IMPLICATIONS FOR MARKETER

Understanding Chinese rural consumers

Alex Mari
University of Lugano (USI), Switzerland
visiting student at Central University of Finance and Economics (CUFE), Beijing, China

ABSTRACT

Purpose – The current study aims to examine the purposes that modern literature suggests to marketers
with respect to consumption patterns of Chinese rural consumers, their sources of product information,
communication's channel status and successful ways to advertise products and services.

Considering the great interest that rural areas development has for national and multinational companies,
can be significant to analyze current academic theories on the topic pointing out concrete and remarkable
differences between urban and rural society.

As the rural consumers adopt the consumption patterns of urban consumers, more and more opportunity
would be explored. In a future perspective, a substantial business opportunity is represented by the
influences that younger generations will have upon their families. For that reason particular emphasis will
be addressed on media and advertising consumption of rural children and their perception of brands.

In addition, many studies underline the lack in research in this area. Western theories applied to deal with
rural consumers obtained scarce results during the past. In this respect, I personally assume that an in-depth
analysis of the actual consumer behavior contest is necessary to develop further marketing strategies
targeting rural consumer.

Beijing, Jenuary 2008

Course of International Management


An executive summary for managers and executive
readers can be found at the end of this article.
Literature Review
In 1979 thanks to Open Policy established by Vice
Premier Deng Xiaoping, Chinese economy has
enjoyed a rapid growth. At that time, most of the
residents of the rural areas were engaged in farming
activities. Recent findings show that agriculture's
share of employment dropped steadily from 69
percent in 1980 to 45 percent in 2005 (State
Statistical Bureau, 2007).
Despite two decades of economic growth, China
still face a deep-rooted economic divide between
urban and rural areas. Even do, higher quality life
standards were verified in both rural and urban
areas, there is an increased gap related to personal
income. By 2005, the annual per capita income of
urban and rural Chinese have been 10.493 Yuan
(about 1175 €) and 3.254 Yuan (365 €) respectively.
The urban-rural income inequality has been
attributed to Chinese government's decades-long
restrictive policy on rural-urban migration (the
household registration system, Hukou) and its
continuous urban-biased welfare polices (Yao,
1999). In addition to income inequality, the
difference in quality of education children receive
also affects their ability to seek and access
information. One of the main consequences of poor
educational system in rural China is that children
may not be able to access information in an active
way. As researchers found, the direct consequence
is that they rely more heavily on personal sources in
obtaining market information (Chan and McNeal,
2007).
Lu and Peng (2000) analyzed the rural consumption
structure noticing a significant improvement in
living standards. This was demonstrated by the fact
that rural households are spending greater share of
income on food items, housing, education and
recreational services. The Engel coefficient, i.e. the
percentage of expenditures on food in total
consumption expenditures, was 37 percent for
urban households and 46 percent for rural
household (State Statistical Bureau, 2007).
After survival has been assured, rural consumer
begin to spend more and more of their income on
non-necessities and cultural/educational
consumption goods and services.
In order to maintain stable economic growth and
minimize negative effects of the actual world
financial crisis, the ultimate government's goal is
rely more on domestic consumption.
According to Global New Wire, China has been
shifting the focus of its proactive fiscal policy from
stimulating investment to strengthening low-income
earners' purchasing power.
As China's rural economy continues to develop, an
increasing number of multinational corporations
(MNCs) will expand from urban areas into rural
regions. China promises many opportunity of fast
expansion, however, the presumption of China as a
homogeneous market often makes it difficult to
access market demand and enact effective strategies
(Cui and Lui, 2000).
Chinese rural life profile
Chinese government defined rural areas as a
population of 780 million people among which, in
2006, there were 210 million children under age 15.
A rapid rate of urbanization can be noticed analyzing
the changes reported by United Nation. According to
them, urban population increased from 31 of the
total in 1995 to 41 percent in 2005. In that year,
urban residents contributed two-third of the total
retail sales (6.7 trillion Yuan).
Even do, it is China urban areas that are producing
most of its economic growth, the ten largest cities
are made up by only 4 percent of the total China
population, accounting for approximately 22 percent
of earning power.
This disparity in consumption is not only attributed
to inequality in income, but also to poor retailing
distribution network, insufficient after-sale service,
and slow income growth (Zhang, 2003).
