China Market Report

Minor Assignment
Word count: 1300 words Tuesday Class 1:30pm-3:30pm Student ID: 10079105 Miss. Thao Vu 4/17/2012

Executive Summary
The purpose of this report is to investigate China market including their consumer buying behavior; it will concentrate more in international travelling industry. Throughout this report are definition of target market and its importance, then we will go in detail of Chinese segmentation variables , this will help to provide a better understanding of each type of segment. Next is the appendix that analyzes the market segment profile of China travelers market. Finally, after reviewing consumers purchase behavior and market segmentation is a discussion of most important influence on the consumer buying behavior decision making process is given. In this part explain factors that place a great impact on Chinese consumers purchase decision.

Contents
Executive Summary....................................................................................................................................... 0 1 2 Introduction .......................................................................................................................................... 2 Definition of Target Market and its importance ................................................................................... 3 2.1 2.2 3 What is Target Markets? ............................................................................................................... 3 Why are they important?.............................................................................................................. 3

Segmentation variables and their relevance to China market ............................................................. 3 3.1 3.2 Segmentation variables ................................................................................................................ 3 Their relevance to China target market ........................................................................................ 4 Geographic Segmentation .................................................................................................... 4 Demographic Segmentation ................................................................................................. 5 Behavioral Segmentation ...................................................................................................... 5 What segment are there in the Chinese market .................................................................. 5

3.2.1 3.2.2 3.2.3 3.2.4 4 5

Market segment profile of Chinese market .......................................................................................... 6 Consumer purchasing behavior & decision making process ................................................................ 7 5.1 Purchasing behaviour.................................................................................................................... 7 Personal characteristic .......................................................................................................... 7

5.1.1

5.2 ............................................................................................................................................................. 7 5.2 Chinese cultures role in buyer behaviors..................................................................................... 8 Need recognition & problem awareness .............................................................................. 9 Information search................................................................................................................ 9 Evaluation of alternative and purchase ................................................................................ 9 Post-purchase evaluation ..................................................................................................... 9

5.2.1 5.2.2 5.2.3 5.2.4 6 7

Conclusion ............................................................................................................................................. 9 References .......................................................................................................................................... 11

1 Introduction
This paper is a very preliminary attempt at a small meta-analysis on different subjects in the field of Chinese market of international travelling industry. It also lifts out a few aspects of Chinese consumer behavior that might not be completely understood by many people. The first par is about 2

what are target markets, and why is it important for an organization to learn and understand their target market. This second part is about segmentation variables and an analyzing of China market segmentation, it provides a limited basis to which we can relate topics discussed in the third part. The third part will be a discussion of the most important influences on the consumer buying behavior decision making process for China target market.

2 Definition of Target Market and its importance

2.1 What is Target Markets?
A target markets are the specific groups of customers that a company is aims to capture Target audience is a specific group of people within the target market at which the marketing message is aimed. It can be formed of people of a certain age group, gender, marital status, etc., e.g., teenagers, females, single people, etc. Analyzing Geographic, demographic, psychographic and behavior are the four main ways to find your target market.

2.2 Why are they important?

Discovering the appropriate target market(s) and determining the target audience is one of the most important activities in marketing management because they are potential buyers of a product or service. Once these distinct customers have been defined, a marketing mix strategy of product, distribution, promotion and price can be built by the business to satisfy the target market. In marketing if you have no target, you'll be shooting into the black expanses of space - where no one exists. Therefore, a well-defined target market is the first element to a marketing strategy.

3 Segmentation variables and their relevance to China market

3.1 Segmentation variables
It is widely thought in marketing that than segmentation is an art, not a science. The key task is to find the variable, or variables that split the market into actionable segments There are two types of segmentation variables: (1) Needs (2) Profilers The basic criteria for segmenting a market are customer needs. To find the needs of customers in a market, it is necessary to undertake market research. Profilers are the descriptive, measurable customer characteristics (such as location, age, nationality, gender, income) that can be used to inform a segmentation exercise. The most common profilers used in customer segmentation include the following: Profiler Examples:

Geographic Region of the country Urban or rural Demographic Age, sex, family size Income, occupation, education Religion, race, nationality Psychographic Social class Lifestyle type Personality type Behavioral Product usage - e.g. light, medium, heavy users Brand loyalty: none, medium, high Type of user (e.g. with meals, special occasions) (tutor2u, n.d.)

