Roland Berger Chinese Consumer Report 2009

Roland BeRgeR Strategy ConSultantS Issue 06 09

Study
In-depth knowledge for decision makers

Chinese Consumer rePorT 2009

Roland BeRgeR Strategy ConSultantS

dear Reader,
over the past 20 years, roland Berger has conducted more than 80,000 interviews
in China with people from all walks of life, giving us unprecedented access to the way
Chinese consumers see their world. We have found out about their preferences and
dislikes, their hopes and fears, their aspirations and what they are happy with in the
status quo.

these interviews were mostly held in connection with one of the more than 200 assign-
ments we work on in China each year, affording us unrivalled insight into the Chinese mar-
ket. For at least 15% of these assignments we have used our roland Berger Profiler tool to
analyze the behavior of Chinese customers.
Charles-Edouard Bouée,
Regional Coordinator Asia,
President & Managing Partner, to keep on top of developments in 2008/2009 we felt it was important to conduct a large-
Greater China
scale survey to consolidate our knowledge of this exciting and still growing market. this
study presents you with some of the results of this undertaking, which covered 12,000
Chinese consumers in 64 cities, ranging from the four megacities Shanghai, guangzhou,
Shenzhen and Beijing down to tier-3 cities.

Ignatius tong, Partner and Vice President, Consumer goods and retail in China, believes
knowing the customer base is vital for any business striving to penetrate or survive in the
Chinese market: "More than ever, it is critical for FMCg to be tailored to specific consumer
needs. this requires a more insightful understanding of consumers that goes beyond mere
demographics." John Shen, Partner in automotive, agrees and points out how critical brand
management has become: "Brand loyalty can only be nurtured and enhanced through the
consistent delivery of brand values at every customer touch point. Brand strategy and
brand management should be at the top of the agenda for every Ceo."

We are delighted to be able to include interviews with two Ceos of Western companies
which have been operating successfully in China for many years: Paolo gasparrini, Ceo
of l'oreal China and günter Butschek, President and Ceo of Beijing Benz daimler-Chrysler
(BBdC). their impressions about the future of the Chinese market will be of great interest
to any reader working or investing in China.

the following report is the first of what we're hoping will become an annual cornerstone
of insight into the Chinese consumer market. In 2009 everybody will be looking to under-
stand the unfolding domestic consumption in China as exports suffer due to the world eco-
nomic crisis. In this environment we are looking forward to continuing to assist businesses
in China in developing the domestic customer base and defining winning road-to-market
strategies for our clients in this country.

study 3

a. Method and scope 04

B. the chInese consuMeR 08

1 SIx reCoMMendatIonS 08

2 ChIneSe SurPrISeS 18

3 KnoW your arChetyPeS 21
contents
4 SaMPle InduStrIeS: the CoSMetICS MarKet 28

5 SaMPle InduStrIeS: the autoMotIVe InduStry 33

6 StraIght FroM the horSe'S Mouth 37

c. aBout...

... roland Berger 42

... CIC 43

... l'oréal 44

... BBdC 45

d. contacts 46


expeRIence and eMpIRIcal ReseaRch: gettIng to know

a. Method and scope the chInese consuMeR

recently, roland Berger conducted a survey to analyze Chinese consumers.
over the course of two months, over 12,000 individual interviews were conducted
with consumers between the age of 18 and 64 in a representative study.

"Both emotional and ratio- of our respondents, 14% lived in one of the four
nal benefits should be taken Chinese megalopolies, 43% in a tier-1 city, 27%
into account when defining in a tier-2 city and 16% in a tier-3 city. altogether
brand positioning. We need we covered 64 cities in the country, ranging from
to go beyond functional Shanghai with 18 million inhabitants to small cities
benefits and address the of about 1 million people.
self-expressive needs of
consumers as well, subtly Consumers were asked questions regarding brand
symbolizing the life atti- perception and differentiation, consumption
tudes of the target group." behavior and purchase patterns as well as lifestyle.
this method was in line with the basic methodology
John Shen, Partner of the rB Profiler, developed and used international-
(Automotive CC) ly by roland Berger Strategy Consultants.

