Using Co-­Creationto Conquer theChinese CosmeticsMarket

Contents

Executive summary + Methodology

China: a complex market for the cosmeticsindustry + Skincare is everything

+ Health and beauty: 2 sides of the same coin

+ A new consumer group: cosmetics for Chinese men

Using co-­creation to engage local consumers with brands and products + What is online co-­creation?

+ The Chinese participative spirit – a catalyst for co-­creation

5 rules to make online co-­creation work inChina

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The authors want to thank Liz Grubow, Johannes Hartmann, Guillaume Legay, Kenneth Simonsen, Stéphane Courqueux, Oleg Curbatov, Sam Flemming, Frederique Covington, Stéphane Wilmet,Marie-­Claire Thao, Nourite Eladan for their contribution to this white paper.

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Executive summaryFor global cosmetic companies, China is no longer just an “emerging” market;; it has become the place to be. With the highest growth rate in the world, China promises big opportunities -­ but also big challenges. More and more Western brands are trying to understand the desires of Chinese consumers;; which products will appeal to their needs and tastes and which are the best and most relevant ways of communicating with them? Chinese consumers love Western brands. However, they are beginning to seek out local cosmetic brands because these brands have a deeper grasp on Chinese needs and culture. It therefore becomes a necessity for global cosmetics companies to develop a localized approach to the Chinese market. This paper examines how online co-­creation can help engage creative Chinese consumers with Western brands. As a result, Chinese consumers can assist foreign cosmetics companies in lo-­calizing and developing more relevant products for their own markets.

Co-­creation opportunities in China

UNDERSTAND -­ The online co-­creation approach enables to embrace the creative, sensorial and emotional potential of Chinese consumers that is not always explored through traditional means of research. Brands can better understand consumer needs, expectations and motivations -­ and avoid serious communication risks related to launching a new product in China.

INNOVATE -­consumers (not only traditional end-­users), so that the results coming from co-­creation projects provide more innovative insights. This strategy can naturally lead to the invention of new product categories rather than improving existing ones.

ENGAGE -­ Chinese consumers are some of the most active consumers in the world and are very vocal users of social media. Thanks to its participative and engaging approach, online co-­creation enables brands to create a long-­lasting relationship with Chinese consumers by becoming more familiar to them.

5 rules to make co-­creation work

1. Involve Chinese consumers at the early stages of new product development 2.

3. Start with creative consumers

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4. Use collaborative platforms

5. Continue the conversation

Co-­creating with Chinese consumersJust as you would have expected, this White Paper was co-­created with the participation of Chinese creative consumers. We decided to involve the eYeka community in this project by asking them to share their personal beauty-­care experiences. In order to gather deeper insights, we used a projec-­tive technique: our creative Chinese community was encouraged to imagine an American tourist who is travelling to China and wants to better understand what Chinese women (and men) do to be considered beautiful. Thus, the community was asked to share its “Chinese beauty secrets” with this

Community Brief Kate is a young American woman who has decided to spend a month in China as a tourist. She is curious about everything Chinese – people, nature, culture, cities… but as a woman, she is par-­ticularly interested in Chinese women’s beauty habits.

-­ Do Chinese woman use the same products than in the West?

-­ Does “make-­up” means the same as in her country?

-­ Is personal grooming related to Chinese traditional medicine?

-­ Are there some differences between Chinese cities/regions?

-­ She would like to learn more about your beauty routine!

-­ Share your beauty secrets with Kate: What are you beauty rituals, beauty moments and favorite

products (make-­up, hair care, skincare…)?

-­ How do you feel after your self-­care moment?

By the way, men, you are also welcome to participate! You can ask your mothers, girlfriends or sis-­ters about their beauty experiences or share your own self-­care experiences.

Experts’ interviews To nourish our understanding of the Chinese beauty market, we decided to conduct interviews with several experts. People who agreed to participate in the development of this paper are representa-­tives of global cosmetics companies, market research experts and academics. Their experience

study. Surprisingly, even though the co-­creation with the Chinese creative community was conducted independently of our expert interviews, we found a strong correlation between the results.

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METHODOLOGY

China: a complex market for thecosmetics industry “Chinese consumers are demanding and discerning. They are looking to brands and products that understand their skin needs and issues and will produce results.”

