The Source Book A collection of insights into China’s consumers in the year of the 2008 Beijing

TNS China Source Book TNS is the sixth sense of business™ China Source Book – Contents

A welcome message from TNS China, CSM Media China’s view of the world Hypermarkets are helping Research and CTR Market Research to create a new shopping culture among China’s China’s market research 6 industry races ahead middle classes 12 1 Guide your marketing in China with these 10 important consumer trends China is competing with The making of China’s 7 Germany and the UK as the Olympic dream world’s third largest market 2 for advertising Online China enters 13 new territory How the China Olympic 8 Sponsorship Benchmarking China’s car market System is helping Olympic shifts into top gear sponsors measure their Will China’s cosmetics 14 return on investment market soon eclipse the United States? 3 9 How China’s taste for luxury is growing Who are China’s favourite 15 sports stars? The TNS Insights into China’s China Sports & Sponsorship elderly – the fastest- Barometer provides growing segment of China’s Is Mobile Instant Messaging some insights population about to overtake SMS in 4 10 China? 16

China’s TV shows tune into A look at China’s booming the Olympics credit card industry Short biographies of our TNS experts 5 11 17

TNS China Source Book TNS is the sixth sense of business™ 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Welcome to the China China’s market research Source Book industry races ahead

It’s a well-worn cliché that China’s 1.3 billion During the Beijing 2008 Olympic Games, more China is likely to have the world’s fifth population represents the world’s largest eyes than ever will be turned to this country. largest market research industry by By David Lowden, market. With a GDP in 2007 of RMB 24.6 We hope you find the TNS China Source Book Chief Executive, TNS trillion, it’s no surprise that China is a magnet to informative. around 2012, eclipsing Japan on the way the world of business. Best wishes China’s hunger for market research shows For many years, western global brands But a variety of other statistics bring China no sign of abating. During the last five years, drove demand for market research but Jim Sailor into a much sharper focus. At the end of 2007, money spent with market research agencies this has changed. Managing Director, TNS China there were 547,286 million mobile phone in China has doubled, and over the past 10 [email protected] Over the past three or four years, the volume subscribers, and 210 million active Internet years it has quadrupled. The result? The sector ★ of market research generated by Chinese users. More than five million passenger vehicles Paul Wang is today worth US$600 million . TNS believes companies has been growing much faster were sold in China in 2007. China has 3,000 Managing Director, CSM Media Research that by 2009, it will have grown by as much than the spend by multinationals. China’s TV channels, and more than 20,000 cities and [email protected] as 70% from this level to become worth more leading market research agencies are finding towns; more than 100 cities have a population than US$1 billion. By around 2012, China will Ruoyu Chen that the volume of business they receive from greater than one million. overtake Japan and will be the world’s 5th President, CTR Market Research Chinese companies is approaching 50% of [email protected] largest market for market research. Prosperity is on the rise. Measure this in terms turnover. Our partner in China for continuous of TVs if you like. At the end of 2007 there were It is realistic to expect market research in and syndicated business – CTR Market 137.43 TV sets per 100 urban households. Or Press Contacts China to show 15% to 20% real growth in the Research – is certainly seeing more rapid measure it in terms of the number of wealthy next five years, and certainly double-digit real growth on the Chinese side of its business. individuals. There were approximately 350,000 Katie Zurita growth for the next 10 years. Also, as Chinese companies start to look US$ millionaires in China by the end of 2007. International PR Manager Even when China eclipses Japan, there will still overseas for higher sales and greater brand And China is an astonishingly dynamic society; [email protected] be significant room for growth based on annual share, they will come to Europe and the United the 20 million rural Chinese who move to Stuart Ridsdale market research spend per capita. While China States. This will be good for the big market China’s cities each year underline this. Head of Global PR will then be the second largest market in the research agencies who have already built up [email protected] Around the world, TNS understands the world for advertising, China’s annual market relationships with these companies in China. consumer better than any other company. In research per capita will stand at US$3 in 2012, The future for our industry in China is exciting. China, it’s no different. against the US$30 that will be seen for the US and Germany, and nearly US$40 in France As that future unfolds, I hope you find the In 2007, for example, we surveyed more than and the UK. insights that follow to be interesting. 1 million Chinese consumers in more than 300 cities, communicating with them via the internet, the phone or face-to-face.

★ Source: ESOMAR.

TNS China Source Book TNS is the sixth sense of business™ 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 China has seen an enormous transformation since From Tianjin to Beijing via it opened to the outside world in the 1980s. In ■■ China’s interest in the Olympic Games sport, that transformation puts China in a strong is rising and credible position possibly to take the lion’s There has been a continuous increase Helsinki: the making of China’s share of the gold medals in the 2008 Beijing in interest since 2002 among urban By Pierre Justo Olympic Games. It has taken a century, but the Chinese. By the end of 2007, 60% of Olympic dream question posed by Tianjin’s Youth Magazine as urban Chinese declared they were either long ago as 1908 has finally found an answer. ‘very interested’ or ‘quite interested’ Sport has played a strong role in Chinese society in the Games. This is up from 2002 when the comparative figure was 42%. and culture for centuries The level of interest in China is the highest level ever seen among any other In 1908, Tianjin’s Youth Magazine asked its Much has been written about how the origins worldwide properties – even higher than readers: ‘when will China host the Olympic of football (initially called Cuju in Chinese) was interest levels recorded by TNS Sport in Games?’ It has taken a century to get recently traced to the province of Shandong (a the FIFA World Cup. the answer. fact officially acknowledged by FIFA in 2003, and coming as a shock for English soccer ■■ How Chinese sporting life has China’s 100-year-old dream of hosting the aficionados). But less has been written about transformed Olympic Games started to materialize more the practice in the Yuan dynasty (1206 -1378) Since 2003, Chinese people have been than half a century ago, when the legendary of Chuiwan, the ancestor to the game of golf. practising more sport. Back then, close ‘Flying Finn’ Paavo Nurmi – winner of nine gold The same applies to Damaqiu (polo) in the to 23% of urban Chinese said they medals in the 1920s – lit the torch to start the Song Dynasty (960-1279), and to gymnastics never practised any sports or physical Games of the 15th Olympiad in Helsinki. in the Tang (618-907) and Wei-Jin dynasties activities. By the end of 2007 this figure was down to less than 10%. That’s a special memory etched into the minds (220-420). Many artifacts and paintings underline the strong role of sports in Chinese of many Chinese and the Chinese Olympic ■ society and culture. ■ More sports are finding eager TV movement. It happened in 1952, when New audiences China had been in existence for only three years. Given this sports heritage, nobody should Thanks to the Olympics, many Chinese people have had the opportunity to Only a few delegates from the People’s under-estimate the enthusiasm and discover other sports and other cultures. Republic of China travelled to Finland to witness commitment of the Chinese for the Olympic For the first time, there are now sizeable the Games. While they did not participate in any Games. Analysis and research into the attitudes TV audiences for baseball (450 hours of of the sports events, this visit is acknowledged of Beijingers and Chinese to the 2008 Olympic this sport aired in China in 2007), as well as China’s first involvement in the modern Games has revealed a high and growing level as for taekwondo, cycling and especially Olympic movement. Helsinki was the starting of personal engagement among ordinary track & field. point of a dream that took more than half a members of the public. Research has shown century to come true. that all segments of the Chinese population are motivated, not just a minority, not just But 1952 and 1908 aside, fewer people may be Beijingers. Research has even shown how aware of the importance of sporting culture in the Olympics have transformed the daily China, especially foreigners. sporting life of Chinese people, and even their consumption patterns, and their media habits.

