China’S Geographic Market Segment: a Preliminary Study

ABSTRACT - China’s regional differences in economic development and consumer purchasing power have a significant impact on consumption patterns and effectiveness of marketing in China. This paper proposes seven geographic market segments of China: South, East, North, Northeast, Central, Southwest and Northwest. Analyses of recent survey data suggest that Chinese consumers’ consumption patterns vary greatly across these regional markets, in both consumable products and durable goods. Multiple factors including household income, local culture, climate conditions, and product availability influence consumer purchases. These regional differences have meaningful implications for effective marketing and expansion strategies in China.


Geng Cui, Howard University, U.S.A. Jianguo Zhu (1998) ,"China’S Geographic Market Segment: a Preliminary Study", in AP - Asia Pacific Advances in Consumer Research Volume 3, eds. Kineta Hung and Kent B. Monroe, Provo, UT : Association for Consumer Research, Pages: 38-44.

Asia Pacific Advances in Consumer Research Volume 3, 1998      Pages 38-44


Geng Cui, Howard University, U.S.A.

Jianguo Zhu, University of Connecticut, U.S.A.


China’s regional differences in economic development and consumer purchasing power have a significant impact on consumption patterns and effectiveness of marketing in China. This paper proposes seven geographic market segments of China: South, East, North, Northeast, Central, Southwest and Northwest. Analyses of recent survey data suggest that Chinese consumers’ consumption patterns vary greatly across these regional markets, in both consumable products and durable goods. Multiple factors including household income, local culture, climate conditions, and product availability influence consumer purchases. These regional differences have meaningful implications for effective marketing and expansion strategies in China.


In the past two decades, China has experienced rapid economic growth and become one of the biggest Big Emerging Markets (BEMs). The advent of China as a viable consumer market has important economic implications for multinational corporations (MNCs). In the face of major political, social and economic changes sweeping China, some MNCs believe that the often-elusive market has finally become lucrative. Enticed by the rapid growth of consumer spending in many product categories, some MNCs have ambitious plans such as to open hundreds of retail outlets in China. However, for many foreign marketers, the immense mainland population has not translated easily into a heady stream of customers. Many foreign ventures suffered from sluggish sales and escalating overhead (Rheem 1996). Haste in expanding the scale of operations in the country without fully understanding the Chinese consumers contributed to less than gratifying returns for some firms.

As more MNCs continue to converge in this market, many of them have recognized that making inroads into China requires in-depth understanding of its market structure and consumers, careful planning, and effective marketing strategies (Cui 1997). A common problem that MNCs face in China is accurate assessment of the effective consumer purchasing power and demand for their products. One underlying cause of this problem is the lack of understanding of China’s regional differences in economic development, consumer purchasing power and responses to marketing activities, and their impact on consumption patterns. Thus, examination of China’s geographic market segments and consumption patterns may help shed some light on effective marketing strategies.


The popular press has written much about China’s pent-up consumer demand. But there has been no systematic analysis of its consumers and marketing implications until very recently. Many previous studies have focused on the economic, political and market barriers to access the Chinese market (Campbell and Adlington 1988). Yet some fundamental marketing issues such as the effective market size for foreign goods and consumer preferences have not been properly addressed. The lack of rigorous research may have been caused by the often too optimistic misconception that China represents a large and homogeneous group of consumers with increasing disposable income, crazing for foreign goods. Although there may be some truth to this depiction in the eyes of a firsttime China-bound firm, nothing is farther from reality than the attempt to approach China with a monolithic view of the market.

Despite its rapid economic growth in the last two decades and the substantial commonalties among the Chinese people, China is largely a developing country and by no means represents a single national market with a majority middle class. While people in China’s booming coastal cities have enjoyed rapidly rising income and standard of living, consumers in inland regions are less fortunate, and 70% of China’s 1.2 billion people are peasants, living hand-to-mouth. Hasty investment may overshoot the local demand and result in loss of precious resources. For instance, Yaohan’s Nextage Department Store in Shanghai’s Podong New Zone has not been able to meet its profit goals since its opening in 1995 (Cheng 1996). Most existent studies measured the attractiveness of the Chinese market using a single profile such as the "super consumers" or the "average" Chinese (Moore 1993; Xu 1990), and have overlooked the diversity among the Chinese. In reality, China represents a conglomeration of heterogeneous markets that can be segmented by multiple factors such as income, education, occupation, family composition, and local culture (Cui 1997). As MNCs move beyond the peripheral coastal cities into inland regions, market segmentation and targeted marketing have become increasingly relevant in China.

