1. Turun kauppakorkeakoulu • Turku School of Economics
THE FUNDAMENTAL FACTORS THAT AF-
FECT THE BUYING BEHAVIOR OF CHI-
NESE HIGH-END CONSUMERS
The cultural values driving towards luxury
Bachelor´s Thesis
in International Business
Liiketaloustiede, kansainvälisen liike-
toiminnan kandidaatin tutkielma
Author/Laatija:
Tuomas Poukkula
71784
Supervisor/Ohjaaja:
M.Sc. Valtteri Kaartemo
18.4.2013
Turku

3. Table of Contents
1 INTRODUCTION...................................................................................................5
2 BASIC CONCEPTS................................................................................................8
2.1 High-end products..........................................................................................8
2.2 Brands and lifestyles ......................................................................................9
2.3 Consumer buying behavior ..........................................................................11
3 PREVAILING FACTORS THAT AFFECT CONSUMER BEHAVIOR IN
CHINESE HIGH END MARKETS......................................................................14
3.1 Values and attitudes towards high-end consumption...................................14
3.2 Personal factors ............................................................................................15
3.2.1 Modernity.........................................................................................15
3.2.2 Success, achievement and wealth ....................................................15
3.2.3 Individualism ...................................................................................15
3.2.4 Personal freedom .............................................................................16
3.3 Psychological factors....................................................................................16
3.3.1 Confidence.......................................................................................16
3.3.2 Modesty and humility ......................................................................17
3.3.3 Glory and awareness of shame ........................................................17
3.3.4 Perseverance ....................................................................................17
3.3.5 Patriotism.........................................................................................18
3.4 Social factors................................................................................................18
3.4.1 Social position..................................................................................18
3.4.2 Family ..............................................................................................19
3.4.3 Respect and superiority....................................................................19
3.4.4 Face..................................................................................................19
3.4.5 Collectivism.....................................................................................20
4 CONCLUSIONS ...................................................................................................21
REFERENCES................................................................................................................23

5. 5
1 INTRODUCTION
This bachelor’s thesis is about analyzing the factors affecting consumer behavior in the
Chinese high-end (luxury) market, based on available literature. The motive for this
study is that today 27% of the world’s luxury consumers are Chinese, which makes
China the largest luxury market in the world. The rate is forecast to increase to 34% by
2015. Even though China has relatively high savings rate (Sanderson 2008, 10), the
growth of its luxury market is supported by the fact that the amount of luxury consum-
ers is about to rise, as the nation experiences 20 % annual growth of new millionaire
households and most of the existing ones are very confident that their household in-
comes will increase during the next five years. (Luxury without Borders – –, 2012.) This
gives also motivation for Western companies to invest in China.
China on the other hand is huge, not only geographically but also demographically,
culturally and in terms of the distribution of wealth. This implies that in terms of deter-
mining consumer segments there is not exactly one single China but many Chinas. The
income gap in China is very wide. The people with highest level of income live in the
biggest cities in the Eastern coastal areas while the people with a very low income level
live in the Western and Central parts of China. (Chinese GDP – – 2011.) The people
with low income are seen as very patriotic and price-sensitive people who tend to favor
low-end products manufactured in China and who filter a large amount of advertisement
(Sanderson 2008, 20-23). It means that if a Western company brings its products to the
Chinese low-end markets it has to differentiate its product offering because the minute a
Chinese player with same sort of products is brought into play, the Western rival is very
likely to be wiped out. Differentiation and possible intellectual property rights, that have
to be acquired, raise the costs of foreign companies, and therefore the prices of their
products. Higher prices tend to reflect that the products are high-end. So, in case of en-
tering the Chinese low-end markets, there is a paradox: the product offering should be
differentiated because otherwise, when local competitors enter the market, they will
crush the Western rivals because in the traditional Chinese culture, that the low-end
consumers represent, the Chinese version is always better than the Western one. Differ-
entiation raises costs, and hence, prices, and therefore the product offering is no longer
low-end which was what the company wanted in the first place. So it seems that the
low-end markets do not seem a very legit option for foreign enterprises to enter.
On the other hand, the high-end markets in China are very interesting and full of op-
portunities for Western B2C businesses. Geographically speaking, the luxury markets in
China encompass the largest cities in the Eastern coastal areas, such as all the cities of
Tier 1 (Shanghai, Beijing, Guangzhou and Shenzhen) and in Tier 2a (Hangzhou, Nan-
jing, Tianjin and Chongqing) (Chevalier & Lu 2010, 107). The special autonomous re-
gions of Hong Kong and Macau such areas but due to their slightly different consumer