3.2 Their relevance to China target market

3.2.1 Geographic Segmentation Geographic segmentation means dividing the whole market into different geographical region units, such as countries, states, regions, counties, towns or streets. The organization can determine to operate business in one or more geographic regions or within all the regions; however they must pay attention to the differences of needs and preferences among regions. Many companies today are localizing their products, advertising, and promotion to fit the needs of individual regions, cities and even neighborhoods. For example, Campbell found that its canned nacho cheese sauce, which could be heated and poured directly onto nacho chips, was too hot for Americans in the East and not hot enough for those in the West and Southwest. As a result, today Campbells plants in Texas and California produce a hotter nacho cheese sauce than that produced in the other plants to serve their regions better. Some other companies are seeking to cultivate those untouched or untapped areas. For example, many large companies are leaving away from the major cities and suburbs with fierce competition to set up shops in small-town America. Hampton Inns has opened a chain of smaller-format motels in towns too small for its standard-size units. For example, Townsend, Tennessee, with a population of only 329, is small even by small-town standard. But the result is very satisfactory. Situate on a heavily traveled and picturesque rout between Knoxville and the Smoky Mountains, the village serves both business and vacation travelers. Hampton Inns opened

a unit in Townsend and plans to open 100 more in small towns. It costs less to operate in these towns, and the company builds smaller units to match lower volume. Geographic segmentation provides useful distinctions when regional preferences or needs exist. But its important for marketers not to only use geographic location as a segmentation method because distinctions among consumers who are in the same geographic location also exist. Therefore, using multiple segmentation bases is probably a much better strategy for targeting a specific market. (Sun, 2009) 3.2.2 Demographic Segmentation In demographic segmentation, the market is divided into different groups on the basis of sex, age, family, education, income, occupation, race, region, nationality,etc... Demographic variable is normally used to identify consumer groups. It is easier to measure demographic variable than other types of variables. Demographic factors can also help the marketing people to know the size of target markets and reach target markets effectively. 3.2.3 Behavioral Segmentation In this segmentation, buyers are divided into groups according to their knowledge, attitude, usage, or response to a product. Many marketers believe that behavioral variables, including occasions, benefits, user status, usage rate and loyalty status, are the best starting points for constructing market segments. (Philip Kotler, 2007) Firstly is occasions. Buyers can be distinguished according to the occasions when they begin to need, purchase or use products. Secondly is is user status. Markets can be segmented into groups ofnon-users, ex-users, potential users, first-time users and regular users of a product (Philip Kotler & Gary Armstrong,2005). Lastly is loyalty status. A lot of consumers are loyal to some particular brands. Brand loyalty status can be divided into four groups : hard-core loyals (consumers who buy one brand all the time), split loyals (consumers who are loyal to two or three brands), shifting loyals (consumers who shift from one brand to another), and switchers (consumers who show no loyalty to any brand) (P. Rossi, E. McCulloch and G.Allenby, 1996). The enterprises can learn a lot from analyzing the degree of consumer loyalty in order to maintain their existing clients, also to use promotion to attract those consumers without loyalty. 3.2.4 What segment are there in the Chinese market There are many ways to segment a market: by lifestage, attitudes, needs, behaviours or just about any other consumer characteristic you can imagine. The best segmentations have these aspects in common: The segments are easy to identify and access in the marketplace; They are sufficiently large, valuable and distinct to justify a dedicated marketing strategy; The segments are sustainable over time In this case, the segments were determined using two criteria; the horizontal axis indicating the level of experience and interest in long haul travel and the

