Tag Archives: McKinsey

How fast is the Chinese market changing?

According to a recent McKinsey’s survey about Chinese consumers, Chinese have taken to consumerism with ease, embracing thousands of new products, services, and brands. Three findings stood out.

Even in the face of rising inflation, Chinese consumers are more confident this year than in 2010 about their financial prospects.

the survey shows that the number of respondents who choose to spend more—buying in greater quantities, more frequently, or more expensive items in a given category—is holding firm. Whereas last year’s survey showed that consumers offset higher spending in some categories by spending less in others, this year there appears to be much less rebalancing.

Among urban consumers, the number of first-time buyers—a group that has been a major driver of category growth in China—is declining. as so many products are now both available and within the financial reach of large numbers of consumers. Big variations in the importance of first-time buyers have opened up, depending on the category and geographic region. At the geographic level, the penetration of certain goods may be high in China’s more economically developed regions, but plenty of consumer-conversion opportunities remain in less developed ones, which the government has targeted for higher economic growth


Finally, although brand awareness is rising, we see little sign that brand loyalty is following suit. In fact, more and more consumers choose among a growing number of favorite brands. The survey shows the extent to which consumers value brands more than price or channel, largely because they believe that branded products are safer, of higher quality, and more reliable than nonbranded ones. But faith in brands still does not translate into brand loyalty. In fact, both the number of consumers who always choose from among a relatively small set of brands—whom we refer to as “repertoire loyalists”—and the number of brands in their repertoire continue to rise. The average Chinese consumer now chooses among three to five brands in any given category, compared with two to three brands two years ago. In some categories, such as apparel, where luxury brands have grown hugely popular, the contrast is sharper still.

To succeed in this environment, executives will need to understand where the growth prospects lie, both at the category level and in different geographic regions. Only then will companies be able to prioritize resources and tailor strategies appropriately, to strike a balance between building mass appeal and meeting the needs of specific consumer groups, to focus on perceived value rather than absolute price, to modernize marketing tools for the Internet age, and to embrace rapidly growing online sales channels quickly. Companies must have both the flexibility to adapt and the skills to innovate to keep in step with the Chinese market’s exciting development.

How to engage consumers?

Dealing with customer engagement has never been easy – especially today when customers are all inter-connected and receive all kind of information from all kind of media. This is why the rules that apply to old media such as TV and press can not work with nowadays  consumers.

CDJ by McKinsey

McKinsey devised a model, the Consumer Decision Journey (CDJ), whose simple four steps can be applied to companies belonging to different fields, retail too. Its implementation is not easy but as stressed by McKinsey, rewards can be worth the effort.

But let’s get into the four CDJ steps a little deeper, quoting the McKinsey study which can be fully downloaded on their website.

“Align: Invest marketing resources where consumers spend their time. In most cases, this will involve shifting resources from the “consider” and “buy” stages of the CDJ to the “evaluate” and “advocate” stages. Many companies will also have to shift their investments from paid media (channels owned by other companies, such as print or online newspapers) to self-owned media (such as the brand’s Web sites) and earned media (customer-created channels, such as communities of brand enthusiasts).

Link: Make sure that your messages reinforce each another. Given the proliferation of channels, this can be challenging and many companies have been disconcerted to discover that information about their products— including model numbers, descriptions, images, and promotions—isn’t the same across online channels and even within their stores. Coordinating your message might require new techniques. Apple, for example, took steps to eliminate jargon, align product descriptions, create a rich library of explanatory videos, and institute off-line Genius Bars to ensure consistency, accuracy, and integration across touchpoints.

Lock: Keeping your customers’ attention is key. To do so, companies need to develop direct, opt-in channels, such as e-mail promotions, Twitter and Facebook feeds, and apps. One good example comes from Nike, which progressed from simply exhorting consumers to “just do it” to helping them act on its motto. Nike+ gear records and transmits customer workout data, holds global fund-raising races, and provides customized online training programs. For its part, McDonald’s has enticed millions of Japan’s mobile-savvy consumers to sign up for mobile alerts with discount coupons, contest opportunities, special-event invitations, and other brand-specific content.

Loop: Mine content created by consumers and experts for insights into customers and the brand, and use data collected about customers to create content that will engage them. Consumer-generated content is particularly valuable because it reveals their wants and needs. A classic example comes from Amazon, which allows customers to rate products, and makes these ratings available to shoppers. Amazon doesn’t stop there, though; it also uses this data to decide how it presents its products. This creates an information-rich loop—from data to content and back to data—that strengthens Amazon’s value chain and contributes to product development and customer support. Data loops can also help companies personalize communications, thus deepening the customer relationship.”



Multichannel marketing and value proposition: how do customers perceive value?

I was reading a very interesting article by McKinsey about the value proposition to offer to multichannel retail customers: it does not only competitive price but also the degree of trust they have in a retailer, its product assortment, and their previous buying experiences. The article goes on presenting two exhibits, both related to a U.S. based research whose results I think can be easily applied to many other other Western culture countries. 

Essentially, what McKinsey researchers state is that:
– multichannel retailers can use certain pricing moves to play the value card, applied to key value items, priced competitively to create a public perception that a retailer offers good value across the many retail channels a consumer uses: stores, the Web, or catalogs;
-retailers also can carefully craft product assortments in ways that influence value perceptions;
– value “heroes” with low price points should be overrepresented in online, in-store, and external marketing;
– tactics such as free shipping, in-store pickup, generous return policies, and price-match guarantees are critical drivers of value perceptions.

China retail luxury: a long-term insight

China: a market that is continuously growing, a very rich but still unknown to the many. What is clear is that China is set to become the most powerful economy in the world, and this will happen in a very short time. Many are the companies that have already sucessfully entered the Chinese market, luxury good brands being the pioneers.

A McKinsey survey over 1.500 Chinese luxury consumers during spring 2010, shows interesting trends which are basically telling to the world that the “consumer culture” is changing at a very high speed, following the changes in the society and urban landscape. For those who are interested, the whole report can be downloaded here, but three are main facts:

  • “Rapid increases in wealth, and shifting social mores that sanction the display of that wealth, are driving a growing infatuation for luxury goods among Chinese consumers.”
  • “Access to an explosion of information on the Internet, an increasing penchant for overseas travel, and first-hand experience purchasing and consuming luxury goods are contributing to a substantial rise in sophistication among luxury consumers in China. Contrary to popular belief, a growing number of Chinese luxury consumers are exhibiting a noticeable trend away from overt displays of wealth, and towards more understated forms of luxury consumption.”
  • “Rapid urbanization and growing wealth outside of China’s largest cities is driving the emergence of several new geographic markets with sizable pools of luxury goods consumers. Over the next 5 years, [McKinsey] expects that the number of such cities will double from 30 to 60.”

Other key findings are social-demographics related. Not only traditional luxury brands consumers, but also 13 million upper-middle-class households (earning $15,000 to $30,000), which are stretching their budgets to buy luxury watches, jewelry, handbags, shoes and clothing. This segment represented 12% of Chinese luxury consumption in 2010, but is expected to reach 22% by 2015.

The survey also shows that approximately 73% of luxury consumers in China are under age 45, significantly younger than their counterparts in western nations or even nearby Japan. 

All these findings essentially reinforce the widespread idea that if this trend is going to be followed in 2011 too, China will become the biggest retal luxury market in the close future. (Source: McKinsey, Picture credits: TheChinaObserver)