Learning curve for consumers

Updated: 2012-08-10 08:56

By Andrew Moody (China Daily)

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 Learning curve for consumers

Peking Tan, research and development director of Millward Brown, says many Chinese consumers are not loyal to brands. Zhang Limingzhu / for China Daily

Millward Brown executive develops market research models using state-of-the-art scientific techniques

Peking Tan says the Chinese are going through a phase where they are only just learning how to be consumers. The 34-year-old research and development director for global brands research company Millward Brown is one of the world's leading experts on the Chinese consumer.

"In China most consumers are learning how to be consumers and how to make the right decisions," he says. "It is like me. When I planned to buy my first car, I not only observed the car market but asked friends about their cars. I then felt I had a greater understanding. When I buy a car in future, the decision will be based much more on whether I like it. It is a process a lot of Chinese people are currently going through right now."

Tan was speaking in the company's expansive Beijing offices on the 7th floor of Xihuan Plaza that have a panoramic view of a city with more than 20 million consumers itself, more than many European countries and almost all US states.

Tan says Chinese consumers often think differently and are less selfish or individualistic than Western consumers.

"They don't live only for themselves. They live for their families and the future of their families. When they are making a purchase they will consider whether their wives or their children will like it also," he says. "They will also save for a time when they know they will have to spend money such as a child's wedding, even if that child is currently only 10."

One of the major talking points among Western multinationals in China is the creation of new markets as many towns in inner and western China develop - eventually creating the much-heralded market of a billion consumers that China watchers have been talking about for decades.

Tan believes the differences between tier one (major cities like Beijing and Shanghai), tier two (the provincial capitals, if not tier one) and even tier three (the remote cities) are often exaggerated.

"I think if you look at the consumption behavior of tier-two cities like Hangzhou and Changsha, you won't find many differences between them and Beijing and Shanghai and I think tier-three cities are also on a similar level now," he says. "The big gap is between the first three tiers and the tier four very rural small towns."

Tan says it would also be a mistake, however, to view people in tier-four cities as rural hicks with no spending power.

"People there often have more disposable money because the cost of living is not so high. I am from An-xiang in Hunan province and my little sister still lives there," he says. "Their life there is very good. They only work eight hours and after work they can afford to go to different restaurants and try various foods every day. She and her family also travel two or three times a year on holiday. So these consumers should not be ignored."

Tan himself left Hunan to study biology at Tsinghua University before doing a master's degree in psychology at the Chinese Academy of Sciences in Beijing.

He then decided to go into marketing, joining local company ACSR, which set up a joint venture with Millward Brown, part of the WPP advertising and media conglomerate, in 2006. His current role is involved in analyzing data and developing market research models using cognitive science and other state-of-the-art scientific techniques.

He is also involved in providing information for the company's famous Brandz surveys, which rank the value of brands globally. It also produces the Brandz Top50 of China's most valuable brands.

Tan, with colleagues, advises many Western companies that are keen to understand the true nature of the Chinese consumer.

"We are helping a Western dairy company at the moment and they are very keen to understand Chinese consumers. Their products are mainly imported from Australia and New Zealand," he says.

"What we have found is that with food safety being such a big issue in China consumers would be prepared to pay 50 percent more for their products than for local brands."

Tan says it is not a particularly surprising finding since in China there is often no direct correlation between income levels and the purchase price. "In the dairy category people are concerned more with the safety issue than with the price. They think it is very important for themselves and their children," he says.

Tan says it is a quirk of the market that Chinese consumers always think Western products are better, even though there are still some sentimental attachments to certain Chinese brands like White Rabbit chocolate or Warrior shoes which go back many years.

"If I buy White Rabbit, it would really be for nostalgia reasons because it bears a childhood memory. I think brands such as this are deploying new branding strategies that take advantage of this collective memory," he says.

Tan says Chinese consumers are not particularly respectful of brands generally and are not loyal even to Western brands. "I think the concept of brand loyalty is more of a Western thing. China does not have a long history of being a consumer society. They are certainly more critical of Chinese brands," he says.

"When there is something wrong with a Western product, they don't think it is the fault of the brand, whereas problems with Chinese brands - such as the scandal over milk powder a few years ago - it can do great damage to Chinese brands. They automatically think the brand itself has something wrong."

Tan says there is a clear divide between the generations in terms of their consumer behavior. "The older generation -those born before 1970 - tend to follow the crowd. In the lower tier cities these people buy such brands as Goldlion (a Hong Kong-based clothing brand) because if they don't buy it, they think they lose face," he says.

"Those born in the 1970s and 1980s are very keen on value and doing online comparisons. Those born in the 1990s, however, just buy things they like so long as they have enough money. They have no concern about the future. Their families always support them financially."

Tan says this often leads to a complex matrix with different generations buying the same products but for different reasons. "If you take designer goods, for example. People say Chinese people like designer goods. What they often don't realize is that they are all different Chinese people," he says.

Tan says there have been some clear examples of foreign brands misunderstanding the Chinese consumer such as Minnesota-based Best Buy, the electrical goods retailer which quit China last year.

"Best Buy offered a spacious and quiet shopping environment but Chinese consumers didn't like that. They prefer their stores to be crowded and bustling, like those of homegrown brands such as Gome and Suning," he says.

Tan admits the Chinese consumer can be difficult to fathom not just for Western companies but for Chinese ones too. "You get situations where many wealthy old people buy very low priced goods whereas young people who don't have much money still buy expensive goods like iPhones. This lack of a link to income is unusual," he says.

Tan says one thing is clear is that modern Chinese consumers are very aspirational. "They have many expectations about their life. They think in a few years they can live better. Chinese consumers are always insatiable. They want to own more."

Deng Zhangyu contributed to this story.


(China Daily 08/10/2012 page6)