Friday, April 1, 2011

Impulsive Purchasing Behaviour in China

Sources: Image1, Image2

Although Japan felt immediate effects of the 9.0 earthquake on March 11th, the aftershock made its way to China in a different form. Panic due to radiation scares from Japan’s Fukushima Daiichi nuclear plant quickly spread across the Middle Kingdom. Following a mass text message guised as an important BBC announcement, hundreds of thousands of Chinese consumers hit the markets to stock up on salt – which was thought to combat radiation. What they didn’t know before impulsively purchasing lifetime supplies of salt (marked up to 10 times the typical price for the special occasion) was that the distressful text message was a hoax. By the time impulsive consumers realized that there was no radiation scare (and even if there was, salt wouldn’t remedy it) mega-chain stores had released statements reinforcing their non-refundable food product policy.

Before I had time to brush this salt incident off my shoulder, there was already a new craze – laundry detergent – a product that just happened to be on my grocery list a few days ago. I strolled over to my local Carrefour and perplexedly gazed at an entire aisle of desolate shelves where the detergent once was. This time consumers were reacting to Proctor & Gamble’s announcement of a 5-15 percent price increase on products, effect April 1st (no joke). During what some journalists have called the “detergent dash”, some consumers reportedly bought a year’s supply of items like paper napkins, only to save a few Yuan in the long run.

White, granulated products aren’t the only popular items either.  Last week it was reported that Hong Kong mothers were hoarding Japanese baby formula among other “pre-quake” imports as fears spread over contaminated food from Japan.

From a PR and marketing perspective, I’ve gotten a few golden nuggets of information from China’s impulsive purchasing behaviour in the past few weeks.

For PR:
How to proactively avoid a crisis situation by monitoring the news
  1. Monitor the media for news that can connect to your company in ANY way
  2. Be the first to acknowledge your company’s connection to the event – transparency is key
  3. Communicate with the public, whether your company was effected or not (shortly after news of the radiation scare, China Marine Food sent out a press release to ensure customers that their food is still safe)
  4. Monitor feedback from key audiences – open a two-way communication channel
  5. Provide continuous updates until the situation has passed
For marketing:
An assessment of Chinese mass-consumerism based on these events
  • Purchasing behaviour is influenced by environmental conditions, WOM marketing and the purchasing behaviour of others
  • The most significant cases of impulsive buying are for health reasons – emphasis on health benefits for products
  • During what may be perceived as a crisis situation, people in a middle to lower income bracket and with less access to information are more prone to mob mentality when it comes to certain purchases; upper-class citizens were not reported to impulsively purchase high-cost remedies (difference in mentality)
  • Government intervention significantly decreased impulsive purchasing, but thousands still continued the impulsive purchasing regardless – consumers often need the approval and opinions of people around them and in this case, the reacted to fellow purchasers rather than messages coming directly from the government or a specific company
  • Chinese have different spending habits than Americans; they will not spend more than they earn for short-term gratification, especially lower class citizens who typically do not own a credit card
 How to make your product/service desirable to mass consumers in China
  1. A publicity stunt or major occurrence (creation of hype) 
  2. Limited time offer catering to the hype – market through WOM
  3. Accessibility and low cost of product/service
  4. Media coverage while running with the hype to entice others

At my request for a colleague to proofread this post before submitting it, he mentioned the implication that I’m suggesting to take advantage of the consumer’s fear to sell products. Rather than changing my findings, I would just like to note that I am not suggesting that marketers induce fear to sell their products or services. However, I am suggesting that typical marketing methods, such as WOM and publicity stunts, may prove useful in reaching these specific consumers.

Interesting Facts
  • China’s national sales of salt peaked on March 17th at 370,000 tons; after government crack down on the rumours, sales dropped to 82,000 tons on March 19th, still well above the average daily sales of 15,400 tons
  • The last time China faced similar panic buying was during the epidemic of severe acute respiratory syndrome (SARS) in 2003, when shoppers bought vinegar under the mistaken belief that it could prevent the deadly disease

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