When tea-maker Lipton launched a mobile phone marketing campaign in China in 2008, it deployed something it knew about the Chinese market: People loved to give and receive small gifts. To send such a gift, mobile users provided Lipton with the name, mobile number and address of friends and family. Within a month, Lipton sent messages to 162,318 mobile numbers. More than 100,000 of the recipients confirmed their information, and Lipton sent each a teabag. With that small, clever step, Lipton got what it hoped: A low-cost marketing campaign that quickly spread its brand among young, white-collar consumers and expanded its customer database to be used for future marketing initiatives.

Lipton's not unique in going digital, of course. Companies in China and elsewhere are devoting more of their marketing budgets to digital channels including search engines, social networks and mobile phones. China’s model broadly copies that of the United States, but it offers fertile ground for testing a digital marketing approach, providing data that is rich with potential.

But regardless of the medium, marketing will always require mastering the art of winning customers’ attention, loyalty and wallets. Success in China requires an understanding of Chinese customers’ needs and copying what works in the United States and elsewhere won’t necessarily work. What's more, while finding an audience to target in China may cost less in terms of time and money than in traditional channels like television, communicating a message effectively may require double the effort.

Smart Phones, Smart Advertising

Dan Wong, chief operating officer (COO) of digital marketing services provider Madhouse, which collected data for the Lipton campaign, noted at theTechnology for Marketing & Advertising Forum in Shanghai (TFM&A ) in October, that only around 1% of advertising spending goes to mobile channels today. But with smart phone users expected to reach 20 million by the end of the year and 100 million next year, the industry is optimistic that more marketing budgets will be earmarked for digital as smart phone ads become more sophisticated, interactive and engaging.

In a new effort, Lipton is teaming up with Kaixin, China’s second-largest social networking web site, with more than 80 million registered users. From October 25 to December 1, Kaixin users in nine major Chinese cities could send virtual Lipton teabags to friends. By the end of the event, 380,000 were sent and the campaign attracted 30,000 fans and nearly 280,000 site visits. Lipton also has online stores on Taobao and Paipai, the two largest e-commerce platforms in China.

Companies are in many ways simply following their customers. Advertising revenue more than doubled year on year in 2009 at Renren.com, China’s biggest social networking site, with over 150 million registered users, according to Donna Li, general manager of strategic marketing and media planning. One reason is the growing number of Western multinationals with headquarters in Shanghai redirecting their home strategies that target the likes of Facebook to China. “Nike sportswear has 115,000 friends on Renren, and this base represents important equity for the company,” says Li.

From his vantage point, Alan Yan, CEO of AdChina, a Shanghai-based digital platform that places ads with more than 400 outlets in China, sees mobile channels are emerging rapidly. “The mobile ad platforms we launched this summer are expected to rake in double the amount of business than the online platform we launched three years ago in their first 12 months," he says. Although online marketing has grown an average 50% annually over the past three years — much higher than the ad market as a whole — "we expect mobile marketing to reach 80% to 100% growth annually, including all mobile terminals such as mobile phones, iPads and Kindle." Among these, he says mobile phone applications are growing the fastest, comprising 25% of all mobile traffic today. "We expect the percentage to hit 75% over the next three years,” he adds.

The Interconnected World

Traditional media groups are taking such growth projections to heart. Guangzhou-based 21st Century News Group and its flagship 21st Century Business Herald newspaper, with a daily national circulation of more than 762,000, is aiming to provide advertisers with a choice of full digital content, multi-channel platforms and content that links clients and readers, Han Lei, the firm's chief technology officer, told delegates at the TFM&A forum. “In the future, when an auto company launches an ad, you are going to not only see it in the newspaper, but also see a full 360-degree version of the car itself online,” he said. Revenue from new digital channels went from zero to RMB10 million (US$1.5 million) in 2009 and is projected to double in 2010. The group was surprised that newspaper subscriptions also rose slightly.

According to a white paper on customer interaction by Selligent, a Belgium-based customer relationship management services provider, 90 trillion e-mails were sent and 126 million blogs created globally in 2009. Tweets sent on Twitter rose from 5,000 a day in 2007 to more than 50 million today. There are currently more than half a million active users on Facebook.

