Analysis of Brand Loyalty in Chinas Cosmetic Market

Analysis of Brand Loyalty in chinaw argons Cosmetic Market1.0 What is enhancive food securities industry place?Cosmetic atomic itemise 18 not strange to every nonp atomic number 18il, even though some hoi polloi dont use them. They decidedly hear almost them. Cosmetics were invented in thousands approach patterns ago. When ornamentals were introduced, they were considered as exclusive things utilise by womanly. In those measure, only few kinds of augmentatives endureed. nigh quite a little entrust enhancives atomic number 18 limited by some sorts such as inwardness, compensateup. Actu whollyy, nonfunctionals summon in many forms. Except for redolence and makeup, they comprise of shampoo, soap, lotion and sepa estimates. Cosmetics be utilise to c be for and clean people body, master(prenominal)tain people in a well condition and evoke people apricot (Kumar et al., cardinal hundred6). For instance, the in 10tion of sun protection is to keep out UV and reduce the risk of exposure of getting skin fagcer.In the ago, custody utilize decoratives to dress up would be treated effeminate. Certainly, people didnt hear about mens ornamental advertising. Nowadays, the truthfulness has gradually changed. The enhancives prevail not been the patent of women. Men and kids join in throng of use enhancives. The number is increasingly growing up. Este lauder as the offshoot womens nonfunctional companies tried to enter the male enhancive grocery in 1964. After 1 family trial, it came out with Aramis and an entire line for mens skin. (Alpern) In cosmetic market, thousands of cosmetics for men and kid ar avail equal to(p). In past ten year, cosmetic companies launched some results that were suit equal for both men and women. As men customers emergence, companies start to launch new intersection line for men. Exclusive perfume and cleansing foam were designed for men. In point to lay these uphill electric potential cust omers, many cosmetic companies invest a lot on advertising through TV, beauty magazine and others. The aim of the advertisement is to aim the idea that cosmetics argon not girly products. Some big cosmetic companies prosecute famous actors or sportsmen to promote products through positive imagery. It lets men intend that utilise cosmetics is very normal. (Souiden and Diagne, 2009)The cosmetic manufacture is superstar of the most emulous industries all everyplace the world because more than 300 cosmetic instigants exist in the market. Most of these companies utilize great number of resource in Research and pay offment to launch new products every year in order to meet ever-changing customers need and demand. Innovation is fundamental to excerption and success of cosmetic companies. (Kumar et al., 2006) To stay vantage point during fierce rivalry, cosmetic companies should urinate value to customers.The World top ten cosmetic companies ar Maybellline scotching for 7 .4% market share, Avon (5.4%), LOral Paris (5.3%), Lancme (4%), Clinique ( 3.6%), Revlon (3.3%), Este Lauder (2.9%), easy lay Factor ( 2.8%), Cover Girl (2.7%) and Shiseido (2.2%) (Ejiofor, 2006). All of them seize about 40% of the market share.1.1 Overview of cosmetic market in china chinaware is the countries with the outsizest macrocosm in the world it makes up cardinal-fifth of the worlds population. The population suppuration array of china is 0.629% in 2008 with a current number life forecast of 73.18. Men possess 51.8% of the total population whereas women possess 48.2%. (Nancy E, 2008) Chinese remunerative more attention to beauty bed date back to ancientry. It has already deeply rooted in Chinese culture. In Chinese meter and art, beauty has always been extol (Newham, 2006)Before the reform and assailable adit policy were useed, China economy was very not good. Most of income of Chinese was spent on food, superman and house. They didnt hand extra money to steal cosmetics. Through proper economy policies are carried out by Chinese government, economy is booming is China and people living standard is increasingly remedyd. People have more disposal income to spend on beauty. more than and more people absorb beauty information from different sources. Some of them kick the bucket beauty maestro. They believe using up money on beauty as a valuable investment. Attractive appearance and figure forget assist them to get benefits in career and social life, because everyone loves beauty. (World Wide take note China)In order to join World Trade Organization (WTO), Chinese government reduced implication tariffs. Due to reduction of import tariffs, cosmetics import was increased 160% from 1996% to 2001. (Li,2003) Since 2001 China has entered WTO, it tryd a good opportunity for contradictory cosmetic companies to access China market. For these companies, China is a big rising market collectable to the largest population. In saturation market such as Europe, cosmetic companies are demanding to boost their gross revenue. Many foreign companies correlative venture with internal manufacturers through advanced technology along with products and grand capital and set up plants in coastal regions such Guangdong responsibility and ingrain in China. Top twenty cosmetic swords have flowed in China cosmetic market. (Asia Consulting) On the other hand, regarding to domestic manufactures, they as well understand benefits. For example, advanced technology assists to doively reduce production costs and improve product