According to Rogers (1960), urban and rural society
differ in family, group relationships and values. One
particular aspect of rural families is that they are
more likely to see children as economic assets. In
fact, while profiling the rural families, emerged that
12.2 percent of them tended to export their family
members to the urban are as cheap labour so that the
whole family income, and subsequently living
standards, could be improved (Chen, 2008). This
phenomena should be kept in mind considering the
vast migrant population that already influence the
attitudes of their local culture. Therefore, being
opinion leaders they represent a segment that need to
be targeted. Moreover, rural families are more likely
to retain educating, entertaining, religious
orientations and protection function.
Source: Chan, K. And McNeal, J (2006)
Sources of product information in rural China
According to the findings of a recent survey
conducted by Chen Qimei and He Yi, to effective
deliver commercial messages to rural consumers
we need primary to understand their media
consumption and their sources of product
information. The analysis showed that most of the
families (96 percent) hold a television. As a
consequence rural Chinese consumer ranked TV
commercials as the top source of information
(77.58 percent in 2001 as compered to 37.5 percent
in 1987), see figure 1.
On the other hand, the importance of both personal
communication (i.e. 'family') and direct experience
with the product (i.e. 'oberving at market') had
diminished (Chen, 2008).
Commercial messages delivered through Internet
and new media have low penetration in
consideration of the fact that only 2,8% of
households owned a computer. In addition, it has
been proved that different information sources is
significantly related to product-specific contexts.
As you can see from table 9 (Appendix), TV
commercials are still top choice across all the
product categories but other information sources
vary across the four product categories took into
consideration. Although, 96 percent of the rural
families owned a TV and 77.58 percent use the TV
commercials as primary source of information, only
22.62 percent trust these messages. As we will see
later on, trustworthy of TV commercial decrease
with age and for that reason youngsters represent
the most strategic segment for marketers.
Differences in perception of sources credibility are
mainly due to the nature of product category and
lifestyle. For example, for soft drink purchase half of
rural Chinese consumers trusted their personal
experience while for dietary products is needed an
external source (only 2.17 percent of consumers
learn by themselves). Since the perceived risks for
these kind of products are quite high, consumers rely
upon their in-group for the most trustworthy product
information.
I assume that for highly involved purchase category,
urban consumers rely more on several information
sources like Internet or salespersons, while in rural
society peers' recommendation becomes the most
credible source. Hence, the assumption that world of
mouth communication should be used as strategic
tool to promote products high in social risk.
Attitudes toward the whole marketing mix
A recent study on rural consumption patterns shows
that urban and rural consumer are different in terms
of attitudes toward the whole marketing mix:
product price, product promotion, brand names and
product distribution. This obvious consideration is
due to the lower levels of hierarchy of needs that
rural consumer occupy. As a result, the difference in
needs among these two societies drives toward the
usage of different product to reflect the improvement
of their living standards. For example, rural
consumers listed houses (29.2 percent), color TVs
(22.2 percent), telephones (4.8 percent) and cars (3.5
percent) as products considered to reflect
improvement of living standards. Differently, for
urban consumers soon after houses (33.6 percent)
were indicated: PCs (9.3 percent), air conditioners
(8.6 percent), color TVs (8.6 percent), and cars (8.5
percent). The results suggest that there still exists a
huge difference in terms of ideal material
possession (status symbol) between rural and urban
consumers.
Also, it is expected that new symbolic consumption
patterns emerging among urban consumers, such as
PCs, air conditioners, will ultimately spread to the
rural consumers (Sun and Wu, 2004). In the same
survey were asked respondents to describe their
ideal projections about future. In this case, both
rural and urban consumers ranked the need for
safety (physical and psychological) as important
concepts. The main difference reside in the fact that
rural consumers revealed their psychological needs
indicating “well-to-do” and “materially rewarding”
as adjectives to describe their future. On the other
hand, need for self-enhancement was found in
urban consumers that selected “natural” and
“spiritually enriched” as main important concepts.
Taking Maslow's hierarchy of needs as model to
judge these results, I assume that since the
motivations and values are located upon different
levels of pyramid, the commercial messages aimed
to reach the attention and to achieve sales, should
differ among areas.
Furthermore,a substantial difference in
consumption habit has been found when
considering shopping places. In that case is easy to
understand the reasons why urban consumers were