Because imported goods and those made by joint ventures are usually more expensive than domestic products, income is clearly correlated with purchase of foreign goods. However, focusing on the rising income alone as the sole indication of market potential is insufficient. Location of residence has a significant impact on consumer purchasing power, innovativeness and readiness for purchase of foreign goods. Regional differences in local culture and consumption patterns greatly affect the marketing of consumer products. So far, sales of foreign goods have largely been limited to coastal cities and other major metropolitan areas. Furthermore, regional disparity in market infrastructure, transportation and distribution logistics can erect stumbling blocks for MNCs. Unilever, when introducing its Wall’s ice cream in China, had to adapt its distribution strategies to various locations (Clyde-Smith 1996).

Appropriate market segmentation and selection of target market(s) are essential for effective marketing strategies in a divergent and competitive market place (Engel, Fiorillo and Cayley 1972). In a market as diverse as China, meaningful market segmentation can assist MNCs in understanding the mechanics behind China’s consumer trends, establishing realistic goals, and making informed decisions as they make incremental commitment in resources for expansion in the country (Batson 1996). As many MNCs have successfully established beachhead operations in China’s coastal cities, some of them are further expanding into other regional markets. Due to the enormous regional differences in economic development, consumer purchasing power, local culture, and consumption patterns, a geographic segmentation of China’s consumer market may well be advised for accurate assessment of local consumer demand and development of effective marketing and expansion strategies.


Like many big states, China is a country of heterogeneous subcultures with a broad spectrum of local cultures and dialects. Based on geographic location, culture, and economic development, China has traditionallybeen divided into a number of distinctive regions: South, North, East, Northeast, Central, Southwest and Northwest (Batson 1996). These terms have been used in historical and political senses to describe China’s different regions. Each region has its own distinctive topographic characteristics, natural resources, economic priorities, and cultural traditions. People from various regions are also known to differ in temperament, values, and life styles (Batson 1996).

Since the beginning of reforms, regional disparity in economic development and consumer income have further widened (Aguignier 1988). Besides the factors of geography and comparative advantages, recent government policies have contributed to the increasing regional disparity. Following Deng’s adage to "let some people get rich first," coastal areas were the first to experiment with economic freedom and attract foreign investment, while the inland regions have been slower in changes (Yeung and Hu 1992). Based on economic development and consumer purchasing power, the seven regional markets can be further grouped into three levels of market development and consumer readiness for purchasing foreign goods: growth markets, emerging markets, and untapped markets.

Following the "Open Door" policy, the three growth markets B South, East and North B were the first to attract outside investment and have benefited the most from economic reforms (Yeung and Hu 1992). In 1979, China established the four Special Economic Zones (SEZs) in South China. Again, in 1984, China further instituted 14 "Open Cities" for foreign investment along China’s coastal provinces. These regions are the prime recipients of foreign investment and the major markets for foreign goods. They are the most advanced in economic infrastructure and market development. All these regions have higher per capita income than other areas (Griffin and Zhao 1993). For instance, the top five markets including Guangdong, Jiangsu, Zhejiang, Shanghai and Beijing have 16.9% of the country’s population yet accounted for 33% of national retail sales (Lim 1995). Consumers in these markets have become increasingly well off and sophisticated.