Liz Grubow, LPK Beauty

As the second largest cosmetic market in Asia

global companies, yet it presents a huge chal-­lenge: understanding the Chinese consumer.

It is a common mistake – especially in the cos-­metics market – to consider China as one entity: “it’s really wrong to think that what works else-­where, will also work in China”, says Stéphane Wilmet (L’Oréal). Not only are climate differences evident be-­tween regions, but the market is also develop-­ing unequally – there are still large economic, social and cultural differences between cities in China. According to Kenneth Simonsen (GfK), “In Europe it is common to speak of China as one entity, but it is important to know that there are huge differences between cities in China”. So “you can’t communicate with everyone in the same manner”, concludes Stéphane Courqueux (IFOP Asia).

“ ”“I think it’s Shiseido, the Japanese brand. As their commercials are quite good,

they always give you a feeling that their products are specially for Asian con-­

Winwin520, 26, Shanghai

While global cosmetics brands must take all of this into account when approaching the Chinese market, Asian brands already possess the lo-­cal knowledge needed to connect with Chinese consumers: “Brands from Korea and Japan are competing with Western brands to communicate

consumer”, says Liz Grubow (LPK Beauty).

The path to sustainable success for global cosmetics brands is the ability to quickly im-­plement localized communication and prod-­uct innovation solutions in China. Misunder-­

can lead to failure – that is spending a lot of time and money to grow brands and products that don’t resonate with Chinese consumers.

Consumer voice

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“Step 1: wash my face with warm water and cool water alternately

Step 2: toning lotion with cotton pad

Step 3: use eye cream: I will use my -­

der the eye, just like playing piano

Step 4: Moisturizer: I will warm the

If make up, I will have 2 extra steps:

Step 5: If make up, I will use sun screen block and make-­up base.

Step 6: use lip care stick. After using the lip stick, I will put a tissue to my

mouth and rub a bit so that it looks

more natural.”

Eryu, 23, Guangdong

The perception of beauty and beauty product consumption are shaped by culture.When it comes to beauty, skincare is the primary concern for Chinese consumers. “They are heavy users of skincare products, which represent around 70% of their beauty consumption”, stresses Liz Grubow (LPK Beauty).

Whiteness is the main feature of an ideal skintone in China and cosmetics companies constantly of-­fer whitening products as well as products with strong SPF protection.

According to Guillaume Legay (Sephora), “each region is very different. So the approach of selling beauty products should be different too. For example, Asian clients ask for skincare products, then

in Europe.” Since Asian consumers use many skin creams each day, they are interested in larger product offerings. Furthermore, Chinese consumers are very demanding when choosing products

Consumer voice

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Skin is everything

The concept of beauty in China is holistic. It is a marriage between external appearance and internal health. Beauty-­care has a more preventive, internal function in China than in the Western world.

An example of the synergies between external beauty and health is the renewed interest in traditional -­

ed in traditional Chinese medicine: “this is not just about the product. This is an entire concept, a phi-­losophy, a culture. Herborist is based in a truly different approach”, says Guillaume Legay (Sephora).

Throughout the ages, traditional Chinese medicine has always been an essential part of Chinese consumers’ lives -­ be it for health or beauty.

Cosmetic companies that understand the role that traditional Chinese Medicine plays in Chi-­nese beauty perception and beauty product consumption can build more relevant Chinese brand identities.

“According to traditional Chinese saying, “use our inside to nourish the outside”,

which means you need to have enough sleep, balance incretion, and regularly

clean all the toxin out of our body etc. if we can have all these, your skin will be

good.”

Bigchenxi, 23, Beijing

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Consumer voice

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Health and beauty : 2 sides of the same coin

When it comes to skincare, one of the biggest differences between China and the West is that men are increasingly active skincare consumers in China: “in the foreseeable future, men will be the source of the next growth in the Chinese skincare market” (IFOP study)

Taking into account that there will be more young Chinese men than women in the near future, global skincare brands will have new opportunities in product line extensions for men.

There is much less cultural resistance regarding the consumption of male skincare products in China: “The younger Chinese man is looking for skincare expertise and does not look to traditional shaving

Foreign cosmetics brands have a unique opportunity to tap into the skincare market for Chi-­nese men by offering them products that appeal to their needs and attitude towards beauty.