found more sophisticated when compered with
rural consumers. Urban consumers were more
likely to shop at stores with high quality customer
service and in well-known stores, whereas rural
consumers acquire goods that are not available at
home, mainly in traditional markets. The main
reason is that they reside in areas where there is a
lack of infrastructure and the market is several
hours journey from home and is open once a week
(Pennington, 2002).
For many rural consumers, going to gigantic
shopping malls in the city areas might be simply a
once-a-year experience (Sun and Wu, 2004).
In addition, an easy access to shopping outlets lead
consumer to consider shopping as entertaining
group's activity. This could be one reason why the
majority of rural consumers (56.9 percent) going
shopping alone compered with 37.1 percent of
urban ones. The most frequent shopping partners
for rural consumers are friends (18.5 percent),
followed by spouses (13.9 percent) and children
(4.5 percent). Analyzing the findings emerged that
in rural regions, friends can wield bigger situational
influences than spouses.
With respect to product price, rural consumers were
more price-conscious and consequently more likely
to compere prices among sellers and negotiate over
lifestyle easily explain this phenomena. At the same
time, particular relevance should receive some of the
statements loaded higher in the survey in order to
understand rural consumers attitudes toward both
domestic and foreign products. Inland consumers
declared: “I pay much attention to product price, so I
like to buy inexpensive and functional products” and
as a consequence “Nowadays domestic products are
not bad in quality, and less expensive than imported
products. So I will buy domestic products”. High
level of price-conscious is strictly related to
adaptation of innovative product. Due to limited
risks they are willing to take, rural consumers were
more likely to buy products that were already used
by everyone else and to adopt the product
recommended by reliable sources like friends and
relatives. Sun and Wu pointed out that, with the
development of consumer advertising, that is
especially available on TV, the gap between rural
and urban consumers in terms of product innovation
might become smaller and smaller.
Moreover, findings suggest that rural consumers are
more suspicious of mass media advertising. This is
probably due to neither conveniently available nor
affordable nature of the items advertised.
Since rural consumers are not likely to use the
products advertised, messages deliver through TV
commercials are hard to believe for them. For that
reason I assume that some messages might
negatively impact on consumers attitudes toward a
product, especially those create to satisfy complex
needs. On the other hand, trustworthy decrease by
age and therefore to target messages to children
represent a strategic move, considering the great
influence on their families.
According to Sun and Wu, although marketers invest
heavily in retail advertising and in-store promotion
to build brand equity, the lack of retailing structure
decreases the chances for rural consumers to be
exposed to these marketing promotions.
Thus, urban consumer are often overwhelmed with
commercial messages and the rate of
attention/attractiveness will be consequently lower.
Studies have shown that responses to advertising are
more positive in countries with newer advertising
industries (Zhao and Shen, 1995).
Moreover, some manufactures have considered rural
China as a secondary market and channeled poor
quality products to the rural market.
In the same research emerged a big difference in
brand attention among the two societies.
Rural consumers responders agreed with the
statement “A brand name does not matter, as long as
it is functional” while speaking about brand
consciousness, whereas urban consumers loaded
higher on such statements as “I pay particular it than
urban consumers.
Differences in income and attention to brand name.
I like to buy well-known brands” and “the product
we buy should be high-end”.
To compere urban and rural brand recall
respondents were given ten daily product categories
and were asked to name two best brand each
category. More than half of the rural consumers
could not name any brands in such product
categories as PCs, refrigerators, fragrances, cell
phones and cars/trucks. Considering that some of
these products are not widely available in rural
households it is obvious to face low rate responds
(for example, PCs are owned by only 2.8 percent of
households). For instance, asking a boy to recall
specific women's brand, i.e. low interest and less
attractive, the results might be discouraging even in
urbanized area.
Having said that, I assume that brand recall is
strictly linked to the utility that a product has for
the responder whether this is a functional or
emotional utility.
Although advertisement targeting children begin to
appear in CCTV (China's national TV station),
these budget represent only a small portion of the
total expenditure.
Rural Children media and advertising
consumption
According to the one-child policy in China more
and more Chinese families will enter into the 4-2-1
patterns, which stands for four old people being the
parents of the husband and wife, the couple
themselves and their only child. Therefore, Chinese