South China (hua-nan) includes Guangdong, Fujian and Hainan Provinces, and now Hong Kong. Guangdong, with near-autonomous control of its economy, has quickly integrated with Hong Kong, and has already surpassed Shanghai as the most productive region of the country. Fujian has attracted many investors across the strait from Taiwan and is renewing its historical ties with the island. The four original SEZs located in this regionCShenzhen, Zhuhai, Shantou and XiamenChave attracted the most foreign investment. This region also represents the Chinese culture of the South, i.e., Min-Yue Culture, with plenty of contact with the outside world and great emphasis on mercantile entrepreneurship. Cantonese and Fukienese are the major dialects of the region. Consumers in this area, about 7% of Chinese population, are among the most prosperous in China, have long been exposed to foreign products, and are considered the trendsetters among the Chinese.

East China (hua-dong), centered around the mouth of Yangtse River, consists of the city of Shanghai, and Zhejiang and Jiangsu provinces. Its open cities include Lianyungang, Nantong, Ningbo, Wenzhou, and Zhanjiang. Other medium-size cities sprawling in this region specialize textile and light industry manufacturing, such as Suzhou and Wuxi. Known as the "head of the dragon," Shanghai is the industrial and financial nerve center of China and the gateway to eastern China’s 200 million consumers. This region has become China’s industrial powerhouse, boasting 30% of the country’s industrial output for the last few years (Batson 1996). Shanghai is also the regional cultural nucleus, representing the "Hai-pai" culture, known for having the best amenities and products for enhancing the quality of life. Shanghainese is the main dialect of the region, with many variations. Comparing to other parts of China except for the South, consumers in this regional market are the most innovative, setting trens in fashion and lifestyles (Sum 1997).

North China (hua-bei) includes Beijing, Tianjin, and the provinces of Hebei and Shandong. This region has also attracted investment from countries such as Japan, Korea and the US, and some of the biggest foreign investors such as Motorola and General Motors. Close to the political center, this region gets high priorities in infrastructure development. This regional economy has been growing very fast over the last few years. Beijing as the geo-political center of the nation also represents the culture of the North B Jing-pai culture, attaching great value to stability and control. The biggest agricultural province in China, Shandong Province has the best township enterprises. Comparing to the consumers in the South, they are relatively conservative yet still open to new product ideas.

Northeast China and Central China have recently enjoyed respectable growth and received increasing foreign investment. They are the emerging markets and need to be cultivated. Northeast China (dong-bei), with the provinces of Heilongjiang, Jilin, and Liaoning, and the port city of Dalian, has begun to reap the benefits of the reforms. This region emphasizes its heavy industries such as mining, automobile and machinery, found in industrial cities such as Shenyang, Changchun and Harbin. In recent years, the border trade with Russia has boomed. In the far north of China, this region has long winters and limited agricultural output. Manchurians and Koreans are the major ethnic minorities in the region, and have great impact on the local cultures.

Central China (or Zhong-yuan), including the provinces of Henan, Hubei, Hunan, Jiangxi and Anhui, is the heartland of China with heavy emphasis on agriculture. Yet depleted resources and perennial flood have made some areas of this region the poorest in the country. Headed by the industrial city of Wuhan, they have shown more respectable growth than in the past. This region is building several major transportation hubs for China and the Euro-Asia corridor, thus important for reaching other parts of country. As the waves of reform ripple through this region, its consumer market will grow faster and increasingly attractive to foreign marketers.

The land-blocked inland regions of Southwest China and Northwest China are lagging behind and largely remain untapped by foreign marketers. Compared to the dynamic and rapidly developing eastern provinces, they are less accessible and relatively backward and poor. Southwest China (xi-nan) including Yunnan, Guizhou, Guangxi, Tibet and China’s most populous province of Sichuan (over 110 million people), has always been of tremendous interest to foreign marketers. Despite its industrial output and agricultural bases, most firms find the consumer market here sluggish (Batson 1996). The topography of mountain, basin and plateau makes this region difficult to access. But with rich endowment of natural resources and a huge population, this region has great potential, waiting to be explored by foreign investors. Many of China’s ethnic minorities reside in this region, making this region the most culturally diverse.

