Reasons of Chinese Consumers for Purchasing Luxury Brands in the UK - Literature review Example

?An investigation into Chinese consumers’ reasons for purchasing luxury brands in the UK Chapter Two: Literature Review Overview This literature review discuses the purchasing habits of luxury brands by Chinese consumers residing in United Kingdom. Chinese represent a significant portion of the British population. The Chinese are the fourth largest minority group residing in Britain following Indians, Pakistanis and Black Caribbean (Bailey et al., 1994). Furthermore, China also has the fourth largest consumer base of affluent households in the world (He, Zou & Jin, 2010), these need to be considered as well because of their ability to travel to and invest in education in UK. In spite of having such a strong presence and considerable purchasing power, this ethnic minority has not been studied as much as it deserves. Through this research we should be able to establish: Impact of Western Values on Chinese Traditions. The reasons and perception behind making such purchasing decisions. Chinese perception of brands and role a brand name plays Brand Image Journey towards brand management starts with the development of brand identity and concept and determining the way the public should perceive the brand by communicating a distinct brand image and personality (Okonkwo, 2007). According to Scholz (2012), luxury brands focus on the top two tiers of the Maslow’s hierarchy of needs pyramid: Self-esteem and self-actualization. A luxury brand as opposed to a mass brand has fewer versions and products so that the brand can retain its superiority and uniqueness (Fich, 2011). Furthermore, in most cases the luxury brands are manufactured by hand or have a certain element of customization, making it one-of-a-kind product. However, on key feature of luxury brand is the fact that they are always very high-priced and are not affordable by the masses (Schloz, 2012). This fact alone retains the exclusiveness of a luxury brand as it is unreachable by masses and can be afforded by the very few with the purchasing power. In spite of what may be perceived, luxury brands are seldom bought spontaneously. Thus the majority of consumers of luxury brands put significant effort in the buying decision. In other words, the spontaneous buyers of luxury brands represents a small percentage as opposed to 70% of luxury consumers that plan in advance for buying a luxury product (Scholz, 2012). Thus luxury goods cannot be exclusively restricted to price, where the consumer is seeking bargains for convenience goods but is willing to pay a significant sum for luxury product. This is where the concept of Brand Image comes in; brand image involves the marketer to breathe life into an inanimate product, thus creating a perception of human characteristics and distinct personality in the eyes of the consumers (McLoughlin, Aaker & McLoughlin, 2012). Brand image is on the receiver’s side. Image research focuses on the way in which certain groups perceive a product, a brand, a politician, a company or a country. The image refers to the way in which these groups decode all of the signals emanating from the products, services and communication covered by the brand (Kapfere, 2004). Brand image plays a positive role in boosting the product choice when the consumer forms a congruency between their self-image and the brand personality. The marketer’s aim is to create a clear positioning of their brand in the minds of the consumer by means of brand image, thus the brand image is the most powerful tool that can be used by the luxury brand. Luxury Brand Consumers Nicole Fich (2011) in her book Brand Management for luxury goods distinguishes clearly between a “product” and a “brand”, the product can be a car but a brand would be BMW. It is the brand name that makes a huge difference in terms of price that the consumer is willing to pay and the key feature that distinguishes the brand from competition. China and the Europe have a very rich and old civilization, and so is their long relationship. Presently this relationship is strengthened by the cultural exchange of students entering from China to the UK. The Chinese students bring cultural diversity to universities in UK. And for the Chinese students it is a chance at a higher quality education which is the access to which is more difficult in China because of limited universities for the large population (Kolb et al.). In the year 2010 about 284,000 Chinese students went to various countries abroad to study of which about 93% were privately funded (bbc.co.uk). If fact according to Chinese officials, Chinese is the largest pool of foreign students abroad. Since Chinese economy is growing at a very rapid pace, the government is also supportive of individuals who seek to acquire knowledge and skills from foreign universities. Chinese Historical Appreciation for Luxury The Chinese Scholar Bureaucrats in history possessed a very luxurious lifestyle, this was brought about by their social status, ancestral wealth, education and stable income (Lu, 2011). These intellectuals paid immense importance to the beauty of life and considered their personal collections of luxurious goods as a means of immense pride and fulfilment. The appreciation for fine art, craftsmanship and calligraphy dates back to hundreds of years in teh Chinese culture. This uniqueness and superior craftsmanship evolved into the luxury industry in the West. The wealthy Chinese consumers today are not only buying luxury brands to show their social status but also to function as a reminder of the luxurious lifestyles of their proud ancestors. So for the Chinese today, the quest for luxury goods takes roots in their proud history. The appreciation for innovation, quality and craftsmanship is something they grew up with and their appreciation has been passed on from generation to generation.. Cultural Implications Since the Chinese government has adopted the one-child policy since 1980s and strict implementation of birth-control methods, the Chinese consumers have been greatly influenced by the decisions of these so-called “little- emperors” (Bell, p90). This term refers to a single child who may be provided for by parents and two sets of grandparents and in response perhaps needs to satisfy the expectations of all of them. China’s one-child policy has left the present student generation with accumulated wealth