Strategy of WeChat: How Tencent Should Create Value on Mobile Based on Competitive Positions?

With WeChat, Tencent  is capitalizing on its great competitive positions in China for social networks (QZone, TencentWeibo…) and chat application (QQ).

The final objective being to become one of the largest Internet company in the world, mobile commerce is key. For mobile commerce, a large user base and a appropriate software is necessary to collect enough data to know the users and to interest brands and firms. This is how Tencent should build long term value.

Strategy of Development by Adjacent Segments

WeChat is a product-customer combination that is close or similar to other services developed by Tencent: chat services and social networks. The application called WeChat is a mix of what Tencent does better than many other firms taking into consideration the user experience on several devices. WeChat team uses the skills the firm already has thanks to its staff. As a consequence, and specifically in China, the adjacent segment can be served by Tencent with relatively little extra effort. The launch in China was a prelude to deciding which new customers to target outside China.

The strategy for WeChat is to develop the size of the user base with the combination of extending the coverage of the existing product / service and bringing out additional features on a regular basis with upgraded version of the application.

An Invisible Blue Ocean Strategy

The combination of conversations that become more fun and a private social network is a way to avoid segments that are already dominated by Facebook and Whatsapp. Tencent aims to apply its own blue ocean strategy with a new core customer group, the world population.  The value is in offering customized relationships both between users and with the brands with a final goal of building loyalty and monetization through physical stores and mobile shopping. The blue ocean might not be really seen by non-strategy experts due to the fact it is a long term strategy based on personal interests. The application looks similar to other applications today. People might think Facebook, with the Facebook Messenger application, has the same strategy: not really. Tencent removed the showcase characteristic of Facebook and added a better experience with more fun, privacy, and personalization.

Actions to Increase the Market in China

In China, Tencent is also able to use brand stretching at home because its existing brands are very popular. Tencent should add extra-features, value, service and quality. For example, they already did adding video call to the application allowing making free calls with flexibility between video and audio modes. This tactic benefits as well to all the users, even those outside China. Tencent always try to deliver more to its users, more than they did the year before, and more than their local competitors. Chinese firms are talented to put themselves in the position of the customer to know better how to answer better their needs. Games, interest match, payments, and shopping are coming.

Actions to Enter New Markets

Tencent has to educate potential users outside China because they are not already familiar with Tencent services like QZone and Tencent Weibo.

Developing the best product is a good method and building a powerful brand is the best way to differentiate from the competition like Facebook. Facebook is a strong brand working toward monetization. Building a brand protects Tencent and users against inferior imitations of the application. Consumers prefer brands because they dislike uncertainty and need quick reference points.

The brand is new so requires a heavy investment in advertising and other marketing techniques like e-marketing.

A great user experience, additional extra-features, and large adoption throughout the world will build user loyalty and attract brands willing to pay for a price premium.

Conclusion

Tencent is very confident in its existing skills that are better than competitors and answering user needs. However, being true in China, it is less true in other countries where the culture is very different. Tencent should imagine future features potential users are likely to look for in the years to come. We strongly believe it is already all planned by Tencent. The Chinese firm should be open to partnerships with leaders in a segment adjacent or totally external to Tencent business in order to expand faster and keep growing. Everybody how fast the Internet changes: WeChat must expand the user base in 2013 in order to succeed in their global strategy.

Ansoff Matrix for business development in China

2013-03-19-ansoff- matrix

In China, Tencent offers WeChat, a new service,  to existing users  using internal skills and avoiding strong Chinese competitors.

Ansoff Matrix for business development in the Rest of the World

2013-03-19-ansoff- matrix

Outside China,  Tencent takes existing service WeChat and offers it to new markets and users. This can be done at relatively little extra cost under the condition of virality, but can be risky if this strategy requires investment in fixed costs (local staff), if users have different requirements, or if competitors are faster.

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