Northwest China (xi-bei) consists of the provinces of Shanxi, Shan’xi, Gansu and Qinghai, and the Autonomous Regions of Inner Mongolia, Ningxia and Xinjiang. This region is relatively less developed and the least accessible due to the landlocked locations. Cultivation over several thousand years and the expanding desert make this region less arable. Xi’an, the nation’s ancient capital and a tourist hot spot, is the cultural capital of the region. Mongolians and Muslims are the major ethnic minorities of the region and play an important role in local cultures. Little is happening in the impoverished west far as imported consumer goods are concerned. Having recently opened for foreign investment, these provinces are trying to catch up with coastal areas. By investing more heavily in this region and encouraging inter-regional cooperation, Chinese government hopes to reverse the trend of growing coastal-inland disparity.

It is important for MNCs to understand the overall market potential of China as well as its regional differences (Campbell and Adlington 1988). Although there have been many studies of China’s regional disparities, most of them have focused on economic development and income distribution (Aguignier 1988; Griffin and Zhao 1993). Few have explored their impact on consumption patterns and implications for marketing strategies. Generally speaking, economic development has a significant impact on consumer purchasing power and consumption patterns. While consumers in developed economies spend a small portion of their income on necessities and purchase various durable goods based on their self-concepts (Belk 1988), one enduring characteristic of developing countries like China is that necessities such as food and clothing still require a large percentage of people’s income. As the economic development leads to increase in consumers’ spending power, their preferences and consumption patterns will begin to diverge.

Since the reforms began in 1978, China’s coastal regions have become more advanced and modernized than the inland regions. Therefore, consumers from the more developed coastal cities should have higher household income than their inland counterparts. By the same token, consumers in coastal regions would spend more, yet a smaller portion of their disposable income, on consumable goods than consumers from inland regions. In terms of durable goods, ownership of big-ticket durables and luxury items should be higher in coastal regions than inland areas. In addition, consumer from coastal areas are also more innovative and receptive to foreign goods. Despite the intuitive validity of this a priori segmentation, empirical data are needed to explore whether these regional markets truly differ in consumption patterns, and whether they constitute separate segments and warrant differentiated marketing strategies.


Due to the increasing income disparity between urban dwellers and rural residents, sales of foreign goods have been largely limited to urban markets. Thus, consumer purchase data from China’s top cities will be useful for analyses of regional differences in consumption patterns. In the fall of 1996, China Central Viewers Survey & Consulting Center (CVSC) conducted a national survey of Chinese consumers using its panel group for television program ratings. The panel’s sample is random and stratified at multiple levels to represent China’s urban residents, including replacement households for refusals and dropouts, thus highly projectable to China’s urban population. The panel includes 5,116 households from China’s 30 major cities. The survey staff received extensive training, personally delivered the survey instrument to the participating households, and collected the completed questionnaire from them at a late date. The survey questionnaire asked the heads of household to furnish their household purchases from July to September of 1996, and ownership of durable goods at that time.

The data include general demographic information of the households: family size, with children under 14 or not, and monthly household income. The survey data consist of purchase information in 37 product categories such as food, beverage, alcohol, detergent, appliances and consumer electronics, thus providing substantial information on the consumption patterns of Chinese consumers. Household purchase information also includes whether they purchased a particular product, if so, quantity, brand, price and features, etc.. Since this study’s objective is to examine the consumption patterns of consumers across different regional markets, it focuses on the penetration rate of a particular productCthe number of households thatpurchased or owned a particular product during the three month period. From this database, this study selected 9 cities that are representative of China’s seven geographic segments with a total of 2,811 households (Table 1). The study compares purchase data of six food and beverage products (Table 2), six household items (Table 3), and six durable goods (Table 4). These product categories are adequately representative of Chinese consumers’ purchase of consumable and durable goods.


Demographic Profiles of Regional Markets

Table 1 contains the general demographic statistics of the seven geographic segments and the national averages, including household income, family size and composition, education, and occupation. Among the respondents, 47% were male and 53% were female. Age distribution was 14% between 14-25, 19% between 26-35, 36% between 36-50 and 31% between 51-65. Among their households, 18% had one or two people, 51% had three people, and 31% had more than three people. These demographic characteristics suggest that the panel households are largely representative of China’s urban population and have high level of data integrity and projectability.