“I don’t usually stay up late as it’s really bad for the skin, so I will avoid staying up

too late if I don’t have anything that is urgent.

I also drink plenty of water every day to make sure my skin has enough water.

Before sleep, I will give my feet a hot bath: it’s the immersion of both feet and an-­

kles in hot water. I usually do that for 10 minutes.

This can help improve blood circulation and it’s good to our body! This is a very

traditional Chinese way.”

Rainzeye, 22, Shanghai

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Consumer voice

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A new consumer group: cosmetics for Chinese men

Using co-­creation to engagelocal consumers with brands and products“In the 21st century, “going local” is the ticket to success for multinational brands”

Jing Wang, Brand new China

The best way to bridge the knowledge gap in China for cosmetic brands is to directly collaborate with Chinese consumers by using an online co-­creation approach. This approach refers to a deep collaboration between a brand and its consumers to innovate marketing, products and communica-­tion so that the resulting output would fully connect with consumers while conveying the brand in a manner that best resonates with them.

The co-­creation approach has three principles:

UNDERSTANDThe purpose of the co-­creation approach is to better understand consumer needs and motivations. It allows brands to minimize communication risks related to brand or new product launches in the Chinese market.

INNOVATEThe online co-­creation approach is about engaging creative consumers (not only traditional end-­us-­ers) so that the results of co-­creation projects provide more innovative ideas that are pertinent to the consumer. These will naturally lead to the invention of new product categories or more engaging communication rather than merely improving what already exists.

ENGAGEBy involving consumers in the creation process, co-­creation enables brands to create a long-­lasting relationship with consumers based on trust and familiarity. This strategy then increases their pro-­pensity to buy and recommend the brand and its products.

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Co-­creation is an active, creative and social process based on collaboration between producers and consumers.

Frank Piller & Christopher Ihl, 2009

There are many ways to collaborate with consum-­ers. Yet, one of the most effective ways is via online co-­creation. Unlike more traditional methods, this is not about conducting focus groups or seeking con-­sumer feedback on products already developed. In-­stead, co-­creation is about involving consumers in the early stages of development and acting on their feedback throughout the innovation process.

While involving consumers at the right time is im-­portant for any co-­creation process to be truly suc-­cessful, pin-­pointing the right type of consumers for the project is absolutely key for any results worthy of the effort. Who are the right consumers to target? Only a tiny fraction of consumers have the creative capability that can deliver innovation breakthrough. These people are called “creative consumers”.

Unfortunately, most market research, “crowdsourc-­ing” initiatives or innovation-­related consumer en-­gagement takes place within the 90% of consum-­ers who only display “average” creative capability. Therefore, the information provided often does not deliver the game-­changing results or breakthrough innovations companies need in order to stay com-­petitive.

and engage this 1% of consumers that display exceptional creative abilities. These consumers can “help brands gather innovative insights,

entire new business opportunities.” (Forrester Research, Co-­creation Vendors 2011)

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What is online co-­creation?

Rapid engagementOnline co-­creation is the quickest way to engage with Chinese consumers.

Traditional surveys can take months -­ even years -­ to deploy in a country as big as China.

As international cosmetic brands set-­up shop in T2 or T3 cities, they quickly realize that they do not

Thanks to the Internet, there are currently more than 400 million Chinese consumers accessible on-­line. According to the Boston Consulting Group, China has the most active digital population among the BRICI (Brazil, Russia, India and Indonesia) countries.

With the increased importance of the Internet and word of mouth communication in China, online co-­creation is the best way to quickly become a part of consumer’s daily life.

Creative understandingOnline co-­creation taps into consumers’ creative potential and innovative insights.

Co-­creation is a collaborative task that is more enjoyable than simply answering questions. By using traditional research techniques companies may often get results that do not reveal any new information. Co-­creation approaches make it is easier to gather deeper and more innovative insights and uncover less-­evident consumer needs.

Since creativity is a means of self-­expression and self-­realization, people are naturally more engaged in creating something. And when creating for a brand, consumers build familiarity with it.

