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The Innovation Generation in a Changing China: China's Millennials

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Michael Stanat, author of "China's Generation Y," looks at some of the forces of change that are buffeting China and how researchers can respond to them.

Published in Quirks Market Research magazine in April 2015.

By Michael Stanat, SIS International Research, http://www.sisinternational.com

Published in: Business
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The Innovation Generation in a Changing China: China's Millennials

  1. 1. © 2015 Quirk’s Marketing Research Review (www.quirks.com). Reprinted with permission from the April 2015 issue. This document is for Web posting and electronic distribution only. Any editing or alteration is a violation of copyright. C China’s Millennials represent one of the largest population segments in the world, with over 300 million people. Born during unprecedented times of economic growth and development in the 1980s, this generation now wields substantial influence on business, economic development and culture. Unlike in Europe and America, studies show that China’s Generation Y is economically better off than their parents. They are one of the best-educated and most affluent seg- ments and have more English-speaking people inside the country than any generation in the past. This young generation continues to steadily exert their influence on the world’s second-largest superpower in society, business and culture. For the first time in years, economic growth has begun to slow from 10 percent to rates around 7 percent annually. Some fear that declining growth, an aging population and other challenges could further reduce economic expansion. The Chinese government recently enacted policies that favor transitioning to a more consumption-based economy. This may challenge the sensibilities of Chinese consumers who traditionally value saving cash over consumption. These seismic changes will significantly impact peoples’ attitudes and behaviors in the marketplace. For researchers, understanding consumer attitudes and behaviors in this quickly-developing marketplace is important. Consider the following changes and trends impacting China’s huge Gen Y demographic. The evolving Internet culture. China has almost double the number of Internet users than the entire U.S. population, with recent estimates putting that number at 600 million people and growing. Gen Y is very socially engaged and represents the majority of Internet users in China. Global research studies have shown that Millennials there spend much more time online than their contemporaries in other developed economies. These habits are important to marketers and researchers who aim to generate insight on attitudes and preferences, track changing trends and uncover opportunities. Chinese social media is diverse and expansive, featuring its own domestic social brands includ- ing Weibo (microblogging) and WeChat (instant messaging). Internet memes, viral media and online slang are increasingly popular among young citizens, despite Internet restrictions and occasional Michael Stanat looks at some of the forces of change that are buffeting China and how researchers should respond to them. ••• marketing research in china A growing force The innovation generation in a changing China | By Michael Stanat snapshot quirks.com/articles/2015/20150411 FOR ELECTRONIC OUTPUT ONLY
  2. 2. To purchase paper reprints of this article, please contact Quirk's Editor Joe Rydholm at 651-379-6200 x204 or at joe@quirks.com. censorship crackdowns. Because social media is vital for this generation, they are more brand conscious than those who have come before them. The nature of social media, which encourages peer review and sharing of reviews, increases the importance of word of mouth and the need for customer feedback. Mobile and e-commerce innova- tion. Every day, hundreds of millions of people access their smartphones in China. According to the government’s China Internet Network Information Center (CNNIC), 2014 was the first year that more people accessed the Internet by mobile than by personal computers. It’s no surprise that the demand for mobile devices is high. A Washington Post report in late 2014 found that versions of iPhone 6 were fetching over 10 times their selling price in the U.S. Apple and Samsung have spent years vying for market share. Xiaomi, a new do- mestic competitor with far less economy of scale and marketing power, has recent- ly threatened to significantly disrupt the market with its affordable smartphones. Founded in 2010 by former Google execu- tives, Xiaomi has made industry inroads by marketing its affordable, high-quality products through effective online social media campaigns. Of course, competition in the world’s largest smartphone market is notoriously fierce. Xiaomi’s rapid ascent to a 14 percent market share in 2014 (according to the Wall Street Journal) is most impressive, considering it appealed heavily to urban Millennials and de- signed its products with a mix of foreign and domestic talent. The significance of this accomplishment cannot be under- estimated in China’s highly competitive