6. 6
values deriving from their European colonial heritage, these cities should be regarded as
separate markets.
The consumer behavior in Chinese high-end markets is really extraordinary because
there has been a shift towards westernized consuming features that are actually conflict-
ing with traditional Chinese values. One good example is the franchising business in
China. Chinese people are known to be very conscious of what they eat and how the
food they eat, affect their lives. Hence, Chinese consumers could be expected to ignore,
say, Western style fast food whose ongoing consumption is regarded as unhealthy. Still,
it is interesting that for example McDonald’s and KFC are very big players in Chinese
restaurant business. For example it is published that in 2005, KFC had a one percent
market share of the whole restaurant industry in China One percent market share does
not sound much, but when the whole industry is worth over US $100 billion, KFC gath-
ered over US$1 billion of revenues (Liu 2006, 28).
The Chinese luxury market has been described as the “melting pot” implying that the
Chinese value system, that also plays a major role in consumer behavior, has been mod-
ified by Western cultural values. The Chinese cultural values have a history of thou-
sands of years and therefore it is very hard to imagine that those values could disappear.
It seems that somehow the Chinese and the Western features, in spite of their conflict,
can co-exist. One cannot look down upon the traditional values or the effect of western-
ization, but in order to build one’s stable position in China, a Western business has to be
aware of the both of the value propositions of Chinese consumers. (Lu 2008, 56.) Those
propositions are described as “looking to the past” and “looking to the present” imply-
ing that the Chinese luxury consumers are attracted by goods representing the Chinese
cultural heritage (e.g. tea, silk, jade and porcelain) and the Western high-end lifestyle.
(Hoffman & Coste Manière 2013, 24-27.) Some people might find this modernized
Chinese consumer behavior very complex, but still, all such controversies make it fasci-
nating for a researcher. In this thesis, both the traditional Chinese values and effects of
westernization will be discussed in order for a reader to better understand what sort of
aspects ought to be incorporated into a company’s marketing strategy when entering
and creating a stable position in the Chinese high-end market. Also, for the reader’s
motivation, it is worth noticing that the traditional values of the Chinese culture derive
from Confucian philosophy that is prevailing in the vast majority of other Asian coun-
tries as well (Lasserre & Schütte 2006, 176-178). Westernization and the flow of West-
ern values, on the other hand, can be seen as a by-product of long-lasting foreign trade
that also other Asian emerging economies are very likely to experience in the future.
Therefore, China is actually showing an example to other countries in the Asia-Pacific
region, and the lessons learned from China can be applied other countries that also pos-
sess a strong Confucian heritage. In this thesis, the basic concepts related to high-end
products and consumer buying behavior will be discussed briefly. They will be used to

7. 7
produce a theoretical framework that will be applied to categorize the factors affecting
the buying behavior of Chinese high-end consumers.

8. 8
2 BASIC CONCEPTS
2.1 High-end products
The words high-end and luxury can be used interchangeably but the reason to prefer the
usage of the word high-end is that, in Chinese, the word luxury (奢侈 she chi) withholds
the ideas of extravagance, uselessness and wastefulness. The negative emphasis of word
luxury derives from the ancient philosophies of Confucianism, Taoism and Buddhism
that regard the consumption of luxury as a sin. Therefore it is suggested that, to avoid
communication conflicts, the Western marketers operating in China, should prefer the
word jing pin (精品) that is translated as a high-end. (Lu 2008, 28.)
To determine what is meant by high-end products, one has to study some categoriza-
tions of consumer goods. In economics, consumer goods (or services) are categorized as
necessities and luxury goods. The distinction is based on the nature of their income elas-
ticities of demand. Luxury goods have income elasticity larger than one, whereas neces-
sities have less than one. In other words, higher income raises the demanded quantity of
luxury goods more than in case of necessities. (Begg 2008, 66.) For example, food, in
general, is a necessity, as the bought amount of it hardly changes when one’s income
change. Wines and spirits are luxury goods because they are bought in bigger quantities
with larger income levels. (Deaton 1975, 266.) The economics’ classification of prod-
ucts creates a stable base for understanding the differences of consumer goods, but it
fails to emphasize that products vary by price also within a product group. For example
salt can be expensive or inexpensive which states that there is luxury salt and non-
luxury salt.
Bernard Dubois and Patrick Duquesne refine the definition luxury goods as being
expensive products that have their luxury status only in a specific market and that lack
functional advantage over their non-luxury counterparts. (Dubois & Duquesne 1992,
36.) This definition, that compares the attractiveness of products with same functionali-
ties, fits better in this thesis, but in order to draw a clearer line between low and high-
end, one should analyze a branding expert Daymond John’s item-brand-lifestyle model
(John 2010, 656).
The item-brand-lifestyle model describes four development stages that a product can
go through during its lifecycle. Those stages are:
1. Item,
2. Label,
3. Brand,
4. Lifestyle

