How to Engage with Chinese During the Recession

A Study by Publicis Shows Chinese Still Want to Live Well, but Changes Are Happening Fast

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HONG KONG (AdAgeChina.com) -- The global recession will lead to long-term changes in attitudes and behaviors of consumers in Greater China. But the financial situation hasn't changed their desire to live the "good life," said Daniela Barrera, planning director of Publicis Worldwide in Hong Kong.

"What is different are the values, attitudes and behaviors that have changed in order to maintain this good life, which has altered the way marketers should engage with consumers."

The Publicis Groupe agency conducted a study in seven cities -- Beijing, Shanghai,
Daniela Barrera
Daniela Barrera
Guangzhou, Hangzhou, Qingdao, Taipei and Hong Kong -- between December 2008 and March 2009. Nielsen Co. assisted with the fieldwork.

Through online tracking and face-to-face conversations, more than 1,500 consumers were interviewed about their reactions to the current economic situation as well as the long-term ramifications for over 20 product categories such as luxury goods, day-to-day discretionary items, beauty products, consumer electronics, in-home entertainment and travel.

Personal confidence remains high
The survey indicates that consumers across Greater China are searching for more value in reaction to the global financial crisis; 70% of those surveyed refuse to move to cheaper brands.

According to the study, only between 5% and 10% of respondents intend to cut stays at four- and five-star hotels, for examples, or stop dining at formal restaurants and purchases of high-end clothing and accessories over the next 12 months. Instead, people intend to cut back on the basics, with 20% to 25% saying they will do without regular discretionary day-to-day purchases like informal eating out, in-home entertainment and personal-care items.

Consumers across Greater China are "reacting better than western people" to the recession, Ms. Barrera said. Personal confidence remains high, with mainland Chinese the most confident that their financial position will remain stable or improve in 2009, compared with last year, both in terms of maintaining their household income and their current standard of living. However, they are more confident in themselves than in their respective governments.

At the same time, they are "scared" about the global situation and are "putting some decisions on hold and planning to reduce their spending. Some are also looking to replace assets" lost in investments such as stocks and real estate, Ms. Barrera said.

Consumer spending has fallen across all categories, particularly on luxury goods -- although Hong Kong residents "are the least willing to give up on luxury goods, and the Taiwanese are the most willing," she added.

Mainland Chinese, meanwhile, are the most determined to keep their favorite brands, particularly when bigger implications are involved like safety, security and fake goods.

They want more guarantees. Also, they are new to the "good life" compared with Hong Kong and Taiwanese consumers, so for them it is relevant to maintain public evidence of success they have only recently achieved," she said. Taiwanese are the least interested in sticking by favorite brands

Four types of Chinese consumers
Stress relief has become increasingly important among Chinese. In the beginning, they were looking for affordability and discounts, but now, purchases are becoming a more emotional decision. Consumers are seeking reassurance that they can maintain their lifestyle and looking at purchases as a form of relaxation. As a result, spending on travel is expected to grow in 2009.

Not all consumers in Greater China are alike, but Publicis identified four shopper types, which were "remarkably consistent" across all three countries, Ms. Barrera said.

Business as Usual High-Enders
(37% of consumers in Greater China)
Characterized by an optimistic, positive outlook, their purchase intentions for the future remain mostly unchanged, but they intend to spend more on high-end categories.

Cautious Regulars (37%)
This group is in a wait-and-see limbo, characterized by a desire to protect their everyday standards. Their purchase intentions remain constant, but they are very hesitant about buying more big-ticket items.

Ultimate Cutters (15%)
Characterized by emotively driven drastic behaviors, this group intends to cut back significantly across nearly all categories, particularly day-to-day items in favor of long-lasting durables; one-half of this group behaved as High-Enders in 2008.

Ultimate Indulgers (11%)
Characterized by emotively driven opportunistic behaviors, cutting low involvement categories in favor of high-end gratification purchases; 75% behaved as Cautious Regulars in 2008.

How marketers should engage
In the early days of the financial crisis, marketers should have communicated value while consumers were exhibiting shock and denial and were resistant to change about cutting back. In this period, said Ms. Barrera, they expect companies to provide them with accessibility and communicate value and affordability through coupons, discounting, and lower prices, particularly for fast moving consumer goods marketers.

In the second phase, they should help consumers cope with changes taking place, providing emotional reassurance by exhibiting quality, safety, heritage, gratification and enjoyment.

During the third and final stage, which is already commencing, marketers need to embrace values adopted by consumers, connecting with consumers through programs about being a responsible citizen or being positive about the future, for example.

Barclays Bank, for example, is talking about what wealth means to its consumers, "not money but recognizing achievements in life that might not be financially based," Ms. Barrera said.

A changing perception of western culture is another result of the global recession.

The crisis erupted from the U.S. "so suddenly and is so pervasive and immense in magnitude, there is growing resentment towards the west. Chinese consumers used like the west, now they look at the U.S. and see faults and feel a lack of trust," Ms. Barrera explained.

"On the other hand, there is a growing sense of pride in their own culture, which encourages looking at families and discourages people from living beyond their means. There is a lot of talk about this right now in China, particularly in online forums."

Chinese are also taking a more skeptical view of their own government, now that economic growth, personal advancement and financial security are no longer a given.

"People see themselves as better suited to provide trust and leadership in the same way they traditionally regarded institutions and brands," Ms. Barrera said.


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