Define Shanghai Tang's customer on various demographic/psychographic parameters In view of the unique features of the Chinese customer, draw a marketing plan for Shanghai Tang, covering the following topics: How can the brand take advantage of the low brand awareness among the majority of luxury customers? How should the brand adapt its strategies based on the Chinese perception of beauty? What distribution channels should the brand adopt? Do you think it should go to Tier 2 & Tier 3 cities? What range of products should it focus on? What strategies should the brand adopt to target Chinese traveling abroad? Executive Summary Shanghai Tang’s Customer In order to understand Shanghai Tang’s customer, it is important to first understand the overall market for luxury goods purchased by Chinese customers. There are several characteristics of the Chinese luxury consumer that can be viewed as broad-based, general features of the market. Once these features have been outlined to provide a context for the market in which Shanghai Tang operates, attention can then be turned to the particular customer segment that Shanghai Tang targets. The overall Chinese luxury market. One of the most salient broad-based features of the Chinese luxury customer is that the level of knowledge regarding luxury brands is not as well-developed as it is among most Western luxury customers. This has important ramifications for the China luxury market in general, because lower levels of differentiation between brands in the mind of the Chinese customer results in a reliance on other more overt cues to establish perceptions of prestige. For example, Joanne Ooi comments on branding in China and notes that “You must be expensive, prestigious and international to seduce the Chinese consumer.” Furthermore, according to an Ernst and Young report cited by the case, Chinese customers are “more conspicuous customers who took pride in sporting international labels, which they considered a sign of success and wealth.” Thus, in the Chinese luxury market, price, prestige, and international brand recognition are generally preconditions for the success of a luxury brand. Another unique characteristic that defines the Chinese luxury market is the tension between “Confucian values of humility and the pursuit of status as a tool for upward mobility," according to Tom Doctoroff of the advertising agency JWT. This tension has important implications for the segmentation of the Chinese luxury market because it places some customers at different points along a continuum of motivations to make a purchase. At one end of the continuum, customers’ motivations are more intrinsic and related to self-reward that accompanies a purchase. These customers may respond better to lifestyle marketing messages and products that allow them to complete an ideal self-image. At the other end of the continuum, customers’ motivations are more extrinsic and associated with conspicuous consumption for the purpose of establishing status or approval in a social environment. These customers likely respond more to aspirational marketing messages, and they buy more for prestige rather than to support a particular lifestyle image. Interestingly, this characteristic of the Chinese luxury market has a geographic dimension, whereby consumers in Tier 2 and Tier 3 cities tend to be placed further towards the extrinsic or conspicuous consumption side of the continuum of motivations. Two other characteristics that define the Chinese luxury market include a relatively young customer base and the prevalence of counterfeit goods. Luxury goods customers are primarily working professionals between the age of 20 and 40, which likely contributes to lower levels of sophistication in terms of
page 1 / 6
Overall segmentation of the Chinese luxury market can be represented in the following diagram. Against this backdrop of the Chinese luxury market in general. Lastly.ShanghaiTang
differentiating between luxury brands. Even more aligned with a bandwagon-oriented conspicuous consumption perspective. On the issue of demographics. our customers are not followers. Chermont voices a preference for behavior for behavior and attitudinal-based targeting. new rich. saying that he would define the target “as sophisticated working and traveling people. Shanghai Tang’s target customer. explaining. In addition. little emperors. is more prevalent in Tier 2 and 3 cities. Shanghai Tang is seeking to carve out its own space among customers who seem most similar to the traditional elite segment described above.” and they “enjoy wearing their cosmopolitanism and cultivation on their sleeve. In contrast. the little emperor group may have less spending power. "I dislike the idea of core customers. is comprised of recent celebrities and tends to be a younger." Joanne Ooi augments this description by adding that the prototypical Shanghai Tang customer is a genuine individualist: “Definitely. and balances status-oriented conspicuous consumption with a more conservative attitude towards spending money.
