BEIJING: Brands looking to drive word of mouth in China must adopt a localised approach in order to make an impact among consumers, according to McKinsey.
The consultancy reported that 60% of Chinese shoppers regarded their friends and family as being an important source of product information and as playing a key role in shaping their purchase decisions.
More specifically, a previous study had found that 66% of adults in the country agreed that these groups influenced which moisturiser they bought, compared with 38% of participants in the US and UK.
"Physical or virtual, word of mouth is an essential brand-building tool for companies in China," Max Magni and Yuval Atsmon, who work for McKinsey in the country, said.
"You just can't stop the word from spreading in China."
McDonald's, the fast food chain, tapped into this trend by promising that seven of its outlets would give away free McSpicy Chicken Wings for a week if one million netizens expressed their "love" for this product online.
Over the course of four weeks, two million consumers signed up to the campaign microsite, and McDonald's handed out 10,000 McSpicy Wings, sales of which also rose by 10% nationwide in March month-on-month.
One reason that peer recommendation plays such a vital role in China is the large number of goods that are being launched at any given time, meaning brand experience and loyalty levels are relatively low.
"Consumers are also trading up to brands that are more expensive for the first time, so seeing a friend use a product serves to reassure them," Magni and Atsmon said.
"The less a consumer knows about a product or the more conspicuous the choice, the more they are likely to care about others' opinions."
Another defining characteristic of word of mouth in China is that it is largely localised, a result both of the size of the country and the fact that individuals tend to live in close proximity to their friends and family.
To take just one example, Snow, the beer brand, enjoys an awareness rating of 97% in Chengdu and 87% in Hefei, but this figure falls to just 9% in Guangzhou and 4% in Nanjing.
Moreover, individual beer brands hold a market share of more than 10% in just two of the 22 regions regularly assessed by McKinsey.
Similarly, while there are some 800 motorcycle manufacturers in China, no single firm delivered more than 10% of category sales in 2009, and most people can name just two or three operators in this sector.
"For these reasons, successful companies in China cluster investments in a few geographic markets," said Magni and Atsmon.
"This allows them to gain a market share after which network effects kick in, accelerating growth and improving profitability."
Sony, the consumer electronics firm, attempted to achieve this goal by holding free photography lessons, which boosted brand recommendation scores among an influential selection of customers.
"The rising sophistication of consumers may reduce the reliance on word of mouth in future, but no marketer can afford to ignore it today in China," Magni and Atsmon concluded.
Data sourced from Harvard Business Review; additional content by Warc staff