We added this latest research to the knowledge
gained in over 20 years of working in China and a
total of about 80,000 interviews. We can thus give
you a real insight into the minds of your potential
customers.

study 5

taIloR youR custoMeR a brand's value proposition thus needs to there are four main areas where the
appRoach to theIR values be aligned with the value profile of its rB Profiler can be applied:
target group. this is where the rB Profiler
when brand values and consumers' value steps in. It helps you see the fit between  measures brand perception from

It
systems converge, the consumer is likely consumers and brands, providing a way to a consumer perspective, including
to purchase the product. the RB profiler measure and quantify the value systems comparisons with competitors or
helps you create such a fit. of consumers and brands using the same with other brands in a company's
methodology. the rB Profiler is a vehicle portfolio
every consumer has his or her own set of for values-based brand and marketing
values, desires and aspirations to which management and creates a lasting  identifies consumer needs, defines

It
he or she attaches varying degrees of competitive advantage (figure 2). consumer segments and evaluates
importance (figure 1). their attractiveness. It helps in ana-
how It woRks lyzing the brand projection in commu-
this complex set of values, or value profile, at the core of the rB Profiler are 20 funda- nication and at the point of sale and
influences how individuals make purchas- mental values describing all aspects of enables companies to compare the
ing decisions. the link between the values an individual's consumption behavior. current situation with their own targets
and the concrete purchasing decision is the axes of the matrix measure degrees
formed by the brand's value proposition − of emotionality/rationality and of maxi-  ue to its intuitive nature and the fact

d
the values it projects into the market via malism/minimalism. all the values are that the results are statistically proven
its logo, product design, communication, elicited from consumers using carefully on a quantitative basis, it supports
price, etc. at the moment of the buying developed attitudinal statements, and can direct buy-in from your organization
decision, these two value systems come be measured and validated quantitatively. and easy implementation into the
together. this is the "moment of truth." marketing mix
When a brand's value profile and a con-
sumer's value profile converge, then the  helps with brand monitoring,

It
consumer perceives the brand as "his" or tracking and controlling
"hers" and is likely to purchase it.


THe MeANiNg OF VALueS

FAir: high ethical standards, social
awareness, solidarity Figure 1
NATure: high ecological standards consumer value profiles
PuriSM: minimalism, understatement, the rB Profiler enables consumer and brand values to be visually represented
reduction to essentials in a value grid
TrANquiL: calmness, relaxation,
Peter
harmony
PreSTige: status orientation,
E E
expressiveness, attention-seeking Prestige Thrill & Prestige Thrill &
Fair Entertainment Fair Entertainment
Vitality Vitality
ViTALiTy: mental and physical fitness, Classic
Nature Classic Carefree Nature Carefree
activity, independence
Tranquil Clanning Cool& Tranquil Clanning Cool&
CLASSiC: timelessness, elegance, Purism Trendy
y Purism Trendy
y
– Security + – Security +
aesthetics, design orientation Service
Innovation
Service
Innovation
& Protech
SeCuriTy: averseness to risk, Smart Quality
& Protech
Smart Quality
Shopping Personal Shopping Personal
"safety first" Efficiency Efficiency
Proven Proven
CLANNiNg: friends, family, Total Cost
Customized
Total Cost
Customized
team spirit R R
THriLL & eNTerTAiNMeNT: risk,
adventure, having fun, enjoying life
CAreFree: easygoing, spontaneity,
1

optimism
COOL & TreNDy: trendsetting,
innovation, self-differentiation VALue griD
PrO-TeCH: high-tech, cold trans- e = emotional = pro-values
actions r = rational = anti-values
PerSONAL eFFiCieNCy: efficient + = more consumption <Values> = fundamental values
performance, just-in-time, comfort, – = less consumption of consumers
convenience
CuSTOMizeD: individualization,
exclusivity, flexibility, variety
SerViCe: clear information, uncompli-
cated fulfillment, competent advice,
warm transactions
quALiTy: longevity, reliability
PrOVeN: scientific proof, authority,
traditional/tried and tested products
SMArT SHOPPiNg: bargain hunting,
excellent value for money
TOTAL COST: frugality, penny-pinching,
price-defined buying decisions

study 7

Figure 2
understanding consumer behavior
By matching the consumer and brand profiles, the rB Profiler makes it possible to predict consumer behavior

consuMeR pRoFIles BRand pRoFIles
Peter Brand A
"Kevin gong" Brand a
E E
Prestige Thrill & Prestige Thrill & kevin gong is very performance-
Vitality Vitality
Classic Classic
oriented – efficiency, innovation
Nature Carefree Nature Carefree
Clanning Clanning
and quality are more important
Tranquil Cool& Tranquil Cool&
Purism Purism to him than a low price
Trendy
y hIgh FIt Trendy
y
Service Service
Innovation
& Protech
Buy Innovation
& Protech
Smart Quality Smart Quality kevin gong chooses BRand a –
Efficiency Efficiency the brand is expensive, but stands
Proven Proven
Total Cost
Customized
Total Cost
Customized
for innovation and high quality
R R
lo
W
no

