Big growth in brand loyalty is predicted

PUBLISHED : Thursday, 08 March, 2012, 12:00am
UPDATED : Thursday, 08 March, 2012, 12:00am


Mainland consumers will develop stronger brand loyalty in the coming decade, says McKinsey in its latest consumer behaviour forecast.

Calling the new trend good news for companies, Max Magni, a McKinsey principal based in Hong Kong, said that as brand stickiness increases, companies should de-centralise their decision-making structures to make the best of an increasingly disparate group of consumers as well as the country's distinctive regional markets.

McKinsey's studies showed the percentage of respondents on the mainland who stick to their preferred brands rose from 21 in 2009 to 23 last year. It is estimated that by 2020 the figure will be between 30 and 40 per cent, comparable with developed markets. It is currently 34 per cent in the US and 33 per cent in the UK.

In its 'Meet the 2020 Chinese Consumer' report, the management consultancy studied 49 cities across the mainland. It found regional differences are so great that no universal 'China strategy' can ever work.

'For example, a portfolio that works for the cluster of cities around Hangzhou on the wealthy east coast won't work for the cluster of cities around Chengdu,' Magni said. 'Sometimes I tell my clients, you need to see China like a continent, not a country.'

He said that to take advantage of the opportunities presented by the mainland's still-developing consumer markets, brands must target groups by income, gender and age rather than take a blanket approach.

Chinese consumers are pragmatic and like to purchase products that they truly need, he added.

Yuval Atsmon, another McKinsey principal, said China is at a turning point as the population is getting older, the degree of urbanisation is deepening and income is increasing.

Beijing has been trying to encourage domestic consumption to drive economic growth as a way of moving away from its reliance on exports, creating a massive opportunity for the consumer goods industry.

The McKinsey report expects volumes of online retail sales on the mainland to continue to boom. Sales have already tripled to about US$120 billion from 2009 to 2011.