SOURCE: The Boston Consulting Group

October 24, 2007 00:01 ET

Better Insight Needed to Win Consumers in Fast-Changing China

BCG Report Finds That Global Trends of Trading Up and Treasure Hunting Are Becoming Key Drivers of Consumption, But China Is Different From the West

BOSTON, MA--(Marketwire - October 24, 2007) - Most global consumer companies understand that succeeding in China is an imperative. Yet too many have concentrated on footprint expansion and near-term opportunities at the expense of understanding the massive changes Chinese consumers are undergoing, concludes a report published by The Boston Consulting Group (BCG).

The report, "Winning the Hearts and Minds of China's Consumers," argues that in order to be a long-term winner in this most strategic market, companies must focus on securing a marketing advantage through consumer insight and segmentation and by developing superior product functionalities and emotional brand affiliations.

Two shopping trends in particular are emerging as major drivers of Chinese consumption: trading up and treasure hunting. This finding is based on survey responses from more than 4,000 Chinese consumers across 13 cities, as well as in-depth interviews conducted through focus groups, home visits, and "shop-alongs."

"Armed with superior insight into consumer behavior, a relatively small player could leapfrog the competition and usurp a market leader's position with remarkable speed," said Hubert Hsu, a BCG senior partner based in Hong Kong and a coauthor of the report. "Today's leaders must anticipate consumers' attitudes or risk losing ground to competitors."

Among the report's other key findings:

--  Generational differences pose challenges. Because China is changing so
    fast, generations only a decade apart have grown up in quite different
    circumstances, and that has created some striking cross-generational
--  Trading up beats trading down. The percentage of Chinese consumers who
    are planning to increase their spending in the near future is more than six
    times that of those who will spend less (see exhibit). That is a much wider
    spread than in either the United States or Western Europe.
--  Brands matter more than in the West. Half of the Chinese who trade up
    said they would purchase a product because of its brand name, whereas only
    33 percent in the United States and 20 percent in Western Europe would do

The report warns that marketers should beware of taking too simplistic a view of Chinese consumers' attitudes toward spending. Decades of rapid change have brought stress and insecurity, and a greater percentage of Chinese report such feelings than do consumers in other countries.

"Not only does China's market represent a variety of demographic segments with divergent cultural experiences, but also the segments are constantly shifting," noted Carol Liao, a Hong Kong-based partner who heads BCG's Center for Consumer Insight in Asia. "To anticipate the shifts, it is critical to develop an intuitive understanding of how customers think and feel about their lives, keep a close watch on consumption trends, and focus on building sustainable brand loyalty."

To receive a copy of "Winning the Hearts and Minds of China's Consumers" or to schedule an interview with one of the authors, please contact Eric Gregoire at + 1 617-854-4570 or

About The Boston Consulting Group

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