Preliminary analysis of data reveals some noteworthy demographic differences between these regional markets (Table 1). South China, represented by Guangzhou, has the highest number of people per household (3.53), followed by Northwest China (3.46) and Central China (3.44). The city of Tianjin has the lowest number of people per household (2.84). For all other cities and regions, the average number of people per household falls between 3.09 and 3.30. A reasonable interpretation for the highest number of people per household in Guangzhou is that far from the political center, the city has recently relaxed "family planning." Or with higher income, its residents are less likely to be deterred by the financial disincentives of having more than one child. This is consistent with another finding that Guangzhou has the highest percentage of families (49%) with children under 14 (Table 1). As for the percentage of households with children under 14 in other regions, Shanghai comes in second place with 45%, followed by Central China (43%), Nanjing and Tianjin (42%). Northeast China has the lowest percentage (34%).

In terms of consumer purchasing power, Guangzhou topped the list with an average monthly income per person of 487 RMB (Table 1). Shanghai came in the second place with 480 RMB per person, followed by Beijing (423 RMB), Nanjing (405 RMB) and Tianjin (370 RMB). Thus, South, East and North regions lead China in consumer spending power. For other regions, income figures are 342 RMB for Central China, 331 RMB for Southwest China, and 311 RMB for Northwest China. These statistics support the proposition that households in coastal areas and major cities have higher income than those in hinterland regions, and are largely consistent with the results of previous studies (Griffin and Zhao 1993). However, the exception is that Northeast China, classified as an emerging market and represented by Shenyang, has the lowest monthly income per person (290 RMB).





Purchase of Consumable Goods

In the food category, purchase of instant noodle and ham sausage shows some regional variations (Table 2). Purchase of instant noodle tends to be higher in the north, such as Beijing (82%), Tianjin and Northwest (81%), and lower in the southCGuangzhou (72%) and Southwest (55%). Central China leads the nation in purchasing ham sausage (75%), followed by Northwest China (71%) and Tianjin (70%). Purchase rate in southern cities is much lower: 12% for South China, 22% for Southwest China, and 29% for Shanghai. These findings suggest that consumers from various regions differ in their culinary traditions and sources of protein intake.

Purchase of vegetable oil, commonly used in Chinese cooking, does not show much regional variation (Table 2). Penetration of this product ranges from 80% in Shanghai and Southwest China to 92% in Central China. However, purchase of vegetable cooking oil is very low in Northwest (43%), perhaps due to product availability and substitutes. Penetration of yogurt generally is higher in coastal citiesCShanghai (43%) and Guangzhou (36%)Cthan in inland regionsCCentral China (19%) and Northeast (16%). Yet penetration of yogurt is very high in the Northwest (43%), probably due to the high concentration of diary farms in the region. In the beverage category, purchase of colaCprimarily a foreign product such as Coca-Cola and Pepsi ColaClargely follows the regional lines: 74% for South China and East China, and 71% for Beijing, much higher than the national average (58%). Southwest China is the lowest (51%). As for beer, regional differences in purchase are noticeable, with Northeast in No. 1 position (83%), followed by Beijing (78%), Tianjin and Xi’an (74%). Beer is the least purchased in Guangzhou, only 64%. Overall, more households in the north purchased beer than those in the south.



As for household products such as toothpaste and laundry detergent (Table 3), regional differences are very small. Penetration of toothpaste ranges from 91% in Shanghai to 97% in Beijing. Purchase of laundry detergent is led by Northeast China (96%), and the lowest is 85% (Beijing). But most cities are around 90%, and the national average is 89%. However, personal care products show greater regional variations. Northwest leads in purchase of both shampoo (90%) and skincare products such as lotion (53%), probably due to its harsher climate. As for cosmetics, Northeast China led the way with 43%, followed by Tianjin (32%) and Wuhan (27%). Compared to the national average of 26%, purchase of cosmetics is surprisingly low in Guangzhou (10%), perhaps due to consumer attitudes (Sum 1997). Purchase of roll film shows noticeable regional differences. Guangzhou led the country with 51%, followed by Beijing (49%). Other regions are all in the 30% range. However, Southwest China (28%) and Tianjin (27%) are significantly lower than the national average (37%). In this case, discretionary income, availability of outdoor facilities, and consumer lifestyles all make a difference in consumer purchases.