TNS China Source Book TNS is the sixth sense of business™ 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 – product packaging and adverts making use Helping Olympics sponsors of sports stars. For Lenovo, the most recalled China Olympic Sponsorship adverts are Olympic themed, especially the ads Benchmarking System measure their return on investment it has broadcast regarding their role as a torch relay sponsor and some of their work regarding The 2008 Beijing Olympic Games is the the Olympic Countdown. most important commercial sporting The China Olympic Sponsorship Benchmarking System is a event of our lifetime. For global brands, unique research product it is a rare opportunity to build market By Matthew Brosenne share. For local companies, it is a unique opportunity for global exposure. Large ‘marketing bets’ have been made on the Over 70% of consumers claim they are more By wave 3 in mid 2007, we found that people Olympics and TNS felt it was essential likely to purchase the products or services of were much less interested in the progress of to create a system for measuring a a company they know is an Olympic Games Olympics facilities. They were now looking at sponsor’s return on investment. The sponsor. If you are sponsoring the 2008 Beijing individual sports stars. Any Olympic sponsor battery of research projects we have set Olympic Games, this kind of insight matters. building this new element into their promotions up to do this is unique. would clearly stand a much better chance of There are 63 official sponsors listed on the cutting through to the consumer. Our China Olympic Sponsorship Beijing Olympics official website, nearly three Benchmarking System includes: times as many as Athens 2004. Between them, Digging deeper, we also found that the best ■■ Analysis of the above-line cross- they have invested more than RMB 20 billion. recall of Olympics-related advertising is media creative treatments of both While their goals vary, they all want to know just focused on adverts around individual sports Olympic Sponsors and the competitive how effective their sponsorship marketing is. stars. So while this is ranked third in terms ■■ Satisfaction rising brands that are not sponsoring the of what people pay attention to, it ranks first Overall satisfaction in China with the Olympics. That’s where CSM Media Research stepped in what people can remember. We also found Olympics has reached new heights, in. Starting in 2006, we have been conducting with an average satisfaction of nearly that advertising recall of the Olympics Logo ■■ Analysis of below-the-line activity. 1,500 face-to-face interviews each quarter on products ranks second. A brand with a 8 on a 10-point scale (with 1 indicating among respondents across 10 of China’s cities. strong retail network could use this insight to ‘not satisfied at all’ and 10 indicating ■■ We have also integrated advertising By the end of the research in October 2008, its advantage. Third place and fourth place for ‘very satisfied’). Our first measure of spend data across different media we will have done 16,500 interviews, a total recall went to adverts with Olympic themes satisfaction was 7.1. platforms. of 11 waves. The results are used in the China and adverts focusing on the China Olympic ■■ Coca-Cola is top Olympic Sponsorship Benchmarking System, a Delegation. unique research product. Coca-Cola has consistently led the way The driver for recalling an Olympic sponsor in respondent awareness as a Beijing To help clients determine effective Olympic varies according to which client company Olympics sponsor. Coca-Cola is followed sponsorship strategies we had to determine that we identify, with our research looking at by Lenovo, Yili, China Mobile and adidas. what people pay attention to in the Olympics Coca-Cola, China Mobile, Yili (a prominent dairy ■■ Name that sports star and in sports generally. Our initial face-to-face brand in China), Lenovo or adidas. For Coca- Over 43% percent of respondents surveys showed that people were focusing Cola, consumers recall sports star ads, Olympic correctly associate with the on three elements: the Chinese Olympic themed ads and product packaging. For Yili, Coca-Cola brand. And 37% correctly delegation, China’s Olympic teams within only two of these three elements are strong each sport; and how construction of Olympics associate with Coca-Cola. facilities was progressing.

TNS China Source Book TNS is the sixth sense of business™ 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 72% but Liu Xiang at 68% is now very close. Yao Ming is head and shoulders Liu even managed for the first time to attract China’s sports fans show their more votes than Yao in Tianjin (45% vs 41%). global perspective By Pierre Justo The future competition looks tense. above the rest China’s Yao Ming and Liu Xiang are front Noticeably, when the question of popularity of mind among the urban Chinese we Who are China’s favourite sports stars? The TNS China Sports is left to the ladies, Liu Xiang almost pips Yao surveyed. But the sports fans we spoke & Sponsorship Barometer tracks perceptions of top names Ming at the post, scoring a strong 53% overall to were able to name a long list of stars ranking among females that comes close to from outside China. Apart from David Interview Chinese about their favourite sports and unbeaten No.1 sports star in China ever Yao Ming’s 56%. China’s females care less for Beckham, here are the overseas names stars and there’s no doubt about the top three since the TNS Sport China Sports & Sponsorship soccer stars, it would appear, with Beckham in they mentioned: cited spontaneously – basketball star Yao Ming, Barometer started in 2003. fifth place with a much weaker 16%. We have followed by Olympic 110-metre hurdle gold ■■ Ronaldo observed for many years that Chinese women medallist Liu Xiang, with soccer star David Liu Xiang, who in Athens became the first ■■ Michael Jordan have a stronger affinity for ‘local’ stars, while Beckham coming a creditable third. Chinese athlete to achieve the ‘triple crown’ of ■■ Diego Maradona athletics – world record holder, world champion men are more interested in the ‘international ■■ Michael Schumacher Shanghai-born Yao Ming, a towering 7 feet and Olympic champion – scores 50%. In 2007, names’. Brands targeting China’s female ■■ Pelé and 6 inches tall, enjoys the loyal support of he narrowed the gap between himself and consumers take note! ■■ Thierry Henry his compatriots as he furthers his career with Yao Ming, having clearly earned a place in the ■ Look at the top three sports stars from the ■ Ronaldinho the NBA’s Houston Rockets. The NBA’s tallest hearts of Chinese and of marketers in China who ■ perspective of the age of respondents, and ■ Kobe Bryant player, who began his career with the Shanghai associate his photogenic face with 14 brands, ■ another picture emerges. Among 15 to 24 ■ Franz Beckenbauer Sharks, scores the highest in the China Sports & more than any other sports star. ■ year olds, the ratings begin to even out with ■ Luìs Fìgo Sponsorship Barometer. London-born David Beckham, who built his scores for Yao Ming and Liu Xiang at 53% and Yao Ming scores an overall popularity rating of reputation through his nearly 400 appearances 48% respectively, and Beckham’s popularity Now cut the data from the perspective of those 56%, meaning this was the percentage of urban for Manchester United and as captain of increasing to 29%. This is a full 7% better than who spend more than 500 Yuan each year on Chinese aged 15 to 54 years that spontaneously England, manages 22%, a notable performance the initial overall score for Britain’s soccer star. sport. It’s still the same top three in the same declared Yao Ming to be one of their favourite making him by far the best known and favoured In a similar way to the clear gender difference, order, but Beckham rises in popularity scoring sports stars. In fact, he has been the impressive foreign sports star. In that category he tops the preference for stars is related to an age 32.6%. These scores come much closer to Yao Ronaldo (sixth with 13%) and former basketball barrier (age 35) with respondents over this age Ming’s 54.5% and Liu Xiang’s 49.7%. Apart legend Michael Jordan (seventh with 12%). favouring primarily local stars (Yao and Liu, but from those top three, we also notice a very Nevertheless, if he wants to remain on the also table tennis stars Wang Nan, Zhang Yining clear orientation towards international stars at podium, Beckham will have to watch out for two and Deng YaPing). the expense of local heroes. Clearly, financial Chinese idols, the stars and It’s interesting too to drill down to how fans background plays a significant role in how Tian Liang that were cited respectively by 18% of different sports – football, basketball, attracted Chinese people are to sports stars. and 12% of respondents. table tennis and Formula One – see these But regardless of whether we name Yao Ming, Look at the results in 11 major Chinese cities personalities. The overall rankings are the same Liu Xiang or David Beckham, all eyes will turn and it’s interesting to see that Yao Ming’s – Yao Ming, followed by Liu Xiang and David to Beijing this summer. And China’s sports fans biggest fan base is in the northern city of Beckham. But ask only the fans of Formula One will see a host of fresh sporting performances Shenyang (67% ranked him as the top sports for their views, and they push Beckham up to that will almost certainly reveal fresh insights star) and the southern city of Shenzhen (61%). second. And the footballer’s score of 11.8% when TNS Sport reveals the latest results of the His home city of Shanghai gives him a score of comes very close to Yao Ming’s 14.4%. China Sports & Sponsorship Barometer.