FIt
Bu
y

3 4
FIt
W

y

Brand B
lo

Ben
Bu

"Wendy Meng" Brand B
no

E E
Fair
Prestige Thrill &
Entertainment
Prestige Thrill &
Entertainment
wendy Meng is a very responsi-
Fair
Vitality Vitality
Classic Classic
ble person – she cares about the
Tranquil Clanning Tranquil Clanning
environment and social issues
Cool& Cool&
Purism Trendy
y hIgh FIt Purism Trendy
y
Service
Innovation Buy Service
Innovation
wendy Meng chooses BRand B
& Protech & Protech
Smart Quality Smart Quality – the brand appeals to her high
Proven
Efficiency Efficiency ethical and ecological standards
Proven
Total Cost Total Cost
Customized Customized
R R

5 6


1 sIx RecoMMendatIons

B. the chInese consuMeR
It is well established that Chinese society inhabitants form the most sophisticated
is extremely intricate, complicated and consumer base in China and can be relied
dazzling in its complexity. the country and upon to be early adopters, willing to spend
its people are fascinating and Western more on leisure and adept in the use of the
minds often struggle to make sense of the Internet and other modern media.
country's many facets. anyone who wishes
to do business in China is well advised to We use the term megacity for these four
study the market carefully before ventur- cities, meaning that they are the largest,
ing into such unknown territory. most developed, and highest profile cities
in the country.
to sales and business development man-
agers everywhere, the Chinese consumer Besides the four megacities, China has
seems a mysterious creature. although what we call tier-1, tier-2 and tier-3 cities.
China is the world's third largest economy, an example of a tier-1 city is Chengdu, the
little is known about the preferences of its capital of Sichuan province in the heart of
consumers – we are used to seeing the country. this city is a trading hub and
the Chinese as producers rather than its metropolitan area has over 10 million
consumers. inhabitants. a China daily survey recently
listed Chengdu as the fourth most liveable
With China's economy expected to grow city in China. xiamen, another tier-1 city,
by roughly 7% even in these economically is a much smaller coastal town with 2.6
turbulent times, it's time to get to know million inhabitants. Cities are not neces-
the Chinese consumer a little better. to sarily defined by their number of inhabit-
get you started, here are six points that we ants, but by their relative economic and
have distilled from the many insights that social importance. xiamen might be small,
our survey affords us. these points can be but in 1981 it was one of the first four
seen as general recommendations for any special economic zones introduced by the
business that is in China already or is plan- Communist Party and today has a large
ning to go there. industry base, making it an affluent city.

 don't disregard the smaller cities Shaoxing and datong are examples of
 Concentrate on under-40s tier-2 cities, with 4.3 million and 3.1 million
 Strengthen your brand inhabitants respectively. datong in the
 Channels are critical northern Shanxi province is a coal-mining
 green
go town with a history and economy closely
tied to this industry. Shaoxing, the birth-
place of Communist Party leader Zhou
the dIFFeRence Between enlai, today has a gdP of rMB 222.3 billion.
BIg and sMall
China's four largest cities are Beijing,
guangzhou, Shenzhen and Shanghai.
together they have an astonishing 57 mil-
lion inhabitants with a share in national
gdP of around 14%. these port cities are
traditionally more open to foreign ideas
and steeped in a tradition of trading. their

study 9

tier-3 cities are usually much smaller
Figure 3 and their importance is mainly regional.
comparison of overall consumption patterns in different tier cities examples are tongcheng situated in anhui
province, with roughly 744,000 inhabit-
ants, and Fengcheng situated on the
Mega City 1st Tier city
Megacity tier-1 yellow Sea coast in the southeast, with
E E around 630,000 inhabitants.
Prestige Thrill & Prestige Thrill &
Vitality Vitality
Classic Classic
With China being as big and confusing as
it is, it is easy to concentrate sales and
Cool& Cool&
Purism Trendy
y Purism Trendy
y marketing efforts on the four biggest and
Service
Innovation
Service
Innovation best-known cities. this, however, would
& Protech & Protech
Smart
Shopping
Quality Smart
Shopping
Quality be a fatal mistake. Whilst potential
Personal Personal

