1. “Compare and contrast as to how two (2) aspects or theories of consumer behaviour as
discussed in Schiffman apply to this country and how it differs from that in Australia. Show
how this may provide a marketing opportunity for an Australian exporter.”
Abstract
This paper will use two fundamental principles of market segmentation; demographical and
behavioural segmentation to examine the potential for success for an Australian exporter
entering the Chinese market. Using an array of established brands across a variety of
industries this paper illustrates and details some methods for success in regards to
customer-retention, establishing brand loyalty and remaining competitive. The differences
between the Australian and Chinese market according to demographic and behavioural
principles was found to be immense and not limited to language, culture and religion.
Methods of mathematical comparison including the Gini-coefficient were used to identify
less obvious trends, similarities and differences between said markets.
Introduction
Consumer behaviour examines the reasoning, motivation and thought processes involved in
the buying decision-making process. Understanding consumer behaviour and how it is
relevant to a particular product or service is a crucial component in any marketing strategy.
Prior to entering a new market marketers must determine if their marketing strategy and
product offerings are in-line with those demanded within the market.The success of
marketing efforts will revolve around the degree to which consumer behaviour is
understood and how theseprinciples have been adapted and applied to a marketing
strategy. Given the aforementioned scenario, market segmentation will be based on both
behavioural and demographic theories of segmentation. These theories will be examined
and their relevance to the Chinese market will be discussed. The differences between the
Chinese and Australian market will be highlighted though the use of these theories and
ultimately will detail opportunities for an Australian exporter entering the Chinese market.
Market Segmentation: Demographics
One of the most important concepts to understand regarding a new market is the behaviour
of the customers. This behaviour can change because of different demographic variables
such as age, income, gender, social class, lifestyle, etc. Demographic factors that affect
consumerbehaviour will be based on the person’s particular characteristics although the
characteristics may differ. Demographic factors are based on the relevance to consumers’
beliefs, attitudes and intentions. Humans have a tendency to engage in and enjoy activities
involving effort (Kardes, 2010). These factors apply not only to one market but exist within
every market, differing depending on a variety of characteristics. Demographic
segmentation variables are amongst the most popular basis for segmenting customer
groups in order to focus the on successful marketing strategies and efforts.
Consumer needs and wants evolve and change with time, relevant not only to the current
generation but also the individuals age. Marketers should design, package and promote
according to the particular wants and needs of an age group.As an example of how age
affects consumer consumption we will compare the life expectancy of China and Australia in
order to try to better understand this dominant factor.Australia maintains a greater average

2. life expectancy of 79 years. Low rates of fertility and the continued effects of the 1945-55
baby-booms have resulted in an aging population. Every five years life expectancy increases
by 0.4 of a year. In 2002 those aged over 65 totalled 2.5 million or 13 per cent of the
population. In 2050 there will be 7.1 million in this group totalling 25 per cent of the
population. Six per cent will be over 85 (Biddle, 2011).
Similarly in China, from 1990 to 2008 life expectancy rose 5.1 years, to 73.1 according to a
World Bank compilation of United Nations data. Nearly every other large developing
country, be it Brazil, Egypt, Ethiopia, India, Indonesia or Iran experienced a greater increase
over the same span despite much slower economic growth (Jianghong , 2008). Since 2000,
Australia which started with higher life expectancyhas continued to outpace China in terms
of life-expectancy growth.High, consistent economic growth provides the building blocks for
social and health improvements which has remained true for centuries.The rate of this
growth and the growth rate of economic development are paramount in extending life-
expectancies for any given nation.
Analysing this data, we can develop a marketing strategy that will target a specific sector of
the population. We can take age as a reference amongst other characteristics. Australia at
present maintains a higher life expectancy than China, hencethis market should be
considered viable if the product-offering is in-line with the demands of older or aging
generations. Demographic segmentation is an essential part of any successful marketing
strategy.
Market Segmentation: Behavioural
One of the ways for a marketer to successfully enter a new market is by understanding the
new market and segmenting it into several groups. One of the groups for market
segmentation is behavioural as the base. By understanding the new market or the target
market’s behaviour, the marketer is able to fully understand the needs and thus how to
effectively target the new market.
As an example, Australian consumers tend to be brand loyal when it comes to impulsive
purchases or high involvement products where the cost is high.A company that relies
heavily on brand loyalty is that of Apple. As Apple’s product-offerings are typically high
involvement purchases, existing brand loyalty can often make the difference between a sale
and lost potential. This is seen throughout university with a large portion of students in any
given lecture will have at least one Apple product. Using this information a marketer would
be able to know that Apple is a high-involvement purchase in Australia and therefore it
could be financially-lucrative to establish, through the use of advertising; brand loyalty in
regards to Apple and its product offerings.
Australia and China have a lot of differences in terms of culture and behaviour and therefore
require different approaches to segmentation. According to (Yau, 1993), the easiest way to
figure out the behaviour of a consumer is by examining the consumer’s culture and lifestyle
because thesefactors will ultimately determine the behaviour of a consumer. As time goes
by and society progresses, the culture of Chinese people will begin to evolve as China
becomes an increasing force, both economically and physically-speaking. This will inevitably
lead to a variety of opportunities in a range of overseas markets assuming marketers

