New Ogilvy & Mather China Study Shows how 2nd-4th Tier Consumers Hold The Key To Not Only China's, but The World's Economy

New Ogilvy & Mather China Study Shows how 2nd-4th Tier Consumers Hold The Key
                 To Not Only China's, but The World's Economy

"China Beyond - Change & Continuity" book finds that branding strategies need
to be based on emergent consumer confidence, their voracious appetite for
change and new forms of consumption behavior driven by digital technology and
e-commerce to profit from opportunity amongst small town consumers

PR Newswire

SHANGHAI, Jan. 7, 2013

SHANGHAI, Jan. 7,2013 /PRNewswire/ --With 200 million households belonging
to the consuming classes, China's second to fourth tier cities are arguably
the most important consumer segment in the world. But they are tight-fisted.
In 2011, first tier markets had a disposable income value of 1 trillion RMB,
while second to fourth tier cities had a combined disposable income value of
roughly 8 trillion RMB^1. It is no surprise that advertising spend in Tier 2
to 3 markets was more than four times greater than Tier 1 markets, as the
consuming class population is 7 times bigger^2.

Ogilvy & Mather China's consumer insights and trends team Discovery revisited
lower tier markets in their most recent study, "China Beyond – Change &
Continuity," marking the third time in the last seven years that the team has
focused on lower tier cities. Based on research over a span of nine months,
the 200+ paged book is packed with data, illustrated with photos and rich in
stories about the everyday lives of the people who inhabit these cities.

"'China Beyond - Change & Continuity' is sweeping in its scope, a book that
leaves no nook or cranny in the lower tier landscape unexplored. From the
intimate domestic spaces to the online bridge to the world, from the frenetic
warren-like wholesale markets to the expansive parks where the young whizz on
rollerblades in the shadow of granite statues of revolutionaries, this is a
record and commentary of a China that is once again poised at the brink of
change," said Scott Spirit, Chief Strategy Officer, WPP Group.

The book finds that while some constants remain, a lot of change has occurred
as well. While traditional values such as family ties remain intact, a new
breed of youth has emerged who do not necessarily wish to abide by their
families' expectations. Spurred by job creation, the availability of high
quality housing and education, and a relaxed pace of life, the first wave of
reverse migration is now in full swing – particularly those who migrated to
Beijing, Shanghai and Guangzhou a decade ago and have now realized that after
years of hard work, they are still unable to afford homes, cars or their
child's education. With these interests at heart, shoppers are embracing
e-commerce with enthusiasm and snapping up deals on products that are
unavailable in their local stores. Alibaba's Tmall, a hugely popular
e-commerce platform for local and international brands to sell in mainland
China, have rendered bigger brands as more accessible to these lower tier
consumers. These lower-tier residents are hungry for new experiences and have
time at their leisure, so that local businesses able to can often occupy these
consumers for hours.

"China's lower-tier settings are no longer a world away," said Shenan Chuang,
CEO of O&M Greater China. "The changes in the consumer landscape are driven by
the expansion of the Internet and other digital innovations that have allowed
Chinese consumers to be much more cognizant of the world outside their cities
or towns than they once were, even if they've never migrated themselves."

Notably, the study finds that:

  oFood safety, environmental pollution and the rising cost of property and
    healthcare are the top concerns. These fears are based on the residents'
    own experiences, amplified by the rapid sharing of experiences through the
    Internet. Some local brands are tapping into this anxiety by marketing
    their products as "ecologically safe" or natural – even if the consumer
    are skeptical of those claims.
  oThere is a rise in compassion and belief in community values that is
    leading to community action. Many young people, particularly the post 90s
    generation that was once labeled as being selfish and ungrateful, are
    coming forward to make a difference. As social media has given this
    generation the means to express themselves, especially in smaller cities
    where the youth have few other channels available for expression, they are
    now much more outspoken with usually very emotional responses to current
    events. In addition, their solutions to problems can be quite creative.
  oLower tier residents appreciate their more natural and relaxed
    environment. In comparison to second tier cities, many of which are
    currently in the midst of a construction boom, those living in Tier 3 and
    4 cities believe that their towns are less polluted, offer a more relaxed
    lifestyle, lower living costs, smoother public transportation and higher
    public security. Interestingly, a majority of fourth tier residents want
    to be entrepreneurs, whereas those in second and third tier cities prefer
    stable jobs in the government or SOEs (state-owned enterprises).
  oThere is a seasonality in purchasing trends that goes beyond Chinese New
    Year. The seasonality is most marked when teenagers leave home to attend
    university, or – more importantly for the lower tier – join the army.
    Parents buy their children new mobile phones, laptop computers, sportswear
    and new clothes for the challenging years ahead. China has also come up
    with its own version of Cyber Monday deals: Singles Day on November 11,
    when online retailers rack up huge sales mainly from Tier 2 to 4 shoppers,
    many of whom have taken advantage of the discounts on winter wear at the
    onset of the season.
  oThe affinity with open spaces continues to be strong. As reported in the
    previous studies about lower tier cities, many engagements and
    interactions happen in public. However, there are now many more
    opportunities and spaces for people to spend time with their families and
    friends. New public parks have emerged, as have Chinese
    government-designated scenic spots near the cities. New shopping malls
    have large interactive and entertainment zones where brands encourage
    visitors to sing, dance, roller-blade, fly kites, and graffiti on walls.
  oCounterfeit brands have taken their game upmarket. Three years ago, fake
    brands stayed in the realm of FMCG and consumer durable goods. Perhaps due
    to crackdowns on harmful products by local authorities, these brands were
    not as visible this time. Instead, copycat luxury hotels have erected,
    including Hiyatt (a fake Hyatt) and Marvelot (a fake Marriott) as well as
    counterfeit fashion brands such as Jack Walk (right next door to a real
    Jack Jones) and S-Squared (a fake D-Squared). As the first wave of luxury
    shoppers takes root in lower tier markets, the emergence of these new fake
    brands serve as a learning experience for them.
  oThe mobile Internet has taken over and online shopping requires local
    connectors. Across the city tiers, youth and itinerant entrepreneurs alike
    are using Tencent QQ rather than sending text messages, comparing prices
    before making a purchase decision and listening to music on a digital
    device. Apple enjoys universal recognition as a great brand, but few
    people own Apple products as they say that other brands were "good enough
    for their needs." As much as they appreciate the choices, deals and
    convenience of e-commerce, many are uncertain about the quality of their
    purchases and seek guidance from trusted sources within their wider social