TNS China Source Book TNS is the sixth sense of business™ 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Beginning August 9, 2008 – the day after The world’s largest continuous TV China’s TV shows tune into the Olympics commence – we will publish figures on Olympics TV viewing regularly. It is audience measurement operation the Olympics By Paul Wang an honour and a privilege to provide the most CSM Media Research operates the world’s comprehensive TV audience measurement data largest TV and radio audience measurement during this exciting 16-day period. Stay tuned panel, covering the 1.2 billion people in The Beijing 2008 Olympics is producing a flood of new TV to www.csm.com.cn for regular updates. China who have access to TV and/or radio programming across many TV channels in China (including the SAR’s 6.5 million TV viewers). It is the ‘currency’ of China’s As the 2008 Beijing Olympic Games approach, There are regional differences in China’s TV, radio and advertising industry. The many new TV programmes are being aired in viewing preferences. The highest level of operation covers 231 individual markets. This China. CSM Media Research provides China’s viewing for Olympic-themed programmes comprises the national panel, 27 provincial TV industry with comprehensive audience occurs in Beijing. Next comes Shenyang, panels, 4 municipal city panels (Beijing, ratings and we recently did an analysis in another city in China’s northeast and the host to , Shanghai and Tianjin), 198 city China’s 10 most important cities to see how some of the Olympics soccer games. But to the panels and one panel in the Hong Kong SAR. these new programmes are evolving. south and southwest, interest in Olympics TV Altogether, some 54,000 homes and 178,800 programmes has to date dropped off, although panelists participate in the measurement Even in 2007, there was already a large volume as the Olympics draw closer this could change. of over 1,315 main channels and 377 radio of programmes focusing on the Olympics. In frequencies, every day of the year. the three-month period from November 16th CSM Media Research will continue to monitor 2007 to February 4th 2008, for example, total programmes focusing on the 2008 Beijing broadcast time for programmes related to the Olympic Games across every province in China. Olympics across national, regional and local TV channels was more than 90,000 minutes Top Olympic-themed shows (1,500 hours), marking a new high. Olympic-themed entertainment galas have Over the same three-month period, China’s TV pulled in enormous TV audiences. Here are viewers watched approximately 97 minutes of the top three shows to date: Olympics programming on average. Around 250 programmes were aired on the Olympics during 355 million viewers: 3-channel simulcast this period, up from the 132 that appeared in for TV celebration of the 1 Year Olympics the previous three months. Countdown.

What are the most watched programmes? Our 230 million viewers: 5-channel simulcast latest analysis reveals that Olympic-themed for TV gala on the 1 Year Paralympics entertainment shows perform best. But these Countdown. are very resource intensive shows to put on, 210 million viewers: 3-channel simulcast making it difficult for most TV channels to run of TV celebration of Olympics 100 days more programmes of this type. Other types of countdown, with 4th round of Olympic shows that do well are Olympic-themed talk Song Selection Gala. shows and documentaries.

TNS China Source Book TNS is the sixth sense of business™ 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 music, movies and drama. The appeal of the US Cuisine and romance China’s view of the world extends beyond this into a clear recognition of Cuisine? While Kentucky Fried Chicken and American excellence in education and sports. McDonald’s are well-established in China, TNS surveyed how contemporary urban By Ashok Sethi American universities are considered as the the Chinese do not hold American cuisine best, with the UK not far behind. in high esteem. Instead, the Chinese show Chinese see the world at large, and also their own place in it extreme patriotism, though some have positive While in pop art, the US reigns supreme, when associations with French food. it comes to serious art and culture, it is France What do people inside China think of the world US industry is seen to excel in many areas – which takes pride of place, although the UK around them? We looked for some insights. ranging from quality of high tech products (No. Finally, there is one area that Chinese men takes top spot on the specific topic of quality 1 position), health care products (No. 1), and need to work on. Only 12% of Chinese women of museums. As a country blessed with ‘rich World leadership quality of drinks (No. 1 again). Germany is seen consider men from their own country as culture and traditions’, the Chinese are proud On the criteria of economic development and to make the best automobiles and machinery. handsome (Japanese men rate the worst here). of their own place and ranked themselves top; world leadership, the US towers above all Despite all the trouble facing the American Many more Chinese women seem to be drawn India and UK are a distant second. countries in Chinese minds. Chinese people automobile industry, Chinese still hold American towards the French, the British and the Italians (all enjoying ratings of above 20%). However, clearly see America as an economic powerhouse, automobiles in high regard – next only to those The Chinese feel that the US is the best country Chinese men are most drawn to their own a world leader and an influential country – far made by the Germans. in the world to go and work in (China included), women (40%), though some do acknowledge ahead of any other country, including their although most Chinese would still prefer to But when it comes to perfumes and luxury the charms of French women (23%). With a own. As an economic power they place China settle and finally retire in their own country. products, no country can match the allure serious gender imbalance coupled with the in third place, with Japan between themselves They would, however, like to visit America as of France – a perception which extends to poor evaluation from their own women, Chinese and the US. However, as a ‘world leader’ and tourists – though the US competes strongly personal products in general and garments. men may soon find attracting suitable spouses an ‘influential country’ the Chinese place their with several other destinations such as France, own country at the No. 2 slot, after the US, but an uphill task. In the field of computer hardware and Australia, Scandinavia and Italy. far ahead of any other country. The Chinese also software, the US is the clear leader – with place China far ahead of any other as a country no other country anywhere near it (India is ‘with a fast growing economy’. Based on online research by TNS among Chinese aged 18-44 and a distant second in software). In general, living in key tier 1 and tier 2 cities of China. What about ‘peaceful’ countries? The American products enjoy the perception of highest ranking goes to China and while the being technologically advanced, innovative and Scandinavian countries follow, they only do so modern. Germans and the Japanese do better after a significant gap. Only 9% consider the on products with good craftsmanship, good US as ‘peaceful’ – the same percentage that detailing and products with a long life. The classed the UK as ‘peaceful’. Japan received an Chinese consider themselves as the country even poorer rating. offering products with the best value for money (followed by Japan, and the US not doing too Commerce and industry badly at No. 3 slot). In terms of commerce, the Chinese have Fashion, art and culture the highest opinion of Germany – with 38% associating it with ‘a country which makes America is seen to combine the best of science excellent quality products’. The US has the and art, and is not only seen as a centre of second highest association (33%). Japan and technological excellence but also as fashion Scandinavian countries also do well, followed leader and a trend setter. The US is far ahead by Korea, China itself and the UK. of any other country in producing good popular

