I recently had the privilege of interviewing Chen Yuxin (using the Chinese nomenclature of last-name-first), Distinguished Global Network Professor of Business at NYU-Shanghai and winner of the Paul E. Green Award for excellence in marketing research. Prof. Chen had some excellent insights into what is important to the Chinese consumer and how to segment and market to this group of 1.4 billion people.
Below is the video interview and also a written transcript if you prefer to read instead of watch. This interview was made possible by the NYU-Stern School of Business as part of their Global Alumni Conference in Shanghai.
WGM: Yuxin, we’re talking about consumer marketing today as we are in China. I’d like to get your thoughts on the Chinese consumer and related brand marketing. The first question, it’s always dangerous to group 1.4 billion people together into one consumer group, but broadly speaking what are a couple key consumer insights related to the Chinese consumer? How are they the same or different than other consumers around the world?
Prof. Chen: Generally speaking, Chinese consumers are similar to other consumers around the world; they like quality and reasonable price and so on. But there are some distinguished features about Chinese consumers. I think there are two groups of consumers in China, developed and developing. For the first group (developed) they really like brands. Because they are just new as developed consumers they pay even more attention to brands. China is now #2 in terms of revenue in the luxury category and is soon to be #1. Those are people that really care about brands and see brands as a way to express their newly achieved status in society. That group also includes some middle class consumers in China so they also want to see some good deals, but they care about brands first. For the developing consumers the story is very different and they are very driven by price first.
WGM: Would you care to estimate what percentage of consumers are developed versus developing?
Prof. Chen: I would say about 20% developed and 80% developing.
WGM: Given what you just said about the key facets of the Chinese consumer, what should brand marketers keep in mind as they try to market to this developed set of Chinese consumers, or alternatively what might be some watch outs to stay away from?
Prof. Chen: There are two issues developed consumers really care about. The first is trust. You probably have heard of many scandals in China around food safety and so on. So consumers have to be more suspicious about companies and about brands. So we really like some high quality brands, world famous brands, global brands, because we feel those brands will provide the trust we are looking for. You want to make sure the claim made by a brand is trustworthy. Usually that’s not a big deal in some very mature market because the legal system is better in a sense and consumer rights are more protected. But in China that is probably the number one thing, the trust that is being provided. The second thing is aspiration. Even for those developed consumers, 30 or 20 years ago they were in the developing category. So they really aspire to a better and higher quality life and they want the brand to provide some emotional benefit. Also aspiration can come from two different angles. It can come from something new or something they would like to achieve. The other angle is they are looking for something that lets them get away from their daily life. Daily life in China is very compacted and stressful, a tough environment. Those people who survive this kind of competition are the achiever type, but it’s very stressful and they are looking for the emotional benefit of a “get away” experience.
WGM: You mentioned emotional benefits. One of the fundamental aspects of brand marketing is that balance between communicating functional benefits and emotional benefits. How do you see that balance playing out here in China and what are some of the benefits on both sides of that equation that seem to resonate with the Chinese consumer?
Prof. Chen: Functional benefits can be very basic like if you are selling a detergent it should get clothes clean. If you are a global brand that is usually assumed to be OK, taken for granted. But it is important still if you are targeting developing consumers because even with a basic functional benefit a strong or global famous brand can provide a better functional benefit. With developed consumers they will take the basic functional benefits for granted and they are looking for innovation, additional functional benefits. For example with detergent it can protect their hands or protect the fibers, something additional. Emotional benefits are also very important. Even for consumers in the developing segment you still need to provide the basic emotional benefit like it’s trustful, quality is guaranteed, and also I mentioned this aspiration. Even for the developing segment people have very high aspiration. That is something kind of unique to China is that even though they are in the developing segment they believe their life will be better in the near future. They are still looking for something better, something they want to achieve and that is important.
WGM: Thank you Professor Chen for coming on the WGM China series with me today. I also want to thank NYU’s Stern School of Business for making Chen Yuxin available as part of their Global Alumni Conference here in Shanghai. Until next time we bid you farewell from China.