Change and continuity in China's lower tiers: Insights from Ogilvy's 'China Beyond'

Jane Ling, Michael B. Griffiths and Kunal Sinha

With 200 million households belonging to the consuming classes, China's second- to fourth-tier cities are arguably the most important consumer segment in the whole world. But they are tight-fisted. In 2011, advertising spend in Tier 2-3 markets was 4.37 times that in the Tier 1 markets, while the consuming class population is 7 times greater.

For the third time in the last seven years that Ogilvy & Mather China's consumer insights and trends team Discovery revisited these lower tier markets. Between August 2011 and March 2012 the team, in cooperation with TNS China, conducted field research in 3 provincial capitals (Chengdu, Changsha and Shenyang), 3 prefecture level cities and 3 county towns in Sichuan, Hunan and Liaoning provinces, covering a diverse expanse of geographic, cultural and economic regions. The study was conducted through home interviews with 48 families, 60 retailers, and 15 internet cafe owners, combined with observations in shopping malls and public parks. 80% of the respondent families were native to their city, 20% were migrants. The quantitative study, amongst 2200 middle class families, surveyed their beliefs and attitudes towards family, life, risk, novelty, ambition and fashion. The study also aimed to map out their shopping, media and entertainment habits and identify influences on purchase decisions.

What did we discover?

While there were some constants, a lot of change has occurred here. The traditional values in the form of family ties remain intact, but there is the emergence of a new breed of youth who do not necessarily want to abide by the expectations of their family. Spurred by job creation in the hinterland, the availability of good quality housing and education, and a relaxed pace of life, the first wave of reverse migration is in swing: particularly amongst those who went to Beijing, Shanghai and Guangzhou a decade ago only to find that after years of hard work, they can neither afford to buy homes or cars, nor pay for their child's education. Such is the interest in new brands that shoppers are embracing e-commerce with enthusiasm, snapping up deals on goods that are not available in their local shops. The residents are hungry for new experiences, and local business people who are able to offer them in the new shopping malls can keep them occupied for hours – because these people have the time.