Ownership of Durable Goods

Still playing catch-up with the developed nations, China’s durable goods market seems to have taken the form of "consumption waves," first color TV, followed by washing machine, refrigerator, air conditioner, and most recently microwave oven. A particular product can be a priority purchase (da-jian) for sometime, soon to be replaced by another product. There are little regional differences in ownership of color television, with a high nationwide penetration rate nationwide (96%), ranging from 92% in Chengdu to 98% in Shangha (Table 4). Ownership of refrigerator is also very high in China overall (87%) with some regional variationsCfrom 97% in Shanghai to 79% for Southwest China. Ownership of washing machines shows a similar pattern with a slightly lower national penetration rate (85%). Nanjing leads in ownership of washing machine with 93% while Northeast China has the lowest ownership (75%). Shanghai, however, lagged behind Nanjing, another city in East China, by 11% (82% vs. 93%). Whether the housing condition in Shanghai contributes to this difference needs to be explored. Overall, ownership of these "traditional" appliances is very high in China’s urban areas.

Air conditioner, which has become very popular in recent years, shows much greater regional differences in ownership (Table 4). Shanghai leads with (58%), more than ten times the ownership in Southwest China (5% in Chengdu). Both South China (Guangzhou) and Central China (Wuhan) have 55%, which is not surprising for the hottest places in China. Ownership of air conditioner in these markets is at least twice the national average (24%). Regional markets in the north including North China, Northeast China and Northwest China are generally in the 20%. Hi-fi stereo system, another popular item on Chinese consumers’ wish list, has a very low national average (8%), and also shows dramatic regional differences. South China (Guangzhou) leads in ownership of this entertainment system (41%), followed by Central China (21%), Shanghai (17%), Nanjing (16%), and Beijing (14%). As for microwave ovenCan innovative product for most Chinese consumers, Shanghai led in ownership with 49%, followed by Guangzhou (22%), leaving the rest of the country in the dustC9% in Nanjing, 8% in Beijing, and only 1% in Southwest China. This finding lends strong support to the reputation of Shanghai consumers as the early adopters and trendsetters among the Chinese.


Major Findings

Purchase of some food items such as instant noodle and ham sausage tends to be the most geographically relevant, in that the local culture and culinary preferences result in substantial differences across regions. On the other hand, purchase of vegetable cooking oil, a common ingredient for Chinese cooking, shows little regional variation. More households purchase beer in the North than in the South. For diary products such as yogurt, both income and product availability may impact consumer purchases. However, for emerging products such as cola, which is mostly a foreign product, major metropolitan areas tend to have a much higher penetration rate than their small counterparts, and much higher than the national average. These findings suggest that as income plays a major role in purchase of foreign goods, consumers in China’s major cities tend to be more innovative and receptive to foreign products.



For common household items such as detergent and toothpaste, regional differences in household penetration are much less noticeable. However, for a discretionary product such as roll film, income plays a key role in consumer purchase, and regional differences are much more dramatic. On the hand, income is not always the sole predictor for purchase of consumables. Northeast China leads in purchase of cosmetics, while Guangzhou is at the bottom. Northwest China leads in purchase of both shampoo and skincare products. More households in the north have purchased beer than those in the south. Ths, comparing to income, geography and climate conditions sometimes have a greater impact on the purchase of certain consumer goods.

