China’s new middle class has led to targeted marketing by “layers” of consumption.
“Layered consumption” has been a hot topic in the past two years. In fact, the word “layer” is a generalization of a specific social group. Similar to the saying “birds of a feather flock together and people of one mind fall into the same group”, a layer is a small circle developed by a certain group of people with similar economic conditions, lifestyles, and artistic tastes.
In an era of consumers paying more and more attention to personalized needs and experience, if a brand wants to satisfy everyone, it means that everyone is not satisfied. Therefore, by focusing on advantages, going deep into the target layer of the brand, and serving a specific layer, the enterprises may run well. Implementing targeted marketing as per layers of consumption has become the trend and driving force of the tobacco industry.
So, who has the most purchasing power? What are the consumption characteristics of these groups? And what kind of marketing strategy adjustment should enterprises make?
The new middle-class
The industry has no unified and clear definition for the new middle class. According to the latest survey, a white paper on the wealth of China’s emerging middle-class jointly released by Forbes China and Xiagnshang360.com (an internet financial service platform), China’s new middle class is aged between 25 and 45, and their investable assets are between RMB300,000 and 2 million, except for self-occupied real estate. Different from the property inheritance and investment income of the wealthy people in China, the new middle-class basically depends on themselves.
The most significant characteristic of the new middle-class is that they have obvious rational consumption values. They do not care about price, but rather about quality and the corresponding cost-effectiveness. The new middle class is more inclined to enjoy comfortable consumption, which is in line with their own personality and brings pleasure. They have switched from a mentality of showing off to that of taste.
Driven by rational consumption, the key to attract the attention of the new middle-class consumers is to produce good products of high quality. For instance, on the occasion of the fifth anniversary of the founding of China Tobacco (Chongqing) Industrial Corporation in 2020, its brand Tianzi launched a new high-end product, bringing consumers a strong aromatic, sweet, and fragrant taste experience, while conveying the culture of “Family, Country, and the World”, a move that has successfully attracted the attention of new middle-class consumers.
Generation Z shows a digital gene
Generation Z, born in the mid-1990s and the early 2010s, are replacing millennials in attracting the attention of global brands. Despite being young, they have become the most populous group in the world at 1.9 billion people, accounting for 25% of the global population. There are about 265 million Gen Zers in China, whose spending has reached RMB4 trillion, becoming the hot “gold owners” of the next generation.
When it comes to consumption keywords for Gen Zers, it’s not only “young people’s consumption”, but also the unprecedented scale, speed, and influence driven by a digital gene. At present, Generation Z has directly brought about three major outlets: IP and online entertainment, and Guochao (over the past few years, China has seen a surge in young consumers’ interest in domestic brands and products that incorporate Chinese traditional style and culture, a trend known as Guochao). In the past decade, the attention on Chinese brands has increased from 38% to 70%, largely due to Gen Zers.
Tobacco brands have been striving for years to reach these younger consumers, but only a few brands could make it. Baisha, Huangjinye, and other brands have attracted many younger consumers by fashionable packaging, but this is not enough. To attract Gen Zers, they need to double their efforts in taste innovation, design fashion, and digital marketing.
Seniors switching from “not willing to spend” to “most willing to enjoy”
Young people have been paid too much attention in the past years. However, the population over 60 years old in China is nearly 250 million. According to the population structure, the total population of the middle-aged and elderly is about 500 million. So, they are most likely to drive the economy.
They care more about health, patriotism. and positive energy, which have also become the factors that influence how they select cigarettes. Especially after the epidemic, harm reduction products have become the primary choice for them. To cater to the consumption demand of “smoking better, smoking less” of the senior people, various brands have also innovated new products. For example, the cultural concept of Tianzi is easier to obtain the value recognition from the more senior consumers.
Small-town youth are very willing to spend money
In the consumer market, small-town youth have become a segment that cannot be ignored. These people are aged between 25 and 35, have less work pressure and more leisure time, and live in a relatively affluent third-tier city. They are willing to spend money.
With access to the high-speed train system, they may live only a two- or three- hour drive from a large metropolis. They receive a college education or above, have a decent job and live a quality life in their hometown, and are not willing to work hard in the first-tier cities.
Therefore, the cigarette consumption of these young people in these small town has been upgraded from low-priced products to cost-effective products. This is a huge change and also a huge opportunity for tobacco brands. In the future, the competition in the cigarette market for young people in small towns will be more diversified and fiercer, and there is great potential for market development.
In a word, each generation will develop big and small layers with distinctive characteristics and great effect. These effects have been deeply engraved in our thinking model. At present, a layered economy has become an important tool for enterprises to improve their marketing efficiency and a new driving force for business growth.