1.1 The Growth of the Middle Class and of China as a Country

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Selling to Chinese Consumers

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The Chinese University of Hong Kong

Selling to Chinese Consumers

31 ratings

Course 1 of 4 in the Specialization Doing Business in China

This course is designed to help learners sell their products, goods and services to Chinese consumers. To achieve this goal, the course will use evidence-based research in psychology, economics, legal studies and marketing to help learners understand the historical, economic and legal contexts of doing business in China and the behavioral characteristics of Chinese consumers. The course will cover topics in Chinese and global marketing, Chinese consumers, institutional and cultural influence on consumer motivation and behaviors in Chinese markets, and brand management in China.

From the lesson

The Chinese Consumption Market

China is a big consumption market. It is a distinctive consumption market because of its unique contextual and cultural factors. Why do Chinese consumers spend big money on luxury brands? What roles do historical, contextual and cultural factors play in influencing Chinese consumption habits? The current module seeks to answer these questions.

1.1 The Growth of the Middle Class and of China as a Country6:30

1.2 The Sociological and Economic Characteristics of Chinese Consumers4:25

1.3 An In-Depth Look at Why Chinese Consumers Like Luxury Brands3:51

1.4 The Effects of Lay Elitism on Consumption Choices4:22

1.5 Dialogue with Scholar: Professor Chi-yue Chiu10:53

1.6 The Effects of Agency on Consumption Choices6:23

1.7 Dialogue with Scholar: Professor Krishna Savani10:20

1.8 This Week's Recap1:23

1.9 Dialogue with Practitioner: Susanna Chiu20:19

Meet the Instructors

Prof. Letty Kwan
Assistant Professor
Department of Psychology

Brands that present a big logo and have

exaggerated patterns are often best-sellers

in China. Such brand examples include

Louis Vuitton, Chanel, Gucci, MCM,

and in the entry luxury market, Coach.

This is contemporary China, the place

where all global luxury brands

with their flashy logos are coming in for

a gold rush opportunity in its big market.

I am Letty Kwan, a professor at

The Chinese University of Hong Kong.

I am the instructor for this course,

“Selling to Chinese Consumers”.

In this and the coming 3 weeks,

I will be here to discuss with you

how to sell to Chinese consumers

using strategies that are grounded

in rigorous scientific research.

In this course, you will learn from

research demonstrations, as well as

interviews with renowned scientists, the

behavioral characteristics of

Chinese consumers. Every week also

contains a segment called

“Dialogue with Practitioner”,

which will help you connect

the concepts and theories

you will learn in this course

to the actual marketing practices.

Hopefully, after the four weeks,

you will have a good understanding

of the current China market, and gain

some insights on how to brand and sell

your products to Chinese consumers.

Over the past decade, there has been

an exponential growth in China’s GDP

per capita. Within the last

decade, China’s GDP per capita has jumped

from approximately 2000 US Dollar

to a whooping 8000 US Dollar.

That is a 280% increase in

just 10 years.

China has become the consumption

superpower, overtaking Japan in recent

years. And that is just the beginning.

No other countries are able to compete with

China on the speed of economic growth.

We will return to this subject later on.

America has experienced a similar

consumption boom, but the China

experience is unique in many respects.

Understanding the distinctive cultural

factors that contribute to China’s

extraordinary growth will make

your learning journey worthwhile.

Here are some characteristics of Chinese

consumers, characteristics that have

enormous influence on how they make

consumption choices, and characteristics

that are shaped by Chinese culture.

First, economists generally assume that

consumers’ preferences determine

their choices. Thus, to prefer

what consumer will buy,

we need to know what they like first.

But Chinese consumers’ spending habits

are different. Research has shown that

they do not always buy what they like.

Instead, other factors, like the

anticipated public reactions to one’s own

choices and other normative factors,

may importantly shape what Chinese

consumers want. For example,

Chinese consumers may buy things that

they think others would like them to buy.

Let’s look at an example.

Chinese consumers are particularly inclined

to buy expensive foreign goods.

China's middle class is growing.

How may consumption trends be related to

the growth of middle class in China?

It is projected that there will be

5 billion middle class globally by 2030,

and two thirds of them will be in Asia.

McKinsey projected that by the year

of 2022, 76% of urban Chinese households

will be in the middle class.

This will also be a drastic growth of

upper middle class from the year of 2012

to the year of 2022.

The percentage of upper-middle class

will expand from a 14% of

the total urban population in 2012

to 54% in 2022.

This drastic expansion of the upper-middle

class is expected to contribute to the

overall boost in urban private consumption.

As we can see in this diagram, the amount

of consumption will double within a decade.

This demographic change will be accompanied

by a shift in the consumption habit

in China, because upper middle class

are expected to have different consumption

habits than lower class consumers.

E.g., they tend to spend money on

luxury goods consumption.

The consumption patterns of different

cities will also change, together with the

growth of the middle class in Tier 2 and

Tier 3 cities. These changes will

present new challenges and opportunities

to businesses that intend to sell their

products and services to Chinese consumers.

It is reasonable to believe that most

consumers will buy within their means.

However, consultancy firm IDEO found that

migrant workers who earn an average of

600 USD per month are willing to spend

more than their one month’s salary on an

iPhone. Many Chinese consumers

are obsessed with brand names;

and they are more likely to buy things with

highly visible brand logos so that others

will recognize and notice the brands that

they use. Chinese consumers are also known

to be lower in brand loyalty

and are more willing to try out new brands.

Why are Chinese consumers so

brand conscious? Why do they prefer to

spend on products of famous brands?

Why do they switch brands so often?

In today’s lesson, you will find

some answers to the above questions.

The lesson consists of three parts.

First, you will learn about some

characteristic motivations of Chinese

consumers, and the influence on

consumption, particularly the consumption

of luxury goods.

Specifically, the Chinese are known for

their high achievement motivation.

You will learn how the strong drive to

become an elite in the society influences

Chinese people’s consumption habits.

In the second part of the lesson, you will

learn how social norms affect Chinese

consumers’ choices, and understand from a

normative perspective why Chinese consumers

do not always buy what they like.

In both Part 1 and Part 2, you will watch

interviews with expert researchers in

consumer psychology, who will share with

you how their research findings shed light

on the characteristic motivations on

Chinese consumers. In Part 3, you will

see a “Dialogue with Practitioner”, where

you can connect the concepts you learn,

to actual marketing practices.

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