TNS China Source Book TNS is the sixth sense of business™ 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Chinese consumer trends By Ashok Sethi Guide your marketing in China with these 10 important trends

Making any generalizations about a market as 2. Urbanization large, complex and fluid as China is daunting. Nearly 20 million people in China are ‘urbanized’ But we can still pick out some broad trends every year. The population on the move offers a that help to determine how Chinese consumers unique marketing opportunity. These new urban think, and what they want. consumers resemble neither the city folks they fell just short of the 215 million internet 8. Health and wellbeing have joined nor the rural brethren they have users believed to reside in the United States. 1. New demographics, new wealth Four out of the ten most advertised brands in left behind. They have unique needs, such as However it is not just the numbers which China are health products. The yoghurt market China has gone through a tumultuous change carefully designed financial services as well as mark the internet revolution in China. Chinese has taken off in a traditionally non-dairy market in the last few decades. It has compressed a entertainment and communication products consumption of the internet is significantly largely on a health platform. Fitness clubs, yoga level of development in this short period that and services. different from the West, providing unique classes and slimming pills are all doing brisk other developing countries have not been able opportunities to marketers in China. business. According to research, over 40% of to achieve over a much longer period. Families 3. Female empowerment women in urban China and Hong Kong consider have become smaller, increasing life-spans and 6. Growing sense of nationalism Unlike some other Asian countries, in China, themselves to be overweight. Nearly one- better health conditions are rapidly ageing the women are active participants in the work force. China achieved GDP growth of 11.9% in quarter of urban women in China are planning population and of course, incomes continue to As a result, they have an independent means of 2007, the fifth consecutive year that annual to try to lose weight in the next six months. increase at a brisk clip. Smaller families were income, venture out of the home everyday, and GDP growth has exceeded 10%. China is a Marketers take note. initially fuelled by the one-child policy. But now have the opportunity and desire to spend. Female big force in global trade; it has put a man into delayed marriages, and the push by young consumers have different needs and marketers space and built a railway line on the roof of the 9. Assertive consumers people to set up their own households after need to develop special strategies to attract them. world. The sense of achievement has fuelled a Branding is a new phenomenon in China. Yet marriage (even before it), have strengthened strong feeling of national pride. The Olympics despite heavy investments, marketers have not 4. Concern for the environment the trend. are the crowning glory, providing numerous been able to achieve the same level of respect Expressing environmental concern and buying opportunities for marketers to ride on the While in rural areas, people have experienced and bonding among Chinese consumers as products which are soft on the environment euphoria and build local brands. modest increases in incomes – sufficient to they have accomplished in other countries. is a strong trend among urban Chinese have lifted them out of poverty – in large cities Marketers need to tread carefully in terms of consumers. In fact it has the potential of becoming 7. Individuality entrepreneurship and the stock market has the promises they make as consumers are the new status symbol – just as consumers are A few years ago, most advertising was about created a new class of rich. These high net becoming more and more unforgiving. willing to spend more to show their success, being a good mother, a good wife, a good worth individuals have been responsible for the they are also willing to spend to underline their worker, a good father or a good friend. Self 10. Ascendance of design upsurge in the demand of luxury goods. This environmental conscience. indulgence and pampering are now in mode. Design is now a key brand differentiator. In fast changing profile of the Chinese consumer Consumers are increasingly conscious of their China’s credit card market, for example, it’s strongly determines their mindset and the way 5. Growth of the internet and Web 2.0 own individuality and are expecting solutions not a simple matter of credit limits and interest they evaluate brands. Researchers from China Internet Network tailored to them, rather than mass products. rates. In today’s China, as marketers try hard Information Center (CINIC) counted 210 million Marketers need to recognize this. to differentiate their products, and consumers internet users by the end of December 2007 – demand more than functional attributes, design a cool 73 million more than the year before and is of paramount importance. This applies to every an astounding growth of 53.3%. The number product category, not just apparel and shoes.

TNS China Source Book TNS is the sixth sense of business™ 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Online China enters new territory By Ashok Sethi The 53% growth in the number of internet users in China in 2007 provides enormous potential for effective marketing

China is home to the largest number of mobile of mobile internet on the rise and with over phone users and television viewers. By now, it 500 million mobile phone connections in the will have become home to the world’s largest country, there are significant opportunities for number of internet users. For the end of brands to market themselves in China around December 2007, researchers from the China the mobile internet. iCafes are also becoming a Internet Network Information Center (CINIC) new marketing channel rather than just a place counted 210 million internet users in the to surf the web. country. This was 73 million more than the year before – an incredible growth of 53.3%. The Is the internet just for the elite? Not at all. It number fell just short of the 215 million internet appeals to consumers from all socio-economic users that are believed to reside in the US. backgrounds, not just the well-heeled. Use of the web in China is strongly driven by social While internet users in China enjoy thriving and entertainment needs – with a focus on economic conditions, the purchasing power downloading music and videos, keeping in The rapidly expanding reach and influence Marketers in China can use the internet to of Chinese citizens is relatively modest – with touch with friends through instant messaging of the net in China has created a new set expand their reach too. While many companies nearly three quarters of them having an income and accessing news online. There’s much less of marketing opportunities and challenges. are still confined to operating in larger cities, of less than RMB 2000 (around US$285) per use of the internet to send and receive e-mail Marketers have a powerful medium with the internet has already achieved significant month (Source: CINIC, January, 2008). Clearly, than in the West. Popular Chinese sites such as which to reach potential consumers, inform penetration in rural areas and small towns this group does not provide the opportunity www.taobao.com (China’s consumer-targeted them, educate them and woo them. The direct via internet cafes and community computers. for the lucrative e-commerce activities seen equivalent of eBay) and www.alibaba.com reach and the interactive nature of the internet Marketers need to think about how they can elsewhere in the world. In fact, as many as (directed at businesses) have unique business provides them with the kind of engagement exploit these new opportunities. 53 million of the 210 million internet users models and characteristics specific to China. potential that traditional media is just not last registered live in villages, and per capita able to offer. There’s also the opportunity for creating disposable income in rural areas is less than Web 2.0 thrives in China with as many as two positive ‘word of mouth’. By actively providing one third of that in urban areas. thirds of internet users having contributed to With the strong development of Web 2.0 in detailed information, and engaging consumers the internet in some form or other. Blogging is China, the flow of information between the to share their experiences in a controlled way, Most internet users access the internet using especially popular. There’s dramatic evidence of manufacturer and the Chinese consumer marketers can spawn effective word-of-mouth broadband, not dial-up connections. Given this with , a popular Chinese actress has truly become a two-way phenomenon. campaigns for their brands. the relatively low incomes, it is not surprising and film director. She can claim to have the Companies are already using the net that a large proportion of Chinese internet world’s most visited blog (http://blog.sina.com. to encourage users to contribute to the users – particularly the younger users – get cn/xujinglei), with some 87 million clicks once development of their brands, marketing their access at internet cafés. With the use recorded over an 18-month period. communications and product portfolios.

