“Despite the differences, one particular trend is obvious across every country in the region—the Android smartphone market is on a roll. From just over 50 models of Android smartphones available in the market a year ago, the figure has swelled to almost 170 models in the last quarter,” commented Mr. Hong. “With the ongoing engagement and partnership model between Google and major manufacturers, we can expect more innovative Android smartphones to swamp the marketplace; at least until there is another major breakthrough that can shake the dynamics of the smartphone OS industry,” Mr. Hong concluded.

November 2011

The launch of free newspapers such as am730, Headline Daily, Metro Daily and The Standard, combined with consumers’ increasing online media consumption has transformed Hong Kong’s media landscape and placed greater pressure on paid newspapers according to the latest Nielsen Media Index Survey, which was conducted between July 2010 and June 2011 (before the recent launch of Sharp Daily and Sky Post).

The Nielsen Media Index, first introduced in Hong Kong in 1969, is a unique single-source multi-media survey that provides insights into media habits, lifestyles, attitudes and product consumption of consumers across nine markets in Asia Pacific. Released quarterly, the latest study in Hong Kong polled over 6,000 individuals aged 12-64 via a combination of face-to-face and online interviews.

The latest study revealed readership of daily newspapers (excluding online readership) has dropped 6 percentage points since 2009. During the same period, readership of free newspapers has risen from 27 percent in 2009 to 36 percent this year.

Despite the drop in readership, Hong Kong has the highest newspaper readership in the region.  Singapore comes a close second in terms of newspaper readership and similarly to Hong Kong, is also showing a decreasing trend.  Markets like Indonesia, Philippines, Taiwan and Thailand also follow this trend.  The only market covered by Media Index that shows an increase in newspaper readership was Malaysia, due to the popularity of tabloid news.

Although daily newspaper readership in Hong Kong has declined over the past few years, there has been a notable increase in the number of daily newspapers that readers read, from 1.3 in 2005 to 1.9 today.  “As the results were based on fieldwork conducted before the launch of Sharp Daily and Sky Post, it is expected that the total number of daily newspapers read by consumers will further increase and thus lead to a further expansion of the free newspaper market,” said Celia Fan, Director, Media Research, Nielsen Hong Kong, “Readership of free newspapers has increased while the number of paid newspapers read has declined from 1.2 to 1.0 over a two year period, highlighting the  impact that  free newspapers is having on paid newspapers.”

The Nielsen Media Index results also revealed that consumers are increasingly spending more time reading free newspapers, from 42 minutes in 2010 to 45 minutes today whereas time spent on paid newspapers has remained constant over the years at about an hour.

Threat from New Media

While paid newspapers are facing increasing competition from free newspapers, the emergence of new media is also impacting newspaper reading habits.  According to Nielsen Media Index, the number of people reading newspapers via the Internet, mobile phones and mobile devices has increased by almost three times in the last two years, from three percent to 11 percent this year.

“From texting to video to social networking, mobile phones are taking an ever-expanding role in consumers’ daily lives. As mobile devices become an essential item of our lives, people can access and read news anytime, anywhere without the constraints of connectivity.  According to the Mobile Applications Survey jointly conducted by Hotmob and Nielsen in June, news mobile applications are the most used applications amongst mobile phone users in Hong Kong.” Fan commented.

Although paid newspapers are experiencing a threat from free newspapers and new media, paid newspapers still play a very important role amongst readers who only read them, observed Fan.  More paid-newspaper-only readers compared to free-newspaper-only readers regard newspapers as the most trusted source of news / information, a medium to turn to for in-depth analysis and more importantly, a medium that they cannot do without.  As some survey respondents commented, free newspapers allow people to quickly glance over the major news but paid newspapers provide more indepth analysis to let readers understand what is going on.

What’s Next?

With the launch of another two free newspapers, Sharp Daily and Sky Post, and more newspapers offering news mobile applications, newspaper consumption is likely to increase and change as new media offerings come to the market. It’s therefore critical for media owners to diversify their platforms to reach readers and for advertisers to target their consumers more effectively as a result of the emerging and ever-changing media trends.

“Newspapers, no matter paid or free, will face more intense competition than ever before. It is vital for newspaper owners to differentiate themselves from the others and build a unique image in readers’ mind,” said Fan.

October 2011

The merger of GMI and Lightspeed Research has created one of the world’s largest on-line panel companies.  Of course mergers and acquisitions in this business are not new; in the last few years we have seen Research Now & e-Rewards and Ciao & Greenfield come together, among others.