type as well.Strong economic growth in China shock people all over the world, but cosmetic market in China is growing faster than Chinas economy. According to Chinas canvass Fragrance and Flavor industry Association, cosmetic barters in China have increased by 16.6% to $4.2 billion in year 2001. In year 2004, the sales jumped to 85 billion kwai. China is considered as the instant largest cosmetic s market in Asia, and ranks no.8 worldwide. Cosmetic outgo was 1yuan during the early 1980s, but spending dramatically went to 25 yuan in year 2000. Even in big famous cities nobble, Beijing, the annual average spending on cosmetics was among 150-180 yuan (LIFUNG Research Centre, 2005) Compare acquirement of cosmetic market among Asia, growth rank of cosmetic market is significantly faster than other countries and regions. (Figure 1). Even most the world, this kind of growth rate is fantastic. because, China is the market cosmetic companies exit never give up. China is one of the most outstanding countries for our overseas business operations it is a huge market backed by a population of about 1.3 billion about 10 durations Japans population. (Tadakatsu Saito, Director of Shiseido)Consumption tax introduced by the State Administration of revenue gave benefits to domestic cosmetic companies develop. 11 categories of goods such cigarette, car are root word to spending. Th e aim of consumption tax is to narrow the income up. The widening open frame before long became serious social problem in China. High-end cosmetic is subject to 30% consumption tax, for basic cosmetic is subject to 0%. (Fang, 2005) Actually, most of foreign shuffles are considered as luxury. For domestic cosmetic companies, they can provide militant legal injury to customers. In areas with lower income, it may be more winsome customers than foreign give aways.Competition of China cosmetic market is very keen because more than 300 dirts exist. However, target markets of domestic and foreign blots may be different. For example, customers in large cities with a higher(prenominal) take aim of disposal income have a preference for famous discolourations from foreign countries. Outsides the metropolitan area, however, many customers are purchasing products produced by local companies. In 1980s, there were more or little 40 cosmetic shuffles available in China cosmetic market. These notices only offer limited products such as Shampoo, lipstick. Cosmetics like perfume were used by few people. However, currently more than 300 brands can be found in market In respect of types, skin-care products deem for 35% of total cosmetic output, hair-care products possess 28%, make-up products perfumes are 29% and 28% respectively (Figure 2)In earlier of 1990s, the regulations on Cosmetics in China were very imperfect so that China cosmetic market was jumbled. A huge number of small cosmetic enterprises raid the market healthy development ( Li et al., 2004). Regulations on Cosmetics Hygiene Supervision are the basic laws and regulations on cosmetics that were enacted by Ministry of Health on November 13, 1989 and put into effect of January 1, 1990. They include general provisions of cosmetics, hygiene supervision over cosmetic manufacture, hygiene supervision over cosmetics distribution, the organ for Hygiene supervision over cosmetics and its duties, penalties and s upplementary provisions. For instance, cosmetic ingredients must abide by standards set by Regulations on Cosmetics Hygiene Supervision. Besides, with regard to denominateing, the regulations set d confess provisions. On the label of cosmetics, the name of the product, the name of the producer and the serial number of the hygiene manifest for the producer should be clearly stated. Lots of false advertisements existed in the past exaggerate the effectiveness of the products to misguide customers. Regulations ban false and misleading statements in advertisements (Regulations Concerning the Hygiene Supervision Over Cosmetics) On the other hand, the related business office actively attacks false advertisements. As rapidly development of cosmetics, regulations gradually endure complete. China cosmetic market is standardization and is brought in line with international practice. Complete regulations guarantee sound development cosmetic market. More and more cosmetic manufacturers hav e corporate social responsibility consciously concur with regulations.With rapid China cosmetic market development, cosmetic distribution convey are diversified. Different kinds of modern sell distribution channels sprout into market. In the past, Chinese customers bought cosmetics through supermarkets and hypermarkets. Most of cosmetics they purchase were basic cosmetics such soap, shampoo. In that time, scarce premium cosmetic brands were in the market due to high tariff. Accounting to beauty retailing China 2005, 80% of cosmetics and toiletry sales were completed through hypermarkets and supermarket. Except for supermarket and hypermarket, de softenment store is the other major channel that is very popular among Chinese customers. (Pitman, 2005). In China, cosmetic companies open specialty counters on the first and second floors of department store. These counters forming cosmetic area are convenient for customers. Not every cosmetic brand is able to own specialty counters. The premise is that the brand should have a wide range of products and distinctive brand name and images. Therefore, customers believe cosmetics sell in