Proven
Efficiency
Proven
Efficiency customers in smaller cities might have
Customized Customized different preferences and spending
R R patterns, they are certainly as interested
in consuming as their fellow nationals
in bigger cities and they also have an
2nd Tier city 3rd Tier city
tier-2 tier-3 1
increasing amount of disposable income.
2

E E
the smaller cities might well be home
Prestige Thrill &
Entertainment
Prestige Thrill &
Entertainment
to your best customers.
Fair Fair
Vitality Vitality
Nature Classic Carefree Nature Classic Carefree
See figure 3 to get an idea of the compara-
Cool& Cool&
Purism Purism
Trendy
y Trendy
y tive overall consumption profiles for the
Service
Innovation
Service
Innovation
different city tiers.
& Protech & Protech
Smart Quality Smart Quality
Efficiency Efficiency
Proven Proven
Customized Customized
R R

3 4


Figure 4
the person behind the profile
a possible translation of our
average consumption profiles

SuSAN gAN works as a systems administrator for a
major chinese company
FrOM gHuANgzHOu
Megapolis SiNgLe, 35  Main source of news: Internet

Megacity  newspaper: national daily
E  credit cards owned: two
Prestige Thrill &
Entertainment
 use of credit card:
Fair
Vitality several times a week
Nature Classic Carefree  travels for leisure:

Purism
Tranquil Clanning Cool& twice a year
Trendy
y
 clothes shopping: once a week
– Security +
Service
Innovation
 preferred grocery shopping: mall

Smart Quality
& Protech  accommodation: one bedroom flat

Shopping Personal near the city center
Efficiency
Proven  hours spent watching

Total Cost
Customized tv a day: 1
R  hours spent using the

Internet a day: 3
 likes: risk-taking, innovative things,

trendy features, just-in-time, price-
1 defined buying decisions

NeiL zHeNg Runs a small stationery shop
FrOM Tier-3 CiTy  Main source of news: tv
3rd tier city
tier-3 MArrieD, 43, ONe CHiLD  newspaper: local daily
 credit cards owned: none
E  use of credit card: never
Thrill &
Fair
Prestige
Entertainment  travels for leisure: once every

Vitality
Classic
three years
Nature Carefree
 clothes shopping: twice a year
Tranquil Clanning
Purism
Cool&
Trendy
y
 preferred grocery shopping:

– Security + supermarket and own plot to
Service grow vegetables
Innovation
& Protech
Smart Quality  accommodation: small house in

Shopping Personal
Efficiency the suburbs
Proven  hours spent watching tv a day: 3
Total Cost
Customized  spent on the Internet
hours
R
a week: 1
 fitness, family, elegance
likes:

2

study 11

to show you what these profiles could
translate into, we have developed two
prototype customers, one from one of
China's four largest cities (Susan gan)
and one from a tier-3 town (neil Zheng).
For easy reference we have juxtaposed
their typical behavior, showcasing the
development of the Chinese consumer
across the board (see figure 4).

the notable differences between the two
are obvious at first glance. For example,
"Innovation and Pro-tech" are of very little
interest to tier-3 cities. tier-1 types on
the other hand attach great importance
to "Vitality" and "Clanning". looking at the
color distribution of these prototype city
dwellers, it is clear that their preferences
and interests are often diametrically
opposed.

note the sensitivity to "total cost" which
is high in tier-1 cities, but neutral in tier-3
cities. Instinctively we would assume big
city tiers to be big spenders. however, it
turns out that china is good for a surprise
here – it's the people in smaller cities
who are more relaxed about price-benefit
ratios and their saving accounts.