9. 9
An item is, simply put, a generic product itself with its core function that solves a prob-
lem and satisfies consumer needs. In this context, item is, say, a plastic bag with no
markings on it. It is therefore a product lacking a recognizable name. This lack can be
solved by adding a label on the plastic bag. The label is a way to address the plastic bag
but it is only a name with no special meaning for consumers. When the label does mat-
ter, the product can become a brand. A branded product is a commodity that people can
relate to and whenever people use it, it says something about the kind of person the user
is or wants to be. Brand is also a promise that when a customer buys into it, she can
expect a certain level of personally experienced value and reliability. Lifestyle also in-
cludes the promises of value and trust but the difference between a brand and a lifestyle
is that while a brand categorizes a single product or a service, a lifestyle categorizes a
whole line of products and services. (John 2010, 656-684.)
The widely accepted academic approach to divide product types into two categories
(e.g. necessity - luxury or luxury - non-luxury) and the idea of those two products dif-
fering only by their market status are used in this thesis together with the item-label-
brand model to make a clear distinction between low-end and high-end products. John’s
model includes the idea of a functionality-excluding attraction towards products. There-
fore it is trivial to make the universal division into two by stating that products on the
first and second level in the item-label-brand model are low-end (item and label), and
the products on the third and fourth level are high-end (brand and lifestyle). Now, the
reader knows that in this thesis, high-end refers to a product or service that is a brand or
a lifestyle. Next, it is worth studying how those concepts are studied in academic litera-
ture.
2.2 Brands and lifestyles
In this subchapter, brands and lifestyles will be discussed through academic studies.
Daymond John distinguishes the concepts of brand and lifestyle so that lifestyle good
has the same features as a brand but the features reach a whole line of goods. Because
lifestyle is also a brand with its own specific nature, I will only discuss the concept of
brand in this section.
In academic literature brands have versatile definitions. For instance DeChernatory,
McDonald and Wallace define brand as a product that is augmented so that the buyer or
user perceives unique added values that fit her needs, and what’s more, its success re-
sults from the ability to sustain those added values in the face of competition. (DeCher-
natory, McDonald & Wallace 2011, 34-36.) So in order for a product to be a brand, it
has to not only to meet the needs of its buyers or users, but also to sustain the idea of a
need satisfying item. Many definitions emphasize that a brand has a position in con-

10. 10
sumers’ minds. For instance the definition mentioned above emphasizes that consumers
value the brand more than a generic product, just like John emphasizes the difference
between a label and a brand.
Brands can be discussed from two different perspectives, from a business’ point-of-
view and from consumers’ point-of-view. The former discussion deals with the inputs a
business has to invest in building brand equity while the latter is about the values that
consumers experience from the brand and the values that consuming a brand brings to a
consumer. In this thesis I will only discuss the consumer perspective in order to better
understand luxury consumer behavior.
Brands can be described as functions between a business and its customers. A busi-
ness puts effort on brand creation to build brand equity. Those inputs consist of the sev-
en Ps of marketing mix (product, price, place, promotion, people, process and physical
evidence). After adding an optimal mix of them, consumers see the result of those in-
puts as values that form a personal significance of the branded product to its users.
Those values are described as outputs of a brand. In this thesis the emphasis is on the
consumer side and the company perspective is excluded. Figure 1 presents the concept
of a brand as a function in Chinese high-end markets. The outputs represent the research
results related to attitudes that the Chinese have for brands and lifestyles.
Figure 1: Brand as a function and outputs gathered from Chinese luxury studies. (Blythe
2001, 120); (卢 2007, 31-39); (Dubois & Duquesne 1993, 1-10.)
Brand/Lifestyle
Excellent Quality, Very high price, Scarcity/Uniqueness, Aes-
thetic and Emotional Content, Brand history and Heritage,
Inessential/Superfluous, Conspicuousness, Dream Value
Consumer perspective (outputs)
Product, Price, Place, Promotion, People, Process, Physical Evidence
Company perspective (inputs)

