Why you can't spend small in China.

It's time for advertisers to adjust their expectations on Chinese ROI.

Despite it’s recent slow down, China remains an important item on the “To Do” lists of many International Brands.

Companies looking to grow, in a significant way, realise that the Chinese market remains an exciting option.

For Western marketers however, it can still be a scary place. Between language and cultural barriers, unfamiliar payment methods and difficult trademark laws, China is a region best approached with a carefully thought out strategy.

Increasingly brands want to “dip their toes” in the China pool. They want a trial run of Chinese marketing before they decide to get serious about the region.

This is a perfectly sensible approach so why are so many brands disappointed with the results?

What’s needed here is some expectation management when it comes to how far campaign spends will go in the Chinese market.

Lets start with online population sizes. The current pool of Internet users in the USA is just shy of 287 million. In China that number is more than double at 721 million.

The difference is even more pronounced when looking at smaller online markets like the UK (60 million), France (56 million) and Australia (21 million).

This means your campaign spend is spreader thinner in China then in any other market. When your campaign is spread this thin, advertisers should expect an impact on results.

As an example, let’s take a $5,000 USD ad spend on Google in the USA and compare it to a $5,000 USD ad spend on Baidu in China

Due to the massive differences in online population, spending $5,000 in China is comparable to spending just $1,988 on Google in terms of reach.

What results would you expect, as an advertiser, for a $1,988 campaign?

Brands need to set their expectation on Chinese ROI accordingly.

Again the difference is more pronounced in smaller online markets:

The results are the same regardless of the campaign type. SEM, SEO, display, video, mobile or social; we need to adjust expectations on how far campaign budgets will reach.

Looking at a market like Australia – to achieve a similar impact of a $5,000 ad spend, Australian brands would need to spend $14,332 USD in China.

Of course for those who persist and successfully launch their brands in the Chinese market – the rewards are enormous. Your brand is suddenly in front of:

• the world’s largest population;
• the world’s largest online population;
• the world’s largest group of tourists (and the biggest spending tourists);
• the largest consumer of luxury goods; and
• the world’s second largest film market (that’s second to Bollywood by the way, Hollywood comes in third)

It's no surprise that so many International brands are looking to grow China into their largest market. It’s a good strategy.

It’s also a great approach to start smaller, test the markets, test your approach and build your brand up over time.

All that’s needed is a little expectation management around return on investment for those trial budgets.