3. properly understand local consumer behaviour and can effectively tailor their marketing
efforts accordingly.
St-Maurice in “The McKenzie Quarterly” (2008) states “that Chinese consumers are sensitive
to value for money and generally have a clear idea of which functional features merit a
higher price.” It can be concluded that most Chinese consumers are knowledgeable
regarding the price vs. functionality balance and therefore marketers must emphasise a
products functions and capabilities.
Another fact about Chinese consumers is that they place high value on the image and status
that the product or service will provide.Marketers must be consistent with the usefulness
and the quality of the products as modern Chinese culture emphasizes the importance of
aesthetics and prestige. Therefore,because of these characteristics China has developed a
huge market of fake products which attempt to imitate existing, high-end brands and labels.
Although these theories cannot be applied to all Chinese people these theories arerelevant
to 70% of Chinese consumers which are middle-aged. Thus in conclusion to the Chinese
consumer behaviour, it can be stated that to be successful in the Chinese market a product
has to be consistent with its price and quality and must convey a certain level of prestige or
value.
Relevance to China and differences from Australia
Since China's reform and progress towards globalisation, marketisation of the Chinese
economy has become an irresistible trend. Marketing theories play an increasingly
important role in China. The following will describe how consumer behaviour theories apply
to the Chinese market.
Market segmentation theory is dependent on the needs of consumers throughout the
market that is divided into different consumer groups. Geographic is one of the five
common segmentation strategies and it aims to define specific areas that require custom
promotion. Geographic segments are particularly important in China because China has
complex climate and large population. There exists an enormous impact on product sales
due to changes in climate. To illustrate, Lao Gan Ma chili crisp sauce is the most famous
brand of chili sauce in China. It was created in the southwest area where people are
accustomed to spicy foods. China’s geographical environment is so vast and widespread that
some area’s lack the essential tools required for production. In the southwest mountainous
regions it is difficult for farmers to grow vegetables and it isalso far away from the sea so
they require alternative sources for seasoning and flavouring (Zhang, 2006) .In full
knowledge of this issue, Laoganma positioned their product at provinces where people love
to consumer spicy foods and cuisines. Nowadays it is growing fast and owns the largest
market value in part thanks to the success in provinces such as Hunan, Jiangxi and other
northern provinces. In comparison to Australia which is more of a complete market
economy this marketing behaviour will be weakened due to logistics, food preferences, and
the other reasons although Australia also has a complex climate.
For the demographic aspect, in accordance with the internationally accepted Gini
coefficient, China’sGini coefficient reached 0.474 in 2002 which places China above the
international warning line of 0.4 (Wan 2004). This means China has the world's largest