The traditional elite segment is characterized as wealthy. more trend-oriented audience. with standards.” Rather. sophisticated personalities. while also including some who have generated wealth through business. it is interesting that Executive Chairman Chermont somewhat distances Shanghai Tang from the notion of using demographics to target customers.000. they enjoy looking different from the crowd. In fact. as a badge of honor. perhaps most importantly contributing to the greater importance of own-stores to ensure legitimacy.000 to $30. as if people below or above a certain age shouldn't wear Shanghai Tang. with the two key dimensions of purchasing motivation (extrinsic versus intrinsic) on the X-axis and level of sophistication (astute versus indiscriminate) on the Y-axis. Four primary customer segments are identified and positioned on the diagram: the traditional elite.
page 2 / 6
. The widespread availability of counterfeits presents unique challenges and opportunities.” Hence. the traditional elite has a higher level of sophistication because they have been consuming luxury brands for a longer period of time than other segments. and middle-class aspirants. stemming primarily from business and entrepreneurial activity or government roles. in the context of the overall luxury market in China. resulting in high levels of education in terms of pricing and brand prestige if not in terms of more subtle brand positioning. the new rich. Shanghai Tang’s target customer can be described on some key demographic and psychographic dimensions. the middle-class aspirant segment has annual income of perhaps US $9. but arised from the one-child policy and is supported by as many as six sources of disposable income: parents and two sets of grandparents.
page 3 / 6
as the target customer is likely a frequent traveler. Analysis of current situation. a marketing plan for Shanghai Tang needs to establish new ways of resonating with the target Chinese customer. but faces the dilemma that a large portion of its business is attributed to foreign tourists who purchase while on the Chinese mainland. the propensity of Chinese customers to purchase when traveling abroad. and mechanisms of promotion.ShanghaiTang
As a subset of the traditional elite segment. However. Similarly. durability and utility as an attribute of shoes. wedding gowns are not a sufficient opportunity for the customer to realize their individualism because they are basically worn just once. Although weddings are unique and special events in the life of potential customers. and the emergence of Tier 2 and 3 cities. Marketing Plan In providing a market plan for Shanghai Tang to best attract its target customer. Now. a recommended product assortment and price positioning. the unique Chinese conception of beauty. Jewelry. Shanghai Tang’s concept is well-positioned to appeal to an educated. Building quality into the products also allows Shanghai Tang to resolve the apparent conflict between luxury and traditional Chinese perspectives on humility and beauty. presents an opportunity for Shanghai Tang to differentiate from other brands that rely more on brand name than on product functionality. They desire to be noticed. Furthermore. ample opportunity for licensing other accessories and even housewares does exist. Therefore. Just as Shanghai Tang strives to offer a unique narrative steeped in China culture. fragrances fall short of the ideal product for Shanghai Tang in this respect: they do not say enough about the person making the purchase. the products must convey the individualism and sophistication. and especially shoes and handbags are ideal product categories that can leverage the unique positioning of Shanghai Tang’s design and also allow for higher levels of quality to be built into the product in order to appeal to the more educated and sophisticated target customer who will be attuned to these attributes of the product in addition to merely the brand name. For example. a suggested approach to channel management and distribution. elite clientele. That said. Joanne Ooi is an ideal leader of the design team. handbags. Her extensive research of on Chinese history and tradition is an asset in the creation of unique collection embedded in an exotic Chinese narrative: “cultural roots for every single product. They do not contribute sufficiently to the customer developing their own narrative about the lifestyle they are trying to create for themselves.” Such positioning affords Shanghai Tang a wide range of possible product offerings. and even luggage. Shanghai Tang was first launched in Hong Kong. the customers Shanghai Tang targets have a high level of sophistication and brand awareness relative to others in the China market. Joanne Ooi is in perfect alignment
page 4 / 6
. Through these points of focus. However. In particular. it is also important for them to broadcast their individualistic nature to their peers. Shanghai Tang should adhere to a principle that style ought never to subvert quality and functionality. but was largely unsuccessful in those international cities. Product assortment and price positioning. They seek to purchase luxury products that contribute to the realization of a particular kind of self-identity associated with their individualistic nature. the brand has receded with its attention focused on China. Shanghai Tang’s foray into wedding gowns is perhaps a mistake in this respect. including: low brand awareness. the scope of possible product assortment should be limited to items that capitalize on the values that are central to the target customer. it should present a compelling narrative involving quality and craftsmanship. perhaps more so for the features and style of their clothing and accessories than for wearing the brand in and of itself. focus will be on three aspects: an analysis of the current situation. eyewear. prominent issues will be addressed. then tried to grow abroad with stores in New York and elsewhere. Given the current situation and its target customer. Shanghai finds itself in a challenging situation given that Chinese luxury customers are typically attracted to brands that have first been established internationally. Currently.
