By Gordon Chu | August 25, 2009

More Questions Than Answers – The New Chinese Consumers

In the past decade China has been the buzz of companies and brands from all four corners of the world. Everyone dotes on China as the anchor in global expansion from McDonalds to Intel – there really isn’t an industry that hasn’t recognized the sheer potential of China’s economic standings. Today, it’s almost difficult to not read in every advertising news article the mention of opportunity or this “emerging middle class” in the China market. Especially in dire economic times on the domestic front, many companies find reprise by merely looking east towards the new land of global consumerism. But, underneath the superficial layer of understanding the “what” or opportunity to be had, we are still trying new ways to figure the “how” part of the equation and capitalize on this wave of Chinese consumers.

Needless to say, there is no magic answer to the “how” but understanding the overwhelming complexity of the Chinese consumer is a great first step at paving your own way.

Part of that complication roots from hypocrisy of cultural, geographic, and economic influences that really have surfaced recently with the boom of China’s economy. Not only do we (as brand advertisers and content providers) need to contest with a culturally isolated country that has only begun to open its doors to global persuasion, but we have to deal with an unprecedented and ever-changing /growing consumer group at unprecedented speeds. In other words, making sense is the first step to understanding.

Consumer Psychographic – Frugal / Lavish Shopper

With years of endured struggle of poor economic times and 1.3 billion people to contend with, the idea of social Darwinism is a natural part of growth in China’s modern history. Consumers were poor and luxury items weren’t even a thought when your main concern revolved around putting food on the table on a daily basis. Thus, the advent of the frugal shopper where saving is a matter of survival. Although the mindset of saving may be foreign to the rest of the world, it has been engrained and passed down from generations to generations and is a big factor in buying behavior.

On one hand, there is the inclination to be frugal with spending and saving as noted above. On the other, we have a booming “emerging middle class” with access to significant purchasing power that is paving the way with consumer and retail spending.

Consumer Psychographic – Domestic / Global Brands

China is a proud country of its history, its abilities, and its culture. After all, China in Chinese literally translates to “middle country” meaning the rest of the world revolves around China. So, for the proud nationalist consumers, buying local / domestic is a part of their buying behavior. Local brands flourish very well in China and there is something to be said when a local company has the ability to compete against much larger Western companies who look to enter the Chinese market (for examples, look at Taobao vs. eBay; Baidu vs. Google).

On one hand, there is the inclination to side with Chinese local brands. On the other, we see a spike in uptake of Western brands where, for the first time, Chinese consumers have access and the ability to purchase these items.

Now, I understand that neither of my examples above is mutually exclusive to the psychographic of the Chinese consumer, but it does briefly illustrate the complexity of going forward with marketing / branding efforts to align all sides of this growing market. The two examples above also lay the foundation of some of the more pertinent factors in the purchasing decision process where buying boils down to branding, value, and trust.

Branding

Especially in today’s market where Western influence does impact the purchase-making process, this generation of “emerging middle class” consumers yearns to stand apart from the rest. Branding is a statement for consumers to declare their own individuality and set them apart from everyone else. In many cases, the ability to purchase these brands is a statement of its own. For example, the cachet of ordering an expensive bottle of top-shelf cognac at a Chinese nightclub far outweighs the pleasure of actual consumption.

You see examples upon examples of how branding influences purchase behavior across all products and industries. Louis Vuitton and Christian Dior are two of the most popular brands amongst Chinese women despite the fact they often save up to a year’s worth of income in order to purchase a single item. Porsche launches a four-door sedan recently in China to meet the demands of ultra-wealthy consumers looking to make a statement by the way of transportation. Functionality and practicality aside, branding will continue to heavily influence buying behavior.

Value

If you have ever visited China before, you would understand that price is merely a suggestion when shopping. Haggling and negotiations is expected of consumers and is driven by what Chinese consumers deem as value.

Let’s not mistake the difference between value and costs because they can be interpreted very differently in the eyes of consumers. Where ‘cost’ is a function of monetary value (which will universally always be a factor in buying behavior), ‘value’ is intrinsic to how the product / service benefits the lifestyle or convenience of the consumer.

For example, the latest craze in China is chocolate with added calcium which is eaten primarily for health benefits and not for taste alone. Consumers view this as an extra benefit or an added ‘value’ which will influence their buying behavior. The introduction of mobile phone 3G network is an example of how the extra ‘value’ of the 3G network was not deemed as beneficial for consumers to buy when the added benefits were already available through other means (i.e. WiFi, Bluetooth, etc.).

In China where every RMB counts, value will also continue to drive consumer buying behavior.

Trust

We all remember the recent formula milk debacle in China where consumer products are often faked with heavy consequences. Granted, the formula milk example is an extreme case of this situation, but trust is a big issue in the eyes of Chinese consumers. Today, Chinese mothers will pay more than 30% for safe formula milk (benefits foreign brands) over local domestic brands.

Fortunately for us, Chinese consumers’ favorable trust / impression of Western brands roots in a higher quality product or service. It may take some time to win over trust (not uncommon for consumers to take up to 6 months reviewing brands before the purchase of a PC), but brand loyalty runs deep and consumers do not easily sway unlike their Western counterparts. Still not convinced? Take a look at Nokia, Coke, Intel, and Buick to see how they’ve built their sizable market share in China.

China Today

While these broad ideas of the Chinese consumer psychographic only scratch the surface of buying behavior, they are one layer of what we have to be aware in our efforts in China. Mix in geographic, cultural, and economic differences from region to region / city to city, all of a sudden there is an endless maze of complexity to the “how” question we first addressed. Despite these obstacles, the good news is China is slowly moving towards globalization where we (as brands and content providers) can meet all on common ground. When this might happen? No one will really know, but when it does – there is plenty to offer to this group of new Chinese consumers.

Gordon Chu is the VP of Business Development at METAN Development Group. For comments/questions, email gchu@metanmedia.com.