Selling Condoms in China? How Going Social Helped Durex Win the Market.
Want to sell condoms in China? It isn’t easy.
Just ask Reckitt Benckiser, the British consumer-products company, which in 2010 acquired Durex, an iconic 85-year-old brand that sells slightly more than a quarter of the world’s condoms. Durex already held a 30 percent market share in China, but the market was small, as only one in 10 sexually active Chinese used condoms.
RB set out to grow Durex sales, but quickly realized that the strategy that had worked everywhere else was not going to work in China. The company could not get premium pricing for its condoms, as counterfeit knockoffs flooded the market. Neither could it get consumer attention — advertising was just too expensive in China. And high distribution costs made it impossible to sell the product outside the largest cities. The Chinese marketplace was a daunting challenge: “It was January, and they already knew that they weren’t going to make their numbers for the year,” said an industry observer.
Realizing that it would not succeed, RB abandoned its previous approach and went for a complete strategy overhaul with an all-social and all-digital strategy. And within three years, the new way of doing things created a massive win for Durex. Sales jumped threefold, as prices went up, the overall market for condoms grew, and the company’s market share soared to 45 percent.
RB’s experience demonstrates how powerful a well-crafted and sharply executed social strategy in China can be. It also helps many foreign companies in China that face the same problems that RB did. The highly competitive Chinese business environment makes it difficult for any foreign firm to sustain premium prices. And TV advertising is very expensive for everyone: There are more than 3,000 different terrestrial, cable and satellite TV channels in China, so it takes a lot of money to reach the target audience scattered across so many outlets.
To make matters worse, each channel runs advertising auctions that are so competitive that a 30-second prime-time advertising slot in Beijing costs four times more than the same slot in New York City. In fact, a campaign that delivers a message to only five percent of Shanghai’s population costs the same as a campaign delivered to five percent of the entire population of India.
Distribution is also very expensive, as China’s retail largely relies on mom-and-pop stores. Unlike in the U.S., the top five retailers represent only a small fraction of overall sales, and even they run distribution largely on a store-by-store basis, giving each a lot of latitude to pick suppliers. Producers have to build salesforces that go from store to store. Some companies hire up to 25,000 in-store promoters to showcase products, and sometimes “accidentally” stand in front of competitors’ products.
What is unique, however, is how RB tackled all of these problems. Rather than adjusting its strategy bit by bit, RB went for a radical strategy makeover, which relied on three pillars:
- Leverage Weibo, one of China’s Twitter equivalents, to get cheap advertising;
- Engage with key opinion leaders online to build a premium image;
- Partner with e-commerce platforms to reduce distribution costs.
The decision to leverage Weibo was relatively straightforward. China has more than 600 million Internet users, two-and-a-half times more users than in the U.S., who spend more time on the Internet than watching TV, and spend more money on online purchases than Americans do. A lot of that time is devoted to Weibo, where users gather news, post links and videos, and buy products directly from the feed. So if RB was going to build a market by advertising Durex condoms cheaply, social media was the way to go.
Selling something as personal and intimate as a condom is difficult, even among the younger generation, so RB embraced a light-hearted approach by creating a fictional character called Little Dudu, a cute and animated condom-like character, who dished out entertaining messages, pictures and videos, provided sexual-health information and posted about love and emotional support. Little Dudu invited people to a Durex Valentine’s Day party at a Beijing nightclub, and asked them each to bring five of their friends. Many of those who attended posted photos from the party on Weibo, which attracted nationwide attention for the condom brand.
Dudu also pushed the advertising envelope in a way that would have made “Mad Men” proud. When Beijing was struck with torrential downpours in June 2011, for example, Dudu posted a message suggesting how lucky he was to have two Durex condoms in his pocket. He posted photos of people putting condoms over their sneakers to keep them dry. The campaign went viral, and Durex’s popularity soared. The humor and cleverness of the posts made them huge hits in China, and by the end of 2013, Durex posts had received a combined 500 million unique hits, all of that at a fraction of the cost of advertising on TV in China.
Using Weibo, Durex also targeted key opinion leaders in China’s blogosphere,and cleverly brought them into the fold. Some were nationally recognized personalities, while others were just Weibo users with large followings who frequently posted quirky updates. By connecting with these trend-makers, Durex hoped that those connections would be shared among their followers.
For example, Durex team members noticed that a blogger with 300,000 followers and who posted on average 10 times a day had mentioned that he’d had a fight with his girlfriend. Durex sent him flowers and a box of Durex condoms, a photo of which the blogger posted proudly on his Weibo account. The post was shared widely among his followers. This crowd-driven effort paid off, as Durex became the brand of choice for affluent Chinese consumers. The company was able to charge $5 for a dozen low-end condoms, and up to $30 for its most popular varieties.
Lastly, Durex reconsidered its distribution strategy. The company partnered with the Alibaba Group, which oversees the Chinese equivalents of Amazon, eBay and Groupon, to provide consumers the ability to buy condoms online. Eventually, customers could buy Durex directly through Weibo and WeChat, the hugely popular instant messenger and picture-sharing application in China, and have the products delivered to their house or office.
What Reckitt did with Durex in China offers a clear-cut template for companies entering China: Steer away from offline advertising and distribution, and go for the all-digital trifecta of social media, digital opinion leaders, and e-commerce distribution.
But there is a much deeper lesson here, and it’s about the incentive to change. Durex adopted this radical strategy because it had to. Without it, it would have failed to conquer the second-largest economy in the world. And out of that desperation, it found a strategy that worked, and now the company is rolling it out across the globe.
This is very different from many companies here in the U.S. that are largely satisfied with their marketing and distribution. For them, the incentive to adopt an all-new, all-digital, all-social strategy is zero. They experiment around the edges, expand into e-commerce, and add a little bit of social media here and there. But since the rest of their strategy remains unchanged, the results are not that impressive, and digital and social strategies get pushed to the side.
A real act of leadership here is to start your strategy from scratch as if all you had at your disposal was Twitter, Facebook, Amazon and eBay and a set of customers on their mobile phones. Durex clearly did that, and beat everything they had done before.
Mikolaj Jan “Misiek” Piskorski, the author of “A Social Strategy: How We Profit from Social Media,” is associate professor of business administration and the Richard Hodgson Fellow in the Strategy Unit at Harvard Business School. His writing has appeared in the Harvard Business Review, among other publications, and he has written the Harvard Business School Cases on many social media platforms, including Facebook, Twitter, Foursquare and Myspace. Reach him @mpiskorski.