Anyone attending an ESOMAR conference in the last few years, or even viewed the number of on-line panel sponsors to this publication will see the huge array of panel companies who, at least on the face of it, provide essentially the same commoditized service – access to consumers who are willing to take part in surveys for a fee.

So is the recent M&A activity the result of an oversupplied, stressed market?

Terry Wiley from Lightspeed comments that there are too many panel companies in the more mature Asian markets such as Japan and Australia, but “SE Asia is still wide open although traditional online methods are restrictive in many emerging markets and suppliers will need to look at alternative methods such as mobile”.  He goes on to point out that M&A activity for which his own company is currently engaged with GMI is “a strategic necessity. Lightspeed/WPP saw strengths in technology with GMI, as well as providing expanded coverage in key markets such as India and Latin America”.

James Rogers from Toluna comments that Asia is like the 3^rd installment for the on-line panel industry (after the North America, and Europe).  The opportunity for Asia is that it can learn from the development of the on-line research industry in the other regions.  The rate of adoption of on-line research as a method has been much faster in Asia since a lot of the technology can be imported from the West.  The level of competition has also kept pace with the rate of growth, so hence a need for some consolidation. “The quicker you get hold of resource through acquisition, the better” comments Rogers.

Some see the recent mergers as a natural process, not unlike the consolidation that has been observed with the main stream research agencies – mergers of large players such as Synovate and Ipsos to provide better regional coverage for Ipsos in Asia, TNS and RI for economies of scale, or the acquisition of Saffron Hill to provide Added Value specific local market coverage and access to specialist skills.

Many of the drivers of integration are for regional coverage.  The merger of Research Now and e-Rewards provided strong coverage in both Europe and the US, while other acquisitions are for filling gaps in specific markets where some regional players can be weak, e.g. Indonesia, Thailand, and the Philippines.

James Burge from Research Now comments that acquisitions are also for specific capabilities, for example their recent acquisition of Conversition in the area of social media.

But mergers are a far more efficient way of scaling up – it is very expensive and even ‘intimidating’ for a panel company to attempt to scale up through organic growth alone.  Mergers also provide the economies of scale and frees up resource for further R&D within the panel companies.

Mergers in panel companies present some unique challenges.  As ‘technology companies’ the integration of panels and IT can be quite challenging and can take 1 to 2 years to complete.  Depending on the terms and conditions that panel companies have with their panelists, they might need to be re-invited to the panel.  Jason Buchanan comments that while 5-6 years ago the technologies of panel companies were more homogenous, as technologies developed they have diverged, meaning technologic integration is now more challenging. 

Less predictable is how well two panel companies can be integrated from a cultural standpoint.  Many panel companies are fairly recent start-up businesses, and such companies have quite a unique culture of entrepreneurialism and the people within these companies can be “extremely opinionated”. 

James Burge comments that ‘a merger of equals’ tends to work better culturally, since they tend to be at the same stage of development or maturity whereas a larger firm acquiring a smaller start-up company it can take time to work towards common values and working styles.  These though are not unique to panel companies and would also apply to most companies going through M&A.

Standing out from the crowd

As a more commoditized product, the scope for differentiation among on-line panel companies is somewhat limited.  The main areas that panel companies seek to differentiate themselves are a) end-to-end client service quality from advice in survey design through to delivery of data, sometimes even in charted form, b) their technology, e.g. river sampling, other capabilities in social media, and programming, and c) price – while one would expect a commodity such as panel-based surveys to have found their own price level, price differentials still exist making this partly a differentiator between companies.

Philanthropy is also an important element of on-line panel companies.  While such initiatives can help to differentiate companies in the main stream, CSR is often part of the philosophy more progressive technology-based companies which includes panel providers.  More than one of the on-line panel companies for example donated funds to the Japan Earthquake & Tsunami appeal.

Most expect further consolidation in the industry.  Enemies will have to become friends, and some advice “don’t burn your bridges, because there is a high chance of acquisition.”

Terry Wiley sums it up “Get specialized, get big, or get out!”

October 2011

On-line research is no longer the cheap and fast alternative to conventional data collection, but is now defining how to research consumers.  

By Piers Lee – Senior Consultant & Managing Director of BDRC Asia

The Asia Research annual review of the on-line research business is a deep dive among on-line industry experts, designed to inform industry stakeholders of key developments in the on-line research business.  This leader is the review of 2011 and what to look out for in 2012.