TNS China Source Book TNS is the sixth sense of business™ 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Will China’s cosmetics market soon eclipse the United States? Demand for cosmetics is racing ahead, thanks By Jason Yu in part to the 2006 liberalisation of direct sales

Data from TNS Worldpanel China (National 5.2%, while prices of facial cleanser and skin Urban Panel) shows that China’s cosmetics moisturizer increased by 8.1% and 8.4% sector (skin-care and make-up products) respectively. grew from US$2.4 billion at the end of 2006 to US$3.1 billion by the end of 2007★. This was a China’s liberalisation of direct sales (meaning 29% rise. TNS is predicting growth of between home sales) is having a major impact on 15% and 20% in the US$ value of China’s the country’s cosmetics sector. China put a cosmetics market during the next three years. moratorium on direct sales in cosmetics in 1998. But the government issued a new law If China achieves the 20% level of growth in in 2006 that allowed direct sales on the back 2008, its cosmetics market will be worth some of tighter regulation. Major foreign brands now US$3.7 billion, eclipsing the US cosmetics have fresh opportunities. TNS data shows the market (skin-care and make-up), which was share of spend from the direct sales channel in worth an estimated US$3.6 billion★★ at the China has shot up, rising 21% in 2007 over the end of 2007. previous year for skin-care products, and 23% for make-up. It’s not possible to say for sure when China’s cosmetics market will eclipse the US, but it will The first direct sales player granted a license ★ All data from TNS Worldpanel China (National Urban Panel), except ■ estimate for 2007 size of US cosmetics market (see below). happen sooner than we think – the year 2008 to sell at national level in China was Avon, ■ Cosmetics household spend is up China clearly stands out from its is likely. Growth in 2007 over 2006 in the US with brands targeting a range of affordability ★★ neighbours, with average spend per Data from Information Resources Inc. (IRI) in the US. The figure cosmetics market was flat. If that continues in levels. Mary Kay is also permitted to undertake of US$3.6 billion is an IRI estimate. the next three years, China is likely to overtake direct sales and was one of the fastest growing household at the end of 2007 in urban the US. Even if we see growth of 2% in the US brands in 2006. Amway is another direct sales areas of just US$40, far lower than the in 2008, China would probably take the lead player, with its prestige Artistry brand. US$191 level seen in Korea and US$176 over the US market. in . This points to a significant This is an exciting market for cosmetics brands opportunity. What’s driving this? Rising prices, consumers from the US and Europe with the promise of ■ trading up to more expensive products, growing growth in the next few years. ■ Spending on cosmetics per trip is up demand for anti-aging products, and the official The average spend on cosmetics per relaxation in 2006 of an earlier ban on direct trip in China – at just US$6 – compared sales. On prices, for example, TNS Worldpanel to US$31 in Korea and US$26 in Taiwan China data shows the average price increase underlines the opportunity for overseas in China of make-up for 2007 vs 2006 was brands to sell more products.

TNS China Source Book TNS is the sixth sense of business™ 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 The most obvious theme is around functional now leading separate lives, the elderly need China’s grey opportunity beckons needs, such as special foods and supplements, to look elsewhere for emotional sustenance. product labels, packaging and instructions that Some of the more affluent are looking beyond are legible to fading eyes, and large easy-to- the care of their own children to social Elderly people are the fastest-growing press buttons on phones. responsibility and philanthropy. Others are segment of China’s population By Ashok Sethi learning to pamper themselves, without feeling There are social and emotional needs too, guilty. Marketers need to understand these yet few marketers are aware of the changing emotive needs with sensitivity. What is the most important concern for Zhang son. But most important of all, Zhang Yan will dynamics. Elderly consumers have throughout Yan, a 60-year-old retired school teacher living – based on the average longevity of females in their lives bought products for their children; Traditionally, marketers in China have tended with her husband in Shanghai? The answer is Shanghai – still be one of China’s consumers their emotive needs have centered around to ignore older consumers and focused their health. And food and exercise, she feels, are the for at least another 20 years. protecting and nurturing their families. They energies on the young. But with changing two most important determinants of health, so Normally countries age as they grow more chose brands that were associated with being demographics, marketers have no choice but to she goes to great lengths everyday to shop for a good mother, a responsible father or a meet the needs of the elderly. Many companies the freshest vegetables and live fish. prosperous. In the Philippines – a relatively poor country – the proportion of consumers conscientious home-maker. But with children have already taken notice and are changing gear. Zhang Yan is typical of many of China’s elderly. under 15 years of age is twice that of Japan. Their only child is married and lives in the Other developed Asian economies such as neighbourhood. Drawing a pension of RMB Korea, Hong Kong and Taiwan have significant China’s ‘grey market’ is a major opportunity 2000 (US$285) per month, Zhang Yan leads a greying populations. But with its one-child ■■ Health care ■■ Consumer products gregarious life with her retired friends. They policy, China is in the unique position of having With the traditional reluctance to live in Faced with a shrinking youth population, meet regularly, exercise and sing together, shop a large ageing population before it becomes old age homes rapidly disappearing, this the marketers of chocolates, snacks together and often holiday together. She is a sufficiently well-off to bear the cost of its will create a huge market for elderly care and drinks products may be compelled voracious user of her mobile phone, but mostly elderly citizens. homes and clinics. to look beyond their traditional young uses text messaging to keep the monthly bill in What’s more, with China’s commitment to market and focus on the elderly. check. She loves to go out and especially likes ■■ Health supplements continuing its one-child policy (it aims to to visit the tranquil farms around Shanghai. This is already a huge market, with the ■■ Retail layouts stabilize the total population at 1.36 billion When she grows older, she wants to live in an elderly buying for themselves and children There are implications for the design in 2010, up from around 1.3 billion now), the old people’s home and not be a burden on her splurging on gifts of huge, extravagantly of retail aisles, and physical positioning proportion of elderly citizens will grow further. packaged health products. of products. Product labels need to be China’s current senior population is already large and easy to read and store shelves estimated to be 156 million – some 12% of ■■ Targeted services should provide easy access. the total. In some cities, grey consumers are Special TV programmes, shows and even a much bigger segment. In Shanghai, 20% of gaming can help address a huge market ■■ Financial services the population is over 59; by 2020 this could for leisure activities and entertainment for China’s elderly will respond positively increase to 33%. the elderly. to carefully designed financial and insurance products. Despite today’s limited purchasing power, ■■ Special product design China’s elderly folk constitute a staggeringly Mobile phones and computers need to be large consumer base. But how can marketers easy to use, and incorporate large buttons. accurately read and understand the special needs of these consumers?

TNS China Source Book TNS is the sixth sense of business™ 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Trust a good card brand to deliver a credit worthy By Ashok Sethi performance and Zhang Hong