vertical axis indicating the respondents preference towards challenging themselves when travelling. These two criteria were chosen as they were seen as core attributes of those likely to visit Australia. Given the various factors that come into consideration when choosing a travel destination, the position of each segment was determined using a combination of emotional, attitudinal and behavioral elements. In segmenting the Chinese travel market we looked to develop a segmentation model that could provide the foundation for a full range of marketing programs and strategies including brand communications, media planning, promotions, public relations, product development and our international media programs. Taking these factors into account, we identified five distinct segments in the Chinese long haul travel market: Self-Challengers Family Connections Sightseers Ready to Leave Close to Home These segments are distinguished by their travel experience on the one hand, and their attitudes to travel and the style of travel experience they seek on the other. Almost every long haul traveler in China can be allocated to one of the five segments weve identified. Together, the five segments account for more than 19.5 million people. (The Chinese Traveler, n.d.)

4 Market segment profile of Chinese market

The next few pages are an introduction you to the five segments. These appendixes were retrieved from the Tourism Australia website (p.6-18) to demonstrate the characteristic of Chinese market segment.

5 Consumer purchasing behavior & decision making process

5.1 Purchasing behavior
Philip Kotler defines marketing as a social and management process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others. It is extremely important to understand what consumers need and what exactly influences their buying behavior.

Marketing stimuli/Other Stimuli

Product Price Place Promotion Economic Technological Political Cultural

Buyers Black Box

Buyers Characteristics Buyer's decision process

Buyers Response
Product choice Brand choice Dealer choice Purchase timing Purchase amount

Figure 1 Stimulus-response model. Source: Kotler, p. 188. 5.1.1 Personal characteristic

5.2

(Consumer market,n.d.,p-9)
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Figure 6-2 Factors Influencing (Behavior

5.2 Chinese cultures role in buyer behaviors

Culture influences each step of decision making process. According to Chinese culture, Chinese buyer behavior performs the following characteristics:

(Yan, 2009)
This model is important for anyone making marketing decisions. It forces the marketer to consider the whole buying process rather than just the purchase decision (when it may be too late for a business to influence the choice!) The model implies that customers pass through all stages in every purchase. However, in more routine purchases, customers often skip or reverse some of the stages. The buying process starts with need recognition. At this stage, the buyer recognizes a problem or need or responds to a marketing stimulus. For example, you feel hanger, then you have a need to eat. Or you pass Starbucks and are attracted by the aroma of coffee and chocolate muffins. An aroused customer then needs to decide how much information (if any) is required. If the need is strong and there is a product or service that meets the need close to hand, then a purchase decision is likely to be made there and then. If not, the process of information search begins. A customer can obtain information from several sources: Personal sources: family, friends, neighbors etc Commercial sources: advertising; salespeople; retailers; dealers; packaging; point-of-sale displays Public sources: newspapers, radio, television, consumer organizations; specialist magazines Experiential sources: handling, examining, using the product The usefulness and influence of these sources of information will vary by product and by customer. Research suggests that customers value and respect personal sources more than commercial sources (the influence of word of mouth). The challenge for the marketing team is to identify which information sources are most influential in their target markets. In the evaluation stage, the customer must choose between the alternative brands, products and services. (Yan, 2009) 8

