Market Segmentation Strategy in China I Daxue Research

30Sep2015

Market Segmentation Strategy in China

Market Segmentation Strategy in China proved to be necessary

China has been recently attracting major foreign brands in many different sectors. Zara, H&M, Swatch and others internationally loved companies have already settled in China. From their experience, it becomes apparent that tastes and preference of Chinese consumers differ from the Europeans. Therefore, before entering the China’s market, major foreign brands has been carefully working out a market segmentation strategy to make sure, that their products suit tastes of potential new customers.

Type of market segmentation strategy in China crucially depends on the nature of business

When it comes to market entry in China, a consumer is a central interest. Therefore, knowledge of consumer’s needs and preferences is a key to success. Market segmentation strategy in China helps to identify, evaluate and target potential consumers. For each particular market, consumers are divided into segments by different criteria depending on business’s needs and nature. For example, if it is a make-up market for luxury cosmetics, then high-income consumers are identified. More specific, it can be a cosmetics market for ageing skin. Then, particular age group is targeted. The strategy allows identifying a required group of consumers and evaluates their purchasing potential.

Demographic and geographic segmentation is typical for China’s marketing

There are two types of this marketing strategy. In China, demographic and geographic segmentation are particularly used. This is because consumers’ purchasing habits are more likely to depend on one or both of these factors.

Geographic segmentation as a way of targeting Chinese customers

Geographic segmentation basically implies dividing consumers into segments in accordance with their location. For example, in China, they can be divided into consumers of tier-1, tier-2, or tier-3 cities. Alternatively, it may be the coastal area, which is largely developed, and any other areas. The way of division and targeting consumers will massively depend on a business. For example, for fresh fish retailers, “coastal and other areas” could be a suitable division, while for luxury brand shop, “tier-1, tier-2 and tier-3” are more appropriate, because middle-class customers are targeted.

Demographic segmentation in China usually targets certain income level

Demographic segmentation implies dividing customers into groups by gender, age, income and other demographic factors. In China, demographic segmentation is greatly applied when different income-level groups are targeted. “Love for luxury” trend among Chinese consumers led to a large group of potential customers in the luxury market. Shrinking middle class and rising income are also the subjects of this particular market study. However, the strategy may also target low-income groups. It will largely depend on the nature of products. For example, Lancôme and BMW were definitely evaluating high-income consumers as potential customers, while Wal-Mart and IKEA did not consider middle-income consumers as a central interest.

To conclude, market segmentation is largely applied by large international brands when interning Chinese market. Moreover, it is possible that two or more segmentations are used. This is because the taste of potential consumers in China is different from that of the Europeans due to its unique culture. Therefore, a good market strategy is a must.