Foreword Defining <strong>Chinese</strong> luxury brand consumers Enhance brand awareness Winning in the luxury market 2
Foreword China is close to becoming the second largest luxury market in the world and it is increasingly attracting the attention of major luxury brand producers worldwide. In view of this, <strong>Roland</strong> <strong>Berger</strong> conducted a study on the behavior of <strong>Chinese</strong> consumers when buying luxury goods and their choice of brands. The aim of the study was to offer those companies that wish to engage in this prestigious and lucrative market with valuable insights about their target consumers. To achieve this goal the study looks at the key factors influencing and determining the purchasing behavior of <strong>Chinese</strong> consumers: broadly their social characteristics as well as psychological and behavioral traits. Our experts further segmented the entire consumer population into six archetypes, which we call Era Leaders, Wealthy Second Generation, Ambitious Elites, Savvy Investors, Stylish White Collars and Gift Buyers. China has a great deal of consumers who can be characterized as Gift Buyers. In addition, "showing-off" (exhibitionism) is a significant feature in all the other archetypes too, albeit to varying degrees. One in four consumers in China belong to the archetype Era Leaders. One of their strong traits is a penchant to follow others. Given these findings it is not surprising that internationally famous brands are still the top choice for <strong>Chinese</strong> luxury goods consumers. To better understand the market, <strong>Roland</strong> <strong>Berger</strong> closely examined the considerations and actions that culminate in the purchase of luxury goods. They noticed that the purchase of a luxury good is the culmination of four distinct steps. We call these stages Origin of Consciousness, Selection of Brand/Product, On-site Decision and Final Purchase. Our experts further observed that brand awareness plays a very important role in each of the four stages. Member of Global Executive Committee President, Asia <strong>Roland</strong> <strong>Berger</strong> Strategy Consultants The increase in the number of consumers who can be characterized as Wealthy Second Generation, Ambitious Elites and Trendy White Collars suggests that <strong>Chinese</strong> consumers on a whole are maturing. These buyers – unlike most of their peers – do not choose certain brands for the sole purpose of "showing off". On the contrary, they are choosing brands that make them feel good, that give them a certain sense of self-satisfaction. There is a shifting preference toward unique luxury brands, which requires a more nuanced understanding of the luxury goods market. There must be an awareness of more than just the top luxury brands. Today to be successful in China it is often enough for companies simply to have a well-recognized brand. But increasingly brand competition will intensify, especially as a wider range of brands becomes accepted. There is increasing brand awareness among buyers of luxury goods in China. This is a trend that all brand producers have to address and try to exploit, both luxury goods makers trying to maintain their leading position in the <strong>Chinese</strong> luxury market and latecomers striving to quickly catch up to their more established counterparts. When it comes to brands, consumers are upgrading. And makers of luxury goods need to have a well-defined and focused strategy, particularly when investing resources. Accordingly, <strong>Roland</strong> <strong>Berger</strong> experts recommend that players thoroughly consider the following three aspects: 1. Identify brand ambassadors—these are the "active information seekers". Marketing activities should target this group of consumers with the aim of having them "fall for the brand". They need to be aware of the brand and promote it within their social groups. 2. Set up an interactive global store network. Given the fact that the <strong>Chinese</strong> are more likely to buy luxury goods abroad than they do at home, companies should differentiate in-store positioning both within China and abroad. Activities need to be undertaken to better manage how products are selected, customer service and how stores are assessed. 3. Broaden the core market for marketing. Marketing and distribution activities should be extended beyond first-tier cities. Specifically for this exercise, we identified the key luxury market cities through our proprietary model based on spending power and economic scale. Store expansion should occur in these cities. Moreover these cities will form the main battlefield on which the war for brand awareness will be fought. These are the cities where brand preference and recognition will be built. 3
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