CHINESE MARKET SEGMENTATION
Following the results of our primary research, we identified two distinct and measured customer segments – which we named Elite and Aspirational, based on proposed expenditure. These segments will require a unique approach and a tailored offering that we must assemble and satisfy if Manolo Blahnik is to be successful in China. Our findings revealed that our target market is luxury consumers aged 20-39. We found that the older generations are significantly less brand loyal and inclined toward foreign luxury brands, in part due to their upbringing in an era of widespread scarcity and frugality. Our decision was supported by the fact that Chinese consumers develop shopping habits in their youth and keep these habits through their entire adulthood. However, when our current target market expires in terms of age, we will revisit and refocus our marketing strategy in order to retain these loyal customers.
China is already a leading luxury market and could overtake Japan to become the biggest such market by 2015. Chinese consumers are the biggest buyers of expensive items worldwide, accounting for some 29% of spending last year. As the wealth has increased, younger consumers have embraced luxury en masse. These younger consumers are excited to be making money, and are rewarding themselves with expensive goods. A 2010 McKinsey report suggests that in 2010, average household spending for our segments Elite and Aspirational consumers was about $4,000 and $12,000, respectively. These figures will jump to $6,000, and $21,000, respectively, by 2020, providing future demand as further vindication of our market entry recommendation, on top of current demand.
Elite Segment
The Elite class is our primary target market – middle-upper and upper-class women with the disposable income to afford our product with social circles that demand it. Significantly larger incomes and government policies aimed at increasing consumption will benefit all consumer goods companies in China. Discretionary categories, to which Manolo’s belong, will grow 13.4% between 2010 and 2020, as these products become affordable to increasing numbers of consumers.
Elite trends
Our research demonstrated the importance of segmentation after we analyzed the results of our Elite responses versus our overall market responses:
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The elite consumer has more luxury shoes and brand loyalty than the overall market, with 33.3% of respondents owning more than 15 pairs.
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The majority of these customers see a pair of luxury shoes as a worthwhile investment, as opposed to the overall market who do not.
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Elite customers mostly wear luxury high heels at formal events and special or social gatherings.
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Our Elite respondents indicated a much greater preference for own-brand Manolo Blahnik stores rather than department stores.
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Similarities to the market exist in after-sales care regarding demand for free repairs and customized shoes.
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America remains the most influential on segment style; however, South Korea falls significantly, to 11.1%,
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Leather and suede remain by far the most popular materials, with 94.4% of Elite segments consumers favoring black shoes and 77.8% indicating a preference for 5-8cm heels. Lace and Satin represent materials that are more recognized by upper-class consumers.
Aspirational Segment
The second noticeable trend in Chinese consumer spending is trading up, driven increasingly by consumers aspiring to improve themselves and their perceived social value. Chinese consumers are increasingly judging each other by what they buy and what they wear.
We described these consumers as aspirational due to their tendency to aspire to own the product we offer as well as the likelihood that they will be able to in the future, given current economic trends.
We defined our aspirational segment as consumers who were willing to spend between ¥2,000 and ¥3,599 on luxury shoes.
Aspirational Trends
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Similar to the Elite customer, black 5-8cm heels were by far the most common luxury shoes demanded by our survey respondents.
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There was a significant need for free repairs from the aspirational consumers
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72.2% of aspirational targets are heavily influenced by online fashion blogs, while 50% are highly influenced by friends and family.
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The United States remained as the most influential to Shanghai Aspirational consumer style, with Italy seeing a sharp increase in influence to 55.6% of respondents in this consumer group.
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Aspirational consumers showed a greater willingness to buy online, but this percentage was still small in terms of responses.
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One of the most difficult aspects to overcome in our aspirational segment is that 66.7% owned less than five pairs of luxury shoes, and every single respondent owned 6 or fewer brands.
Conclusion
Moving forward, international luxury brands in China should move away from marketing solely to the older, wealthier classes and focus more on the younger middle and upper middle classes that are media savvy and interested in a brand experience, not just a product to flaunt their wealth.
http://www.chinabusinessreview.com/understanding-chinese-consumers/
http://www.mckinsey.com/insights/asia-pacific/meet_the_chinese_consumer_of_2020
http://www.digitaljungle.com.cn/blogs/luxury-brand-marketing-for-the-domestic-chinese-consumer