of two pairs of grandparents that are willing to invest in the future of their grandchild. According to Bell (p.90) when these “little emperors” reach the college-age, they are familiar with Western culture and follow the belief-system that is more fashionable to buy foreign luxury brands. The belief has been sponsored by parents and grandparents who are willing to pay premium prices for the most luxurious foreign brands they can afford as parents for their future heir or heiress. But unfortunately very few make it to top universities like Tsinghua University (Beijing’s equivalent to MIT for USA), so sending the child abroad to study is a very actionable and preferred plan for most Chinese families (Hille, 2012). In 2004, UK took over United States place as the most popular destination for the Chinese students (bbc.co,uk). The Chinese students mostly pursue degrees in technology, finance or business. They are geographically dispersed from Aberdeen to York; these students make significant contributions to their universities as well as the UK economy (Kolb et al, p156). Furthermore both UK and Europe allow for students to work part-time while studying and work full-time during their summer breaks. This enables the students to have extra money available to buy luxury goods as well as help them gain experience to find better paying jobs eventually. Some key reasons identified by Wang, Hi and Li (2012) in their research on the attractiveness of Chinese as consumers of foreign brands are: Chinese today are exposed to a much more dynamic environment due to the changes in their political, economical and social structure. These factors have led for a significant change in cultural and value system; this stands particularly true for the younger generation that is more adaptable to changing environment. The young Chinese consumers have observed changes as their economy shifted from a socialist to a market one. This gradual shift has also opened them towards accepting foreign products with greater enthusiasm. Western products and culture raise a mix of both admiration and antipathy for the Chinese consumers. Demand for luxury goods particularly foreign brands can also be determined on the basis of various studies that prove that the Chinese consumers la great emphasis on materialism and peer or group influence. Chinese Consumers and Ethnocentricism Chinese government in their attempts at encouraging domestic products have introduced tariffs, taxes and laws to discourage the Chinese from buying foreign products. For most products that are price sensitive, Chinese consumers are shifting away from imported products in favour of local ones (Bi et al, 2012). The flip side of such an approach is that Chinese consumers who live abroad or visit abroad are very keen to buy foreign brands due to their scarcity in their own country and the price differential. Aside from price, nationalism has also played a role. The Chinese are very culturally oriented and products that cater to this aspect have better chance of appealing to the Chinese audience. For this purpose it is imperative that marketers conduct a lifestyle analysis of their consumers in order to fully understand their needs and aspirations. For multinational luxury brands, such information is vita in understanding consumer everyday needs. Bi et al (2012), in their study of Chinese ethnocentrism towards buying the product considered various other aspects such as perceived quality, features and consumer experience. Their conclusion was that Chinese may not express it but they all harboured ethnic tendencies to some extent, this attitude influenced charity decisions but there was little impact on purchase decisions. The purpose of discussing this study was to suggest that Chinese are ethnocentric by nature; however one important element that this study did not include was the impact of “brand”. The brand perception and brand personality are the key determinants of the way consumers respond to a luxury brand. And in case of luxury brands the consumers base their decisions more on the brand image than on ethnocentricism. Need for Social Recognition Consumers do not select brand on the basis of their features alone, they also consider the role a brand can play in creating and maintaining their social identity. This can be particularly true for luxury brand where the consumers are willing to pay a premium just in order to be able to communicate facets of their own identity through the brand personality. Willis (2008) in his study of Chinese shopping behaviour concluded that most Chinese shoppers prefer to shop in groups and value peer opinion a great deal. The purchase of Western luxury brands can be considered a vital scenario where this peer perception comes into play. Willis (2008) also suggested that Chinese would prefer Western product if they feel that the product can add to their self-image and add lustre to their image as perceived by peers and colleagues. This peer-admiration was so important that the Chinese consumers are at times willing to overlook the functionality of the product in favour of self-esteem and status. Previously many researchers have implied that there is an emotional bond between consumers in both East and West with regards to foreign products. This response was greater in favour of domestic products on the basis of ethnocenticism and moral obligation (Wang, Hi and Li, 2012). The consumers of today have come a long way from that, today they have exposure to numerous foreign and domestic brands that are competing for brand loyalty. The researches of today take a more practical perspective, implying that personal values such as materialism, social influences and self-esteem play a much more active role in a consumer’s response to a foreign product (Wang, Hi and Li, 2012). Materialism Materialism is defined as the belief that a consumer holds that material possessions are important in life because they bring happiness and success (W. Wang Et al, 2012). This concept of materialism can play a very significant role in the evaluation of foreign luxury brands for the Chinese consumers because they would attach intrinsic values to the brand such as self-identity, life quality and social well-being. Thus they would perceive the ownership and acquisition of foreign brands would translate into their self-identity enhancement and improved life quality. Wang, Hi and Li (2012,p4) in their research go so far as to