As part of this review, Asia Research undertook depth interviews with the heads of some of the major panel and on-line technology companies including Lightspeed Research (Terry Wiley), SSI (Jason Buchanan), GMI (Ludovic Milet), Toluna (James Rogers), Research Now (James Burge), and i-Link (Chris Rowen).

The most notable aspect of the 2011 review compared to previous years is how these companies talk less about the practicalities of doing on-line surveys in Asia, but instead how on-line research is now determining the type and style of research that is being implemented, and the changes that technology is having on the overall research business.

In a sense the writing is on the wall for traditional research – respondents are less accessible, less co-operative, and less patient.  The 20+ minute telephone interview (which is still the mainstay of most CATI projects), is no longer practical with the type of audiences brand owners need to reach out to such as the youth market, affluent groups, and business decision-makers.  Ludovic Milet from GMI comments “We can’t do brand health tracking in 10 years times in the same way as we are doing it today.”

On-line research is leaving home

The hottest topic in this year’s review is mobile technology.  Research is about how to access consumers, and in many of the developed markets the smart phone has almost become a permanent consumer appendage.  Ludovic Milet from GMI comments that consumers “wake up and go to bed with their smart phone”.  Its closeness to the consumer therefore lends itself well things like diary based studies.

Research Now has launched its smartphone App panel in the UK and Australia.  Here panelists can participate in surveys any time, any place, and this is particularly useful for more mobile groups such as the youth market.  James Burge from Research Now says smartphone based research could account for up to 20-30% of their business in 3 year’s time. This method is particularly useful for time / location sensitive studies such as media.

James Rogers from Toluna comments that the technology for mobile research has been there for about 5 years, but the reason it is not yet taking off like it should do is that surveys are still too long.  With mobile research the questionnaire needs to be very short, and there are limitations because of the small screen.

The new technology is being designed around consumer lifestyles but the market research agency, probably under pressure from the client, is not adapting the surveys to fit this new landscape of research.  Research buyers within corporations have to meet the expectations and information requirements of a multitude of their internal clients all trying to get their slice of information within limited budgets – hence the 30 minute survey.  The answer is for all stakeholders to align to the new realities of 21^st Century consumers.  The definition of a ‘long survey’ has fallen from 35 minutes to 15 minutes and panel companies need to work with the market research agency to educate clients on this.  Shorter interviewers will mean more accessibility, and more research – literally “less will be more”.

Sampling nightmares

Some of the old arguments over the ‘representativeness’ of on-line panels in Asia are starting to fade as more and more consumers now get access to the Internet.

Some of the key developments in on-line research over the last year have been ‘river sampling’.  The technique has both it plaudits and critics.

Terry Wiley from Lightspeed comments that the increasing demand for respondents has resulted in dynamic sampling and on-line intercepts via the likes of  banner advertising, but he argues that there is not enough transparency regarding the use of these methods due to potential data quality concerns.  “People (through these methods) are not engaged and as a result click through rates and quality of responses is much worse because people are primarily motivated by an instant reward”.

River sampling can be particularly problematic for brand awareness surveys.  Respondents are drawn in from specific websites where they might have had heavy exposure to a particular brand or set of brands.  This will lead to highly biased brand awareness data.

The counter argument is that traditional email invitation to panelists is simply not sustainable. James Rogers from Toluna comments that email as a medium is far too overused, and you now need to rely more on community based panels and “embracing the essence social media”.  This can mean creating an open dialogue between panelists and then routing them to surveys at appropriate intervals.

Jason from SSI comments that to help ensure representative web-sourced samples, respondents are first drawn into our sampling system and screened prior to taking part in the survey, which overcomes the problems associated with ‘river sampling’.  But he points out that the threat to the on-line research business is that methods are being chosen mainly on economics rather than what is the optimal survey solution.

Companies still have to consider mixed methods, comments Buchanan, on-line is part of the mix of survey methodologies and not the be all and end all to research.  The SSI merger with Opinionology has helped provide the company a wider range of data collection methods.  We believe the optimal mix for data collection from a pan-Asia perspective includes online, offline, mobile and  text message-based methods – the industry should accommodate for those countries that have  slower Internet speeds and lower smart phone penetration.  This can also be more convenient for some respondents, but again for this to work the surveys need to be much shorter than those market research agencies are currently designing.