Like many other product categories in China, the credit card industry is booming

An estimated 40 million credit cards are in In order to do this, companies need to circulation in China, compared to estimates differentiate their offering from the competition of less than 3 million in 2003. Economic and establish a strong bond with the consumer. growth, growing income, urbanization and Credit card companies need to understand the development of organized trade have how the market is segmented, decide which Another consumer segment involves Indeed, functional needs can be merely contributed to this increase. segments they want to cater for, and offer environmental awareness. This issue is surrogates for emotional needs. For instance, specially designed and targeted products for becoming so important, there is likely to be an if you talk to the Chinese credit card consumer, While enjoying growth, the credit card industry each segment. excellent market in China not just for gold or a high credit limit is rarely mentioned as an needs to be concerned about several factors. platinum cards – but a green card. Such a card important requirement when getting a new How long will this natural boom last? How to Consumers need credit cards to be widely would support environmental issues, and project card. However, when you try to probe further, deal with fierce competition? How to make the accepted in retail outlets, for example, so they the card holder as an intelligent, well-informed, what comes to light is that the credit limit is consumer spend more on the card? And what look for high credit limits on their cards with considerate and socially responsible citizen. actually a reflection of their status and self- about customer retention? But most importantly small annual fees or no annual fees at all. recognition as well as a source of security. The – how to make a profit? Deep down, consumers look at brands as aids Image is also key. Credit cards are highly implication is that the marketers need to cater to satisfying strong emotive needs such as a Most of these questions are related to the visible products and – when used in social to the underlying true needs – and if providing need for control, a need for excitement or a challenge of establishing credit cards as a situations – are an indicator of the user’s a high credit limit is a problem, they can cater need to bond or feel protected. By appropriately brand. China’s market has already accepted status. By carrying a card whose social imagery to the hidden emotive need in a different way. segmenting their customers, banks can create credit cards as a product, but when there is no is easily identifiable, consumers are making an image and personality for their brand which Credit card issuers have invested surprisingly loyalty, when consumers easily swap from one a social statement about the social class they fits the emotive needs of their target. little in reaching their consumers or card to another having been enticed by a free belong to, or how they want to be seen by establishing a stronger relationship based on gift, it implies that they have not accepted credit others – successful, affluent, modern or even Banks also need to look innovatively at an understanding of consumer needs. The cards as a brand. And until that is achieved, fashionable. So credit cards need to display the functional needs. Like other visible products, success of this business in China is dependent the industry is always going to be faced right social imagery for the right segment of credit cards can be a reflection of the user’s on the ability of credit card companies to with disloyal consumers. By building loyalty, customers. This requires banks to be innovative personality. The card can be an attractive piece develop a strong bond with their consumers, companies will also increase their profitability. and to go beyond the obvious imagery of status of plastic that the consumer is happy to exhibit. a relationship that extends beyond functional So one of the biggest challenges today is how to and class, and the corresponding clichéd offer So the very appearance of a card can develop a attributes and embraces emotive needs. establish credit cards as a brand in China. of gold and platinum cards. strong identity and bond with the consumer.

TNS China Source Book TNS is the sixth sense of business™ 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 In 2007, hypermarkets had made their biggest Hypermarket operators predominantly comprise Shopping gets hyper in China impact in Shanghai, where this channel international retailers. Among the leaders are accounted for more than 45% value share of Wal-Mart/Trust-Mart (US), Carrefour (France), Hypermarkets are helping to create a new By Jason Yu the grocery sector. Hypermarkets have also Tesco (UK), and RT-Mart (Taiwan). taken off in Hangzhou (40.1% share in 2007), shopping culture among China’s middle classes Shenzhen (38.3%), Guangzhou (36.6%) and We see a significant opportunity for Chengdu (33.9%). hypermarkets to penetrate China’s retail sector Go shopping in China today and chances are China in Shaoxing, a prefecture level city with still further. A few international hypermarket you’ll find yourself walking the aisles of a giant a population of 650,000. It was a significant operators are already looking into expanding hypermarket. These spacious retail facilities, move. By end of December 2007, Carrefour had Why are hypermarkets into tier-2 and tier-3 cities. typically carrying comprehensive product opened 112 hypermarkets in China. winning business? ranges, and in spaces often in excess of The hypermarket channel is a nascent industry, Data from TNS Worldpanel China, which whose turning point is still to come as the 4,000 square meters, are taking hold in China ■■ Low prices continuously measures household consumption lack of competition in second-tier cities is an thanks to the lure of low prices, convenient Most Chinese hypermarkets are in 20 of China’s provinces as well as Beijing, opportunity for further development. one-stop shopping and accessible locations. utilizing price cutting and ‘every Tianjin, Shanghai and Chongqing, shows that Hypermarkets are also offering other retail day’ low price strategies to attract outlets such as restaurants, cinemas and coffee hypermarkets increased their share of the value ★ shoppers into the store. houses that can turn a shopping trip into a day of China’s grocery sector in the country’s 15 ★ TNS Worldpanel’s share of value in China’s grocery sector covers ★★ out for China’s shoppers. largest cities from 29.8% in 2006 to 32.0% in ■■ One-stop shopping 50 representative product categories. 2007. The share in these largely provincial capital A wide range of food and non-food ★★  In the US, stores such as Wal-Mart have cities and municipalities – known as tier-1 cities – Beijing, Guangzhou, Shanghai, Tianjin, Shenyang, Wuhan, items are pulling Chinese families Chengdu, Xian, Jinan, Nanjing, Hangzhou, Qingdao, Chongqing, been able to create an entirely new shopping has continued to increase, reaching 30.1% in the into the stores. Fresh food (including Dalian and Shenzhen. culture. Now, that one-stop shop philosophy first half of 2007. We are predicting a share for cooked ready-to-eat food) goes down is achieving the attention of China’s largest hypermarkets of 35% by 2009 – compared to the well with consumers. spenders – the middle-class consumers. level of just 19.7% seen in 2001. ■■ Location On average, China’s middle class consumers The hypermarket successes contrast with Most Chinese hypermarkets are visit hypermarkets every 10 days. This is a the supermarket sector which has recently conveniently located in city centres shopping pattern owners of hypermarkets can experienced retrenchment. Supermarket share or shopping malls close to residential bank on for predictable revenues. of value dropped from 28.4% in 2001 to 19.8% communities and also offer free in 2007. TNS data shows the number of visits shuttle buses. So it’s no surprise that most international consumers make each year to supermarkets retailers are looking closely at China and has trended down since at least 2005, while ■■ Total shopping experience hypermarkets are rushing in. In July 2007, the number has risen for hypermarkets over the Restaurants, cinemas, department Carrefour opened its 100th hypermarket in same period. stores, and coffee shops are often located on the premises of a hypermarket.

TNS China Source Book TNS is the sixth sense of business™ 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Advertising spend pushes ever higher By Tony Tian

China is competing with Germany and the UK as the world’s third largest market for advertising

Advertising expenditure in China has been a market share of 3.5% and 2.3% respectively. rising dramatically. Organic growth for 2007 As with most of the major emerging markets – versus 2006 was 9%, while in the three such as Russia, Eastern Europe and Brazil – TV previous years the figure was 18%, 18% and accounted for the lion’s share of advertising 22% respectively. With a market worth US$44.6 (74.1% of total spend), while other types of billion gross in 2007 (excluding internet and media are having a tougher time. Newspapers new media such as LCDs in commercial (at 13.5%) and magazines (1.8%), and outdoor buildings), China now competes with Germany media (3.7%) are struggling to hold their share and the UK as the world’s third largest market of the advertising market. for advertising – with only America and Japan ahead. Market share of China’s advertising spend in 2007: There’s no slowdown in sight. CTR Media TV 74.1% Intelligence (part of CTR Market Research – the leading market research company in China) Newspaper 13.5% forecasts that China’s measured advertising Outdoor 3.7% expenditures in 2008 will grow by 15%. Internet 3.5% Already, 2008 is shaping up as a key year. LCD 2.3% Spending gains will be mainly driven by the high Magazine 1.8% growth rate of internet display advertising and Radio 1.1% The auto industry, for example, saw rapid The continued growth of China’s economy new media – including mobile TV, digital LCD/ growth in advertising of key vehicle brands, boosted the tourism industry. Reflecting

LED panels, mobile phone TV and IPTV – due to ★ Source: CTR Media Intelligence with advertising expenditure for MPVs and the increase in both inbound and outbound the impact of the 2008 Beijing Olympic Games. SUVs growing at 33% and 75% respectively. tourism, advertising in the tourism sector grew Driven by higher lifestyle aspirations which are Spurred on by increased consumer demand at a steady rate of 16%. The countries that As in many other countries, internet and new leading to increased consumption, domestic for better quality products, and expanded retail advertised the most in China were the ones media advertising maintained explosive growth. demand in the auto sector, household appliance distribution that is penetrating rural areas that continue to be the preferred outbound Internet advertising in China grew by 48% in sector and tourism sector is increasing rapidly. more effectively, advertising in the household locations of Chinese residents – the Hong Kong 2007, with gross expenditure totalling US$1.65 Advertising spending in these and other sectors electrical appliances sector received a boost SAR, Japan, South Korea, Singapore and other billion and ranking fourth among seven key also saw high growth, according to CTR Media and grew by 13%. Advertising in this sector Southeast Asian countries. Advertising in this media types (see chart). LCD in commercial Intelligence. targeted middle-end and high-end appliances sector was also boosted by tour packages buildings ranked No. 5 with a total advertising such as high-definition televisions (HDTVs), offering personalized itineraries and new types spend of US$1.1 billion. Internet and LCD had humidifiers and dryers. of tours, such as cruises.