Figure 5
the person behind the profile
a possible translation of our average
consumption profiles

Consumer profile: age 30-39
LAurA HuA, 32
E clothes shopping: twice a month
Prestige Thrill &
Fair Entertainment
Vitality  Buys skin care products in a

Nature Classic Carefree specialized shop
Tranquil Clanning Cool&  pays more attention to brand

Purism Trendy
y
than price
– Security +
Service  uses the Internet for shopping

Innovation
Smart Quality
& Protech  uses teleshopping or mail order
Shopping Personal  likes: innovative products,

Efficiency
Proven new features, just-in-time
Total Cost
Customized
R

3

SHi zHi, 48
E clothes shopping: twice yearly
Prestige Thrill &
Fair Entertainment
Vitality  Buys skin care products

Nature Classic Carefree in a supermarket
Tranquil Clanning Cool&  pays more attention to

Purism Trendy
y
price than brand
– Security +
Service  uses the Internet for some

Innovation
Smart Quality
& Protech shopping
Shopping Personal  does not use teleshopping

Efficiency
Proven or mail order
Total Cost
Customized  likes: comfort, convenience,
R bargains, independence

4

study 13

age Is MoRe than a nuMBeR regardless of geographical location,
our data shows clearly that the age of age or economic circumstance, 90% of Figure 6
40 denotes a threshold in consumer those surveyed say that they have I pay more attention to brand
behavior in China. there are many reasons "confidence in products made by well than to price
for this. one of the most important is that established and experienced suppliers".
35% 33%
people under 40 have spent all of their In any event, most brands that are trusted 31%
adult life in a time of market-oriented in China are Chinese; indeed it is often 25%
reforms which began under deng xiaoping stated that local brands cater better to 23%
in the early 1980s. customers' taste and needs.

to highlight the main differences be- age is also a factor for brand importance. 18-24 25-29 30-39 40-49 50-64 (age)
tween someone in the 30-39 age group younger people pay more attention to
and someone in the 40-49 age group, we brands. geography does not seem to
have used our research to construct two matter all that much: People in Beijing and
more prototype consumers: laura hua, people in small towns think of themselves
32, from guangzhou and Shi Zhi, 48, from as roughly equally knowledgeable regard- Many multinational brand manufactur-
Beijing. Figure 5 shows the rB Profiler ing fashion. ers have adapted their logos for China
blueprints and possible examples from
both age groups. on the surface, brand loyalty seems to be
driven by nationalistic considerations, with
Consumers aged between 30-39 are people assuming they can trust Chinese or
the most important target market at the local brands more than foreign ones.
moment. they are more open to innova-
tions than their elders and have more however, it turns out that some of
disposable income than those younger the most trusted brands mentioned
than they. by respondents are in fact foreign,
especially in western china; the respon-
Companies need to watch the develop- dents think of them as chinese, just
ments in younger age segments if they because they are known to be good.
want to benefit from future high-income
consumers. trends are likely to echo those this goes to show that Chinese consumers
of earlier young consumer generations in will base their brand loyalty also on qual-
more advanced economies. ity and price rather than just on whether
something is "made in China". Consumers
BRands do MatteR in the highest segment, with an annual
the Chinese are extremely interested in income of rMB 250,000 and above, are
brands and attach a lot of importance most interested in Western brands and
to which brand they buy. any product or have a clear understanding of what's
service intended to penetrate the Chinese Western and what's not. these segments
market needs to establish a strong brand. also show the highest interest in Western
culture and are, either through economic
ability or intellectual interest, more open
to foreign influence and ideas in general.