11. 11
The assistant professor of the School of Management in Shanghai Fudan University,
Lu Xiao, has gathered a study of six attributes that correspond to Chinese high-end con-
sumers’ expectations towards brands (卢 2007, 31-39). According to Lu’s findings,
Chinese consumers buy into brands that have a very high price and excellent quality, are
unique by nature and represent scarcity. Brands also have to have some aesthetic and
emotional content in order to create a sentimental attachment to consumers. The Chi-
nese are also very interested in the history and legacy of high-end brands and therefore
value their brand heritage.
Dubois and Duquesne continue the list of attributes by inessential/superfluous, con-
spicuousness and dream value (Dubois & Duquesne 1993, 1-10). High-end products are
not necessary for survival and their function is to represent the wealth and social status
of their consumers. Dream value refers to the will of possessing the good. The posses-
sion of a good helps a consumer to fill her long-held dreams and satisfy her social and
personal aspirations. Conspicuousness refers to the habits of showing off one’s wealth
in order to get respect from others.
2.3 Consumer buying behavior
The consumption habits of a person are a way for her to tell a story of herself. A young
Chinese business woman living, say, in Changsha Hunan province, starts her day with a
cup of Yunnanese jasmine tea and Finnish Benecol beverage for breakfast, wears Gucci
shoes and carries a Louis Vuitton hand bag, dines in a local YUM Brands restaurant and
spends her leisure time with friends for example in a local Starbuck’s. That is part of her
story. People make buying decisions daily and by doing that; they unintentionally build
a brand of themselves (John 2010, 301-308). Therefore it is interesting to look more
closely on what happens psychologically when people consume.
Professor of Marketing, Jim Blythe describes the main phases that a consumer goes
through her mind buying situations. I will describe those phases here briefly. The next
description is based on his book The Essential of Marketing.

12. 12
Figure 2: Phases of consumer buying behavior. (Blythe 2010, 34)
Problem recognition arises when a consumer realizes she has a utilitarian or a hedon-
ic need for a certain item. It can be impulsive or conspicuous. There is a gap between
the existing and the desired state. Blythe calls this gap a drive that can be created
through marketing. He also points out that everybody has one’s own optimal simulation
level (OSL) in which the drive is on the verge of still being enjoyable without being
uncomfortable. Understanding the local market and the prevailing culture can help one
to market one’s offering and to reach the consumers’ OSL. Drive is a key concept in
this context because it leads to motivation – the evaluation of the desirability of the de-
sired state and the degree of ease in achieving it. Motivation leads to the search of avail-
able information of related items.
Information search can be either external or internal. External search refers to ways
of getting the information via professional channels, say, a manufacturer’s literature, or
via marketing channels such as advertisements or word-of-mouth. The internal search
instead involves only the consumer’s previous experiences of the product category and
the expectations of other people’s expectations of the products. In case of brands, the
internal search is probably sufficient. The emphasis in this practice is to reduce risk in-
volved in acquiring a certain product and as analyzed in the section of brands, the
brands actually reflect the idea of low risk or totally risk free use of its item.
The next phase is the evaluation of alternatives. Here the consumer has her own con-
sideration set that includes all the possible alternatives that most likely meet her needs.
There is a competition between brands going through in a consumer’s head and the
Problem
Recognition
Information
Search
Evaluation
of
alternatives
Purchase
Post-
purchase
evaluation

