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China: Beyond the Tiers

China's city tier system does not provide enough granularity for marketers to make apt investment decisions. This white paper identifies growth potential for brands based on "connected consumers".

China is one of the most dynamic markets in the world. Brands need to look for rich data that will provide an accurate picture of China’s investment landscape. But neither China’s traditional city tier system nor “political” consumer classifications such as “the middle class” provide enough granularity for marketers to make apt investment decisions.

MediaCom China has launched this white paper “Beyond the Tiers”, to provide a new system of “connected cities” for market segmentations across China, to identify growth potential for brands based on “connected consumer” and “connectedness”.

Brands often consider the income of their prospects, but do not base their planning on the consumers’ mind-set

“Brands often consider the income of their prospects, but do not base their planning on the consumers’ mind-set,” said Peter Petermann, Chief Strategy Officer of MediaCom China.

“China’s traditional city tier system does not reveal anything about a city’s uniqueness as a consumer market. For instance, the term “middle class” is broad and vague as there is no criterion to reveal the change of consumers’ attitude and way of thinking, as well as their locations.”

China through the lens

Connected cities

According to the new city segmentation system called “Beyond the Tiers”, China’s cities are divided into 11 segments allowing brands to identify the most profitable consumer markets. The cities that either are already in full bloom or are progressing with great strides are called “connected cities.”

“Connected cities” are markets that share the following necessary preconditions for growth:

  • They have both the digital and non-digital infrastructure to support expansion strategies
  • They have a sufficiently large and growing population with enough disposable income
  • They are forecast to contribute over proportionally to the increase in consumption growth.

The five main clusters are:

  • The rich megacities and the export-oriented boomtowns with a projected population growth of up to 40%
  • The peripheral cities that benefit from spill over from the large metroplex areas and show immense growth in consumption power
  • The large cross-border cities that benefit from trade with neighbouring countries and show high per capita income growth
  • The modern industrial cities whose economic power stems from their industrial success and their ability to reinvent themselves.

GroupM’s annual media panel, Shan Hai Jin, allows a deep dive into these segments and makes it media actionable. For example, people living in boomtowns and peripheral cities often choose to buy snacks in department stores or shopping malls, while in cross-border and modern industrial cities convenience stores are more prominent.

Another interesting find is that while potential car buyers in Megacities and Modern Industrial Cities seem to decide primarily based on price, performance is the main factor in Boomtowns and Crossborder Cities, and the car’s look is most important for people in Peripheral cities. When it comes to the use of skincare products, consumers across different clusters also have different reasons for purchasing their favourite products. In Megacities they are looking to pamper themselves, shoppers in Peripherals want to improve their mood, and Crossborder and Modern Industrial consumers are looking to improve their personal image.

Brand owners communicate better with consumers once they better understand what products connected consumers in connected cities are interested in

“The approach of ‘connected cities’ is much less arbitrary than the traditional tier system, and, therefore, provides a more robust basis for strategic decision making.” Said Rupert McPetrie, CEO of MediaCom China, “The connected cities present optimal growth opportunities and offer a fertile landscape for investment. Hence, brands that are looking to expand their territories should consider these markets first. Brand owners communicate better with consumers once they better understand what products connected consumers in connected cities are interested in; how they need to be marketed to; and where they can be most effectively reached.”

Download the full white paper here.

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