5.2.1 Need recognition & problem awareness Chineses purchasing behaviors are influenced a lot by their own family. Chinese parents contribute most of their lives for the family; therefore they gain the most respect in a family. Children are looked as the future of everybody in the family; parents have a high expectation on them. In China, other than old parents, children gain a crucial position in a family. As a result, during the process of identifying needs, ages and kids have extremely priority. 5.2.2 Information search There are so many sources to gain information from, such as personal sources, commercial Sources, public sources, and experiential sources. Most importantly Chinese customers are much influenced by words of mouth advertising. It is important to Chinese consumers prefer to be the same with others in the group. Therefore, they like to find information from familiar people. Whatever they suggest is whatever they accept. 5.2.3 Evaluation of alternative and purchase "Mianzi and Guanxi cultures influence buyer behavior a lot in China. In terms of Mianzi issue, Chinese like to be have Mianzi. That means they expect others think them rich, generous, and have good taste, etc., no matter whether they are or not. This culture definitely promoted a luxury consumption tide in China. But that is an unbalanced consumption. Like some research found that the Chinese are seen as having a low level of involvement when purchases are for private consumption but a high level of involvement when they are buying products for their social or symbolic value. Since the Chinese greatly value social harmony and smoothness of relationships within the extended family, the social significance of products are highly important be it to express status, gratitude, approval or even disapproval (Jiang, 2005). Guanxi culture is another factor that results in luxury consumption in China. As most of Chinese know, good relationship with others, no matter it is individual or organization is necessary for success. According to Chinese culture, an effective way to maintain a long-term good relationship is gifts. Together with Mianzi issue, Guanxi culture makes consumers make a good evaluation for high-scale products, and perform their purchases, even that will beyond their ability. They believe, the more expensive the gift is, the more recognition will be gained, the more Mianzi they will have and give, and the better relationship theyll achieve (Jiang, 2005). 5.2.4 Post-purchase evaluation This is the final stage of the decision. China consumers are quite concerns after making a purchase decision. They may feel that an alternative would have been preferable. In these circumstances they are likely to switch brands next time. Chinese consumers are mainly focus on the recognition. If they got the reorganization as what they expected, that would be a positive feedback. To them, the product they bought better be recognized, or they will purchase different brand next time.

6 Conclusion
This paper is only an introduction to Chinese consumer buying behavior and market segmentation. Culture is the major factor that influences Chineses consumer purchasing decision and their perception about a service or product. They are family oriented, very important about product/service recognition, also value luxury life style and expensive product/service because it is considered as their high class image and reputation. Therefore, cultural factors, social factors, 9

personal factors and psychological factors really determine buyers purchase decision process. Hence, understanding consumer behavior is a priority requirement for enterprises to set up a market segmentation strategy. Market segmentation is extremely important for marketers to study who want to bring their new products into China. We identified five distinct segments in the Chinese long haul travel market: SelfChallengers; Family Connections; Sightseers; Ready to Leave; Close to Home Today segmentation is a crucial marketing strategy. It enables marketers to understand consumer needs; preferences also find new marketing opportunities. Therefore it is especially significant for any travelling company that wants to attract Chinese travelers.

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7 References
Consumer market [Handout].n.d. (Available from Edith Cowan University, Joondalup Dr, Joondalup, 6027, Western Australia) Smith, J. (2002). PFF 1198 Lecture notes. Retrieved from Edith Cowan University, School of Nursing and Public Health website: http://www.ecu.edu.au/fchs/sonph/units/pff1198.html Sun,S. (2009). International journal of business and management. An Analysis On The Conditions And Methods Of Market Segmentation. Retrieved April 17, 2012, from www.ccsenet.org/journal.html P. Rossi, E. McCulloch and G. Allenby. (1996). the Value of Purchase History Data in Target Marketing. Marketing Philip Kotler and Gary Armstrong. (2005). Principles of Marketing (Tenth Edition). Pearson Education, Inc. Philip Kotler. (2007). Marketing Management. Beijing: Tsinghua University Press. Tutor2u (n.d.) Market segmentation: Base of segmentation. Retrieved April 17, 2012, from http://tutor2u.net/business/marketing/segmentation_bases_introduction.asp Tourism Australia (n.d.). The Chinese traveler: Segmentation of the Chinese market. Retrieved April 17, 2012, from http://www.tourism.australia.com/en-au/documents/Corporate%20%20Research/Research_Segmentation_Study_china.pdf Tourism Australia (n.d.). The Chinese traveler: Segmentation of the Chinese market (p.6-18). Retrieved April 17, 2012, from http://www.tourism.australia.com/en-au/documents/Corporate%20%20Research/Research_Segmentation_Study_china.pdf Yan,L..(2009). Asian culture and history: Analysis of culture and buyer behavior in Chinese marke. Retrieved April 17, 2012, from www.ccsenet.org/journal.html Jiang, xC. (2005). Mianzi Culture Promoted Mianzi Consumption. Yuejiang Daily, 7,16. Science, Vol. 15, pp. 321-340. Kotler, P., et al., Principes van marketing: Derde editie (The Principles of Marketing: Third European edition), s.l.: Pearson Education Benelux, 20032.

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