Money Today: Chinese consumers are extremely price sensitive, but at the same time have a desire for ostentation.
Money Today, Cho Cheolhee, 22 Aug 2013
Chen Xinlei, a top-tier marketing expert and professor of marketing at CKGSB, recently visited Korea to deliver a lecture for a CKGSB MBA Briefing Session held in Seoul, Korea. In the lecture, he pointed out the “dual-aspects” of Chinese consumers: They are extremely price sensitive, but at the same time have a desire for ostentation. “A brand is seen as a tool to show social position, thus Chinese consumers are less price-sensitive when it comes to luxury brands that serve this purpose, whereas they are highly price-sensitive to brands that do not contribute to raising their social position,” said Chen.
Chen also discussed China’s complex distribution system. He said that although foreign companies employ local Chinese or multinational agencies, a number of them still fail to adopt and survive in the Chinese market due to difficulties in distribution. “Constructing a distribution network costs a fortune and utilizing existing distribution lines is also problematic and complex,” said Chen.
In addition, Chen noted that foreign companies in China face complex risks and burdens that stem from a multitude of legal issues, such as protection of intellectual property rights, monopoly regulation, poor market regulations, and so on. However, foreign companies have no other choice but to continue their business and investment in China since the profits derived from the Chinese market can be substantial. “Korean companies are no exception. They have to execute their marketing strategy with a clear understanding of existing complexity and risk in the China market,” said Chen.
CKGSB is a private, non-profit business school established in 2002 with support from the Li Kashing Foundation. The school offers MBA, FMBA, EMBA and executive education programs.
The CKGSB faculty consists of tenured professors from top universities in America and Europe, including Harvard, Yale, Columbia, and IMD. CKGSB has campuses in Beijing, Shanghai, and Shenzhen in China, and also overseas in Hong Kong, New York, and London.
CKGSB’s alumni include more than 5,000 high-ranking executives from Chinese companies such as Sinopec, Alibaba, and Tsingdao, as well as from state-owned companies, multinational firms and government organizations.