cRItIcal channels Malls are not only popular with the
In China, as everywhere else, there are expected groups: some provinces such Figure 7
traditional sales channels such as shops as Chongqing have also declared a clear people's preference for malls is
and markets, and new channels such as preference for malls. more influenced by size of city than
the Internet and tV. unsurprisingly, young by income
customers are those most likely to use With 250 million users in China, the
the Internet, with 7% of 18- to 24-year- Internet certainly is a force to be reckoned named "mall" as a preferred channel
olds preferring to shop for clothes on the with. younger users and those in the top for household grocery shopping
Internet as opposed to only 1% of over four cities are more likely to use it for 63%
40-year-olds. shopping, whereas the older generation 54%
and those in provincial towns are more
to get a product to the customer, the right tV- focused. 34%
choice of channel is critical. Whilst custom- 21%
ers in the four largest cities prefer the mall apart from a pure sales channel, the
for grocery shopping, only 20% of tier-3 Internet should be viewed as an
city inhabitants do the same. Mall prefer- essential Pr tool when it comes to Mega tier-1 tier-2 tier-3
ence is strongly influenced by city size – reaching the younger and more affluent
more than by income. parts of society. chinese bloggers have
considerable influence in a country which
Western retailers that have been active still suffers from censorship, and compa-
in China since the 1980s have been quite nies that are in their bad books can suffer Malls given as a preferred channel
successful in penetrating the market, significantly. for household grocery shopping
particularly the French supermarket 35%
33%
chain Carrefour. on January 9, 2009 the the devastating earthquake in China in 31%
chain opened its 134th hypermarket in early 2008 is a case in point. dior group 25%
21%
China, this time in Beijing. their american was forced to drop actress Sharon Stone
rival, Wal-Mart, has also been successful, from their advertising in China after she
recently opening its 100th store. Wal-Mart claimed the disaster was "karmic retribu-
China President and Ceo ed Chan has tion" for China's treatment of tibetans. < 5000 5,000- 50,000- 100,000- 150,000-
49,999 99,999 150,000 250,0001)
stated that his company is committed to Bloggers immediately called for a boycott
1)
Income (RMB/yr)
bringing its superstores to tier-2 and tier-3 of dior's products. Similarly, when Chinese
cities throughout the country. Paralympic athlete Jin Jing was attacked
in Paris during the olympic torch relay,
Mall or free-standing superstore? Which Carrefour, normally strong in China, suf-
channel is best depends more on geog- fered from a customer boycott started by
raphy than income, as figure 7 clearly bloggers.
shows. Carrefour and Wal-Mart are using
both channels, but their superstores are equally, the Web can be exploited to
frequently so large that they are stand- improve a company's image; companies
alone rather than attached to a mall. like ge or Wal-Mart that gave generously
after the earthquake received an immedi-
ate positive echo in the blogs around the
country.

study 15

go gReen grow in the future, and companies
Figure 8 surprising as it may seem, concern for the should not underestimate green issues
preference for green products within environment is equally widespread across as a powerful marketing tool.
different consumer segments all types of consumers in china, at least
when it comes to shopping. the car market is a case in point. to date,
I do not buy products produced by there are hardly any hybrid cars in China:
companies that harm the environment young or old, province or big city, large or yet the Chinese car market is expected
(agree to some extent or strongly small income, between 84% and 88% of to overtake the uS as the world's biggest
agree) respondents said they try to avoid compa- within the next decade. Shanghai general
nies that harm the environment and pro- Motors is testing the market with its first
85% 85% 84% 88%
fessed a preference for green products. locally produced hybrid model, which is
priced slightly higher than the standard
the green market in China is still extremely model but is 15% more efficient in terms
underserved. this is not surprising in a of fuel consumption.
country that has so much catching up to
do in economic development terms. now With 1.3 billion people, China could have
that China has overtaken germany as more than 100 million cars on the road if
Mega tier-1 tier-2 tier-3 the world's third largest economy, more the market expands at the average global
and more Chinese can afford to put their level of 10%. China has to take a lead in
money where their mouth is. alternative technologies: the world simply
I would choose green products doesn't have the energy resources to
92% 93% 91% 92% 91% Companies should leverage this new sustain such growth with conventional
green consciousness. Some are already technology.
doing so: In January 2009, Wal-Mart China
announced a push towards sustainability, the Chinese are generally not yet as con-
which includes opening new stores that cerned about climate change and a dete-
use 40% less energy, reducing plastic riorating environment as Westerners are.
bag use by 80% and increasing water But environmental concerns are sure to
efficiency by 50%. the ambitious tar- increase, and companies would do well to
18-24 25-29 30-39 40-49 50-64 (age)
gets were announced on the company's prepare for this eventuality now.
website – an indicator of the importance
attached to the message.