13. 13
brands use signals (e.g. the brand name, images, a price-tag etc.) as their weapons to
win the battle of brands and convince the buyer to choose that particular brand.
After the evaluation of alternatives, come the purchase itself and the post-purchase
actions including the evaluation of the purchase experience. In post-purchase evaluation
the consumer, whether the purchase was a success or not, evaluates if the product meets
her expectations and decides if she will ever buy the products of the same brand ever
again or not. The buyer therefore uses her experience in the future and applies it to all
the behavioral phases. This is described with the arrows drawn from the post-purchase
evaluation box in figure 2.
According to Blythe, even though the decision-making process seems very complex,
the consumers actually apply this pattern in their own peculiar way. This is done via
using personal heuristics – the decision making rules that have been established through
one’s own experience in making purchasing decisions. Blythe mentions an example of
an international traveler who goes to eat only to restaurants with many locals in a for-
eign destination. Here the traveler applies heuristics for evaluation of alternatives. Heu-
ristics can also be applied to information search as well for example by relying only to
certain sources of information, say, word-of-mouth.
According to Blythe, personal heuristics include factors or impulses that derive from
one’s culture and personal experience and that influence the buying process. The three
main factors are:
1. Personal factors that are the features of the consumer that affect the process.
2. Psychological factors that are the elements of a consumer’s mental process.
3. Social factors that are influences from friends and family that influence deci-
sion-making.
Knowing what these prevailing factors are in a certain culture, could help marketer to
analyze market specific consumer buying behavior. In the following chapters I will ana-
lyze the personal, psychological and social factors that, to a great extent, relevantly af-
fect Chinese consumers and that are discussed in Chinese luxury studies. As mentioned
earlier, by consuming certain types of products, people tell stories of themselves. There-
fore the stories of people consuming high-end products differ from the ones buying only
low-end. People also brand themselves by the way they consume, and today in China,
several people want to brand themselves as high-end. The following study of the values
prevailing in the Chinese culture helps to understand why. The factors are presented
according to the classification mentioned above.

14. 14
3 PREVAILING FACTORS THAT AFFECT CONSUMER BE-
HAVIOR IN CHINESE HIGH END MARKETS
3.1 Values and attitudes towards high-end consumption
The high-end consumer markets in China have been described as “the melting pot”,
meaning that the traditional values of the Chinese culture have been accompanied by
modern Western values. The traditional values derive from the ancient Confucian phi-
losophy and are seen to have a stable position in the Chinese culture. Due to the mod-
ernization of the Chinese society, people are also more and more familiar with Western
motives for luxury consumption. In order to succeed in those markets, both of the as-
pects should be taken into consideration.
There seems to be very little quantitative research about values or motives related to
luxury or high-end consumer behavior in China. Chinese cultural values, on the other
hand, have been widely studied. During the 1990s, a researcher Michael Bond and his
colleagues developed the Chinese value survey (CVS) in order to empirically examine
the prevailing Chinese cultural values (Marshall Matthews 2000). Some of those values,
e.g. the concept of face, have inspired academics to write articles about them. Probably
one of the biggest pioneers in the research of the Chinese luxury markets and Chinese
luxury consumer behavior is the assistant professor of the School of Management in the
Fudan University of Shanghai, Pierre Xiao Lu, who has combined the studies of Chi-
nese history and sociology with his quantitative research in order to make rational as-
sumptions about the thriving forces of high-end consumption (Lu 2008; 2010). The cul-
tural values that affect high-end consumer behavior in China, will be discussed in chap-
ters 3.2-3.4 based on his findings and some supportive cultural studies. The classifica-
tion of influential factors will be done as mentioned in chapter 2.3.

15. 15
3.2 Personal factors
3.2.1 Modernity
Modernity, as the name says, is a modern value that emphasizes the notion of being
new, up-to-date and ahead of time. The Chinese are proud of the benefits of moderniza-
tion: urbanization, the modern railway networks, establishment of new shopping malls,
enhanced literacy and economic stability to name but a few. Modernization is also a
sign of better life and the hope of prosperity. Western high-end products represent mo-
dernity and the Chinese believe that the more one possesses Western products, the more
modern the person actually is. It is important for people to reflect a modern image, say,
to friends and colleagues. (Lu 2008, 55-56.)
3.2.2 Success, achievement and wealth
The Chinese high-end consumers represent people to whom success is a very important
goal. Wealth often correlates with success and therefore luxury products are seen as
symbols of wealth and power. Achievements are also key factors in creating one’s self-
image. In general, people do not want to keep success and personal achievements as
secrets, and consuming high-end goods is a way to express them. Still, for the Chinese,
the meanings of success and achievements are not to create personally enjoyed social
prestige, but to satisfy social needs by gaining admiration from other communities. In
other words, the self-satisfaction that achievements and success create, are not a way for
an individual to put herself above her social group, but to gain social status and respect
in a larger scale. High-end products meet the needs of Chinese consumers by allowing
people to gain their status via buying decisions and consumption. (Belk 1984; 1985);
(Lu 2008, 57-58.)
3.2.3 Individualism
Geert Hofstede has defined the distinction between individualistic and collective socie-
ties. In individualistic societies, the ties between individuals (excluding the tie to one’s
immediate family) are loose. In collective societies people are integrated into strong

