Thanks for stopping by to join our discussion on lower tier cities.
If you have just started reading, please click the following links to get caught up with our study and to read about previous insights.
Week 0: Kick-off and study details. Click here.
Week 1: It’s a Matter of Perspective – Click here.
Week 2: The Secrets of the Heart – Click here.
Week 3: Celebrating the Power of Family – Click here.
Week 4: Unveiling Community Dynamics – Click here.
Week 5: The World Outside My Door – Click here.
This week we take our learnings from previous weeks – about the hearts, minds and motivations of lower tier consumers – and we apply these to the commercial world and how they view products and purchases.
When it comes to purchases and consumption, lower tier consumers differ quite significantly from their top tier counterparts. However one thing that they do not differ in is their desire for good, safe products.
LET THE BUYER BEWARE
Lower tier consumers are aware of the scandals plaguing China’s food industry. While their knowledge of food scandals may not be as in-depth as top tier consumers, they are still savvy and suspicious of what they serve to themselves and to their loved ones. Thus, when they are unfamiliar with the category or brands, they will turn to external cues to lead them to making the right decision. These cues may be big brand names that they saw on TV, or which they have heard their friends talking about.
In lower tiers, advertising is important as a means of establishing credibility. Their thinking: the more money you’re able to spend on advertising, the more legitimate you must be.
Says Lisa Richert, Strategy Director, North Asia
“As the saying goes, “Trust is so hard to earn, but it is also lost so easily”. As brands, we need to lead with simplicity, not over-complicating. People want cues to help them know the quality – reminders on where ingredients are from, where it is manufactured, who endorses it and frankly why it should be trusted. With this, we need to leverage their known trusted sources – from media like TV to word of mouth like organizations, the government, and even to the shop keepers themselves.”
Not surprisingly, this concern is a universal truth across China. However, the more we understand lower tier people, we see that the tactics we use to address that concern may need to vary.
POWER OF THE VALUE EXCHANGE
With pressures like this, it is not surprising that lower tier consumers are more price sensitive.
But this goes further than you would expect – this price consciousness translates to many consumers purchasing brands that they may be completely unknowledgeable about. Instead, they are swayed by a low price, a vaguely familiar-sounding name, or more likely, a promotion or free-gift.
One new mom we spoke to confessed that she had never tried the particular brand of baby milk powder she had just purchased before, or had even heard much about it. She walked into the store with the intent to purchase her usual formula, but changed her mind. What made her decide to purchase the new brand? A free photo album with purchase.
To her, the free photo album – inside which she could store precious photos of her little girl – was worth the switch to a new, unfamiliar brand.
Without strong brand knowledge, products that have give-aways can easily sway the brand choice or convince the consumer to purchase something they normally would not want to spend extra money to buy.
Packaging cues or explicitly stated benefits also have great power to guide brand choice.
Ultimately Brands need to create their own meaning if they are going to have value. This value can be functional – clean, smooth, tasty – or emotional – caring, family-oriented, etc. Then, they must find ways to bring that to life. This can take the form of promotions, gifts with purchase, visual cues, content development or association, etc.
The concept of luxury takes on a different meaning in lower tiers – But it does exist. Luxury here is seen through a very practical lens. One lady we spoke to said that she defines luxury as buying clothes that costs above 200RMB (as she usually spends only a fraction of that).
In lower tiers, luxury is not about the brand of car – it’s about owning a car… because owning a car means you can afford the petrol to fill it.
Across China, luxury is still very much tied to price and has little emphasis on brand heritage and/or product quality.
The woman pictured in the photo above is Mrs Wang. She is 33 years old and lives in Huaiyuan county in Anhui province. She did not know that the Louis Vuitton bag given by her husband is considered a luxury item. Before she knew that it was an expensive luxury brand, she was using it as a grocery bag when she shopped for groceries.
Says Jeffrey Tan, National Research & Insights Director:
“We need to make our Brand Stories meaningful beyond price and just image. We want these consumers to be more conscious of the brands they choose versus just purchasing products. They need to understand how the brand fits into their lives and the value placed behind each brand – be it to satisfy emotion or practical needs.”