Find Your Target Customer in China

During the Christmas of 2014, Haagen-Dazs introduced the “Rainbow Latte”  in China. Instead of placing emphasis on product quality, the selling point of the Rainbow Latte is the diversity of flavors and colors. In the context of China, where coffee consumers are mostly young people who regard coffee-drinking as a stylish lifestyle choice, Haagen-dazs seems to have the right strategy.

Everyone knows there are 1.3 billion people in China, but they are not all the same. In fact, the China market could be more diverse than the US market. Due to the large population, you don’t need to reach the entire market to hit big numbers.

So how would you go about figuring out who your target customer should be in China?

Photo by: Qiaomeng

Geographically

In terms of economic development, the Eastern part of China is more developed than the western part. Marketers often segment the Chinese market into four tiers of cities. With 35 million people in total, Beijing, Shanghai, Guangzhou, and Shenzhen are classified as first tier. Second tier cities mainly include provincial capitals and other major cities, which total more than 115 million in population. The lower tier cities see lower levels of income but higher overall population.

Nine years ago, the top eight Chinese cities accounted for seventy percent of affluent households, but the number has fallen to 33% by the end of 2012. This change implies the growing affluent segments in lower tier cities and towns.

Data shows that consumers that live farther from top-tier cities have higher demand for new brands. They tend to have fewer choices due to limited visibility and availability of global brands in their hometown. As the Harvard Business Review suggests, other than cosmopolitan centers in the coastal areas, the “good-enough” markets are emerging as the new battlefield for global players.

Due to historical and environmental factors, culture, language, and lifestyle varies a lot in different regions of China. During the Dragon Boat Festival two years ago, 150,000 Chinese netizens debated over whether rice-dumpling should be salty or sweet. The debate continues today, and many Chinese people from the North cannot imagine why people in South make sweet rice dumplings.

Culture shock isn’t limited to the clash between Eastern and Western values, but occurs inside of China, too. When global players are planning their campaigns in China, culture and language nuance should be a top priority. The inappropriate use of Chinese symbols and language would lead to the failure of campaigns and products, as in Toyota’s case.

Demographically

Half a century ago, the average Chinese person lived a thrifty and simple life. Fast forward to today, despite accumulating considerable wealth, older generations still have the same lifestyle. Unlike American families, the older generation in China are likely to live with their kids and take care of their own grandchildren. Chinese culture is future and family oriented, so older people usually spend little on themselves and give all their savings to their kids.

The “young” generation of China usually refers to people born after the 1980s. Children born after the 80s mostly do not have siblings due to the one-child policy enacted in 1978. As a result, these children grow up doted on by their parents and will often use their parents’ money to purchase goods they personally cannot afford.

In other words, purchasing power largely shifts to them. That’s why it’s not rare to see young Chinese people carrying expensive luxury handbags worth twice their salary.

Unlike their parents and grandparents, the younger generation in China values quality, taste, and design over price. They are interested in the greatest variety of brands and are willing to pay more for premium products and services. International brands and western culture are not new to them, and they are willing to try new products.

Aside from young people, other market categories such as women and the middle class (all are not mutually exclusive) are also open to new brands. Even though the history of global brands in China is short, younger generations, women and the middle class have began to have an awareness of and even an emotional attachment to brands.

Psychologically

Economic disparities lead to diverse education and life experiences. Panos. M divided the China market into three segments: the highly globalized, the highly localized, and the semi-global. People who live in the first tier of cities, or those who have lived overseas require relatively little effort by brands to localize for. This segment includes an enormous number of international students, professionals, and middle class workers. Many brands have tapped into the highly globalized segment and ignored opportunities in the semi-global and highly local segments.

Finding the right target customer in China is not only the starting point of localizing your product for the China market, but it also means new business opportunities. Unlike the US, there are many unmet demands and neglected markets in China. If your business is consumer-oriented, especially when you are targeting a niche market, you can find your loyal customers in China.

490 companies out of the Fortune 500 have already invested in China, and local players are filling up the gaps left by global giants. If you want to be a part of the gold rush, the time left for you to take action is growing short.

Featured image by: Qiaomeng