16. 16
social cohesion in a group, that is also expected to protect the individual through her
lifetime without questioning her loyalty towards the group. (Hofstede, Hofstede &
Minkov 2010, 92.)
China is regarded as a collective nation and even though China is getting day-by-day
more in contact with Western values, individualism is a modern value and still not pub-
licly encouraged in the society. In Chinese culture, individualistic behavior is tolerated
only when it has no influence on collective interests and does not conflict with the pre-
vailing social moral standards. However, today individualistically oriented marketing
catches the attention of young Chinese consumers and encourages them express their
tastes freely. (Lu, 2008, 62-63.) For example, Burger King’s slogan in China is called
Wo xuan wo wei (我选我味) which directly translated means “I choose according to
my own taste” or “My taste, my choice”. Despite some examples like Burger King, in-
dividualistic promotion is limited and tolerated only unofficially (Lu 2008, 63).
3.2.4 Personal freedom
Personal freedom in consumer behavior means making choices without considering
what other people think. Throughout the history of China, people have been neglected
to express their own opinions freely in words, writing, music, through lifestyles and so
on. The government authorities in China have never accepted it. Still, personal freedom
is a new and important value in high-end consumer behavior in China and also affects
the creation of such high-end goods. The luxury consumers today in China express their
own attitudes and tastes, say, through the clothes and accessories they wear, without
paying much attention to collective expectations. The degree to which this value is ac-
cepted, will high-end consumption. (Lu 2008, 63).
3.3 Psychological factors
3.3.1 Confidence
It has been studied that the pride in China’s long history and cultural heritage and the
country’s economic development, have been the factors raising the Chinese luxury con-
sumers’ confidence nation-wide. Also, being admitted to WTO in 2001, winning the
right to host the Olympic Games in 2008 and the Shanghai World Expo in 2010 have
raised China’s national confidence. The risen confidence has influenced luxury travel-
ling; the number of Chinese luxury travelers in increasing annually. The Chinese luxury

17. 17
consumers want to travel to destinations where they can spend their money on really
high-end brand or lifestyle goods, such as Paris, London and Rome. (Lu 2008, 59-60.)
According to the World Tourism Organization (UNWTO), China is the fastest growing
consumer of international travelling services and during the year 2012 the Chinese spent
over US$ 102 billion on international tourism, making China the largest spender before
Germany and United States ( both spending about US$ 84 billion) (Number One Tourist
– – 2013).
3.3.2 Modesty and humility
Modesty and humility are virtues that derive from Confucian philosophy. Unfortunate-
ly, they are afraid to hinder luxury consumption due to the fact that excess and con-
scious consumption are seen as negative counterparts for these two virtues. (Lu 2008,
51). It seems that for a Chinese high-end consumer, the buying decision is a trade-off
between luxury and frugality. That seems to be the reason why some Chinese luxury
consumers hesitate to show off their luxury consumption and therefore tend to keep the
usage of high-end products private avoiding public display. Lu suggests that this atti-
tude can be seen by comparing the sales of Rolls-Royce and its sister brand Bentley in
China. According to Lu, the Chinese tend to prefer Bentley because the flying-lady logo
of Rolls-Royce symbolizes so much power, that by buying Rolls-Royce the Chinese are
afraid to be too arrogant and therefore acting against collective moral standards. (Lu
2008, 51.)
3.3.3 Glory and awareness of shame
Glory and awareness of shame are positive implications of luxury consumption. Glory
is a traditional Chinese virtue that is shared among the family. Wearing luxury clothes
tells a message that a person is successful and therefore a source of pride for the whole
family. High-end consumption can also be used to hide defeats and setbacks and thus, to
avoid shame. (Lu 2008, 7.)
3.3.4 Perseverance
Perseverance is seen as a Chinese virtue a tool of accomplishing one’s desires. Cultural-
ly, perseverance derives from the admiration of heroes throughout the Chinese history.
Perseverance is ranked very high in Chinese value studies (Marshall Matthews 2000)

