Many foreign companies still tend to treat Chinese consumers as an undifferentiated mass. Their priority is getting products into the country, figuring they can then formulate an advertising campaign based on clichés of what people in developing nations want (see BW, 8/22/05, "India's New Worldly Women").
In fact, China's consumer market is quickly becoming increasingly sophisticated -- and segmented. Savvy corporations are learning to tailor their products and pitches to the tastes, aspirations, and demands of distinct elements of the population.
"People from the outside think this is just a gold mine," says Grey Global Group's Josh Li, managing director of the marketing outfit's Beijing office. "Actually, this is a very complex market, with many diverse lifestyles."
THE CHINESE DREAM. To get a good picture of China's emerging consumer class, Grey collaborated with the British Council, a government-funded organization that promotes education and culture, to conduct a detailed study of Chinese aged 16 to 39 living in 30 big cities.
They collected data from home visits with 70,000 people -- an enormous sample size -- that Grey figures is representative of 50 million to 60 million people. The study was supplemented with data from a Chinese research institute survey of 10,000 university undergraduates.
The main trend that emerges is that the younger generations in China are very confident about their future, says Viveca Chan, an early pioneer in studying Chinese consumers, who was until recently head of Grey's Asia operations. "When I went to school, everyone talked about the American Dream, and everyone in China aspired to go there," Chan says. "Now, the Chinese Dream is starting to happen."
PRAGMATIC YOUTH. Another clear finding is that young Chinese adults are extremely driven and are obsessed with getting ahead. "If you talk to them, they are very eager to get connected to the business world, the reality world," says Li. "This is entirely a new generation for China."
Li, who is 35, says when he was in college he was very much involved in politics and took part in the 1989 prodemocracy movement. "Now, students don't care about those issues. They care about getting a good job and are quite willing to join the Communist Party to get it, even though they don't believe in communism."
But this doesn't mean all young Chinese think only about making money. "At the same time, they are looking for fun," he says. "They are looking for safe rebellion and calculated risks. There's a lot of unemployment, so the competition for jobs is huge."
PRECIOUS INFO. This kind of information is valuable for marketing companies as they try to figure out which buttons to push. The study, called the Chinese Media and Marketing Survey, found that the younger Chinese generation can be segmented into consumer groups with distinct psychological perspectives and values.
The biggest consumer category, 34% of the sample, is what Grey labels "advancers." They are obsessed with their self-image, and money is important to them. Most are male, and 69% are married.
"This is the big market, the backbone of China's consumer market," says Li. "And they have a lot of influence over those below them." These are the buyers Volkswagen, General Motors, and the major cell-phone suppliers are after.
KEY TARGET. Another 17% of the young adult market are regarded as "experimenters," meaning they are most likely to be the first, say, to buy a PDA with the latest features. About 11% of those sampled can be classified as "young and hip" -- they are the type who want iPod music players and trendy clothes. They tend to admire the same celebrities as Taiwanese or Hong Kong youth. And 11.6% are classified as "motivated" -- mainly concerned with getting ahead in their careers.
The richest segment, labeled the "achievers," account for about 5%. These are the people who often end up in top executive positions and are a key target market for companies like Oracle.
INFLUENTIAL SEGMENT. This privileged group is always influential in Chinese society, Li says, because of the prestige associated with success. Especially popular are wealthy tycoons who are socially responsible, such as Hong Kong's Li Ka-shing, who donates heavily to educational causes.
A final, and surprisingly big, segment of the Chinese young adults are simply the "independents," those who pride themselves on charting their own course and not following the pack. They account for 8.6% of young adults.
Perhaps the most interesting aspects of the Grey study, however, is the way it breaks down the psychological makeup of today's young Chinese adults. Researchers asked a number of questions about basic values. In many ways, attitudes seem like those of young Americans in the post-World War II era. Among the major characteristics:
Individualism: Roughly two-thirds of young Chinese prefer to do things themselves, rather than rely on others. The same percentage also say they don't judge others on how they live their lives.
Craving a better life: Only 39% of Chinese are happy with their life as is. And a mere 18% say they have enough money to enjoy life. Fifty-nine percent say they need to take risks to be successful. For consumer products companies, this means there is a huge desire for new trends.
Career ambition: Eighty percent of younger Chinese say they are working very hard for their career. Two-thirds agree with the statement, "It is important that my family thinks I am successful."
Liberated women: Men should do house work, according to 64% of men and women surveyed. The divorce rate now is about 22% in China overall but higher and rising in urban areas.
Internationalism: Two-thirds of young Chinese adults say they are interested in other cultures and in international events, while 52% say they are attracted to lifestyles of developed nations. But marketers shouldn't take these opinions too literally. Says Chan: "They don't walk the walk. They still eat noodles, not pasta. Lifestyles are very difficult to change."
Value of knowledge: Some 75% say it's important to be well-informed. "This is an important trend," Li says. "The market is characterized by mobility. People believe they will have a better life with more knowledge." It helps explain why the education market, especially for business and professional improvement programs, is booming across China, as are sales of business books.
Longing for enjoyment: There is growing demand for spiritual experiences. Sixty-two percent say they spend time outdoors to understand nature, one-third say they exercise regularly. "However, this is an aspiration," cautions Chan. "The survey also shows 51% are willing to sacrifice leisure for making more money."
Social consciousness. Young Chinese adults care more about the environment, charity, and public interests in general than older Chinese. Sixty percent say they have often taken measures to protect the environment, and 59% say they appreciate enterprises or brands that support charity.
Add all of these findings together, and you get a profile of a population that's making a dramatic departure from thousands of years of tradition. What's more, attitudes are changing with remarkable speed. They are putting a greater value on creativity, self-expression, and control over their own lives.
For Western companies, understanding this evolving mindset -- and dispensing with old stereotypes -- will be vital for success in the China market. By Pete Engardio in New York
EDITED BY Patricia O'Connell