Kunal Sinha, Chief Knowledge Officer, O&M China, who has led all three
editions of the agency's research in lower-tier markets, observes, "Four or
five years ago, we found that people in China's small towns were fiercely
protective and proud of their traditional crafts and culture. Now they remain
proud, but want to embrace modernity in not only what they wear, but also in
the way they're doing up their homes, in their consumption of entertainment,
and even in what they're eating. The local versions of Starbucks are doing
roaring business!"

Strategies and Implications for Businesses

A few examples of what these insights mean for businesses in China:

  oBrands should fuse health and beauty benefits in their branding. Consumers
    are suspicious that beauty products might be unhealthy, toxic, and
    unnatural – thus seeking reassurance about ingredients. The brand messages
    could be about "being beautiful is good for you," or when these products
    are being bought as gifts, that "I care about you, as much as your
  oInvolve the local community in public sanitation drives: organize clean
    neighborhood contests (with brands as sponsors and support from the local
    government). These initiatives create corporate social responsibility
    opportunities as well.
  oPosition technology brands around the themes of empowerment, connectivity
    and being smart. Lower tier residents want to feel that they have the same
    opportunities as those in bigger cities.
  oRecruit and educate online connectors to become a brand's champion. Help
    them master their Weibo, Weixin and other blogging skills. Keep them
    updated with product news, as they are vital in instilling confidence
    amongst those who are just beginning to shop online. Provide assurances
    about product delivery and return policies.
  oBuild the short-distance travel destination market, enabled by bus and car
    travel. Seed ideas in the lower tier resident's mind about local
    destinations and start creating a range of options for various interest
    groups, such as cycling, camping, hiking, fishing, fresh fruit and
    vegetable picking, adventure sports, local music festivals and heritage
    exploration, etc.

(1) ACNielsen China: "Winning in China in 2011," 2011
(2) Ibid.

To download the book cover:

For photos or more information, please contact:

Wendy Fung
Corporate Communications
Ogilvy & Mather China
+86 (10) 8520 6223

About "China Beyond Change & Continuity"

"China Beyond" is an in-depth ethnographic and quantitative study into
consumers, brands, communication and retail opportunities in China's second to
four tier cities. From August 2011 to March 2012 the Ogilvy & Mather China
Discovery team, in cooperation with TNS China, conducted field research in
three provincial capitals (Chengdu, Changsha and Shenyang), three prefecture
level cities and three county towns in Sichuan, Hunan and Liaoning provinces,
covering a diverse expanse of geographic, cultural and economic regions. The
study was conducted through home interviews with 48 families, 60 retailers and
15 internet cafe owners, combined with observations in shopping malls and
public parks. Eighty percent of the respondent families were native to their
city, 20 percent were migrants. The quantitative study, amongst 2,200 middle
class families, surveyed their beliefs and attitudes towards family, life,
risk, novelty, ambition and fashion. The study also aims to map out their
shopping, media and entertainment habits and identify influences on purchase

About Ogilvy & Mather

Ogilvy & Mather is one of the largest marketing communications companies in
the world.In 2012, O&M was namedCannes Lions Network of the Year andMost
Effective Agency Network by the Effies Global Effectiveness Index. The company
iscomprised of industry leading units in all of the following disciplines:
advertising; public relations and public affairs; branding and identity;
shopper and retail marketing; healthcare communications; direct, digital,
promotion and relationship marketing; consulting, research and analytics
capabilities; branded content and entertainment; and specialist
communications. O&M services Fortune Global 500 companies as well as local
businesses through its network of more than 450 offices in 120 countries. It
is a WPP company (NASDAQ: WPPGY). For more information,,
or follow us onTwitter at @OgilvyWW and

SOURCE Ogilvy & Mather China

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