18. 18
but according to Lu, its influence towards luxury consumer behavior is yet unknown. Lu
believes that perseverance is often connected with excellence and quality that the Chi-
nese high-end consumers value (Lu 2008, 51.)
3.3.5 Patriotism
Patriotism has been a strong value from the ancient times of Chinese history. Still the
value persists among people of all ages and from all areas. Patriotism creates protection-
ism which affects negatively on the power of advertising and attitudes towards foreign-
made products (Sanderson 2008, 20-23). However, the consumption of high-end prod-
ucts that lack viable Chinese substitutes, does not appear to be affected by patriotism
(Lu 2008, 54). The implication could be that, when a Chinese company succeeds in es-
tablishing a high-end brand or a lifestyle product, its Western competitors are forced to
change their strategy. Also, due the patriotic nature of the Chinese culture, it seems ob-
vious that Western companies should not try to enter the traditional Chinese high-end
industries such as tea, jade or silk industry.
3.4 Social factors
3.4.1 Social position
In China, the need to improve one’s financial situation comes from the urge to increase
one’s social standing. It is believed that better life has a material basis and the richer the
person is, the more he enjoys respect from others. Glory deriving from one’s social po-
sition is also transferred to his family. People of the richest Chinese society class have a
high educational background and a wealthy family (Lu 2008, 11). High-end consump-
tion is a way for an individual to express this position. Also people in lower social strata
consume luxury goods in order to give an impression that they are also part of the elite.
(Lu 2008, 51.) In short, luxury consumption, to a great extent, is driven by social posi-
tions of people.

19. 19
3.4.2 Family
Family is surely the most important value for the Chinese. The importance of family
comes from the Confucian ethics. Family represents harmony and social stability. Indi-
viduals are ready to make sacrifices for their families and families are expected to sup-
port their members and being their safety net. Family relationship is intense and a life-
long affair that extends also to grandparents, uncles, aunts, cousins and even further.
(Lu 2008, 48.)
Family is also a very used and appealing theme of TV commercials in China. Ac-
cording to quantitative researches, the Chinese buy into products that mean good for the
whole family. (Zhang, Song & Jensen Carver, 2005, 11.) Many foreign brands, such as
P&G, Hitachi and Rémy Martin have used family theme in TV commercials in order to
reduce the psychological distance between the ordinary Chinese high-end consumer and
the foreign brand (Lu 2008, 49.)
3.4.3 Respect and superiority
In China, social pressures of earning respect seem to be very intense. The roots of such
culture seem to derive from the Tang dynasty (618-907) when government officials ar-
ranged national exams to attract talented young people to enter the governmental jobs
and to help the emperor to manage the country (Huotari & Seppälä 2005, 112). Passing
the exam gave the applicants a stable job and a prestigious social position.
In today’s Chinese society, conscious luxury consumption is regarded as the easiest
way to catch people’s attention. The luxury value of the products that people consume
and the awareness of the high-end status of those products among the public, help peo-
ple to fulfill the need to impress others and to express superiority. (Lu 2008, 6.)
3.4.4 Face
Face is one the most fundamental concepts in the Chinese culture. The idea is that one
can not appear to be weak or look bad in other people’s eyes (Lu 2008, 52). The fear of
losing face is also the reason why people are afraid to say no to their superiors or are
afraid to admit that they do not know something they are expected to know. Face is an
integral part of life for the Chinese. This is supported by a survey of China Daily from
2005 saying that 93% of 1,150 respondents said that they pay much attention to main-
taining their face (Shan 2005). Face can be regarded as a collective value and an infor-

