Consumer Needs and Behaviour in China

As a hierarchical society China has a high PDI score. Powerful stakeholders are at the top with the lower layers expect authority and inequality. In high PDI societies, generally status symbols are used to show seniority, status, prestige, and wealth. Social status should be clear so that others can show adequate respect or give ‘face’. In high PDI societies, luxury brands symbolise social status due to position in the hierarchy distinguishing between the different layers of society; and in high MAS societies luxury brands symbolize status as a result of performance or success. China has a PDI of 88 and a MAS score of 66 and thus the need for luxury brands is a symbol of not only social status (power) but also success (achievement). In China as a communist country, people do not have a long history of luxury shopping as luxury brands weren’t always freely available, however, due to the government's ‘reform and opening’ policy in 1978, China’s market has expanded exponentially and international products (including luxury items) have flooded the market. Brand awareness and consumption are increasing especially amongst the younger consumers accounting for over 20% of the global market. Even though it has been reported that China’s luxury market is currently slowing down, however, the demand remains steady among the expanding middle class as Chinese continue to buy better quality products showcasing their social status. 

According to the Conversation (2015) the growth of luxury brands globally predicted in 2019 is depicted in the following map (China is listed in the highest 6.1-12.4% growth category):

Luxury items are usually defined as expensive designer items, such as bags, jewelry, shoes, clothes, etc. and are meant to be seen not only by the user but by others. In China, consumers are influenced by what others think of them. This is a reflection not only of the hierarchical nature of China but also of collectivism. China has low IDV with a score of 20. Consumers are thus drawn to advertising messages that are linked to a product’s social acceptability and symbolism connected to achievement, prestige, and wealth. Luxury brands are also seen as perfect gifts catering for the self-esteem of both the giver and the receiver. Publicly consumed products can be sold at premium prices, however, home items are selected and should thus be priced more conservatively. 

China as a high PDI society has the third largest percentage of companies using celebrity endorsements in the world. China uses celebrity endorsements to symbolise status and prestige and to ‘give face’ to a product. People are naturally drawn to their high position in society, respect what celebrities think and trust the products that they endorse. In China especially, celebrity athletes are highly popular and thus extensively used to endorse products. Even though China is a high MAS culture Chinese consumers tend to primarily evaluate celebrities based on their values and actions rather than their success and recognition. It is thus important for retailers to choose celebrities that align closely with their brand values and accurately represent their brand as brand ambassadors. 

In China, trust must be actively earned and thus protecting and reassuring consumers is key. Brands have to ensure that consumers will not lose face selecting the wrong brand. Face is seen as a type of social currency one that is sold, traded and earned through daily social and business interactions and important at every stage of the retail process. 

According to Hofstede, consumers from collectivist societies are conformity orientated and show a higher degree of group behaviour. The self cannot be separated from the group and the tendency is to buy products for social acceptance. Consumers from high power distance and collectivist cultures, such as in China, also tend to show greater brand loyalty, especially with dominant brands that have already established themselves in a market and proved that they are superior to competitors. 

When new products are introduced into the market, consumers are confronted with a certain level of uncertainty as they are most likely unfamiliar with the new product. Consumers from high UAI cultures will use parameters such as a reputable country of origin and also brand image/reputation to evaluate the new product. High UAI cultures are reluctant to try innovative products from new companies, whereas low UAI cultures are more likely to embrace these products. China has a low UAI score of 30, and is thus more open to change and innovation making China an excellent platform to launch and test new products from smaller or newer companies that have not yet established a strong brand image globally. 
 

Four times luxury brands wowed Chinese consumers with over-the-top experiential events (LINK).

Experiential marketing is on the rise among luxury brands in China. From Dior, Hermès to Gucci and Chanel, a series of big players have recently pushed out one-off creative events in major Chinese cities, which provides VIP consumers with immersive and memorable experiences by incorporating into their campaigns elements such as art, culture, and technology. Because Chinese consumers are so obsessed with luxury goods, it’s easy for brands to generate buzz in the online community with well-planned events. Thus, the effect of physical events can be amplified on social media, helping luxury brands connect and engage with followers in the digital sphere. 

Starbucks - Unmasking the Chinese consumer (LINK)

Starbucks, a premium coffee retailer that has succeeded in a nation with a deep history and culture of tea drinking. Starbucks changed their entire retail strategy, menu, and store layout for the Chinese market to focus on status, making Starbucks outlets a place to be seen and aligning their brand with aspiration and success. The result is that Starbucks, which opened its first first store in China in 2000 is on course to have 1,500 stores across the country by 2015, making it the chain’s biggest market outside the US. And it’s still able to charge a higher price for its coffee in Chongqing than in Chicago. Much the same model has been taken by Haagen-Dazs ice cream. No Chinese consumer will buy premium ice cream – again costing well above prices in the West – to eat it in the privacy of their home. In China, mainly due to the high PDI, low IDV dimensions, it’s about out-of-home consumption – about being seen, projecting status, and deriving societal recognition.

http://www.bschool.cuhk.edu.hk/faculty/cbk/article.aspx?id=25E840FD