Marketing in the
Chinese Mainland
Leading Discussion
CHINA‘S VAST CONSUMERS
Julie Jeantot
Michelle Chui
Mark da Silva
Steele Hemmerich
Michael Hilscher
Outline
VIDEO 1
VIDEO 2
Introduction
The Consumer Landscape
Evolution of the Consumer Market
Risks and Oppurtunities
Discussion
A new Market
Examples of firms
Q&A
Video Introduction
http://hk.youtube.com/watch?v=iEvOFlpAye8
http://www.pbs.org/newshour/bb/asia/july-dec05/consumers_10-05.html
Questions
• 1) Where are the risks and opportunities in China’s
consumer market today?
• 2) What are the significant changes in Chinese consumers’
spending patterns in recent years?
• 3) Who are the Chinese middle class consumers? What are
their beliefs, values, and aspirations?
• 4) How do Chinese consumers differ among themselves in
their lifestyles and consumption patterns?
• 5) How to target the different segments of the market, i.e.,
the implications of marketing strategies?
CONSUMER LANDSCAPE
 Education: -Minimum 9 years of education
-rural areas less fortunate
 Age groups: - Younger generation the most materialistic
- Middle aged consumer spend a lot in
investing
 Middle Class: -$5,500 RMB (Avg salary in Shanghai)
- Holidays and Celebrations is a luxurious time for
the Chinese.
 Urban vs. Rural: -Urban consumers are much more extravagant in
terms of how they choose to spend their money.
-Rural consumers have a much different mind set in
terms of their spending habits. Overall, they are much more frugal with
their money.
LANDSCAPE CONT’D…
• Increasing income levels in the Chinese market
Who are the Middle
Class Consumers. What
are their beliefs, values
and aspirations?
LANDSCAPE CONT’D…
•
The Chinese economy has been growing at an average of 10% these last few years.
•
Consumers of the 20- 29 age group have seen the most buoyant income, making
them a prime target for retailers.
•
China has a falling Engel coefficient, meaning that as a percentage of income,
people are now spending more on non-necessities, i:e Apparel, entertainment, etc:
•
There is also an obsession with imported, foreign produced products.
•
The Chinese consumer seems to lean toward modernization rather than
westernization.
•
The Chinese Consumers are focused more on the brand and not the product itself.
(Chandler Burr, New York Times, May 08)
•
The focus is on the richest 5%.
•
What do you think is most advantageous to business about the Chinese
consumer Landscape?
How do Chinese
consumers differ
among themselves in
their lifestyles and
consumption patterns?
• 12% of the worlds luxury goods are bought by China, this is in
comparison to 17% to that of the United States
• 30% of the Chinese Market can be classified as the middle class, Wal
Mart Shopping consumer.
• This middle class market is still larger than the population of the United
States.
• However, as the video stated much of the population remains below the
poverty line and relatively distanced from Chinas growth.
• China is still one of the hardest countries for a firm to register and sell
their product
• Taxes are still almost a 100% on imported products.
EVOLUTION: THE
MARKET
 Social Transition in China
-Increasing gap between coast and country side
-before and after 1949
 Apparition of Social Classes
-before 1970
-Economic Reform in 1978  opportunity for social mobility
-Emegerence of Middle Class and Nouveau Riches
-Increasing gap of Social Classes
 Evolution of the Consumer‘s Envronment
-Migration
-Government
-Economy
-Retail Market
Evolution: Cont`d
 Evolution of Spending Patterns
- Food
- Technology
- Fashion
- Tourism
 Evolution of Buying Image
- 1980‘s to 1990‘s
- Consumption in China
- Emancipation of Women
Differences between Generations
YOUR THOUGHTS
What do you think are the risks
and opportunities in the Chinese
consumer market today and how
have the spending habits changed
in recent years ?
RISKS
Understanding customer‘s buying habits in China
Low Brand Loyalty (non- luxury goods)
Brand‘s National Origin
Logistical Challenges
Oppertunities
 Rising Economy i.e. more employees and therefore
more disposable income
 Less savings, more spendings
 New emerging middle class i.e. opportunities for
companies to target this market
 More metropolitan areas
How to target the
different segments
of the market, i.e., the
implications of
marketing strategies?
Marketing
Implications
• Emphasis on the “brand” and not so much on the
product description for luxury products.
• This is the same for foreign products.
• More emphasis placed on the large middle income
group.
• Use local actors, and localize advertising messages.
Localized advertising should have the greatest impact.
• Focus on the new wants of the Chinese consumer,
capitalize on this new consumer freedom.
Establish a New
market
Historic development
Companies from the US or Europe got their start in china by
selling goods to the Chinese government.
During the opening, they sold goods to the emerging premium
segment, but never broadend their focus to include other
segments.
 The “good enough“ Market
( reliable enough products at low enough prices to attract the
cream of chinas fast growing cohort of midlevel cosumers )
 domestic and some mulitnational alike recognized the potential
Development of the
“Good Enough Market“
Two main reasons:
The income of low- class consumers has risen, thus
they are able to purchase better quality products.
Higher income consumers are moving away from the
premium foreign brands and accepting the less
expensive products.
(locally produced alternatives of reasonable quality)
Hence the middle class market is growing faster than
both the premium and the low end segment.
(analog at the B2B Sector )
Chinas Market for
Televisons
Example Firms
High Markt Share
Good Quality with limited features
Priced to undercut foreign brands
Targeted to value seeking, midlevel costumers
ENTRY INTO THE
“GOOD ENOUGH
MARKET“
Example of a foreign
firm
Attacking from Above:
Creation of a line of simplified MRI machines targeted
at hospitals in chinas remote and finacially constrained
second and third tier cities ( e.g. Hefei, Lanzhou )
- Fast growing market where costumers purchasing
habits werent likely to change soon
- Only litlle canibalization risks , but higher risk of
converging segments
Example of a local
firm
Burrowing up from below
Lenovo entered the good enough market via a joint
venture and established ist international brand with the
purchase of IBMs PC Divison in 2005
M&A or Joint Ventures