20. 20
mal social institution in Chinese culture. It also sounds obvious that, in the aspect of
luxury products, if the consumption of a high-end product helps a consumer to build, to
maintain or to save his or her face, the consumer very likely to buy that product.
3.4.5 Collectivism
China, as the majority of Asian countries, is very collectivist by nature. The difference
between Chinese and Western cultures is profound. While the Western usually identify
themselves through personal attributes and achievements, the Chinese define them-
selves through relationships and their social frame. Belonging to a group and fulfilling
shared needs and desires usually surpasses individual needs. This Asian collectivist na-
ture has also implications in consumer behavior. (Lasserre & Schütte, 76.)
The positive implication of Chinese consumers’ collective behavior is the network
effect; when certain consumers groups start consuming certain products, it will create a
push affect and, driven by the force of face saving behavior, the masses will follow their
example (Lu 2008, 53). Usually the first movers are the wealthiest people with high
social and professional status. For example the clothing brand Lacoste used this strategy
to attract consumers when it branded its products in China as “the clothes of bosses”.
(Lu 2008, 53-54.)
Analogically speaking, the downside of the collective behavior is that, belonging to a
certain group and maintaining that position is so important that hardly no-one wants to
risk it by starting new consumption habits. From a Chinese consumer’s perspective,
being the only one, say, wearing clothes of a certain brand, might lead to losing one’s
face and getting stranded from the social group. This kind of fear might be present espe-
cially, when a brand is not well recognized in China. Therefore, for foreign companies,
it might be worth building a strong brand heritage before entering the Chinese high-end
consumer markets because in that case the collective risk of consuming is lower.
The Chinese collectivistic nature can also be noticed through China’s huge gift giv-
ing industry. The Chinese gift economy was calculated to be over CNY 250 billion in
2007 (Zhuo & Guang 2007, 82). The Chinese not only buy high-end goods for them-
selves but also for friends, family members or even for business partners (Zhuo &
Guang 2007, 85). When the Chinese give gifts, the gifts are highly priced and have high
quality standards (Zhuo & Guang 2007, 84). Therefore, the gift-giving industry in Chi-
nese high-end markets gives opportunities companies offering high-end products. For
instance, the Belgium luxury chocolate brand Godiva has recognized opportunities in-
volved in gift-giving, and therefore has made plans in opening 100 boutiques till 2016
(Doherty 2012).

21. 21
4 CONCLUSIONS
The studies of values and attitudes towards high-end consumption in China help a com-
pany to adjust its product offering to the specific market. This idea is presented in the
means-end model.
Figure 3: Means-end chain applied to Chinese high-end markets. (Chevalier & Lu 2010,
155)
The main idea of the model is that, a foreign company starting in the high-end con-
sumer market in China, does not have to make any large scale trade-offs between its
own values and Chinese cultural values but to find a fit between them. Pierre Xiao Lu
suggests that a Western high-end brand starting up in China, has to build brand aware-
ness based on it Western identity and cultural values. Once strong brand awareness has
been established, it should integrate some Chines features to its local and global com-
munication. For example, in 2007 the Italian luxury fashion house Fendi held the year’s
biggest fashion show on the Great Wall. (Lu, 2008, 56-57.) By doing this, Fendi most
Chinese
values
Chinese atti-
tudes towards
high-end
goods
High-end
product bene-
fits needed by
Chinese
High-end
product at-
tributes de-
veloped for
Chinese
Western
values
Western atti-
tudes towards
high-end
goods
Western
high-end
product be-
nefits
Western
luxury pro-
duct attribu-
tes

22. 22
probably succeeded in boosting the Chinese national confidence and also in bringing the
patriotic aspect of the Chinese into play.
China is a promising market for companies selling high-end goods, but in order to
succeed, the prevailing cultural institutions have to be understood because they affect
consumer behavior. The high-end markets consist of brand and lifestyle products. Brand
is a product containing a promise of superior need satisfaction which makes a consumer
to buy the brand over and over again. As Daymond John mentioned, buying into a brand
is a way for consumers to tell a story of themselves. Lifestyle contains the same promise
as a brand, but the promise reaches the whole line of products or services. Brands and
lifestyles can be seen as functions that filter a marketer’s effort to consumer attitudes
about the products. In China, brands and lifestyles have to present excellent quality,
very high price, scarcity and uniqueness, aesthetic and emotional content, history and
heritage, inessential and superfluous nature, conspicuousness and dream value. Con-
sumers make buying decision based on their personal heuristics or decision-making
rules that derive from the individual’s background. Those rules consist of three types of
factors: personal, psychological and social factors. Some commonly recognized factors
affecting the consumption of high-end goods in China, are summarized below.
Personal Psychological Social
 Modernity,
 Success,
achievements and
wealth,
 Individualism,
 Personal freedom
 Glory and
awareness of
shame
 Modesty and
humility
 Perseverance
 Patriotism
 Confidence
 Collectiveness
 Family
 Respect and supe-
riority
 Face
 Social position
Table 1: Factors affecting high-end consumption in China.
Consumers buying decisions might come from these factors. Taking them into ac-
count in designing a marketing strategy in China, can help the company succeed in the
Chinese high-end markets. These factors are so fundamentally prevailing in the Chinese
culture that companies selling luxury in China, can benefit from recognizing and adapt-
ing to them.

23. 23
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