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In China, Loyalty Levels Highest for Mobile Phone Service Providers, Personal Computer Brands; Lowest for Food and Beverage Categories
Loyalty on online retailers remain low among Chinese consumers
Shanghai, China – December 3 – Around 57 percent of Chinese respondents said that loyalty programs (marketing programs that reward members with purchase incentives) were available where they shopped, and of those, 96 percent said they were more likely to visit those retailers, according to a new study by Nielsen, a leading global provider of information and insights into what consumers watch and buy.
“While the concept of loyalty is not new, we are seeing a significant surge in retailers investing in loyalty programs in order to increase consumers’ loyalty as it’s getting harder and harder for retailers to drive growth by purely relying on their quick pace of expansion,” said Brian Negley, vice president of Nielsen China.
The Nielsen Global Survey of Loyalty Sentiment polled more than 29,000 Interneti respondents in 58 countries to evaluate consumer views on loyalty levels across 16 categories including fastmoving consumer goods, technology products and retail establishments.
Nielsen information shows that while the modern trade channels in major cities across China have been expanding fast (up 3 percentage points from 2010 to 16 percent in 2012), the growth of sales from these stores has slowed (down from 20 percent in 2010 to 13 percent in 2012).
Meanwhile, the fierce competition in the modern trade landscape is also reflected in consumers’ low levels of loyalty to existing stores amid the emergence of many new stores. Fifteen percent of Chinese consumers surveyed by Nielsen claimed they shopped in new/different modern trade stores over the past six months in 2012, a two-percentage-point increase compared with 2011, according to a recent shopper trend report by Nielsen.
“It’s becoming more and more important for the retailers to better understand who their shoppers are, particularly the more frequent, higher-spending ones, and design communication programs and assortment around those consumer needs. In addition, loyalty programs provide retailers with a rich source of data, which if properly mined and analyzed, provide very valuable insights,” said Negley.
According to Nielsen’s survey, nearly two-thirds of Chinese respondents said that enhanced customer service was the most valuable loyalty program benefit, while discounted or free products mattered most among global loyalty program participants around the world. Discount or free products and special shopping hours were important to 62 percent and 51 percent of Chinese respondents, respectively.
“When the prices of the products don’t vary much among different retailers, Chinese consumers will give more attention to loyalty programs in which their unique preferences and needs can be reflected during their shopping experiences,” said Negley. “This offers retailers and manufacturers the opportunity to work together to create exclusive product offers and rewards that cut through the clutter and give consumers in their loyalty program recognition. This can also include innovative services, particularly in the online space, where retailers can directly communicate with consumers one to one.”
Though Nielsen’s information indeed shows that loyalty program prevalence and patronage go hand in hand, nearly half of Chinese respondents said that they would opt out of a loyalty or not sign up if it was too expensive, 43 percent would not join a program if they didn’t shop there enough to realize the benefits, and 38 percent would not join in a program if it was too complicated.
The concern of personal information disclosure is another obstacle for retailers in persuading Chinese consumers into a loyalty program, as 34 percent of Chinese consumers surveyed were averse to giving personal information freely, exceeding the global average of only 25 percent.
Nielsen information shows that nearly 30 percent of Chinese respondents claimed complete loyalty to mobile phone service providers, exceeding the global average of 24 percent. Around one-fourth of Chinese respondents claimed complete loyalty to mobile phone brands (24%), financial institutions (23%) and personal computer brands (22%), the highest percentages reported in China across the 16 categories measured.
The relationship between the retailers and the brands they sell can be quite different. In a grocery sector, Chinese respondents expressed more loyalty to the retailers (79% said they were loyal to a grocery retailer) than they did to brands (average 74% loyalty across the categories surveyed). In contrast, in the online retailing space, the likelihood to switch is greater as nearly 30 percent of Chinese respondents said they were not loyal to online retailers.
Chinese consumers surveyed reported higher levels of loyalty to all the 16 categories measured; compared to the global average, the difference in loyalty was more than 10 percentage points for mobile phone service providers (90% of Chinese respondents vs. 76% of global average), personal electronic brands not including computers (81% vs. 68%), home appliance brands (84% vs. 72%), and online retailers (71% vs. 60%).
Similar to the global average, Chinese respondents reported the lowest levels of loyalty to food and beverage categories measured. More than one-third of Chinese consumers surveyed said they were not loyal and likely to switch brands in the alcoholic beverages (36%), cereal (36%), carbonated beverages (33%) and snack (34%) categories.
“To stand out from the competition in these categories, food and beverage manufacturers should work on more innovative product concepts instead of frequent promotion, in an effort to respond to the changing needs of the urban Chinese consumers and to reverse falling basket sizes and lower trip frequencies,” said Negley. “Compared with the past, today’s Chinese consumers attach great importance to self-identity, and seek excitement and self-indulgence through consumption. They increasingly value specialty products that are part of a higher quality of life, which is seen in rapid growth of fusion products like milk tea or the snack biscuits compared with the liquid milk or traditional biscuits.”
According to Nielsen’s survey, 41 percent of global respondents said getting a better price would encourage them to switch brands, service providers or retailers, followed by better quality (26%), better service agreement (15%), better selection (10%) and better features (8%). But for Chinese respondents, the most important bargaining chip to persuade them to switch brands was better quality (30%), followed by better service agreement (20%), better price (19%), better selection (18%) and better features (12%).
“While good prices may initially offer consumers enough motivation to change allegiance to a new product, it won’t keep consumers for long if the product doesn’t deliver on its promise,” said Negley. “Thanks to the steady increase of discretionary income among Chinese consumers, they could also afford a higher price for better-quality products, while the long-standing perception of ‘higher price represents better quality’ is still prevailing among Chinese consumers. Getting the price/value equation right, having products in stock, and offering a satisfying shopping experience are vital ways to build long-lasting customer loyalty.”
About the Survey
The Nielsen Global Survey of Loyalty Sentiment was conducted between February 18 and March 8, 2013, and polled more than 29,000 online consumers in 58 countries throughout Asia-Pacific, Europe, Latin America, the Middle East, Africa and North America. The sample has quotas based on age and sex for each country based on their Internet users, and is weighted to be representative of Internet consumers and has a maximum margin of error of ±0.6%. This Nielsen survey is based on the behavior of respondents with online access only. Internet penetration rates vary by country. Nielsen uses a minimum reporting standard of 60 percent Internet penetration or 10M online population for survey inclusion. The Nielsen Global Survey, which includes the Global Consumer Confidence Index, was established in 2005.
Nielsen Holdings N.V. (NYSE: NLSN) is a global information and measurement company with leading market positions in marketing and consumer information, television and other media measurement, online intelligence and mobile measurement. Nielsen has a presence in approximately 100 countries, with headquarters in New York, USA, and Diemen, the Netherlands. For more information, visit www.nielsen.com.
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i While an online survey methodology allows for tremendous scale and global reach, it provides a perspective on the habits of existing Internet users, not total populations. In developing markets where online penetration has not reached majority potential, audiences may be younger and more affluent than the general population of that country. Additionally, survey responses are based on claimed behavior, rather than actual metered data.