According to experts, public self-­expression is not as widely accepted in China as it may be else-­where. For example, the need to answer to a question correctly is seen as crucial as the wrong answer could lead to a loss of “face” (mianzi) or shame. As a result, verbal communication is less important than visual communication. The online co-­creation approach uses projective and creative techniques lets Chinese consumers save face and is better suited to Chinese culture than other ver-­bal/face-­to-­face research techniques.

Relevent authenticityOnline co-­creation enables companies to enter the homes of Chinese consumers.

Observation is one of the best ways – even better than focus groups -­ for understanding Chinese consumption habits. Nevertheless, it can be time-­consuming and the presence of a researcher can

observation while eliminating the biases of the researcher.

Online co-­creation means that creativity is no longer framed by space. Creative consumers create when and where they want. This results in more authentic, context-­based information.

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Chinese consumers are massively online 400 million Internet users in China The usage rate is the highest among all the BRICI countries More than 80% of digital users use instant messaging, read news online, and stream or download music 73% of China’s online population are aged 35 and under Chinese Internet users spend 2.7 hours a day online 99% of young professionals are Internet usersSource: Boston Consulting Group, 2010

Chinese consumers are highly participative

Source: Harvard Business Review

Represent my perception of a product and show personel ways of using products.

Being recognized by the community for the quality of my craeations

Having fun by creating something for brands

Improve my creative skills

Being rewarded for my creations

Motivation drivers for Chinese participation online

Source: eYeka Chinese community survey, march 2011 12

The Chinese participative spirit -­ a co-­creation driver

UK = 50M CH = 400M

41% have uploaded photo

15% have uploaded video

7% have used microblogging

55% have uploaded photo

34% have uploaded video

23% have used microblogging

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1.Involve Chinese consumers in the early stages of new product developmentIt is important to involve consumers in the early stages of the product development process in order

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product will fully satisfy his/her needs.

It is not only important to involve consumers at the right time – but also involve the right type of con-­sumers in the co-­creation process. According to Professor Oleg Curbatov, companies should focus on Knowledge Marketing by drawing on the skills and competencies that their consumers have. Companies can then apply this extra knowledge by involving consumers in the brand or product experience. According to Forrester’s taxonomy of participative consumers, the most valuable for co-­creation initiatives are: (1) Hyper-­Engaged Customers – fans of your product or brand with whom co-­creation is “more likely to elicit more and more useful, responses”, (2) Creative Consumers – whose primary interest is to apply creative thinking and are thus “a prime source of innovative ideas”, and (3) Experts – who provide brands with their “experience with the particular topic” as they are “ very familiar with a product, service, market, industry, or technology”.

3. Start with creative consumersWhen one uses traditional market research methods to ask consumers what new products or ser-­vices they would like, the results are often very limited;; they translate to suggested improvements of existing products rather than the creation of entirely new product categories. This is because this type of approach addresses the masses rather than working with a target audience. Innovation comes from creative minds and we think that the co-­creation approach is the best way for Chinese

always explored enough through other means of market research.

4. Use collaborative platformsWith the increase in Internet use in China, a consumer’s involvement in a brand’s development is now becoming more relevant than ever before. Online collaborative platforms offer brands the ability to quickly engage with socially active Chinese consumers. Once the product has been co-­created with the most creative consumers, these collaborative platforms make it easier to validate it with cer-­tain types of participative consumers, like experts and the hyper-­engaged consumers.

5. Continue the conversationCo-­creation between brands and consumers requires openness and trust. It also needs to be dura-­ble. Therefore, to build sustainable relationship with local consumers, global cosmetic brands should

really important in the Chinese market comparing with American or European ones is that Chinese consumers need to be accompanied, they need to feel that brands really look after them”,says Kenneth Simonsen (GfK).

5 rules to make co-­creation work in China

About eYekaeYeka is the global market leader in online co-­creation. eYeka leverages an international community of creative consumers that helps companies generate creative insights, unlock innovation opportuni-­

IP protected environment. eYeka serves more than 100 leading brands such as P&G, l’Oreal, Coca-­Cola, Unilever, Danone and Microsoft and is present in France, Singapore, UK, USA and China. For more information: http://en.eyeka.net

The contributors to this paper:Indre Liepuoniute, François Pétavy, Alexandre Olmedo, Maette Caudal, Joël Cere, Yannig Roth, Xuan Long, Garance Boutrit, Claire Vandenberghe

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