As the living standard of the Chinese people rises with further economic development, domestic and international corporations are rushing to provide consumers with more purchasing options. However, choices are created not only for new products, but also for different brands with different attributes and images that appeal to different segments of the population. Brands signify attributes such as high quality or fashionable style, but also affiliation to a certain social class or group, and thus can be sold at premium prices even when manufactured at the same production costs as non-branded alternatives.

In a developing country like China, there is also a large portion of the market that still does not have great purchasing power. With an annual per capita consumption expenditure of urban residents of only CNY 8,696 in 2006, we can hardly expect the vast majority of the Chinese population to become regular customers of premium brands. Instead, the companies that stand to gain much more market share are those that invest in building strong, low-price brands for the consumer goods market created by the budget-conscious Chinese public.

The sheer size of the consumer goods market in China has been an incentive for intense competition in almost every industry. Small businesses can enter the market cheaply due to IPR non-compliance, use their capabilities to mimic existing products, and successfully overcome technical barriers. At the same time, the effective use of mass production allows them to reduce the cost of production and retail prices. They can further undercut their competitors by cutting profit margins, making up for lost revenue by selling large quantities of the same products.

Such a saturated and established consumer goods market strongly discourages investment in building strong low-end brands and improving their market share. After all, in a market that has long relied on price competition to attract consumers, it seems difficult to build brand loyalty, even for well-known and well-established brands. Many companies believe that it is better to reduce brand costs in order to have a price advantage. In this article, however, we will argue that for low-priced products, the brand remains the distinguishing factor on which the Chinese consumer bases his purchasing decisions.

The benefits of low-priced Chinese consumer goods brand

In a market that is famous for replicating products that are sold in massive quantities, and very often without paying attention to design, quality of materials or production processes, the brand can function as a marker of quality. In other words, given a small price difference for similar products in the low-end market, the consumer will buy products from a more reputable brand because it is perceived to be of higher quality, in part because acquaintance translates in their minds to “more people buy it.” so it must be better”

In fact, consumer purchases are affected by strong brands, since they are considered a product safety mark. Studies show that product-related factors such as price and brand, in addition to store name, promotion channels, source credibility, country of origin, nature of product testing authority and the guarantee, significantly affect the final choice that the consumer makes regarding similar product offerings. Therefore, by carefully manipulating these variables when formulating brand strategy, managers can appeal to the large and growing market of security-conscious consumers and gain significant competitive advantage.

In addition to product quality and safety, the brand can also be differentiated through benefits that go beyond the functional attributes of the products. In other words, the brand itself becomes a product differentiation tool and, therefore, a competitive advantage. Even when the branded product is essentially the same as the unbranded product, the brand gives it added qualities.

Chinese consumers tend to have a short list of preferred brands for the products they buy regularly and do not easily stray from it when shopping. Naturally, and especially in light of the current economic crisis, consumers of low-priced products are price sensitive and therefore not always loyal to their preferred brands (in-store sales and promotions can divert purchases). of the preferred brand). Still, on average, Chinese consumers are willing to pay a premium of about 2.5 percent for a brand-name product they buy regularly. Therefore, building and developing the brand in this market segment is and will continue to be essential.

Challenges of building successful brands for low-priced products

As mentioned above, the prevalence of price competition in the low-end market is one of the biggest challenges companies face in developing a profitable and sustainable brand. This has huge implications for brand equity, especially given widespread piracy and copyright infringement. In the Chinese market, many low-end firms do not invest in building an original brand to lower costs, but use brand names and visual identities very similar to those already known to promote their own products.

For example, Whitecat (}+), the historic national detergent brand, has reason to be upset by the existence of Dailycat “a+” which has copied not only the brand name but also the logo and packaging design. Many consumers buy Dailycat by mistake, thinking they are buying the famous Whitecat brand or a slightly cheaper sub-brand from their portfolio.

Also, to overcome the competition from cheap pirated products, low-end companies tend to become producers of imitated, if not pirated products. There is a strong incentive to forego brand investment and focus on price competition for short-term profit in the low-priced consumer goods market. In other words, strong commitment and persistent brand investments that are more for long-term revenue than short-term gain are necessary to truly create strong, low-priced brands. The problem is that many companies simply do not have the financial capacity to continue with such investments for long periods of time.

The national cell phone brand CECT is a good example. CECT entered the competitive Chinese cell phone market by selling low-cost branded phones. In order to stay competitive and gain market share, CECT quickly dropped the brand and began producing imitation cell phones (Nokia, Samsung, Motorola, and more) and selling them for half the price of the original, if not less. Some of these models do not even have the “CECT” mark. As you can see, it was easy and profitable for CECT to switch from producing legitimate branded cell phones to unbranded imitations.

Strategies to use for low-priced consumer goods

While the aforementioned challenges may seem insurmountable, there are strategies that have proven successful in creating profitable brands in the low-end market to appeal to a large portion of price-conscious consumers.

1. First go high, then go low

First of all, and especially in the case of established companies, the brand can enter the upper-middle-range markets before starting to target the low-end market. A strong reputation for high quality in mid- to high-end products can give the company a sustainable competitive advantage when the same brand is introduced to the low-end market. On the one hand, a strong reputation will allow the company to benefit from economies of scale in marketing and brand development. On the other hand, low-end consumers can easily be attracted to the brand as it is perceived as “high status” as it is also widespread among mid-range and high-end consumers. At that point, the brand can beat the competition on both price and perceived quality.

For example, Nokia, China’s No. 1 mobile phone market, first captured a large segment of the high-end urban market before starting to sell cheap and durable mobile phones to the Chinese rural market. The Nokia 1100, Nokia’s first low-end phone in China, was launched in 2003 when color screens were already prevalent in China’s saturated mobile phone market. The phone featured a black and white screen, but nonetheless became one of Nokia’s biggest earners. Chinese farmers’ craze for the Nokia 1100 stemmed largely from its well-known attribute of high quality combined with personalized features: the phone was dustproof and had a functional built-in flashlight, both very useful features if you live in China. rural. The custom attributes were developed by the famous Finnish mobile brand after conducting extensive market research to understand the specific needs of the Chinese rural market.

Naturally, as in the case of Nokia, to successfully build a strong low-price brand, the company must also understand how to satisfy the needs of the target consumer base.

2. Niche brand strategy

Second, companies trying to build strong low-end market brands in China will be more successful if they target consumers with unique and specific needs in this market segment rather than produce products that are similar to other low-end products. unbranded price.

For example, Chinese Yake V9 candy secured the market for nutrition-minded candy lovers by specifically advertising vitamin C content.

Another example is Asus, the Chinese manufacturer of budget PCs and laptops, which has developed a well-designed, small, budget-friendly laptop that successfully targets budget-conscious consumers who want a sleek, lightweight PC to take on the go without to spend a significant amount of money to get it.

Similarly, Cortry Cosmetics, a successful national low-price brand, targets consumers who appreciate the healing powers of TCM. In fact, the brand uses the concept of “I1{