consumer electronics industry. Xiaomi subsequently received glow- ing press and praise for its successes in Asia. In January, it announced that it intended to expand in Brazil and it made further waves by hinting at pos- sible expansion to U.S markets. E-commerce. It’s a common percep- tion that Chinese firms are traditionally better at imitation than innovation but this view is now being challenged. Recently, Chinese firms have made bold strides in e-commerce. One example is the Alibaba Group, which recently launched one of the world’s largest IPOs, surprising investment analysts around the globe. The growth of e-commerce in China is unprecedented. A decade ago, Chinese consumers were wary of online trans- actions. They tended to prefer face-to- face buying, customer service and cash transactions. These elements were the key drivers of product quality. The rise of e-commerce in China is doubly surprising because the red tape of importing and exporting products there can be extremely challenging. China places significant tariffs and cus- toms restrictions on foreign imports. Statistically, China ranks 90th out of 180 countries in the World Bank’s Ease of Doing Business reports. Alibaba’s online portfolio of Web sites has proven to be tremendously successful. Tao Bao is an online marketplace where consumers and businesses can buy and sell goods. T Mall, operated by Alibaba, provides online storefronts for manu- facturers. This B2C platform has enabled Western multinationals to more easily export to China, bridging cultural gaps and allowing businesses to successfully enter this burgeoning new marketplace and to reassure Chinese consumers regarding the affordability and quality of their products. Travel and tourism. The rise of the middle class has enabled a growing segment of the population to travel internationally. Chinese tourism is on the rise and it is reaching beyond Hong Kong, Macau, Japan and South Korea. Increasingly, these tourists are heading to Europe and to the U.S. While Chinese consumers’ interna- tional tourism habits have traditionally focused on sightseeing in capitals and large cities, Millennial tourism is broad- ening to leisure, beach travel, backpack- ing and other recreational tourism. Our firm has conducted in-depth research among Chinese leisure and business travelers, journeying inbound to and outbound from China. There are important factors influencing the prefer- ences of Chinese travelers. Additionally, Chinese culture tends to strongly value relationships and word of mouth. As a result, group travel is popular. Feedback from friends and family is important in decision-making when choosing destina- tions and hotels. For international travel, customized hospitality and amenities that make them feel comfortable and at home are viewed positively. Chinese-language service and food service are also helpful in improving the travel experience. Wine, beer and spirits market. China is already one of the world’s largest wine markets and is the largest red wine market, surpassing the U.S. and France. Western wines, beers and liquors are quickly becoming popular. Interestingly, wine and beer are sta- tus symbols among urban young people and have become signs of China’s growing middle class. In my experience research- ing China’s Millennials, premium alcohol brands can serve as a form of conspicuous consumption to communicate status in a hierarchical society. Relationships and guanxi, or one’s status and social network, remain very important cultural values. In addition, gifting is an important cultural value and driver of wine sales, particularly during the holidays. Innovation is already happening in packaging, digital marketing and logis- tics. It may be some time before Chinese wines become an export to Europe and the U.S., but in Africa and other emerg- ing markets where China’s influence is rising, that day could come soon. Recommended research approaches In terms of recommended research ap- proaches to make sense of this evolving landscape, hybrid methods can be helpful when researching dynamic subjects. Ethnography, both in-person and online, can be useful in understanding lifestyles, values, norms and buyer experience. It can convey visually how people view the world and the changes happening in it. Focus groups and in-depth interviews can provide deep insight to changing trends and perspectives. Quantitative methods can test and measure findings. Given the rise of many customer touchpoints, new online methods can be implemented in places where Internet users congregate. Much is changing for Chinese Millennials – their economy, technology, business, culture and attitudes. The sky- lines of Chinese cities are changing, as are the fundamental ways people communi- cate. Who better to help businesses as they take stock of the opportunities and chal- lenges presented by Chinese Millennials than researchers? No one is better suited to adding value by guiding organizations in their understanding of the evolving at- titudes, opinions, habits and preferences of this powerful group of consumers. Michael Stanat is global marketing director at SIS International Research, New York. FOR ELECTRONIC OUTPUT ONLY

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