Wal-Mart is also addressing another fac-
tor: While pushing their green credentials,
they are continuing to stress their policy of
offering high-quality products at the best
price. the Chinese are still cost-sensitive
and the premium put on being green is
not quite as high as in Western countries.
however, environmental concerns will


IMpRove youR deFInItIon
using the rB Profiler, we can distill the Figure 9
brand image of specific companies. We did Brand manufacturers often lack a clear brand positioning
so for a number of different product areas:
Ford Toyota
 Beer Ford toyota
 sets
tV E E
 phones
Cell Fair
Prestige Thrill &
Entertainment Fair
Prestige Thrill &
Entertainment
Vitality Vitality
 Cars Classic Classic
 care products
Skin Tranquil Clanning Tranquil Clanning
Cool& Cool&
Purism Purism
 Credit cards Trendy
y Trendy
y
Service Service
Innovation Innovation
& Protech & Protech
the overall impression from our analy- Smart
Shopping
Quality Smart
Shopping
Quality
Personal Personal
sis is that in some industries, brand Proven
Efficiency
Proven
Efficiency

manufacturers lack a clear brand image. Customized Customized

Improvements in positioning are urgently R R
required to build a more solid and well-
defined customer base.
Dongfeng Volkswagen
dongfeng Volkswagen
Figure 9 clearly shows that Volkswagen E E
and dongfeng are the only brands that Prestige Thrill &
Entertainment
Prestige Thrill &
Entertainment
Fair Fair
Vitality Vitality
benefit from even an approximation of a Classic Classic
brand image. however, dongfeng has joint Tranquil Clanning Tranquil Clanning
Cool& Cool&
Purism Purism
ventures with nissan, honda and PSa, Trendy
y Trendy
y
which makes the dongfeng profile a corpo- Service
Innovation
Service
Innovation
& Protech & Protech
rate profile rather than a product profile. Smart Quality Smart Quality
Efficiency Efficiency
Proven Proven
In VW's case, the product itself is seen Total Cost
Customized
Total Cost
Customized
as representing a modern, performance- R R
driven brand. Customers think that the
brand is expensive, but they value the
brand image above cost considerations. In 12

dongfeng's case, it is the company that is
perceived as representing these values,
not the product itself. there is a solid value
proposition at the corporate level owing to
the company's JVs. assuming the ability to
develop the necessary r&d capacity, this
might allow dongfeng to eventually launch
its own sub-brands with some success.

study 17

Ford and toyota, on the other hand, suffer
Figure 10 from a very weak brand image. their
weak brand image is also found for some tv manufacturers customer base is ill-defined, making a
positioning decision difficult if not impos-
sible. If the Chinese auto market slows
Samsung Sony
Samsung Sony down for whatever reason, this could mean
E E serious trouble. Foreign manufacturers
Fair
Prestige Thrill &
Entertainment Fair
Prestige Thrill &
Entertainment
also have to prepare themselves for strong
Vitality Vitality
Classic Classic
Chinese brands emerging from successful
JVs that have produced strong corporate
Cool& Cool&
Purism Trendy
y Purism Trendy
y profiles, as in the case of dongfeng. to
Service
Innovation
Service
Innovation brace themselves against such difficulties,
& Protech & Protech
Smart
Shopping
Quality Smart
Shopping
Quality automakers are well advised to reinforce
Personal Personal

Proven
Efficiency
Proven
Efficiency their brand image, find their specific cus-
Customized Customized tomer base and cultivate their preferred
R R channels.

a similar picture emerges for the makers of
Changhong Skyworth
Changhong Skyworth 5
tV sets. two foreign brands have managed
6

E E
to establish a clear reputation for quality
Prestige Thrill &
Entertainment
and modernity; the others, regardless of
Fair
Vitality
Classic
their origin, are weak in comparison. tV
Nature Carefree
Tranquil Clanning
makers should heed the same recommen-
Cool&
Purism Trendy
y dations as for automakers: a clear brand
– Security + – +
Service
Innovation
image is the first step towards surviving in
& Protech
Smart Quality a more difficult and sophisticated market.
Shopping Personal
Efficiency
Proven
Total Cost
Customized Foreign companies need to invest a great
R R deal of time in learning about the Chinese
customer. they need a strong local
management team in place to adapt to a
7
rapidly developing market − one that is
19

poised to become the world's largest and
most important.