China is by all means part of this rapidly interconnected world, with more than 420 million Internet users. Renren.com users interact – sending messages to friends, updating photos and the like – 4.1 billion times a day, which goes to show how widespread online communication has become, Li says.

“We have companies like Nike and McDonald’s all opening their public pages or launching big-scale marketing initiatives on Renren.com,” she says. “According to some estimates, 63% of advertisers increased their marketing spending on social networking sites globally last year.” She noted the success of Facebook, which is expected to be the second-leading seller of display ads by revenue this year, after Yahoo, with 9.5% of the market, according to eMarketer, a digital market research firm.

Plus Ça Change?

Nonetheless, the fundamental way companies do business — spending money to make customers aware of and want their products or services — hasn’t really changed, says Peter Fader, professor of marketing at Wharton. “Social networks certainly changed the mix of media they rely on, but the big picture, where the companies 'shout' and customers choose to listen or not, is still the same. They can make the company shouting process much more efficient and effective, but it’s still basically the same concept as it was 20, 30 or 50 years ago,” says Fader, who is co-academic director of the Wharton Interactive Media Initiative research center.

“But just planting a few seeds on a social networking service and expecting word of mouth to do the rest will not bring the outcome you want,” he says. “Research shows that the actual influence of the influencer on a social network is very limited. You can’t just plant one seed and let it spread; you need to plant a lot of seeds. That sounds a lot like mass marketing.”

Yan of AdChina notes that the marketing approaches on China’s social networks are still relatively primitive, relying on, say, how many people forward posts recommendations online than promoting a brand to a more precisely defined audience group.

Still, innovative marketers are beginning to leverage social networking platforms. Early this year, Singapore-based online travel agency Zuji launched an application called Zuji Map on Facebook, allowing users to plan and book trips with Facebook friends. Developed by Epsilon International, a U.S.-based provider of database marketing services, Zuji Map includes a map of the world that appears alongside a user’s Facebook profile. The map shows where the person lives and marks his or her favorite holiday destinations. This tells Zuji which customers are interested in what kind of travel, says Xu Xiao Ming, sales director of Epsilon China.“It’s a three-win initiative for Facebook, users and the travel companies.”

Challenging Channels

While previously an advertising campaign would entail a few television, radio and newspaper ads, today a message needs to be sent over many more channels — a daunting challenge for marketers. “The speed of fragmentation will only grow faster,” asserts Yan. “Companies will need to integrate various media channels and target consumers to stay relevant.”

It will at times feel like a balancing act. “To reach today’s multimedia customers, you need to cover every possible channel, and you have to 'do a little science' to figure out which combination of channels will give you the best coverage. It takes less money, but more smarts and effort,” Fader says.

According to the Nielson Global Online Survey 2010, 40% of consumers worldwide will buy an electronic product only after they go online for other consumers’ opinions. The same holds true for 10% of consumers of personal care products. As online communities grow, so will the challenge for companies of managing what they say.

To deal with the challenges, says Renren’s Li. companies need to join users’ conversations about their products in an innovative way, and leverage social networking functions to encourage users to spread the word about their brands. Of course, some users’ comments might not be favorable, Li adds, and it’s important to respond quickly and positively when they’re not. “When you have billions of messages, it’s impossible to delete them," she says. "By showing that a company cares about the way its products are used and consumers’ experiences with them, it can turn a negative comment into a positive message.”

In the meantime, some companies are crafting sharp marketing strategies based around mobile phone applications. For example, in October, Nasdaq-listed Ctrip, China’s biggest online travel services provider, unveiled an online, offline and wireless development strategy. Tang Lan, Ctrip’s vice president of marketing, says he expects mobile channels to comprise the company’s third-largest booking channel, after the web site and call center. All that will be helped by the mobile services it launched in April and a mobile ordering application for iPhones in July — in the first four months since the launch, more than 40,000 people downloaded the latter.

Soon, mobile services will function just like a desktop computer, Wharton’s Fader says. Everything you do from your desktop computer you’ll soon be able to do over a mobile network. In the future, a seamless blend of traditional desktop activities and e-commerce will emerge. “We are getting to the point where the two are not distinguishable from each other, except that one is big and fixed and the other is small and you can carry it with you,” he says.