China will soon be home to the world’s fourth-largest population of wealthy households. Companies that hope to reach them must understand how they differ from their counterparts elsewhere, from other Chinese consumers, and from one another.
Talking about wealthy consumers in China may seem odd during the middle of a global economic crisis. Yet for many companies around the world, wealthy Chinese represent a rare opportunity in an otherwise dismal picture.
Despite the global downturn, the number of wealthy households in China continues to grow. By 2015, the country will hold the world’s fourth-largest concentration of wealthy people. Companies that better understand the factors behind their purchases could steal a march on the competition.
Our research shows that their behavior is very different from that of their counterparts in other countries and of consumers in other income classes inside China.1 Indeed, the pool of luxury consumers has become large enough to form distinct segments, each with its own behavior and needs.
Our work included face-to-face interviews in 16 cities with 1,750 wealthy Chinese consumers—people in households earning more than $36,500 annually, which gives them the spending power of a US household making roughly $100,000 a year. These wealthy Chinese households, with an average annual income of about $80,000, represented the top 1 percent of earners in China’s cities. We supplemented the interviews with home visits by our researchers, who also accompanied many respondents on shopping trips.
In addition, we talked with brand managers and marketing specialists in China who serve this sector, visited luxury brand stores, and conducted exit interviews there.
To succeed, marketers selling luxury brands or the premium end of mainstream brands must understand what makes these consumers pick one over another. Indeed, they vary sharply in their preferences: for example, some wealthy consumers in China are still looking for status labels, while others try not to display their wealth. Companies that fail to understand such distinctions could end up wasting millions in marketing dollars and missing big opportunities.
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