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Understanding urbanization strategy from 14th Five-Year Plans

群邑智库 · 公众号 · · 2021-03-24 18:00

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This year’s China “two sessions” was closed last Friday in Beijing. Other than report on the work of the government, China released its very important 14th Five-Year Plan (2021-2025) for economic and social development and long-range objectives through the year 2035, indicating development direction for China. In this week’s media express, GroupM Knowledge summarized China’s urbanization plan in 14th 5-year plans which is highly related to brands’ future development and worth full attention.

Key takeaways are as below：

Embrace domestic circulation: Domestic economic circulation is key driver of future economic development; new type of urbanization is the focus of domestic circulation

New Urbanization, New consumers, New opportunities: New type of urbanization facilitates population movement and furnish new customers for brands

Find the right market in lower-tiers: Brands should determine the market of priority in lower-tiers according to average consumer power, total market size and growth rate of development

Customized media plans in different city clusters: media plans should be differed based on various media preference in different city tiers

Domestic circulation

Domestic circulation as the mainstay and establishing dual circulation strategy has been stated several times and articulated into specific policies since last year. The form below shows key drivers of development and external demand during different stages in economic development. As we can see, demand in major developed countries reduced after every economic crisis and similar patterns might emerge after Covid-19. These make the domestic circulation along with dual circulation as a strategic priority.

Rural revitalization, newurbanization initiatives, coordinated regional development, the integrateddevelopment of city clusters and improving basic public services in rural areasare the main drivers to establish domestic circulation.

Population movement – where is the market increment in future？

The strategy of people-centered urbanization continues to be pursued in 14th five-year-plan. The government will deepen reform of Hukou Restrictions (the household registration system) to grant permanent urban residency to people who move to cities from rural areas, raising the ratio of permanent urban residents to total population from 60.6% in 2020 to 65% in 2025. This means that there will be 61 million new permanent urban residents in five years, bringing at least billions incremental revenue in consumer market.

China further relaxes restrictions for rural dwellers to get household registration status in cities, noting that cities with a permanent population of less than 3 million in urban areas must completely scrap the Hukou Restrictions; relax restrictions in large cities with a permanent population between 3 to 5 million; improve the current settlement policy in mega cities with a permanent population of more than 5 million.

Furthermore, China will promote the establishment of effective institutions for coordinated regional development by building 19 city clusters:

China will also improve the rural development to promote urbanization strategy. In 2020, the 19 city clusters contributed more than 80% of GDP while the residents in these areas only took 45% of the population. To ensure more balanced and more sustainable development, the accelerated population movement from rural to these clusters is the key national strategy. During the process, along with a more optimized industrial structure, the movement will change. Covid-19 also accelerated the local labor market, improving the industrial relocation and optimization.

Implications for brands and media – find the right market in lower-tiers

Population movement is important to every brand in China. China Media Consumption Map by GroupM Knowledge shows that a snack brand with high growth rate often has high penetration rate in all city tiers and the rate in lower-tier cities often determines the future performance of a brand.

In order to help brands master the vast and increasing complex market in lower-tier cites and find the right market to expand, GroupM Knowledge segments 2,198 cities in China into 10 city tiers according to the factors, such as economic performance, consumer power, population, consumption growth rate, etc. Details are attached below.

Here we take two city clusters as an example: first cluster is city tiers (including around 579 cities) with medium consumer power and medium consumption growth rate, represented by Zhaoqing, Qidong and Laohekou, and the second one is city tiers (including around 888 cities) with low power but high growth rate, represented by Shimen County and Ruicheng County. The two city clusters have played a more important role in China, accounting for more than 50% of the total market share, as well as in food services and catering sales, FMCG and consumer goods.

Implications for brands – understand preference on media and content in different tiers

Corresponding products, sales channels and media plans should be made based on target region’s features after determined the market of priority. GroupM Shan Hai Jin found that media usage and content consumption differ among city tiers due to cultural and cognitive differences, which will direct interfere the consumption paths.

Charts below show disparate preferences on media usage and content consumption among various city tiers. Consumers in some tiers prefer social-based app, while others prefer entertaining one (mobile games and music). These differences appear not only in digital media but also in outdoor media.

The differences also appear not only in media and content consumption, but also in the attitude towards ads, leading various awareness-purchasing-recommendation chains. Here we use Shan Hai Jin data and take cosmetic products as an example to show the differences among city tiers.

In terms of popular cosmetic products, consumer in lower-tier cities would be inclined to recommend them as an action of social graces. In this case, both conversion rates of purchasing-recommendation and awareness-purchasing are relatively similar. However, in terms of midrange products, the mentality of recommendation is self-pleasure instead of social graces and effectiveness of the products become the focus of attention. So, propaganda for these products should focus on components and the joy of self-pleasure, instead of celebrity endorsement. In terms of high-end products, they would not be affordable for everyone and there are fewer ways to buy, therefore the driver of purchasing has changed. Among users of high-end products, consumers from both higher-tier and lower-tier cities focus on self-pleasure while those from medium cities tend to show off their life via the products.

GroupM Shan Hai Jin and China Media Consumption Map help brand extend market and seize the opportunity from national development strategy

Shan Hai Jin is a large-scale consumer insight program developed and managed in-house by GroupM. The study experienced the changes of time – from the era of print, TV, internet 1.0, mobile internet to today’s era of social, providing advertisers with data and insights on consumer behaviors and media consumption situation in China for the fifteenth year in succession.

2021 NEW Shan Hai Jin kicks off with a comprehensive upgrade from many aspects. It will cover 800+ cities and reach out to 100,000+ interviewees a year.

GroupM Knowledge will also release China Media Consumption Map in Q2 2020, segmenting cities in China from the aspect of consumption and media usage. To help brands enjoy dividends via fully understanding consumers in lower-tier cities, seizing the moment from national development strategy, finding the right market to expand and making distinguished media.

About Shan Hai Jin

Shan Hai Jin is a large-scale consumer insight program developed and managed in-house by GroupM, aiming to keep track of changes and trends occurring in Tier 1 though Tier 5 markets of China, as well as providing advertisers, media agencies and other relevant organizations with supports in development initiatives.

About China Media Consumption Map

China Media Consumption Map publishes Chinese City Classification with consumption power as the core, based on the brand challenges and responses encountered in lower-tier city. Combining the media structure, consumption scale and potential of brand consumers at all city levels, GroupM Knowledge can explore value markets for brands and provide strategic methods to help brands seize opportunities and outsmart the future.

Data Sources：

Public information, NBS, GroupM Shan Hai Jin, Euromonitor

Understanding urbanization strategy from 14th Five-Year Plans

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