June 27, 2017 | Authored by: Kevin Cancilla
Why are Chinese consumers paying for content while Americans won't?
Businesses that operate on a subscription billing model are thriving in China, having somehow found the key to providing online content without relying on advertising. In fact, according to Bloomberg, both Chinese businesses and venture capitalists understand that advertising revenue is not a sustainable form of operation. By some means, they've figured out a way to get consumers to pay for their content directly.
What is their secret? Is it a difference in culture, or have Chinese content providers found a magic strategy that clicks with consumers? The answer, in short, is both. Recent economic and cultural shifts in China mean consumers are more likely to pay for content. In addition, Chinese brands, businesses and creators have found a model that encourages subscriptions.
The differences between Chinese and American consumers
Chinese shoppers are particularly loyal to their favorite brands, while Americans are far less so. According to the latest Brand Footprint report from Kantar Worldpanel, a company providing international consumer insights, Chinese brands make up nine of the 10 fastest-growing consumer goods companies in the region.
The results of this report make sense considering McKinsey & Company's observations of the Chinese market. The consulting firm also saw increasing brand loyalty in this demographic. This affinity could be a factor contributing to the willingness of Chinese consumers to subscribe directly to product and service providers.
Can American subscription services cultivate this type of brand loyalty in their consumers? They can certainly try but it will be difficult. In a separate report, McKinsey noted only 13 percent of U.S. shoppers stick with a preferred brand, meaning a whopping 87 percent shop around before making a purchase. These statistics are made worse by the fact that, ultimately, 58 percent of shoppers end up leaving a brand. Depending on a company's resources, it may be better to focus on acquisition and retention rather than devise incentive programs to increase loyalty.
In addition, Bloomberg identified one major area that accounts for a significant difference between the reasons why Chinese and American consumers pay for content. Certain cultural shifts, namely economic gains and thriving urban environments, have caused many young Chinese citizens to move from rural areas to cities, separating them from their friends and family. As such, they're more willing to pay for things like video live streaming to feel a sense of companionship. Additionally, they pay for content that helps them live the lifestyle of a modern city dweller.
Adapting Chinese models to suit American needs
So what part of the Chinese model can American businesses emulate? After all, they can't reshape the economic landscape on such a drastic scale as China's, and cultivating loyalty can be a long and difficult path. U.S. subscription services need an actionable plan that will bring them results in the near future.
Thankfully, there are some aspects of the Chinese model that can easily be adapted to U.S. audiences. One is the concept of freemium, where customers have free access to a product and pay for add-ons and upgrades. This model is most popular in video games, and it's used by Chinese companies to great success.
"Mobile payments are becoming more prevalent in the U.S. each year."
Another method American businesses can use is the adoption of mobile payments. The saturation of mobile payments is, admittedly, much higher in China. However, this payment method is becoming more prevalent in the U.S. each year. Positioning themselves at the forefront of mobile pay adoption makes subscription companies much more attractive to customers once this method takes off.
Finally, Chinese media producers give their customers the option to customize the content they receive - a practice American businesses should definitely adopt. Bloomberg described an app called De Dao where customers can subscribe to different newsletters for about $30 per year. Using a similar method helps American companies collect revenue while providing the flexibility their customers want.
Chinese companies that utilize subscription management are taking off, and American business can learn a lot from them. While certain cultural trends are impossible to emulate, American businesses can group content, adopt mobile payments and use freemium where applicable to increase their subscription numbers.
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