department store have reliable quality and can be safely used. Nowadays, various channels including Pharmacy chains, specialty stores overlord stores exist in the market. Specialty stores provide professional helpings and salutary range of products of a particular cosmetic brand. Actually, specialty stores in China are owned by former cosmetic direct exchange companies such as DHC. Because direct selling business model is chiefly prohibited by China government unless endorse is given by China government. Avon as a leading direct selling cosmetic company was successfully granted direct selling license in year 2008. Its also the company obtaining first direct selling license in China. For most of companies, specialty stores as the effective way for them to fix their business models (LIFung research center, 2005)Rapid developme nt of China cosmetic industry has went on over the last twain decades. Cosmetics become the fifth largest consumption products by Chinese customers. This market close up has a great board to develop and is far way saturation. There are two briny reasons. On one hand, China has a population of 1.3 billion so that it has a large potential customer. China government has committed itself to develop the middle and western part of China to balance the economic gap between east and west China. The grand western development programme is in process. The purchasing power of west China leave alone become strong in future. On the other hand, the current capita annual spending on cosmetic of Chinese customers is still far below that of actual countries. Capita annual spending on cosmetic of Denmark and Sweden has reached 171 (Global Insight, 2007) China economy is still booming so that people living standards will increasingly improve. Customers will spend more money on cosmetics. For cosm etic companies, China is pass judgment as a market with enormous business opportunities. (LIFung research center, 2005)1.2 why choose Shanghai?Shanghai has the worlds fastest growing economy. The population of Shanghai is about 16 million, financial income is more than RMB 6 billion, GDP Per Capita is RMB 37,382 and average annual people salary is about 21,781 in financial year 2001. (Zhao, 2005). Shanghai is the biggest commercial city in China GDP has endlessly grown up in past 13 years. In year 2004, GDP growth rate has achieved 13.6% (Wu and Delong, 2006). Shanghai alone accounts for a large resemblance of the target markets for cosmetics. Eastern coastal region is critical to the substantial Chinas cosmetic retail sector. At present, total cosmetic retail sales of Shanghai, Beijing, Jiangsu country, Guangdong province, Zhejiang province and Shandong province is up to 55% of nation cosmetic retail sales. Among them, Shanghai accounting for 12% ranks first, followed by Beiji ng, Jiangsu province. ( HKTDCs China cosmetic market report, 2008). Shanghai is just a city compared to one whole province cosmetic sales of it are still higher than that of province. It proves that cosmetic used by Shanghai people is really popular.Furthermore, Shanghai is viewed as panache capital in China. In Asia, its status has gradually been enhanced. It plays a linchpin role on leading fashion in Asia. Many people believe Shanghai is The Paris of the East. Everything managing peoples appearance and figure are considered as fashion process. Hence, expect for apparel, cosmetic, jewelry and others are parts of fashion people pursue. Cosmetic are used to enhance peoples beauty, exhibit their personality and esthetic preference. (Guthrie et al., 2008). Customers from other cities and province may imitate how Shanghai customers make up, which nervus facialis nerve unguent brands they use.Another main reason of choosing Shanghai is that mostly cosmetic brands no matter internat ional brands or domestic brands can be found in Shanghai cosmetic market. According to the Shanghai commercialized Information Center, Shanghai is not only a place of using cosmetics, but also a major place producing cosmetics. Except for domestic manufacturers, many foreign cosmetic companies set up plants in Shanghai. Shanghai has a sound production environment. Most of suppliers, manufacturers are located tight in industrial area so that it facilitates communication and assists to reduce transportation costs. (HKTDC, 2002)As the economic and financial center of China, Shanghai as locations of this study is selected. The findings of this study can give an overall understanding of brand subjection of Chinese customers in cosmetic market. Shanghai may be more representative in line of merchandise other areas, because a huge number of people in Shanghai are from different cites and areas of China. Hence, it ensures replyents of this study have different background.1.3 Why select facial plectrum?For this research I select facial cream among thousands upon thousands cosmetics. The reason is that facial cream is one of the popular cosmetics in China market and also has large market potential. By contrast, cosmetics like shampoo, soap have already reached saturation because growth rate is very slow (HKTDC, 2002). According to figure 1, skincare products account for around 35% of cosmetics market share and still are the main stream of cosmetic consumption. At the same time, skincare products are the one with bigger market potential and highest profit in cosmetics market. In the skincare segment, facial care is the largest product category consumed by Chinese customers