These customers may purchase large quantities of goods on a single visit because their purchase motivation stems from the desire to cultivate an image of their own ideal self. Shanghai Tang: Taking Chinese fashion to the world. Shanghai Tang is in a difficult position with respect to channel management and distribution because the target segment is quite narrow. As its own manufacturer. Shanghai Tang will also be able to more closely control the quality of its products and perhaps even offer customization to further appeal to its target customer. 6. sophisticated and educated target customer. especially when considering that the target customer is likely a frequent traveler. To the extent that products are “edgy. but that potential will demand an educated and skillful in-store sales team. Shanghai Tang should strongly consider integrating backwards and maintaining ownership over the manufacture of its products. The choice. this translates into the potential to sell across multiple lifestyle product categories. the fact that individualism is one of the key components of the brand’s essence suggests that Shanghai Tang’s products will likely entail small production runs in order to ensure the uniqueness of the assortment. Since small production runs are more costly and demand some manufacturing flexibility. However. 7. to the products available to everyday consumers. p. and adhering to it would allow Shanghai Tang to also transcend the “costumery” aspect of some of its previous products. Shanghai Tang should strive for prime locations in Tier 1 cities and should anticipate a relatively high frequency of high dollar transactions from its target customers. Working further up the supply chain. p. Conclusion
Shanghai Tang: Taking Chinese fashion to the world. which provides further support for a high-control and ownership model of channel management for Shanghai Tang. Higher price points will further separate Shanghai Tang from its association with souvenir-like novelties for tourists. Promotion.” they should so in the manner in which they are functionally superior. and instead send a stronger signal that the assortment is meant for the elite target audience. Shanghai Tang: Taking Chinese fashion to the world. For Shanghai Tang. In order to effectively communicate the higher level of quality of its products. which will make it difficult to acquire and maintain ownership of assets such as physical store locations and the fixtures and properties inside them.ShanghaiTang
with this principle.  Traditional elite segment drawn from both KPMG’s (2006) “traditional business elite” and McKinsey’s
   
page 5 / 6
. Shanghai Tang should price its products higher than it has priced them to this point. whether through materials or design. The second option is the better alternative for Shanghai Tang. Channel management and distribution. Segmentation map created by incorporating elements of two different consulting research reports: KPMG’s “Luxury Brands in China” (2006) and McKinsey’s “Understanding China’s Growing Love for Luxury” (2011). 6. such a narrow target segment implies that Shanghai Tang will likely need to survive on relatively low revenues. p. Shanghai Tang should desire a high level of control over sales channels in order to maintain the utmost consistency of perceptual cues and experience designed specifically for the elite. With a narrow target. is for Shanghai Tang to operate with a greater number of franchised locations and accept lower levels of control over sales channels. who may visit the store infrequently. therefore. or to instead maintain strong control with ownership of fewer locations.
. p.  Shanghai Tang: Taking Chinese fashion to the world.tcpdf.ShanghaiTang
(2011) “luxury role models” segments. 4.
page 6 / 6
Powered by TCPDF (www.  Middle-class aspirant segment taken directly from McKinsey (2011)  Shanghai Tang: Taking Chinese fashion to the world.  Shanghai Tang: Taking Chinese fashion to the world. 5. p.  New rich segment drawn from KPMG’s (2006) “new luxury shopper” segment.  Little emperor segment taken directly from KPMG (2006) with elements included from McKinsey’s (2011) “fashion fanatics” segment. 8. 5. p.  Shanghai Tang: Taking Chinese fashion to the world.