The Chinese economy has seen phenomenal growth in the last three decades and, unlike the West, has survived the GFC relatively unscathed. China now has the second largest economy after the United States with continued economic growth around 8%. Coupled with a population of over 1.3 billion people, China has near endless potential for further growth and market expansion.
China presents a big opportunity for savvy Australian brands looking to expand their reach and grow their customer base internationally. However, to gain market share and get results, marketers need to have a good understanding first of the complex, and ever-changing, Chinese market.
What makes the Chinese market unique?
Excitement around the marketing opportunity in China has unfortunately led some western marketers to jump into the Chinese market relatively unprepared. To make the most of your brand’s entry into the Chinese market you must take the time to properly understand the unique market conditions of the dynamic East Asian markets of Mainland China, Hong Kong and Taiwan, and neighbouring markets such as South Korea and Japan.
The Chinese market itself is dynamic and a lot more complex than many western marketers may realise. China has enjoyed a great deal of progress over the last few decades including higher levels of education and income, an increase in migration and travel, and improved access to global media through technology. This progress has not only contributed to stronger economic growth, but has also changed the nature of the market significantly. China is no longer just the ‘manufacturer of the world’, but increasingly is also developing its own global brands in industries including the car market (eg. Great Wall), and in services such as banking, transportation, tourism and hospitality.
Geography also plays a key role in setting the market in China apart. China is a large and diverse country with varying degrees of economic prosperity throughout. China has seven unique geographical areas; South, East, North, Northeast, Central, Southwest and Northwest. The needs and wants of Chinese consumers in these regions vary according to the stage of the region’s economic development and level of competitiveness.
For example, the coastal region’s income has surpassed that of Europe in many cases, and the market in this region has become very competitive. Korean investment in Western China is making has made this region more competitive on a global scale with many Korean brands manufacturing automotive and consumer electronic products there. Australian firms need to catch up fast if they want to increase their market share in such a competitive environment.
Who is the Chinese consumer?
Chinese consumers are savvy, and like in most other markets, diverse. A study I recently completed with Dr Hamin, lecturer at Macquarie University, and Professor Tung of Simon Fraser University (SFU) in Canada, revealed how cultural factors play a key role in influencing the purchasing decisions of the Chinese consumer. We established substantial differences in customer loyalty levels comparing the Chinese to the Chinese living overseas and Caucasians in Australia and Canada.
China has a ‘savings culture’ where many people save a high percentage of their wages. This has contributed to more prudent spending not only for the more conservative consumers; influenced by traditional Chinese and Confucian values, but also across the board. In short, the Chinese have a ‘save before you play’ mentality, whereas Westerners often follow a ‘play now, pay later’ approach, resulting in high household debts.
Traditionally, Chinese people have valued the brands with a strong reputation, and have long favoured Western brands from Germany, France and Italy. However, in more pragmatic or commercial consumers, customer loyalty is dropping in favour of a greater interest in comparing products based on value for money and functionality, making brand management much more competitive.
‘Face consumption’, where consumers buy luxury products to improve or keep face, is a trend that can still be observed in China, though it seems to be somewhat on the decline. These social consumers are concerned with what their friends or networks think about their purchase and are often willing to pay a premium for image gains. However, now that East Asia is setting up its own premium brands, for example with Chinese and Korean luxury cosmetics and beauty products, there is stiff competition for expensive European brands.
There are a variety of consumer types in China influenced by cultural and economic aspects. The savvy marketer must aim to understand these consumers and tailor activity to serve them accordingly.
The challenge for Australian marketers
As Chinese consumers become more value-focussed as opposed to brand-focussed, the challenge for marketers will be to monitor the change and adapt accordingly. With regional brands in China, Korea and Japan growing fast (eg. the fast food sector, hospitality, cosmetics), Australian brands need to position themselves in a unique way to gain a competitive edge against new East Asian brands as well as the traditional European marques.
The key consideration for marketers will be to employ a strategy that is flexible and accounts for the uniqueness of the Chinese market and the variety of consumer profiles.
Cracking the Chinese market and acquiring market share will only prove successful when the proper research and preparation have been undertaken. If marketers can gain an understanding of China’s market segments, consumer profiles, competitive forces, and the diverse culture and context surrounding China’s economy, they will have made significant inroads into finding success in China.
Dr Chris Baumann is a senior lecturer in business at Macquarie University.