4. urban-rural income gap with the ratio of3:1; though the proportion in the western provinces
is higher amounting to more than 4:1 (Chinese Academy of Social Sciences).
Gome is China's largest home appliance retail chain which has adopted an interesting
approach to store positioning. Gome doesn’t bother building stores and facilities in rural
areas due to a lack of demand, though instead Gome employs salespeople to travel door-to-
door for rural sales. For example, a salesman sells a television with new function. If this
feature is easy to use villagers will convey their appreciation through word-of-mouth, where
alternative forms of communication have yet to be established. This method can reduce the
sales-creation aspect of commercials, helping to alleviate any potential financial issues. Also,
the technical staff will adjust the washing machine power because the villagers were not
willing to pay more for electricity fees. Furthermore, price is critical factor to villagers as
they fall under low-income earners and thus have little funds available for non-essential
purchases.
This situation is greatly different from Australia due to China's rural and urban average
income gap. Australia is a developed, high-income, post-industrial societywhereas China has
just begun the process of industrialisation. The differences in the two nations’ markets are
far greater than their similarities. For instance, Ganzhou and Guangzhou are two important
cities of each province in China. But the GDP of Ganzhou is about 112 billion Yuan whereas
Guangzhou is about 1.0604 trillion Yuan (2011) therefore the purchasing power of
Guanzhou is almost one-hundred fold that of Guangzhou. The distance between these two
cities is two-hundredkilometres thus they maintain similar geographic characteristics. On
the other hand the purchasing power of between Australia’s states differs much less in
comparison.
Exporting opportunity to Chinese market
Australia has built a strong relationship with China over the years by exporting significant
quantities of products, specifically raw materials and metals. However as China’s culture is
ever-evolving and changing, an exporters approach must also evolve in order to remain
competitive in the Chinese market. China has been Australia’s second biggest trading
partner by consistently purchasing enormous amounts of commodities such as iron ore, coal
and copper in which Australia has a competitive advantage over. The Australia -China Free
Trade Agreement (ACFTA) has offered opportunities for Australian exporters to gain a
competitive advantage by dealing with one of the largest economies in the world. The
agreement allows Australian exporters to enter the Chinese market with minimum
restrictions to trade and thus makes Australian exporters more competitive.
However, before entering the Chinese market direct marketing needs to be used in order
for Australian exporters to adapt to the Chinese culture. Consumer behaviour is also
required for examination before entering the market. It is paramount that marketers
understand the local culture and what is of value if they are to succeed in the Chinese
market. If this is conducted well, "consumers purchase the same brand consistently,’
(Cannon, 1998) in which Australia can build a strong exporting relationship with.

5. Adapting Behavioural theory
Studying the behaviour of Chinese consumers is important, as an Australian exporter will
need to consider all these aspects in order to have a successful opportunity to trade. A
factor seen in the behaviour of Chinese consumers in buying a product is the quality and
price. Before an Australian exporter chooses to expand internationally into the Chinese
market through exporting it needs to construct a suitable marketing plan after studying the
cultural behaviour of consumers. They will need to focus on determining the right price for
the quality offered in the product. Keeping the Gini-coefficient in mind, the right price will
also need to be determined within the right area. The visual appearance of a product in
China is seen as a major factor of their consumer behaviour as appearance is a determining
factor in most purchases. For an Australian exporter to capitalise on an opportunity within
the Chinese market they must ensure that their product offering communicates the right
value and represents prestige in accordance to the demanded level.
Adapting Demographical theory
An Australian exporter needs to ensure it has the latest statistics when studying the
demographics throughout China. Firstly, the average life expectancy of China is lower than
Australia. This helps Australian exporters to not focus on many products aimed at a higher
age group such as 80+. As China's Gini-coefficent gap surpassed the recommended
maximum, an Australian exporter needs to ensure it does not target high priced products
where income levels are low. Looking into the life style is very important success as there
are areas in China where only one out of eight people have a television. An Australian
exporter needs to market its product through other means such door-to-door marketing
and avoid large, expensive television advertising that may not even each the target
audience.
China's economic growth and Australia's ability to maintain its competitive position will be
the key determinants of Australia's export growth in China (Lianjing and Mahmood, 2006). It
is seen that behavioural and demographical theories need to be applied before an
Australian exporter chooses to enter the market. However, there are always risks associated
when it comes to doing business in China. As China produces many products at a cheap cost
due to their low costs of labour, it puts pressure on Australian to remain profitable and
competitive in the ever-changing Chinese market. Ultimately, understanding the
behavioural and demographic factors found in China does not guarantee success though it
does reduce the risk of failure assuming the marketing strategies were tailored according to
the acquired information.
Conclusion
Ultimately, the success of an Australian exporter relies not on the knowledge and
information collected pertaining to China’s demographic and behavioural features but
rather on their ability to adapt and tailor their marketing efforts according to the research
collected. No amount of research or preparation will guarantee success in China’s ever-
evolving and changing markets though such preparation in conjunction with a well-
structured marketing plan will yield endless opportunities and considerable potential for an
Australian exporter looking to export into the Chinese market.

6. Authors
Fabricio Palomino (41618513)
NitinDhingra (42109043)
Filbert Jonathon Jong (42318009)
Qichangjie (41814339)
Cameron Couch (42154979)
*Group contract will be submitted in-class as signatures are required.
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