By Max Magni and Yuval Atsmon
Consumer behavior in China could be changing yet again. Until now, research has shown that the Chinese usually trust better known brands, primarily because the latter help assuage concerns over product quality and safety. According to the latest McKinsey survey, 35 percent of respondents in China believe that companies that market products across a range of categories are more trustworthy than those that focus on just one or two segments. That's almost twice the number of Americans (18%) or British (13%) who feel the same way.
Unsurprisingly, companies in China have targeted consumers with portfolios of products, some selling at very different price points, but all of them marketed under an umbrella brand. For instance, the country's leading packaged foods company, Master Kong (Kang Shi Fu), sells instant noodles, beverages, and cookies all under the same brand. Multinational giants like Kraft, P&G, Unilever, and Coca-Cola use a variation of the same tactic: They emphasize the corporate brand more in China than in other markets.
However, recent trends could force marketers to rethink that strategy. There's a growing sense of the self among the Chinese and an increasing emphasis on self-expression, which is causing at least one major change: The importance of emotional considerations in purchase decisions is shooting up. The need for emotional benefits in categories such as chocolates and mobile handsets rose, according to our survey, from 1 percent in 2009 to 19 percent in 2011—a number that seems likely to keep rising.
Marketers will have to cater to Chinese consumers' desire to express their individuality by developing brands that "talk" directly to them. That will apply not only to high-involvement products such as cars and mobile phones, but also to commodities such as milk and salt. Even in a low-involvement product category like detergents, 7 percent of Chinese consumers—up from 2 percent in 2009—say that the best products should not only clean clothes, but also make them feel special.
As the Chinese become more knowledgeable about products and more affluent, and safety standards become tighter and better enforced, they'll feel safer trying out lesser-known brands. That'll make them more receptive to niche brands that talk to them as "individuals" as a way of setting themselves apart.
A Dutch infant formula brand, Friso, is among those showing the way. While other brands focus on product safety and the ability to strengthen the immune system, riding on fears of the recent food safety scandals, Friso emphasizes emotional benefits for mothers. It has positioned the brand as "mom's best friend," and the claim is backed by a website that provides facts, nutritional information, and tips that will be useful during the mother's pregnancy and the child's infancy. According to the company, the website has received more than 50,000 unique visitors in the first two months after its launch.
Until now, marketers in China have concentrated on maximizing scale, but they must now consider developing portfolios of more targeted brands and sub-brands. Here are a few tips that will help them:
- Segment the consumer base to ensure that marketing decisions start from a deep understanding of what consumers want and what gets them excited. Segmenting consumers based on attitudes and behaviors will require investments in research.
- Create tailored product offerings that speak to consumers as individuals, not as part of the consuming mass.
- Roll out niche brand concepts and marketing campaigns, targeting consumers in wealthier cities where the trend toward individualism is taking root quickly.
- Re-think brand strategy, investing more in sub-brands and less in the umbrella brands created in the past.
Max Magni is the head of McKinsey's Consumer Practice in Greater China. Yuval Atsmon is a partner in the firm's Shanghai Office.
This originally appeared in the Harvard Business Review blog.