Jenny Chan 陳詠欣
Feb 26, 2015

The anatomy of Chinese customer loyalty

CHINA - Loyalty is a choice. Or is it? Recent research by Epsilon into Chinese spending attitudes provides a perspective on how faithfulness and devotion to a brand can be strengthened.

Chinese character for 'loyalty'
Chinese character for 'loyalty'

Epsilon sought to explore Chinese consumers’ definitions of brand loyalty and their loyalty motivations, as well as to compare the behaviour of loyalists versus non-loyalists.

The data-driven marketing solutions company conducted the research in the third quarter of 2014 via online channels and face-to-face interviews across mainland China, with 1,000 respondents classified into three socioeconomic classes.

Especially in China, the return on loyalty investment is high. Loyal customers stand by their preferred brands despite wavering market conditions. Loyalists are more generous with their private information and more likely to refer products and services to friends.

Marketers aiming to win the loyalty of Chinese consumers must look beyond one-size-fits-all marketing programmes and develop data-backed targeting strategies to increase efficiency, according to Epsilon (which, we must note, sells services in that very area).

Brands that came out on top in the loyalty survey are those who are establishing the mechanisms to effectively communicate with and service customers—even after the sale is made. 

In this year’s survey, quality, which is determined as a basic criterion in the West, topped the list of loyalty motivators in China for the first time ever (see below).

 

Product performance and endurance of quality have now trumped price in the mind of the Chinese consumer. Savvy ones no longer necessarily align with the most popular brands, nor with those brands which offer the most convenient locations, said Vivien Deng, China country leader at Epsilon. The exception is for lower income and college respondents, where having convenient locations is significantly more important. 

Nowadays, Chinese consumers are not easily enticed by members-only privileges and rewards programmes. These factors ranked lower on their priority lists. Epsilon's results indicated that Chinese consumers extend their loyalty only once they are satisfied with the intrinsic value offered by brands.
 

Why China loves Apple

Apple received the highest score for loyalty of any brand cited across all categories. What explains Apple’s unrivalled loyalty in China? Yes, the products are attractive. Yes, the price point is high enough that the iPhone is a status symbol that is more accessible than a diamond-studded watch or flashy sports car.
 
But China’s love affair with Apple goes beyond vanity. Epsilon's research revealed that the kingpin brand is most adept at integrating online and offline touchpoints to deliver a seamless customer-service experience. And this integrated experience has not been seen before in the mainland, at least prior to the last decade. The Apple Genius Bar has impressed Chinese customers with a level of respect and must-do service attitude that still eludes retail staff in all other sectors in China, said Deng.
 
 
Pragmatic loyalty
 
Chinese consumers also cited loyalty to brands in those sectors where their money is most at stake. E-commerce and financial services topped the Epsilon loyalty rankings. Deng explained that Chinese consumers tend to gravitate to a handful of trusted platforms like Taobao and ICBC because they need to be on guard against e-commerce and banking scams every day.
 
"Loyalty in e-commerce and financial services is reinforced by the fact that it is time consuming for consumers to switch providers," she said.
 
Following repeated food-safety scares, from counterfeit meat to sewage-laced cooking oil, it's not a surprise that Chinese consumers are opting for foreign grocery brands that they can trust, like Carrefour and Amazon's special e-commerce channel for Chinese consumers to purchase and import food items duty free. However, lower-income and blue-collar respondents are much more loyal to domestic Chinese brands.

Affordability drives loyalty

The Chinese passion for luxury does not necessarily translate into brand loyalty, according to Epsilon’s survey. Globally, the Chinese may be the biggest buyers of luxury items, accounting for some 29 per cent of purchases last year according to Bain, but they do not feel a sense of allegiance to only a handful of brands as seen in other categories.

Luxury brands with first-mover advantage like Dior or Louis Vuitton are now finding that they are seen as old-fashioned. The recent trend of Chinese shoppers to turn their back on mainstream luxury brands is compounded by the fact that the whole category stalled last year following the government’s crackdown on gift-giving, which severely hurt mainland luxury sales.

Brands offering affordable luxury—Coach and Kate Spade, for example—are making headway with urban consumers who are opting for less opulent brands.

Channel their loyalty

To contend with the sheer scale of the China market, many brands blindly adhere to “360 degree marketing,” disbursing their investments across a wide variety of channels to reach as many consumers as possible. But Epsilon’s survey show that channel effectiveness varies drastically by sector.

E-commerce loyalists are accustomed to using a variety of digital channels including company websites (42%), email (35%), WeChat (34%), mobile apps (29%) and QQ (29%). Financial services loyalists prefer face-to-face interaction (44%) and text messaging (35%) among other digital channels. Grocery loyalists prefer in-store communications (62%) and are still agreeable to postal mail (24%). 

 

 

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