Digital red envelopes are a crucial marketing tool in China, not just during the Chinese New Year
The Chinese new year has come and gone, but the red envelopes called hongbao live on. It is well known that brands such as Mulberry and Dolce and Gabbana share the Chinese tradition of donating money during the Spring Festival. Now more brands are finding ways to benefit from the role of Hongbao in the Chinese mobile ecosystem.
WeChat has positioned itself as a leader in the digital exchange of red envelopes, called “lucky money”, on its platform. Tencent says that during the Spring Festival season this year, 768 million people exchanged red envelopes with WeChat – a 10% increase over last year.
Before the holidays, a survey conducted by Lightspeed Research across 900 respondents revealed that over 80% of users had planned to exchange hongbao on WeChat this year, while only 69% had planned to share envelopes of physical money, and less than a third of respondents said they would use the similar function on Alipay.
It is not surprising that WeChat dominated the scene of digital envelope exchanges given its history with the phenomenon
Tencent rolled out its first major promotional campaign in 2014 during the CCTV Gala Festival, the most watched TV event in the country, encouraging users to use WeChat’s “shake” feature to receive red envelopes full of prizes.
Obviously, consumers loved it. Indeed, many experts agree that this particular occasion has modernized a very structured and traditional way of giving gifts among family members in China, not only for the Spring Festival but for weddings, birthdays and special events. More importantly, it has helped consumers to be more comfortable with sending and receiving money on a mobile app connected to their credit card.
“It was a very important moment when the red envelopes became popular because it’s no exaggeration to say that WeChat Pay was largely based on the success of ‘lucky money’ or ‘red envelopes’ on WeChat,” Matthew said. Brennan, a well-known WeChat expert and co-founder of China Channel. “WeChat Pay would not have the use it has today.”
This adoption rate has put WeChat Pay behind Alipay as a preferred payment option, and not only in China, according to the Hurun Chinese Luxury Consumer Survey 2018. Only two years before, bank cards were still the most popular payment method among wealthy consumers.
While most of WeChat Pay’s use revolved around micropayments, transaction amounts have increased, and a number of luxury brands have encouraged the use of WeChat payments through e-shops on the platform or by scanning WeChat QR codes in physical stores.
About 26 percent of WeChat users turn to WeChat Pay for online shopping, 21.6 percent to pay restaurant bills and 20 percent to shopping malls, according to the WeChat user behavior report published last year.
Moreover, demonstrating the convenience that the exchange of money on a smartphone involves, the red envelope has led to the expansion of mobile payments in dozens of features on WeChat, including charity donation, taxi payments, and food delivery.
But making payments using red envelopes instead of sending a more impersonal transfer or paying an account has a function that exists throughout the year. First, to make peer-to-peer micropayments within the WeChat messaging platform, and second through incentivized marketing, usually in the form of discounts.
Traditionally, brands do not directly benefit from friends who exchange money online, but occasionally you can participate in social donations, sharing the red envelopes of friends who are directly connected to brand coupons. For example, Starbucks allowed users to send cups of coffee as digital red envelopes to friends via their WeChat app.
There have been several other ways in which brands have adopted the tradition of Hongbao in their daily marketing schemes through cooperation with WeChat Pay
After buying something in-store using WeChat Pay, consumers can, for example, receive a red envelope with a surprise discount. Sometimes, the beneficiaries are also driven by the brand to send “lucky money” to a friend, helping the company to expand its customer base.
In most cases, says Brennan, participating companies are consumer brands because the idea of a discount is generally not an incentive to which luxury brands want to be associated. However, while WeChat and Alipay compete to find ways to retain users for their mobile payment ecosystem, they continue to explore ways to incentivize customers and even promote various new technologies.
In addition to offering immediate discounts in the form of hongbao as a result of mobile payments, Alipay has included traditional envelopes in an augmented reality game last year on the tail of the global Pokemon Go phenomenon.
Users can give the app access to their cameras and locations to see the digital Hongbao floating in front of them. The brands are involved in collaborating with Alipay and “hiding” AR red envelopes in their stores or their products, promoting the combination of online and offline realities (O2O) among followers.
WeChat also allowed retailers to take advantage of the O2O gamification using red envelopes, working with a shopping mall to incentivize buyers with a hongbao treasure hunt. Luxury brands such as Hermès already use mobile games as a marketing channel. Instead of offering discounts, they can reward commitment with exclusive products or access to events.
Alipay and WeChat Pay present new and significant opportunities for brands operating in China. “There is an intense war to protect those payment platforms and also to integrate more and more with offline payments, combining online and offline sales experiences,” said Brennan. “From the back-end, this also means using data better and improving logistics, as consumer expectations in China are increasingly demanding.”
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