1 March 2016
Tags: Branding / China / Hong Kong / Research
Attracting potential customers is the first step of the marketing funnel. This is where creative approaches and true ‘out-of-the-box’ thinking have the biggest impact: it puts brands on the map. For this research we have focussed on finding the sweetspots on that map. We asked consumers: ‘How do you most likely learn about a new brand or product?’
The answers are very revealing: Whereas multinational audiences (‘Rest of the world’) state that ‘Websites/ Blogs’ and ‘Friends’ are the most important sources, ‘Advertising’ is the most common source listed by Chinese respondents (closely followed by ‘Social Channels’). ‘Websites/ Blogs’ and ‘Friends’ on the other hand rank very low.
Once consumers have ‘come through the door’ it’s important to capture their attention and to influence their decision making. In today’s marketing funnel social media plays a key role at this stage. A brand’s social media followers are by default more likely to make a purchase than people who are only remotely aware of a brand. Also, it’s easier and more cost effective for brands to reach consumers who follow them. The questions thus boils down to: what kind of information do consumers want to see on social media?
Our research shows that Chinese netizens are much more pragmatic than consumers based elsewhere:
At the purchase, or conversion stage so-called ‘price anchors’ are important. A price anchor refers to the amount of money that consumers deem reasonable for a product or service. Consumers often have no way of knowing how much a product or service is actually ‘worth’ and typically develop price anchors based on past or related experiences. Perfume, for instance is sold in tiny flasks and can easily cost 200-500 HKD. So based on that market fact consumers may conclude that 300 HKD this is a reasonable price for perfume. 300 HKD is their ‘price anchor’ for perfume.
In developing markets consumers have different price anchors than consumers in developed markets. Although in developing markets price anchors may be lower in terms of totals, they are not necessarily lower when expressed as a percentage of the average income. To learn more about price anchors we asked consumers what their monthly income is and we also asked them to tell us what price they deem reasonable for: a salad, a smartphone, a handbag and an apartment.
Chinese consumers deem 26 HKD a reasonable price for a salad, compared with 37 HKD for Hong Kong people and 55 HKD for multinational respondents. For smartphones and handbags Chinese consumers are actually willing to spend almost the same amounts as consumers from around the world.
Many articles claim that Chinese consumers are less ‘loyal’ to brands than consumers elsewhere. In 2014 the SCMP ran the headline: ”Chinese customers’ lack of loyalty puts pressure on brands“and even McKinsey writes that to Chinese consumers “brand loyalty is often secondary”
Considering these factors we believe that there are no fundamental differences with regard to customer loyalty. The above described ‘catch-up’ effect caused by more brands entering the Chinese market may still affect brands today, but fundamentally there do not seem to be differences in behaviour. The diagram below shows that.