TNS China Source Book TNS is the sixth sense of business™ 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 car buyers can choose from more than 60 car China’s car market shifts brands. In short, China can be considered one of the most competitive car markets in the world. By Klaus Paur into top gear China has become the ticket to success for many international car makers, allowing them Fast growth in the passenger vehicle market sets China apart to compensate for stagnating or even declining sales elsewhere. General Motors and Ford, for In 2005, China surpassed Japan and the major immense potential for further development. example, have established flourishing operations European car markets to become the world’s Increasing economic prosperity enables more with their joint venture partners in China. second largest automotive market. Only in the households to purchase passenger vehicles, Volkswagen, the longest standing foreign player US are more vehicles sold every year. Since allowing the owners to enjoy mobility and also on the mainland, accomplished record sales in then, China’s auto market has experienced a to show off their success. The fast-expanding 2007, making the most important healthy expansion with year-on-year increases market for cars, MPVs and SUVs is above all market for this manufacturer outside Germany. Brands are most important to young consumers in sales volumes of 20% and more. We have driven by first-time buyers, who account for for whom the purchase of a car signifies the become used to double-digit growth rates around 70% of new vehicle sales in China. The The Chinese passenger vehicle market is also expression of a modern life-style. since the beginning of the new millennium, and forecast GDP growth over the next three years a success story for Chinese car manufacturers. Results from recent studies show that the the future also looks bright. With a projected of more than 8% annually and the projected Within only a few years, several domestic car number of ‘modern’ consumers in China is on continued annual growth of 20%, China is increase of household incomes will support the manufacturers like Chery, Geely, and Lifan the rise. This is one reason why car makers destined to become the number one auto continued expansion of the passenger vehicle have successfully developed their own vehicles should invest further in trendy designs and in market within the next three years. Even from market. and achieved substantial sales without any the most conservative standpoint, China will cooperation with international car makers. wider brand building. So the tremendous growth gain the global top spot no later than 2015. Virtually all car manufacturers produce and sell Chery deserves particular mention, as it has potential of the Chinese car market alone is their vehicles on the Chinese mainland. The become the 5th largest car manufacturer in no guarantee for sustainable success. Vehicle What makes China stand out among all major country has rapidly transformed into a ‘buyer’s terms of sales, after Volkswagen, General manufacturers need to be sensitive to emerging auto markets is the tremendous growth of market’ with consumers empowered by an Motors, Toyota, and Honda. Altogether, consumer needs and must establish strong the passenger vehicle market, combined with ever-widening range of choices. Today, new Chinese car brands own some 30% of China’s brands. The latter poses particular challenges to passenger vehicle market. China’s own independent car manufacturers. Development of Chinese automotive market In terms of consumer behaviour, China is an For many reasons, China stands apart from 18.3 other promising auto markets like Brazil, ) emerging yet fast evolving automotive market. sales in million units ) Functional product features are key to the Russia and India. Only the correct ‘reading’ of 15.3 ) ) 17.2 purchase decision, but brand considerations consumer expectations and market demands ) projection growth 20% p.a. 12.7 ) 15.6 are gaining more importance as consumer will enable car makers to accomplish their ) ) 14.2 10.6 ) behaviour becomes more sophisticated. ambitious goals. ) projection growth 10% p.a. 12.9 ) ) 11.8 8.8 ) 10.7 7.1 9.7 5.9 5.1 4.4 3.2

TNS China Source Book TNS is the sixth sense of business™ 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 China’s taste for luxury grows Four key trends in the luxury market: ■■ China wants its own luxury brands ■■ Collectibles are in vogue Growing competition and deeper product By Sandy Chen The luxury goods market in China is The gratification that comes from collecting dominated by products designed for the and appreciating exquisite goods is highly penetration have made luxury goods Western market. But with a resurgence of appealing to China’s affluent shoppers. interest and pride on the part of consumers in increasingly accessible ■■ Don’t forget status their own culture, opportunities now exist for Luxury goods have become increasingly ■■ Connoisseurs Status and prestige continue to underpin ‘Chinese luxury’ products. accessible to a wider market in China. There is The Connoisseur’s admiration for a product this market. Luxury goods manufacturers now a new breed of consumers who are keen goes beyond that of status. They appreciate ■■ Demand for limited editions must provide these in ample measure. to stand apart from the crowd by purchasing good quality and command respect for their With high-end luxury consumers looking to exclusive services and exquisite products. sophisticated tastes. stand apart from the rest, brands now have the opportunity to offer exclusive In 2008, a TNS report pointed to an opportunity ■■ Future Shapers premium products. for purveyors of luxury to elevate their A Future Shaper’s purchases are an offering and address a need for ‘individuality, extension of their personality. They revel indulgence, connoisseurship and status’. As the in being different from the crowd. As China to double its share of global Targeting purchasers of luxury products is luxury market matures, so do the needs of its innovators, they are the first to buy into a consumption of luxury goods by 2016 difficult since the estimated 350,000 people consumers, meaning there is no longer a single product. in China with a net worth of more than US$1 homogenous consumer base. TNS has predicted that China will account ■■ Hedonists million represent less than 0.02% of the for one-quarter of world demand for luxury Hedonists are about self-indulgence, country’s population. TNS identified four luxury consumer segments goods by 2016. With China already taking consumption for oneself rather than to with distinctive needs, all key to unlocking the approximately 12% of world output of luxury Many have yet to grasp the high levels of impress anyone else or to prove a point. potential of the new ‘luxury superbrand’. goods at the end of 2006, this would amount wealth in Guangdong province in the new ■■ Bling Lovers to a doubling of its share over a decade. cities such as Shenzhen, Dongguan, Shunde Show-offs? Yes. This market segment is all and Zhuhai. Income in southern cities about ‘bling’. As more and more consumers If the sales value in China of top luxury brands in Guangdong province is higher than in become increasingly affluent, this segment grows at the same speed seen in recent years Shanghai. is also likely to grow in size. – of between 10% and 20% per annum – by 2016 the nation could be buying up to 25% of We believe the growth in demand for luxury The purpose of the report into luxury the world’s luxury goods each year. goods will be helped by brands penetrating superbrands is to underline to companies in the beyond the elite and finding an appeal among luxury business that, if they are to succeed in But marketers of luxury brands should not the middle classes. In an online survey – China, they need to be sure their market strategy expect quick and easy returns; they have to Luxury Brands and Middle Class Chinese does not target just one type of consumer. demonstrate an extremely strong international – TNS found that over half of middle-class presence first. respondents longed to buy luxury goods, High-end consumers want recognition of their even if they could not afford them at present. status through brands that represent their need Brand-building in China requires the same for individuality and indulgence. The report kind of patience, sustained investment and strong distribution as other markets. China’s found that the desire for ‘luxury superbrands’ By Jim Sailor is extremely high. There’s a big business consumers are savvy. opportunity here for savvy luxury brands.

