BEIJING (AdAgeChina.com) -- Lenovo Group is best known for making PCs, laptop computers, mobile phone handsets and other electronic devices.
Starting this month, the Chinese marketer is becoming an expert in a new role--film distributor.
The Beijing-based computer company has partnered with third-party film exhibition crews to select and present feature films in over 3,000 villages and small towns in 31 provinces and regions across China, usually at no charge to the audience.
The film program, which will run from June to December 2009, is part of a government-aided initiative "to amplify the entertainment and leisure life of [the] rural population," said Anthony Feng, a company spokesman in Beijing. Lenovo's sponsorship is less about altruism, however, than a desire "to get closer to rural customers, passing messages about the Lenovo brand and its products."
At each screening, Chinese can visit an interactive Lenovo PC Bazaar to learn more about PCs, experiment with product demonstrations and pick up fliers about the the company's products and services. Lenovo ads created by Ogilvy & Mather in Beijing air before each film.
Lenovo has invested in a similar program to visit elementary and high schools at the town and county level in China. It offers training to students about how to use PCs alongside ads and on-campus product demonstrations.
Both programs are part of Lenovo's "PCs for Rural China" program, aimed at consumers in China's third-, fourth- and fifth-tier cities and towns--a potential market of about 700 million people.
Tier three encompasses about 150 county capitals, most home to over one million people. Tier four covers thousands of towns ranging in size from 100,000 to one million people, and tier five includes China's smallest towns and villages, the refuge of farmers and very few brands. Annual salaries from tier two to tier four cities are between $2,000 and $5,000.
Lenovo sales hit by recession
The large number of people and their small but growing income levels "have reached the point where rural customers can afford our PCs. Rural markets are very important," said Beijing-based Wang Zhong, general manager of Lenovo's consumer desktops division in China and head of its rural PC program.
The program was announced in April 2009 as part of Lenovo's recovery strategy. The company has been badly hit by the global recession, leading to a sharp drop in overseas sales, and layoffs of 2,500 employees worldwide, about 11% of staff, during the first quarter of 2009.
Lenovo's "PCs for Rural China" initiative is also linked to the Chinese government's home appliance subsidy program, part of a nationwide economic stimulus plan. The program has been extended to include personal computers, along with TV sets, motorcycles, refrigerators, and other products.
Rural customers get a government subsidy for each item purchased. Buyers are also entitled to a free hour of training at retail outlets to help them develop basic user skills.
Mr. Wang, who joined Lenovo in 1997, said it's too soon to tell whether the rural marketing program has paid off, but the company is benefiting from the years it has already spent developing distribution, service centers and marketing programs outside the largest cities.
Head start in rural markets
As the largest domestic PC player, Lenovo moved into the countryside ahead of global rivals like Dell, Hewlett Packard Co. and Acer. In January 2007, for example, Lenovo did an ambitious roadshow program to leverage its sponsorship of the Olympic Games.
The roadshow passed through 1,000 tier-five and tier-six cities and towns, ranging from the capitals of outlying provinces like Lhasa, Tibet to small cities such as Sanya in Hainan province. The average population of the towns is 250,000, and none are larger than one million.
The company's share in rural markets in China has increased from 30 to 42% since the beginning of 2004, based on third-party market research provided by Lenovo.
"Now is time for us to transform that competitive advantage into business results," Mr. Wang said.
As part of its "PCs for Rural China" program, Lenovo will establish 700 branded stores in less developed areas and open 3,000 affiliate sales outlets or windows in retail shops by mid-2010.
It is also creating products specifically for rural consumers that are affordable, reliable, easy to use and offer specialized functions such as tools related to agriculture and basic business education.
Word of mouth, not online research, fuels sales
In cities like Shanghai and Beijing, Lenovo deals with a wider variety of customers, including individuals, government agencies, educational institutions, and corporate clients, who are all comfortable researching purchases online.
In rural areas, however, "the majority of our customers are families and their familiarity with computers is very low. Many people have never used a computer before," said Mr. Wang, who knows first-hand what life is like in small-town China. He was raised in Jinzhou, a small northeastern city in Liaoning Province.
"The most important marketing channel is word of mouth or traditional advertising like outdoor ads," Mr. Wang said. This rural market is so new, however, Lenovo is still figuring out "what they need and how they buy computers. We have an insufficient understanding of customers, a problem for all computer marketers in China."
Another challenge is learning to navigate hundreds of thousands of towns and cities, "which vary greatly by culture, income, GDP and consumer behavior. They are very diverse."
Their only common factor besides written language (although spoken dialects do vary greatly) is lack of maturity "in terms of supply chains, distribution systems and information channels, which make it very hard to execute programs and lowers our efficiency," Mr. Wang said.
"[Lenovo's potential] is unbelievably large...but the difficulty of working there and developing business there is also unbelievably large."
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