The Grandview Mall in Guangzhou. (Shutterstock)
According to a new report by GroupM, emotional drivers are an increasingly important influence on Chinese luxury consumers from tier 1 all the way down to tier 4 cities, but tier 1 leads the pack.
In an extensive consumer behavior market research survey, the agency studied 22 product categories, including automobiles, beverages, cosmetics, skincare, and luxury, finding that emotional factors were the number one reason to buy for more than half the categories.
“This research has forced us to re-evaluate our assumptions regarding consumer behaviour in different market tiers,” said Mark Patterson, the CEO of GroupM Asia Pacific. “Consumers’ attitudes and preferences don’t evolve in a perfectly linear fashion, and tier 4 consumers are showing surprising similarities in some categories to their counterparts in tier 1 markets.”
The research encompassed four tier 1 cities, 28 provincial capitals, 60 prefecture-level cities, and 184 county and county-level cities with 19,400 samples. According to the report’s analysis, its findings demonstrated that understanding Chinese consumption behavior “has to go beyond the standard tiers, geography, demographics, and social groups.”
When it comes to luxury, respondents in the upper tiers were “generally more emotional than their counterparts,” said report. Consumers in the first tier were most concerned with brands based on “emotional bonding” with the brand, while tier 2 residents searched for brands “that cater to their sense of self, status, and wealth.” Meanwhile, tier 3 consumers search for brands that can match their sense of identity as well as social and economic status, while tier 4 consumers were most concerned with the “physical benefits of the purchase,” and “responded well” toward lesser-known luxury brands.
However, these differences varied regionally, according to the report, which found that respondents in the south, north, and east were more sensitive to emotional influences in brand loyalty, while respondents from the southwest and central region were more practical and functional.
This “emotional” purchase motivation for luxury is tied to higher incomes, longer brand exposure, and a wider range of product choices, says the report. These factors lead consumers to become more brand loyal over time.
The report has two pieces of advice for luxury brands based on its findings. First, brands must take into consideration both city tier and geography when adjusting their marketing approach, and second, the progression from tier 1 to 4 is not always standard when it comes to decisions to purchase a brand. Rather, “it depends on the category, consumers’ familiarity with the category, and if it is a category upgrade."
“Most brands in China have focused on getting distribution, but as e-commerce, malls and big retailers are getting more and more established throughout China, the battle will be about which brands the consumers perceive to hold the most value. In this context, it is essential for brands to understand the importance of building the emotional connection with their consumers,” said Patterson.
To access more research on the luxury industry in China, check out Jing Daily's reports page.