children represent an enormous potential market
because of their growing purchases and their
enormous influence on family purchase decisions
(McNeal & Yeh 1997). As children grow
cognitively and socially, there is a growth in their
parental influence strategies, consumption motives
and values. Even families in remote parts of China
experience television advertising as a new form of
cultural authority in installing the idea that
consumption leads to a happy childhood (Jing,
2000). Thus, in 1997 McNeal and Yeh found out
that Chinese children's influence on family
purchase was about 68 percent while for U.S.
Children was only 45 percent.
Ward in 1974 defined consumer socialization the
process by which one could learn about products,
their brands and recall outlets where they can be
bought. Generally speaking, children learn
consumer behaviour patterns primary from parents
and secondly from socialization agents like peers,
school, stores and media.
Moreover, as Moschis and Churchill pointed out,
the more that children interact with the mass media,
the more consumer socialization takes place. In
other words, the amount of interaction with media
appears to be positively related to learning consumer
behaviour.
Rural children pay more attention to television
advertising than urban children while urban children
pay more attention to other form of advertising
(Chan, 2008). One of the reasons is that rural
children consume more national television channels
than urban ones.
The most interesting research on media ownership
and consumption among Chinese children comes
from Chan & McNeal (2006). The two researchers
found that home ownership of broadcast media is
strictly dependent on age of children. As you can see
in table 1, ninety-eight percent of rural children had
television sets at home and three-quarters had color
TV.
Younger audiences like to watch cartoons, children's
drama series, game shows and variety shows.
Teenagers show more interest in sports programs
and new programs (Bu, 1998).
Latest innovation are not popular in rural families
and less then ten percent own DVD players and
computer at home. Even do, six percent of
households owned a computer only half had access
to the Internet. Thus, children's magazine and
newspapers were not largely used while books have
wider appeal. More than 85 percent of children aged
10 to 13 reported that they owned children's books
and read them during the past month (Chan &
McNeal, 2006).
Related to time spent tails on media and other
activities it has been found that about forty-one
percent contributed heavily to daily agricultural
activities and on the average they participated more
in housework with respect to they urban peers. Also,
“playing with friends” in one of the major activities
in rural children daily life. Differently twenty-two of
urban children do not play with friends at all, on
daily basis. As it was presented in table 2
(Appendix), the gap in new media consumption
generates a higher exposure of rural children to TV
programmes. As a consequence, the attention of
young urbans to advertising due to the wider media
availability is spread on several sources, while the
attention to rural children is concentrated mainly on
TV commercials. In fact, other forms of advertising
are not prevalent in rural China.
Surprising, it was discovered a low ownership and
consumption of children's newspapers and
magazines among younger children. According to
the authors, there is a lack of print media targeted
younger children. The main conceptual problem
refers to low attractiveness of contents (long stories
with little illustration and pictures).
Moreover, local editions treat limited topic
whereas, in the reality, there is an increased interest
in the outside world. Secondly, is logistical problem
due to the poor network distribution.
Although rural girls and boys presented similarities
to media access, they are extremely different in
media preferences.
Difference in time spent on broadcast and print
media demonstrated that boys were more visual
while girls were more verbal (Chan & McNeal,
2006).
This analysis is consistent with previous studies
(Greenberg, 1991) that have shown that children
boys preferred active an exciting media content,
Table 1 – Household ownership of broadcast and print media
Table 2 – Attention to advertising
Source: Chan, K. And McNeal, J (2006)
while girls preferred softer and more talkative
formats.
One of the most interesting results is the decreasing
in attention to television advertising. Taking table 2
into consideration, I assume that attention to TV
commercials dectease by age while the attention to
other media increase (newspaper ads, radio
commercial, billboard ads, Ads on transport
vehicles, magazine ads). This may be due to
children's improved literacy and ability to process
information. In other words, that means shifting
from a passive receipt of messages to an active
search of information.
Brand and advertising perception
In a recent research on children's perception of
adverting and brands conducted by Professor Chan,
is emerged that rural children are more likely to
perceive television advertising truthful than urban
children (table 3). As you can see in table 4, a
higher percentage of rural children thought they
liked or liked very much television advertising than
urban children.
In addition, rural children relied more on whether
