Thoughtful China share the highlights from a recent conference in Shanghai, “Market to Watch: Building Brands Beyond Tier One in China”
Building Brands Beyond Tier One in China
Thoughtful China share the highlights from a recent conference in Shanghai, “Market to Watch: Building Brands Beyond Tier One in China.”
In partnership with Advertising Age, the event brought together some of China’s leading marketers and ad agency executives, sharing insights and information about how to connect brands with new consumers during keynote speeches, presentations and panel discussions.
Speakers at the conference confirmed that consumers in second-tier cities are becoming much more sophisticated, discerning and demanding. It was originally thought that they valued price over quality, but research suggests the opposite. Instead, because they have worked so hard for their self-made wealth, every cent they spend must count for something special.
They are also looking for better products locally. With the increased accessibility to information – both the Internet and younger family members working in Tier 1 cities, returning home with new brands – they know what is available locally is effectively second rate, and they resent this.
“ Consumers in second-tier cities are becoming much more sophisticated, discerning & demanding ”
They are also very curious consumers. They want to know what these better products can do for them. At a physical retail level, more time is spent converting consumers in second tier cities than in first, but once they are engaged, the conversion rate is higher.
Ten years ago, second tier consumers preferred to travel to first tier cities to experience brands, but increasingly they want to be engaged in their own cities, as they become more discerning and assertive. They are also rapidly moving beyond logo-based consumption, preferring ‘understated’ luxury brands and products, particularly when it comes to luxury autos. They want to be recognised for their tastes over ostentation.
eCommerce is definitely growing, but consumers in second tier cities still want to touch the product, experience the product and learn about both the product and the brand, specifically in the retail environment.
“ eCommerce is definitely growing, but consumers in second tier cities still want to touch the product ”
Logistics still provide an enormous challenge to brands leveraging eCommerce, with the amount of remote provinces and sheer size of the country. As a result, many brands are adopting a B-to-B-to-C strategy when it comes to eCommerce, selling to small independent resellers to cover as much geography as possible.
In terms of Tiers, brands should remember there is no ‘black and white’ when it comes to positioning in first or second tier cities. Instead marketers should be aware of the aspirational middle class in every individual city, even within places like Shanghai and Beijing.
China was also referred to as ‘a land of possibilities’ when it comes to brand building, which often takes little cues from success in the west. Sometimes marketing strategies that don’t work in the U.S. or Europe can work in China, as was the case with Volkswagen.
To further investigate branding in the Chinese luxury market on Luxury Society, we invite your to explore the related materials as follows:
– 2012’s Best Global Luxury Brands
– How China’s Luxury Goods Market is Really Performing
– Luxury Purchases in Asia Driven by Self Reward & Social Identification
