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How to cash in on consumer boom

By Zhou Yan (China Daily)
Updated: 2008-10-24 11:07

Brand loyalty

As a brand-driven society, two-thirds of Chinese consumers opt for only one or a small set of predetermined brands when they go shopping, compared to less than half of British or Japanese shoppers, although the importance of brands, and brand loyalty, is falling as the choices facing consumers multiply.

The propensity to shop based on perceived value rather than on brand is growing stronger. The number of consumers classified as "promotion-driven" increased 37 percent and the tendency to seek the best deal regardless of brand is stronger among lower-income consumers.

McKinsey's study showed that loyalty to particular brands is waning, with food and beverage companies experiencing the biggest decline. The proportion of respondents saying they would continue to buy the particular brand that they currently purchase has dropped 25 percent for consumer electronics and 53 percent for food and beverage products from the previous year.

The survey also demonstrated that companies have to appeal to customers' preference for functional benefits if they want to keep them. Compared to their Western peers, Chinese consumers place far greater emphasis on practical benefits versus emotional attributes when choosing products.

But in Chinese consumers' mindset, big brands are viewed as a proxy for quality and reliability. Big brands enjoy more dominance in China than elsewhere.

"Big international names in China tend to have higher premiums than in foreign countries, therefore local brands have to seek innovation in products in order to rival multinationals," Chen pointed out.

Chen added that as Chinese consumers are getting more mature, they are also attaching growing importance to environmentally friendly products.

As wealth spreads across China and urbanization continues, regional characteristics are becoming more important than city-tier differences in determining optimal go-to-market strategies. This is another major trend found by McKinsey's annual survey of Chinese consumers.

While city tiers will remain a relevant factor in identifying income-driven differences in consumer behavior, differences in consumer attitudes and behavior between regions are much more striking than those between city tiers, according to the survey.

Regional differences have long existed in China, and as wealth spreads out of the largest economic centers and the addressable market becomes bigger, segmenting customers by region will become more important.

Research from the McKinsey Global Institute on urbanization in China suggested that over 1 billion people will live in cities by 2030.

The survey showed that television remains the dominant advertising medium in China, with more than one-half of Chinese consumers surveyed saying that they would not buy particular brands of food or beverages unless they had seen them advertised on TV.

Yet, increasing exposure to new media among Chinese consumers is changing how marketers reach consumers.

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