True, as the latest Hurun China Rich Report published in August 2009 shows, China now has 825,000 individuals worth more than 10 million yuan and 51,000 individuals with more than 100 million yuan. But they are still a drop in the water, compared to the tremendous volume of Chinese who live in third- and fourth-tier cities. And what is more, not affected by the financial tsunami, they have the resources and desire to spend!

Who are they
When we use the description China’s mid market, we mean people living in China’s thousands third- and fourth-tier cities and affluent east and middle rural areas. First-tier Chinese cities are the four metropolises: Beijing, Shanghai, Guangzhou and Shenzhen. Second-tier cities are the about 166 cities with an urban population over 1 million, comprised of provincial capitals and large prefecture-level cities. The remaining county-level cities are tier-three and tier-four cities. And don’t forget that in the east and middle China lie the vast well-off rural lands.

Why sell to them
Soaked in western consumption influences for about 10 to 20 years, China’s tier-one and two citizens are much more sophisticated than before and are not easy targets anymore. And the consumption markets there are saturated at the cost of new enters or further expansion.In logistics sense they also are not cheap, since they are scattered all over China and many of them can not sustain profitable business alone. If you plan to sell to a provincial capital, you will be best off selling further into the counties to merit your distribution and warehouse costs.

Furthermore, tier-one and tier-two city-dwellers have to pay high for housing, which greatly reduces their purchasing power, while house prices in tier-three and below cities are much lower, even factoring in the gap in salaries among metropolitans and county people.

Besides, factories and companies in third- and fourth-tier cities are domestically oriented, not export-led as their counterparts in coastal areas are. Therefore they are less impacted by any overseas recession.

Good-enough products at low-enough prices
Many marketing managers may reckon that Chinese people in tier-three and four cities are very price-sensitive and not very value-conscious. They are wrong. With the greatest migration in human history undergoing in China, a good many Chinese people, or their relatives and friends, have gone to big cities for work or other affairs and got some taste of delicate urban life style. They don’t want to wear a cheap coat for a single season and find later that it is too worn out or shrink too much to wear anymore, therefore not getting money’s worth and losing face in front of their neighbours. They prefer “buy and hold”.

Foreign companies should not just bring in watered down and cheap versions of their product lineups. They can either introduce simplified products or services with reliable-enough quality, or sell their products in smaller packages but with the same quality, so that the consumers can pay the more affordable price for a savoring of the good life. They can also resort to broadening their distribution networks.

They buy from trusted retail channels
So many food and drug poison cases made even the least urban-minded Chinese elders will think twice before he buys eatables from a small street-side grocery. The same happens to products whose inside structures are not easily comprehensible to ordinary people, like computers and plasma TV sets. They want more trustworthy quality guarantee to fill their own knowledge vacancy. So they prefer to shop in big and modern shopping malls and departments than scattered small retail outlets. Bigness can set their hearts at rest. The right distribution channel counts.

Mind your neighbours
Some foreign companies made the mistake by planting their retail outlets beside locally well-known fakery stores. Though locals can not guess out whether your products are genuine or not, since they know well the counterfeit quality of your neighbour, they will deduce that yours are also a phony. Choose neighbours with integrity, so that even people don’t know you, they will be confident in your products.

Add the finishing human touch
Even till now and in big cities, Chinese service people are not very good at providing good customer experience. They are often indifferent and not caring and considerate enough toward their potential guests. Keep in mind that people win people’s heart. A rude and impolite shop assistant will make a premium product objectionable. If your product is already relatively expensive than other domestic counterparts, it requires far better service than normal to help the customers shell out their money not so reluctantly. Additionally, since your local labour pool may never be exposed to western customer service principles, even if they have the desire to demonstrate their willingness to serve the customer, they may not be polished enough to deliver. Hence, select good salesman, pay them well, and train them harshly.

China’s mid-range markets are growing and expanding very rapidly. Any company failing to respond to them early enough will find fearfully later that even their high-end market share is eroded by companies who carved out earlier and stronger positions in mid-range products and grew more powerful in the way.