the commercial was endorsed by trustworthy
persons as a basis of judgement about truthfulness
of television commercials than urban children
(Chan, 2008).
Table 6 (Appendix) summarized children's
perceptions of advertised and non-advertised
brands. For both soft drinks and computers, rural
children were more likely to perceive that the
advertised brand is better, than urban children.
However, the great confusion about brand concept
was demonstrated by the high number of children
reporting “don't know” answers.
Table 3 – Perceived truthfulness of television advertising (N=2,990)
Table 3 – Liking of television advertising (N=3,239)
Source: Chan, K. (2008)
I personally assume that the questions were to
complicated for younger responders and I would
probably use a more appropriate methodology
integrating photos or videos to the questionaires.
Confusion upon the brand idea can be also fed up by
the wide consumption of counterfeit products.
Children as well as their parents may not even know
that they are counterfeit products. In fact, previous
studies indicated that brand awareness is very low in
rural regions (Sun and Wu, 2004). Their lower brand
awareness is perhaps due to limited exposure to
brands and this drives to the conclusion that rural
children are more pragmatic. This lack in brand
understanding, due to its abstract concept), suggests
that rural children were less likely to use brand
equity as a basis of judgement. Differently, could be
argue that lower brand name consciousness is the
result of less extensive brand equity campaigns
targeting this segment of consumers.
The results show also that rural children were more
likely to put more trust in advertised brands than
urban responders (Chan, 2008).
Practical implications for marketers effect of the action is probably going to be negative.
With this respect, product placement can be one of
The current study has provided insights for the most powerful marketing tools. For example, in
marketers and advertisers to employ the right this period there are several contests on CCTV
strategies to disseminate information and to reach where products appears in the programme showing
successfully rural consumers. It also, suggests to both its functional and emotional characteristics (e.g.
marketers a guideline to target new rural Nike in a reality on basketball game).
generations and analyze the possible ways to In advertisement, marketers should use direct sales
influences their consumption patterns. appeal rather than lifestyles or image appeals.
In urbanized China, markets is mature and the However, it has been demonstrated that celebrity
competition will soon be aggressive. This process endorsement can be very influential, especially
will increase the alternatives available to urban among children.
consumers who will become more and more Considering the more affordable budget needed to
selective upon products and commercial messages. promote products and services in rural regions, one
Marketers cannot target these two society with strategic move could be use this market as a
homogeneous messages anymore. Since needs and laboratory, testing products and trying to generate an
desire are different among rural and urban optimized marketing mix.
consumers, different advertising appeals should be
adopted. A strategic choice to sway rural consumer
is to deliver communication messages towards
opinion leaders. Due to the great influence that
local opinion leaders have over the other
community's members, I believe that direct
marketing actions colud represent the most
effective mean of persuasion.
A key point of this study is the consideration that
rural consumers are more conscious of product
price. In this respect, packaging and product
differentiation are extremely important. Fist of all,
multi-tier consumption patterns allows marketers to
position their products differently in rural and urban
areas, and also potentially prolong their product
life-cycle. One example has been P&G that after
the initial price war with a local competitor decided
to modify its products moving back to essential
service in order to better fit rural consumer needs.
In China, Porter's generic strategy cannot be largely
used. Many companies in fact, are lowering product
price while differentiating the product. Secondly,
marketing should encourage product trial to
enhance rural consumers' learning experience. For
instance, some shampoo are sold in individually
packaged items. Moreover, packaging has a
strategic role helping to fit and meet the cognition
need (e.g. graphic-oriented packaging design). This
packaging should be used as an appeal for brand
recognition.
How was pointed out before, rural consumers might
not be able to decode implied messages because of
their lack of prior product knowledge.
Considering the poor network distribution in rural
regions, a marketing man should first of all figure
out the probability of a product to arrive in a
specific area. Before designing a promotional
strategy he must be sure that a product can be
reached by the consumer properly, otherwise, the
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Appendix

Source: Chen, Q. and He, Y.(2008)

Table 5 – Amount of time spent daily on media and other activities (in minutes) (%)

Source: Chan, K. And McNeal, J (2006)

Table 6 - Children’s perceptions of advertised and non-advertised brands

Source: Chen, K. (2008)