18 February 2019

Baidu’s ultra high yield offering just hunger marketing trick

Baidu, in cooperation with China Asset Management Co. Ltd., will officially launch its online wealth management platform next week. Its flagship product called Baifa {百發} offers an annual yield of 8 percent for depositors.

Now that is incredibly high, compared with the 3 to 4 percent offer from most money market funds. If the search engine giant can provide an 8 percent yield for a sustainable time period, it will not only attract streams of customers, even banks may line up and deposit their money in Baidu’s wealth management accounts.

The high yield, no risk proposition appears too good to be true. In fact, it has raised regulatory concerns.

The China Securities Regulatory Commission (CSRC) said on its official microblog that Baidu’s product does not comply with relevant regulations. The watchdog reminded fund companies and online sales institutions that they should not make promises on the expected yield of mutual funds and other asset-management products. The commission vowed to check the validity of the Baifa fund based on materials submitted by Baidu and related institutions.

Industry insiders agree. With an investment threshold of as low as 1 yuan (16 US cents), it is literally impossible for Baifa to produce an 8 percent yield, unless the group digs into its own pocket to make up for the yield gap, which is around 4 percent, the Securities Times quoted fund practitioners as saying. Most likely, the product is just a marketing gimmick, a form of hunger marketing.

“Hunger marketing” refers to a marketing strategy where the service or product provider reduces the supply in order to create demand. The strategy could stimulate buyers’ desire as well as create noise in the market.  Apple’s iPhone and Xiaomi’s smartphone are but two successful examples of this tactic.

Assuming the offering is limited to 1 billion yuan and lasts only for two months, it will just cost Baidu 6.7 million yuan in interest expenses, which is peanuts compared to the enormous publicity it will generate.

In short, Baidu could be holding a sort of lottery, where only a few lucky ones are entitled to buy tickets which are sure-fire winners. Such a strategy will help Baidu move a step closer to realizing its ambition of becoming the wealth management and finance center in the internet world. If that is the case, then it would be worth every penny Baidu puts into it.

– Contact the writer at [email protected]



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