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China’s Consumer Markets
The Pyramid of China’s Urban Consumer Market
Changes in Consumer Market Rapid economic growth of 9% per year ↑Income/disposable income
↑Purchasing Power (From 1997 to2003, per capita disposable income of urban Chinese increased 64.2%)
↑Population Larger market ↓Collectivism ↑Self-satisfaction ↑Education ↑Consumption Change in consumer preference Change in life style and consumption pattern
Where are the opportunities in China’s consumer market?
Consumer Spending
Savings and Housing
Per capita household savings is increased, it rose 123.9% from 4.6 trillion RMB to 10.4 trillion RMB
To maintain a stable living standard when they are old Spending on healthcare and for big ticket items such
as housing Under the rule of WTO, foreign banks has the
opportunity to take the Chinese deposit starting in 2007
These foreign financial institutions will fully participate in the Chinese financial system
The government encourages home ownership
Smaller initial payments for obtaining a home mortgage is required
Mortgage interest payments is tax deductible Save less, buy more
Automobiles
Large reduction in import tariffs on automobiles following China’s entry into the WTO.
1998stock of passenger cars (per 1000 people)
2.3
new passenger car registration ('000) 508
2003 %change
5.4 135
2083 310
Under the WTO, the automotive financing will be further opened to foreign participation Increase the competition for domestic financing
institutions Reduce down-payment requirements Expand the market
Apparel and Fashion
In 2003 Chinese spent roughly US$56 billion on clothing
Many global brands are undertaking a multi-channel approach to the Chinese market (licensed , franchising )
E.g Gap (US), H&M (Sweden), and Zara (Spain)
Apparel and Fashion
Tourism and entertainment
Foreign brand
Highly brand-conscious Quality is perceived as highly important Preferences for domestics goods has
dropped from 78% to 67% Preferences for foreign goods has increased
from 19% to 22%
Foreign brand
Small stores:purchasing apparel such as footwear, jewelry, or cosmetics
E.g Louis Vuitton, Bally, Gucci and Ferragamo.
Large stores : electronics, furniture, and other home related goods
E.g Carrefour, Metro, Wal-Mart, Auchan, Ikea, and B&Q
Attitudes to luxury brands
The majority of them regard owners of luxury brands as being successful and having good taste
Over half of them said they longed to buy luxury goods, even if they could not afford them at present
Attitudes to luxury brands
Attitudes to luxury brands
2. How do Chinese consumers differ in their lifestyles and consumption patterns?
Lifestyles of Chinese consumers
Demand for trendy and innovative products curious to fashion and fresh products
Demand for quality of life enjoy good quality and luxury goods
Less inclined to save and a strong propensity to spend confidence in their long-term earning potential,
higher qualifications, growing purchasing power
Like to show off individuality build up own image by different brand name goods
Spending according to own interests freedom and independence to spend
Buying products through the internet convenient and popular channel
Lifestyles of Chinese consumers
Consumption Patterns (Products) The need of durables are mostly satisfied in urban ci
ties Color television, washing machine and refrigerator
Desire for life enjoying goods Traveling (48%↑), houses (38.5%↑), mobile phones (35.9%
↑), luxury goods (20%↑), automobiles (15%↑), cosmetics (8%) and laptop computers
Emphasize fashion over function MP3 players → iPod TV games → PS2
Consumption Patterns(Distribution Channels) Department stores became less popular New purchasing channel:
Internet Convenience stores Hypermarkets, shopping centers and warehouse-
style supermarkets
Different approaches of Segmentation
1st Geographic- Coastal (urban &richer) vs. interior region (rural
&poorer) e.g. Shanghai—1st in 「 China Development Index 」 ,
highest GDP per capita in 2006 Gansu—the lowest level in 「 China Developmen
t Index 」 , poorest in China→ urban vs. rural: 3 times higher in consumption
expenditure- sub-segments emerge e.g. Xi’an, Wuhan, Nanjing
Different approaches of Segmentation2nd Demographic: size, density, age, gender, race, occupation, education
etcChina:- changing age and sexual structure of Chinese
population e.g. elderly ↑, 7.7% of the people reached 65 in 2005 &
around 12% in 2010-↑educational level -- > 50% post 80s have secondary lev
el-↑female labours -- > Women purchasing power
Different approaches of Segmentation
3th Income- Working poor—paid more on daily necessities
like food, domestic brands- Salary class—idealistic, willing to pay for brands- Little rich—brand conscious- Rich (yuppies)—prefer foreign goods &brands
Different approaches of Segmentation
4rd Behavioral- Life philosophies: market rejecter, conservative,
pioneer- lifestyle activities: entertainment—reading,
travelling, movie, dinning out etc- Media usage: newspaper, radio, TV, magazine,
internet, mobile phone etc- Consumption attitude: consumption pattern
China’s Vast Consumers1st Post 80s Generation Generation Y aged 18-24 Love entertainment more than household items eg. DVD players 7%(1997)52%(2004)
Mobile phones 10%(1999)48%(2004)
eg. Nokia > Motorola due to emphasis on fashion
Have more access to media eg. TV, magazines, the Internet
Use computer > Watch TV
China’s Vast Consumers
2nd Affluent Group Coastal Urban regions High desire for buying with high purchasing power Love high technological products, especially mobile
phones, pc etc. Willing to pay higher price for higher quality Emphasis on Brand name products
China’s Vast Consumers
3rd Women aged 19-30 (in big cities) Buy products on image Care about themselves and love beautifying
themselves High aspiration and are interested in ownership and
leisure Do not care about price even if they have low
income Favor foreign-invested department stores
3/ How to target the different segments of the market, i.e. the implications of the marketing strategies?
Marketing strategies
1st Undifferentiated marketing Base on largest numbers of buyer Ignore market segment differences Target the whole market with one offer
2nd Differentiated marketing Target several market segments and design
separate offers for each e.g. Gap (clothing) 3 different retail stores format Gap, Gap Banana Republic, Old Navy
Marketing strategies
3rd Concentrated / Niche Marketing Focus on a large share of one or a few segments or niches Used by companies with limited resources – capture more marke
t share e.g. Tetra ( fish supplier 80% of the world’s tropical fish food)
4th Micro marketing 1/ local marketing e.g. CitiBank different services in different bran
ches 2/ individual e.g. Dell Focus on product tailoring Satisfy the needs and wants of specific individual and local custo
mer group
Marketing strategies
For Generation Y Use Concentrated Marketing Online > TV advertising Product design & packaging Suitable celebrities e.g.
李宇春
周杰倫
蔡依琳
F4
Marketing strategies
For Women (aged 19-30 in big cities) Use Concentrated Marketing E.g. Cosmetics & skin cares Foreign brands e.g. Max Factors, Shiseido Fashion – International Brand Name
Marketing strategies
For Affluent Group Use Individual Marketing High class brand name Provide direct experiences E.g. Rolls Royce - Personal selling satisfy specific needs of
customers
Conclusion
Nowadays, the disposable income
lifestyle and consumption pattern changed
purchasing power
Business opportunity If we want to start a business in China
Concentrated on specific segments We need to realize what China’s Vast
Consumer specific needs and wants