TNS China Source Book TNS is the sixth sense of business™ 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 China’s mobile revolution continues By Shawn Wang

Mobile instant messaging is the new kid on the block

SMS has been a huge hit in China with 51% of users utilizing the service daily – however its success, and more importantly its revenue to operators, is under threat from a new player on the scene – Mobile Instant Messaging (MIM).

MIM has been widely tipped to overtake SMS as the primary tool for mobile communication in China, threatening to take away the revenue from operators relying on this service. More surprisingly, recent research has indicated that subscribers. In China there is evidence that Where mobile operators have profited heavily MIM may even eat into other communication MIM has leapfrogged other messaging tools from SMS, these findings present a real methods, including email. demonstrating consumers’ preference for this challenge for their businesses. Do they try and A recent TNS survey found that of those users as an entry level non-voice communication tool. keep consumers focused on SMS to maintain in China who have adopted MIM, this tool has their revenue base, or offer consumers more One reason for the success of MIM is the become the primary non-voice method of choice in messaging? With increasing internet popularity of instant messaging via the PC. communicating. For regular MIM users, this functionality on new mobile phones, and MIM’s According to a recent report by the China is the most used feature on their phone with strong mass market appeal, operators in China Internet Network Information Center (CINIC), 71% using it daily. This compares to only 55% may have no choice but to promote this feature 81% of China’s internet users’ use IM compared of all mobile users that use SMS daily and only more widely. to only 56% who use email, and this is often the 16% that use email on their mobile. MIM is first thing users refer to when they log on. The expansion of China’s consumer technology so popular that globally 11 out of every 100 industry presents real challenges for any messages sent by either a mobile or PC is an The other reason for MIM’s popularity is cost. company looking to invest. Just re-applying instant message via mobile. And of the regular Once a mobile phone user has access to the models from developed markets simply will MIM users this rises to 36 out 100, leading to a internet from their handset; the charge for not work. Consumers will automatically go for decrease in use of SMS and email from 38 and instant messaging is next to nothing, as the the best and most cost effective technology 37, to 23 and 21 out of 100. only cost is a very small data transfer fee. available to them, meaning previously With consumers in China being accustomed Currently 8% of all mobile users globally successful technologies may not be given a to instant messaging from their PC, and more regularly use MIM, with the highest number chance to even get established. mobile operators offering unlimited use of of users in Hong Kong (23%). However, use web browsers, the take up of MIM is going to of MIM in China (Tier 1-3 cities) is also very increase even more significantly – leaving SMS high (16%) suggesting a massive opportunity and fixed email from PC behind. among the country’s 500 million mobile

TNS China Source Book TNS is the sixth sense of business™ 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 About our TNS experts About TNS in China Pierre Justo, Managing Director, Jim Sailor, Managing Director, Media, Sports and Sponsorship TNS is a leading player in China through TNS China, and two TNS Greater China Research, TNS Sport Asia joint ventures: CSM Media Research and CTR Market Research Jim has spent the past 15 years doing research across Hong Pierre joined TNS France in 1994 and was posted to China with Kong, Taiwan and Mainland China. He has strong consumer CSM Media Research in 1999. Since 2002 he has regularly been a research experience across the media, automotive, consumer guest speaker in top sports and sponsorship forums and seminars. TNS China products, technology and healthcare sectors. In business since 1992, TNS is one of the first finance, telecom & IT and new media research. Matthew Brosenne, international market research agencies to start The media intelligence business – measuring Business Development Director, operations in China. In recent years, TNS has advertising expenditure on TV, radio, print and Paul Wang, Managing Director, CSM Media Research grown substantially and established itself as online media – is China’s market leader. CSM Media Research In Matt’s 13 years with TNS, he has developed extensive one of the most successful and reputed market Paul joined TNS as General Manager of TNS China in 1994. experience in both consumer and media research. Currently, www.ctrchina.cn Wang is one of the TV research industry’s leading figures and is Matt is driving business development initiatives on ‘New research and consulting agencies in China, with regularly consulted by advertisers, ad agencies and TV media 150 professional researchers and more than for insights into the TV industry. Media’ Research. 300 employees in three full-service offices in About TNS Shanghai, Beijing and Guangzhou. Ruoyu Chen, President, Jason Yu, General Manager, www.tns-global.com.cn TNS is a global market information CTR Market Research TNS Worldpanel China and insight group. Madam Chen Ruoyu is one of the founders of CTR Market Jason is responsible for the TNS Worldpanel business in China. Research and has been General Manager and legal He is a leading expert in continuous research with over 11 CSM Media Research representative since 1995. In 1986, she organized China’s first years experience, and has worked in Asia and Europe with both CSM Media Research is a joint venture between Its strategic goal is to be recognised as National TV Audience Sample Survey covering 28 cities, and set manufacturing clients and retailers. CTR Market Research (the leading market the global leader in delivering value-added up China’s first national TV audience research network in 1992. research company in China) and the TNS information and insights that help its clients Ashok Sethi, Regional Director, Shawn Wang ,General Manager, Group. Dedicated to TV and radio audience make more effective business decisions. Best Practice and Methodology, TNS Beijing measurement (TAM) research, CSM Media TNS ALM TNS delivers innovative thinking and excellent Shawn has more than 17 years of professional experience Research offers reliable and uninterrupted Ashok has extensive experience in both qualitative and in marketing, market research and consultancy in Taiwan, service across a network of 80 countries. quantitative research. Before taking his current regional role, rating information for China and the Hong Canada and China. Shawn’s experience covers consumer Working in partnership with clients, TNS provides Ashok was the Managing Director of TNS China for more than products, pharmaceuticals, automotive, electronics, IT and Kong SAR. As the ‘currency’ of the TV, radio high-quality information, analysis and insight that three years. telecommunications. broadcasting and advertising trade, CSM Media improves understanding of consumer behaviour. Research operates the world’s largest TV and Sandy Chen, Research Director, radio audience measurement panel, covering TNS Greater China Tony Tian, Vice President, TNS is the world’s leading provider of customised the 1.2 billion people in China who have access Having joined TNS in 2003, Sandy has extensive experience in CTR Market Research services, combining sector knowledge with research issues, such as segmentation, advertising research, Tony joined CTR in 1999 and has extensive experience in to TV and/or radio (including the Hong Kong expertise in the areas of Product Development product testing, brand health tracking, and satisfaction studies. advertising strategy and media intelligence. He started his SAR’s 6.5 million TV viewers). & Innovation, Brand & Communications, research career in TV monitoring back in 1990 as one of the true Klaus Paur, Regional Director, pioneers in China’s media and advertising research industry. www.csm.com.cn Stakeholder Management, Retail & Shopper and Automotive North Asia, Customer Intelligence. TNS is a major supplier TNS China CTR Market Research Zhang Hong, Head of Finance Sector, of consumer panel, media intelligence and Heading up the automotive research practice for TNS in China TNS China CTR Market Research is the leading market audience measurement services. since 2003, Klaus and his team ensure TNS clients are at the research company in China. Specialist forefront of China’s evolving automotive industry. Zhang has research and consulting experience in retail banking, wealth management, credit cards, insurance and investment. His expertise includes consumer panel, media TNS is the sixth sense of business™ background includes market entry strategy, customer segmentation, intelligence, media & consumption behaviour, customer satisfaction and new product development. media strategy, automotive, FMCG, healthcare, www.tnsglobal.com

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