imply that consumers that belong to developing countries where foreign brands are scarce perceive foreign brands superior to local ones and as a means of improving their lifestyle and economic standards. Chinese students in UK have access to these foreign brands so instead of seeking materialistic superiority in convenience goods; they have attached the same meaning to luxury goods with superior quality and higher price tag. Our research will further evaluate this intrinsic meaning that the Chinese students in UK would attach to foreign luxury brands. Seeking Complex Confucian Values According to Oswald (2008) Chinese consumers might even seek Confucian values from consumption of luxury that depict a noble character and simple life.Chinese youth takes a step beyond just expecting luxury brands to show their wealth and success, these brands should exhibit their classy personality and superior tastes. Collectivism and family-orientation are the key Confucian values that guide the behaviour of Chinese consumers. The impact of these values is clearly seen on the consumption of luxury goods. The Chinese consumers buy luxury brands for the brand name and not the product itself (Lu, 2011). They are willing to pay high prices to the well-known and respected brands, the more famous the better. Respect and Superiority, are the other most important values that the Chinese consumers seek. In the materialistic society of today, getting respect and superiority is accomplished through ostentatious display of wealth, and the easiest way to do that is through ownership of luxury brands. Glory and avoidance of Shame, are the third most important value for Chinese consumers. Owning and exhibiting luxury brands translates into having a high status in the society, a stable income and success. These luxury brands can safeguard the status and command respect in the family-oriented society. Cultural Influences of Western Brands on Chinese Traditional Values The opening to foreign brand to the Chinese consumers has been a very gradual process. This exposure of the Chinese consumers to foreign brands can result in cultural influences. The reason why we have selected a younger audience as a sample to study shopping behaviour is because the younger generation in more open to accepting other cultures. Willis (2008) conducted a study through which he determined that traditional Chinese values can and do coexist with foreign values. Chinese consumers may be cautious and group-oriented and express a liking for domestic products but they are also open to Western cultural values of creativity and dynamism. This acceptance is prominent in their demand for products that add self-esteem, status and peer acceptance (Willis, 2008). The higher perceived value and self esteem provided by the luxury product plays a key role in decision making and likelihood of purchase. For example some Chinese students would visit the Starbucks for coffee just to be seen there and similarly buy a Gucci watch just to show that they have the purchasing power, they are trendy and international (Willis, 2008). This preference for Western luxury goods is also a reflection of their ability to break away from traditional values and willingness to adapt to the cultural values of their host culture, in this case UK. Our research will further examine the concept behind such decision-making. The prestige and status associated with foreign brands in China has fizzled-out to some extent because of the high volume and availability of foreign brands in the market and the maturity of the Chinese consumers; however the positive association with foreign brands continues to persist for most Chinese consumers (He et al, 2010). Brand Literacy Advertising plays an important role to lure foreigner towards a brand mainly because they do not have as much exposure to the brand as the citizens of the country of origin. Similarly Chinese students would also seek product information and values through advertising. It is also notable that luxury products are for a niche market and so should be their advertising. Oswald (2008) considers the advertising medium for luxury brands as a barrier to acceptance by Chinese consumers. The purpose of advertising is to create brand literacy for the consumers; advertising would not serve its purpose if the audience feels they are unable to relate to a brand. For example: where as some brands rely on personal selling techniques or one-on-one demonstrations, luxury brands are limited to magazine spreads or single page photograph. For Chinese consumers such impersonal methods and lack of lived-in experience deprive them of relating to the brand and can cause a hindrance in advertising communication. Brand literacy communicates in two levels, it delivers the structural meaning (dictionary) and the semantic meaning (symbolized) for the brand. Oswald (2008) considers the example of luxury perfume ads for women as an example, these advertisements Through colour or black and white visuals the advertisements attract the target audience by taking the average woman many steps away from mundane shopping and saving money to the of the existence of a superior fantasy woman. For Luxury Good- Perception is everything In order for repeat purchase and brand loyalty it is imperative that the consumer can form a brand association with the luxury product. Otherwise if a luxury brand is seen as just an object to exhibit wealth, then the luxury product would just be a one-time affair. Marketers seek brand loyalty above everything else; it is much cheaper to retain a happy customer than to convince a new one to invest in their brand. Similarly the Chinese students may seek a congruency between the brand personality and their own as an expression of self (Oswald, 2010). Chinese students have had brand exposure from China to the UK, so they are beyond the stage of expecting just extraneous satisfaction from the brand. Based on a research conducted by He, Zou and Jin (2008, p 623), Chinese consumer lifestyle and consumption of Western luxury goods following observations were made: Luxury goods indicate that the buying has superior taste Luxury goods are not meant for practical use Luxury goods are always high in quality. References Bailey , N. Bowes, A & Sim, D 1994. The Chinese community in Scotland. Scottish Geographical Magazine vol. 110, No. 2. pp 66-75, Book Bell, S. 2008. 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