Change for better

Common feedback across all these stakeholders is how the industry is seriously addressing panel quality issues.  Terry Wiley comments that steps to ensure on-line panel quality will be one of the main factors that differentiate the panel companies in the future.  Work done by industry bodies such as CASRO and the ARF will come to Asia.  Clients such as Samsung, P&G and Microsoft are also driving the quality issue.  “Brands need to be aware and have an thorough understanding regarding their data suppliers as methods such as river sampling can be dangerous, and poor panel quality could seriously affect the industry.”

Social media is also viewed as the next big thing in on-line research. There are several applications for research in this medium including short, quick surveys, e.g. for polling and observing chatter. BuzzMetrix and Radian 6 are companies operating in these areas.  With social media based research, the incentives need to be different as compared to normal on-line research, e.g. respondents are given credits that they use to buy Apps. 

But developments in on-line research are not just limited to sampling and the devices through which consumers complete surveys.

Chris Rowen from i-Link, an on-line fieldwork company, says they are developing new tools for combining on-line qualitative and quantitative methods by branching people off into qualitative research at appropriate junctures.  “We are also improving the capabilities in question methods with smart phones. We are also seeing mobile technology being used for traditional in-person research, e.g. at venues as a form of Computer Assisted Personal Interviewing (CAPI)”. Chris also says “the situation in Asia is unique in so far as consumers are bypassing the PC, with their main on-line access being through their mobile. Currently there are around 50 different question methods in PC-based on-line research, but only 12 in mobile and this has to increase.  And of course surveys will need to become shorter and more targeted”.

Jason Buchanan comments that technology will continue to move into market research.  While some of this technology is about reducing the more labour intensive aspects of the business, others will unlock more insight including facial recognition technology, location based research (e.g. through GPS), and smart phone based research.

B2B panels

Still, the one area that remains mostly off site to on-line research is in B2B research.  While some of this does take place (GMI report about 5% of their surveys are B2B), these tend to be highly focused samples – sometimes undertaken at higher unit costs that traditional phone based research.  There are still issues about access to more senior business decision makers, e.g. the C-Level, and it will be a very long time before one can get a representative sample of businesses, e.g. appropriately sampled by industry sectors and size of business.  In the US, there are panels of sole traders, e.g. gardeners, interior decorators, etc, but in Asia one is unlikely to get enough sole traders within one specific industry – ‘the more you drill down, the more difficult it gets’.

Terry Wiley says “quality B2B panels in Asia are far off.  The home business is not proper B2B.  LinkedIn tried to set up B2B research with their members 2 years ago, but have since pulled out.”

But Ludovic Milet from GMI points out the on-line panels, while not getting you specific samples by business type, will give you access to business people as a general category and with it higher income groups.  Those with annual incomes of USD80k+ are generally accessible in sufficient samples across many markets in Asia Pacific.

James Rogers from Toluna says that opportunities in B2B on-line research exist in partnering publishing houses and also with organizations such as PWC.  Indeed the Asia Research publication is very successful in undertaking B2B surveys, albeit limited to those who work in the market research industry!

The conspiracy theory

Many research conferences have highlighted the increasing roll of the on-line panel company in end clients’ repertoire of research suppliers.  James Burge comments that clients with in-house research departments have been buying fieldwork directly for many years, so there is no real change here, i.e. they are still buying fieldwork but now on-line fieldwork, though there has been some increase in in-house survey programming in client organizations.  Also, when end-clients go directly to panel companies, it frees up more of clients’ budget to spend on more strategic insight-based research with the market research agency.

The roll of the market research agency is to provide the value add, and if the client doesn’t need it (e.g. by virtue of having their own in-house research department), or the research agency cannot deliver it, then the agency will not be used.

While there has been this increase in end-clients going directly to panel companies, the ‘conspiracy theory’ (being the view that panel companies are looking to undermine the research agency) does not hold much water.  Still 90% of business for on-line panel companies is obtained from the market research agency.  Some agencies are such big buyers of panel-based research that they have set up their own centralized buying departments, partly as a means of routing sales calls away from the researcher to the buyer. 

Ludovic Milet from GMI observes that the clients who buy directly from panel companies are FMCG companies, banks, and media companies.  Some of these are characterized as having their own internal research departments, but some such as media clients are often looking for very fast turnaround research, often for ‘headlines’ rather than for detailed research.

The panel companies admit that survey research will still need to represent people who are willing to take part in surveys but don’t want to commit to being part of a panel – so traditional fieldwork is not yet dead.  But what about the people who are not willing to take part in any type survey?  Maybe just watch them – observation research could be the next big thing!