Ownership of traditional durable goods such as color TV and washing machines is very high in urban China with very small regional differences, placing greater emphasis on the replacement or upgrade market. However, penetration of emerging new products such as stereo system and microwave oven generally follows the regional lines in terms of economic development and consumer incomeCownership in coastal areas tends to be higher than inland regions. Consumers in coastal cities such as Guangzhou and Shanghai are apparently the early adopters and trendsetters. For products that are geographically relevant, such as air conditioners, climate of the locale may be more important than its distance from the seashore. Other conditions such as housing may also influence the ownership of durable goods that will take a lot of space. Overall, these findings suggest that multiple factors including regional economic development, consumer purchasing power, and local culture affect consumer purchases. Depending the product category, consumer purchases may also be subject to the influence of climate conditions, product availability, distribution intensity, and consumer preferences and lifestyles (Sum 1997).


This preliminary study has several important limitations that readers should bear in mind when interpreting the results. First, it examined only a small number of products in each category and could not reveal the diversity in consumption patterns. For instance, in the food category, purchase of ham sausage and instant noodles shows some regional variations. Rice and other foodstuff consumed more in the south need to be included. The survey data contain only one quarter’s household purchases, thus cannot account for seasonal variations. Seasonality may be associated with purchases of food, beverage and some durable goods such as air conditioner. The survey covers only China’s major cities. Cost-of-living statistics and consumer purchases in small and medium-sized cities and even rural areas may provide interesting comparisons. Future studies also need to explore the impact of other dimensions such as psychographics and lifestyles on consumption patterns to generate meaningful profiles of Chinese consumers.


Any multinational corporation that ignores marketing to a quarter of mankind is putting its future in jeopardy (Xu 1990). Without fully understanding China’s market structure and its consumers, a foreign company cannot effectively market its products in China. First, for some consumer products such as food and traditional durables, the commonality of Chinese consumers may allow certain extent of standardization of product and advertising. However, for other products, discrepant income and diverse consumption patterns result in different levels of consumer readiness and responsiveness to marketing efforts. So far, the geoclusters for Western goods have been largely limited to the southern and eastern parts of China and people with high disposable income. Depending on he product category, these distinctive regional segments can help firms determine the appropriate target market(s) and enact proper marketing mix. Thus, for foreign goods and upscale products, target marketing or the concentrated strategy may well be advised. If the product is a medium range product that is appealing to several regional markets, differentiated strategies may be necessary to address various regional variations and to overcome the logistics barriers. Foreign marketers may also resort to "stitch-niche" marketing by focusing an inter-market segment such as Yuppies in various urban markets.

Due to regional disparities, a strategy that initially worked in one region may not automatically translate into success in another. Thus, companies need to research each regional market when planning for expansion in China. A "Region by Region" approach is well advised for MNCs’ expansion strategies. Foreign firms entering the market should start with China’s biggest citiesBGuangzhou, Shanghai and BeijingCwhose consumers are the trendsetters and opinion leaders for the rest of China. These locations allow MNCs to identify the upcoming consumer trends in a timely fashion and respond to the changing needs of consumers rapidly and cost-effectively. Thus, sequential rather than simultaneous introduction of new products across different regions is more feasible. Once MNCs have established a successful flagship operation in one of these locations, they can use it as a springboard for expansion into other regions. Meanwhile, China’s distribution networks continue to evolve along regional lines. For MNCs seeking a national marketing and distribution strategy, these regional gaps will remain formidable barriers for effective marketing and distribution for some time to come, and require creative adaptation to the local market conditions.

While the sum of opportunities in China has become a driving force for marketing strategies, each individual region contains significant commercial opportunities apart from others, and has its own distinctive characteristics and challenges, thus may require discrepant strategies. China’s enormous diversity warrants a systematic approach to marketing planning and strategies. MNCs need to "plan nationally and act locally@Cfocusing the overall market trend while paying attention to regional differences. Whether MNCs will establish profitable operations depends on solid understanding of the regional consumer markets, careful planning, effective marketing and expansion strategies. Successful MNCs’ operations and expansion in China will contribute to China’s economic development and to improving the quality of life for Chinese consumers.


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Geng Cui, Howard University, U.S.A. Jianguo Zhu, University of Connecticut, U.S.A.


AP - Asia Pacific Advances in Consumer Research Volume 3 | 1998

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