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Accenture Outlook | Meet the New Chinese Consumer

Accenture Outlook | Meet the New Chinese Consumer

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Published by Accenture
Successful consumer marketing in China is, in many ways, as much art as science. It combines a sophisticated understanding of local perceptions and preferences with a willingness to embrace unconventional strategies and the best new technology.
Successful consumer marketing in China is, in many ways, as much art as science. It combines a sophisticated understanding of local perceptions and preferences with a willingness to embrace unconventional strategies and the best new technology.

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Categories:Types, Business/Law
Published by: Accenture on May 13, 2013
Copyright:Attribution Non-commercial

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The journal of high-performance businessThis article originally appearedin the 2013, No. 1, issue of 
China
Meet the newChinese consumer
 By Jerey I. Beg, Tzeh Chyi Chan and Xuyu Chen
Successul consumer marketing in China is, in manyways, as much art as science. It combines a sophisticatedunderstanding o local perceptions and preerenceswith a willingness to embrace unconventional strategiesand the best new technology.
accenture.com/outlook
 
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Outlook 2013
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During the past three decades,proound social, economic and culturalchanges in China have convergedto create a consumer market that isunlike any other. Complicating mattersis the speed at which the marketcontinues to evolve.To win the hearts and wallets o Chinese consumers, local and multi-national rms alike need to master a new art that combines the ability to generate meaningul consumer insights amid unprecedented changewith the agility to act on thoseinsights quickly and proactively. Wereer to it as art because it requiresnot simply applying tools and sciencebut also sometimes embracingunconventional and counter-intuitiveapproaches. Along with the promise o opportunity,these approaches come with a certainamount o risk as well. And as withany art, experience is both the teacher and the driver o excellence. Here, then,are ve movements—brushstrokes, i  you like—that Accenture believes thebest marketers in China can apply tomaster their art.
Counterintuitive
Over the past several years, Accenturestudied the behavior o consumers inChina to gain a better understandingo the sales and marketing approachesthat resonate in that country. In 2011,we surveyed more than 330 consumersin China to better understand their behaviors, attitudes and expectations.In 2012, we conducted a similar survey o 504 consumers. The ndings revealve areas o marketing action—somecounterintuitive—that companies mustpursue and master to extend their reachand sales in China.
1. Embrace a more complex,not a simpler, marketingchannel strategy
To make inormed purchasingdecisions, consumers in China rely on multiple channels, ranging romdirect-mail campaigns and advertisingto the Internet. But it is the onlinechannel that customers turn to mostoten when looking or product or service inormation. In 2012, theproportion o consumers doing researchonline topped 90 percent.Like shoppers in other parts o theworld, Chinese consumers tend to“research online, purchase ofine.” And this so-called ROPO eect isgrowing. In 2010, 33 percent o Chineseconsumers purchased products ofineater looking online or pricing, productand brand inormation, as well asor customer reviews. In 2011, thatgure jumped to nearly 43 percent.Meanwhile, the value o ROPO salesduring that one-year period more thandoubled, to $90 billion.Given that the boundaries separatingonline and ofine worlds will continueto blur, it’s critical that companiesdevelop a multichannel marketingstrategy in China that makes it easy or consumers to carry out online andofine activities. And these multiplechannels must be seamlessly integratedto deliver a consistent experience.
2. Sell yourself to everyone,including non-buyers
 While the Internet is the researchtool o choice or Chinese consumersprior to making their purchases, it isinormation rom other consumersthat is consistently most important inhelping them understand what productsare available and shaping their buyingdecisions. Social media is playing anincreasingly critical role here. More than90 percent o Chinese consumers usesocial media and microblogs (knownas “weibos”) to learn about companies’products or service delivery.Nearly a quarter o consumers posttheir provider experiences and opinionsabout a company’s products or servicesseveral times a week. When it comes to
 
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 valuing the opinions o others,74 percent o Chinese consumersresponding to our most recent survey trust the comments about companiesthat are posted by people they know(compared with 68 percent in 2011).Interestingly, however, it is not justthe opinions o riends and amily that matter. In 2011, more than a thirdo Chinese consumers based their purchasing decisions, at least partly,on posts made by complete strangers.In 2012, that number climbed tonearly 44 percent.The lure o online opinion sharingexplains the popularity o sites such asDianping, on which people rate restau-rants and merchants in approximately 2,300 cities across China. By 2012,the website had more than 48 millionmonthly active users who had postedsome 20 million reviews on more than1.5 million member merchants. The sitereports more than 1.2 billion monthly page views—60 percent o which comerom its 40 million unique mobile users.To take ull advantage o the socialmedia channel, companies need a clear understanding o its potential or theorganization. It also requires them toenhance their analytics capabilities toidentiy and monitor customer-relevantsites and opportunities, respond tocomments rom consumers about their brands, and continuously assess thesocial media presence o competitors.
Companies looking to improve their art and extend their reachinto the vast Chinese consumer market must, at a minimum,understand the general market conditions and drivers. However,it is not enough or them to have a passing amiliarity withtheir art; they must become masters. Consider the ollowing:
China is not yet a consumption economy.
The contributiono household consumption to China’s GDP was just 38.8 percentin 2010, compared with 71 percent in the United States and50 percent to 60 percent in most European and other BRICcountries. The government is striving to reverse this trendwith policies aimed at increasing domestic consumption sothat it accounts or 45 percent o GDP by 2020. How muchChinese consumers will be willing to spend remains to beseen, since they have one o the highest savings rates in theworld (38 percent o earnings).
Income disparity is alarming.
The chronic income disparitybetween urban and rural residents continues to widen. In 2011,the average disposable income o urban Chinese consumerswas 323 percent higher than that o their rural counterparts.While the government has launched a series o social andeconomic initiatives aimed at increasing incomes or bothrural and urban individuals by at least 7 percent each yearby 2015—resulting in 7 percent o households having annualdisposable incomes o more than $25,000, compared with just 2.4 percent in 2010—we do not expect the gap betweenurban and rural households to narrow signifcantly.
Urbanization is accelerating and will continue to driveconsumption.
Approximately 13 million people in China moveto cities each year. In 2000, the proportion o urban dwellersclimbed to 36 percent, up rom 20 percent in 1980. By 2015, it isexpected that 60 percent o the population will reside in urbanareas. And by 2020, there will be 70 to 100 cities in China withmore than one million people. This dramatic urbanization is, andwill continue to be, a main driver o China’s domestic consumption.
Proound demographic changes are making the consumermarket landscape more complex.
China’s population is aging.The number o people over the age o 65 will increase by morethan 51 percent rom 2010 to 2020 and will account or14 percent o China’s total population. Thanks to the country’sone-child policy, its workorce is simultaneously shrinking and willactually decrease by 2020. Given that the social security saetynet won’t cover the majority o older residents, younger workerswill be aced with a heavier burden to support the seniors.
The rise o online consumers marks a new rontier or rowth.
 The prevalence o mobile Internet applications and smartphonesis accelerating the rate o online consumption. By 2015, thenumber o Internet users in China will soar to more than 800million, up rom 538 million as o June 2012. Internet access isgrowing ubiquitous in consumers’ daily lives or shopping andentertainment. Online shopping accounted or 3.3 percento China’s retail sales in 2010 and will increase to 8 percent(with sales volume o more than $360 billion) by 2015.
Understanding the undamentals o China’s consumer market

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