2 chInese suRpRIses
China is unique among the nations of leIsuRe haBIts
our planet. It is home to the world's larg- the most costly and time-consuming Figure 11
est population, it is governed by the leisure activity is travel. We therefore differences by age group
Communist Party and it has experienced looked at the travel habits of our
unprecedented economic growth over respondents. number of trips per year
the past 30 years. even now, with the 1.5 1.5 1.2 1.0 0.8
global economy in the doldrums, China Companies in China have been quick to 1.2
still expects roughly 7% growth for 2009. react to the newfound taste for leisure
spending in their country. Ctrip, a full-
Most companies have very little or no service online travel booking service estab- 18-24 25-29 30-39 40-49 50-64 (age)
experience in such a market, making it lished in 1999, has been experiencing a
doubly important to invest in extensive 50% growth rate for the past few years.
research before venturing into China. Some 30% of trips taken are package tours differences by city tier
Western companies that have so far been and about 25% of trips are beach holidays.
successful in the country have usually trips per year
spent years planning their market entry the general leisure trends are not unlike 1.8 1.1 1.1 1.0
before going there. In China more than those found in europe or the uS. But
1.2
elsewhere, unexpected tendencies in the companies have to be careful to use the
general development need to be taken into right channel in the right region, as prefer-
consideration at all times. It is not enough ences differ widely. the Internet is cer- Mega tier-1 tier-2 tier-3
to trust your feelings or base your judg- tainly a big medium in China, but access in
ment on Western market circumstances. remote provinces can be poor.

We identify four critical factors that need It's IncoMe, not Spending per trip (rMB)
investigating by any company wishing to geogRaphy 3,364 3,859 3,516 3,781
establish a clear brand image in China: one might expect to find most families
living under one roof outside the large
 egardless of city tier, leisure spend-

r cities and in the more remote provinces.
ing remains roughly equal – it's the however, this is not the case. In fact,
frequency of leisure pursuits which income is the defining component for
Mega tier-1 tier-2 tier-3
differs demographic factors such as household
 verage family size is connected to

a size and number of children.
income rather than geography
 eople consider themselves to be

P traditionally, families in China are length of trip
fashionable in most parts of the closer-knit than in the West, with many 4.7 4.5 4.5
country, regardless of city tier older parents living with their grown-up 4.3

Interest in Western culture is evenly children and grandchildren under one roof.
spread among all of society But the higher the income, the less likely
such an arrangement is. Several reasons
for this are possible: Mega tier-1 tier-2 tier-3

study 19

 higher income makes it easier to rent FashIon sells eveRywheRe
more than one apartment We asked people whether they had a good Figure 12
 young high-flyers may delay or forgo knowledge of what was fashionable and Persons per household according to
having a family what was not. Surprisingly, the number of income (rMB/year)
 Many Chinese aspire to Western-style people saying they did was similar in the 3.3 3.2 3.1 3.1 3.1
family arrangements different types of cities and across provin- 3.0
ces (figures 13 & 14).
geography, on the other hand, has a
markedly weaker effect on the number this widespread regard for fashion is
of people living in one household. those somewhat puzzling. Consumption behavior
parts of northwest China which are still and cultural environments differ great- <5,000 5,000- 50,000- 100,000- 150,000- >250,000
49,999 99,999 150,000 250,000
least touched by the economic and social ly from Shanghai to Sichuan. however,
development of the past 30 years have an modern media are able to penetrate all
average of fever than three persons per areas of the country, bringing the same
household, whilst some more affluent and ideas about style and fashionableness to number of children according to income
developed provinces such as guangdong, all sorts of different consumer groups. this (rMB/year)
Fujian or hebei show an average of 3.4 is clearly having an impact. 1.4
persons per household. one must also 1.2
distinguish between the general tendency Contrary to what one might expect, peo- 1.0 1.0 1.0 1.0
in cities to live in smaller households and ple in the four richest provinces consider
specific tendencies in the different themselves to be less fashionable than
provinces. those in provinces such as tianjin or anhui.
and the picture is even more complicated <5,000 5,000- 50,000- 100,000- 150,000- >250,000
49,999 99,999 150,000 250,000
what does this teach us? easy assump- when it comes to price sensibility: Some
tions often fail to reflect the reality of areas show up as both price- and fashion-
demographics in china. to understand the conscious, with respondents claiming to
market, you need to look closely at your be more concerned about price than brand.
potential customer base.
When it comes to fashion items of any Figure 13
kind, intensive research into local markets I have a good knowledge of what is
is needed to find the right mix of pricing fashionable and what is not
and branding.
67% 67% 67%
here, as with demographics, china is 65%
good for some surprises.

Mega tier-1 tier-2 tier-3

Roland Berger Chinese Consumer Report 2009

Roland Berger Chinese Consumer Report 2009

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Roland Berger Chinese Consumer Report 2009