in China .Facial care includes facial cream, facial cleanser, toners, masks and sun protection. Facial cream can be categorized into moisturizer, unobjectionablening cream, anti-ageing cream, nourisher and others depending on its function. Moisturizer and nourisher already mention nearly 71% o f facial care market share (Fukuda, 2004). These cream are sold well in China because of dry weather. On the other hand, the whitening cream in China is supposed to be prevalent due to Chinas culture. White skin is one standard trait of the Chinese concept of beauty. Chinese proverb say Yi Bai Zhe San Chou. It means white can offset tercet uglity. Skin tone is very historic viewed by Chinese. Even though healthy skin is popular all over the way, Chinese people are eager for white skin. (The China observer)The demand of facial cream is expected stably growing. Purchase rate and usage rate of these are relatively high in contrast with other products. Therefore, target population may easier to be accessed.1.4 Problem commentThe goal of business is to make as much money as possible. Brand trustworthyty grants a great number of advantages to companies for them to achieve goal. It prevents companies from competition imitation and maintains business stability. On the other side, it g ives customers confidence to shop in a complex market. Because customers need not go through close process to decide which brand should purchase. (Tepeci, 1999). Companies are able to charge higher price to hardcore customers to maximize their profitability. Actually leal customers are less apt(predicate) to regard by price increase. (Kumar, 2002) Furthermore, companies enable to save specie on promotion and acquisition costs to attract customers. Customers are hardcore toward brands will make repeat purchase in the future and make recommendation to their relatives and friends. It provides efficient and effective way for companies to increase their sales. Hence, establishing brand devotion is the sustainable advantage which will systema skeletale the constant flow of customers, dogging profits for companies, finally determine success of companies. (Coggins, 2009)As Chinas economy roars ahead, much of cosmetic companies have entered China cosmetic market in order to seize this attracting market share. One of fundamental reasons is that most of these companies are difficult to increase sales in mature regions such as westward Europe and America. On the contrary, in emerging market, a number of potential customers companies will target. However, in accordance to China market research aggroup (CMR), many marketing executives complain brand committedness cannot be built among Chinese customers. (Rein, 2007) Importance of brand faithfulness should not be ignored. Because it lacks brand consignment, consumers are readily to thumb to competitors products. Cosmetic markers realize significance of brand obedience. When actual customers are not properly retained, new customers must be continuously induced. Hence, companies are supposed to invest huge amounts of advertising, promotion activities, and sales costs to seize new customers. For example, companies have to carry out sale promotion to induce trial and enhance their brand name as well. The expe nditure of capturing new customers is approximately six to ten times what spends on retaining current customers. ( Pogol, 2007)Furthermore, brand loyal customers are less promising to switch to other brands by price allure. Since they consider brand they are loyal towards possess unique value that other brands cannot replace. (Tepeci,1999) Due to meet customers need, companies are able to keep price at high among fierce competition. It reduces curse of price wars for companies. In China, companies lack brand loyalty is really in danger. Imitation is very rampant in many industries of China. Cosmetic market is no exception. Imitator usually set quite low price to draw customers.Moreover, customer spending tends to increase over time. For example, customers who are loyal to facial cream of particular brand are highly likely to try other product lines or new products of the same brand. It provides a solid foundation to companies for new product launch and reduces new product failure risk as well. Thus companies are able to increase sales.Importance of brand loyalty have already recognized by marketer and researches. A number of studies were conducted in this area. Why dont cosmetic companies to create customer brand loyalty? Cosmetic companies cannot implement appropriate strategies to moderate brand loyalty. Because cosmetic markers dont have clear understanding of which factors play important role on touch on brand loyalty in cosmetic market. They didnt make effort in right areas. Even many researches are about significance of brand loyalty, few of them studies on factors creating brand loyalty. Therefore, cosmetic marketers cannot obtain sufficient information to implement appropriate marketing strategies to build brand loyalty.1.5 Research drumheadsDo any factors significantly affect brand loyalty in cosmetic industry?What is current brand loyalty level in cosmetic industry?Which cosmetic brand possesses the highest brand loyalty level?1.6 Research objec tivesThe objective of this research is twofold. On one hand, the objective is to investigate main factors impact brand loyalty in cosmetic market. On the other hand, it identifies current brand loyalty level of cosmetic industry in Shanghai. It can be treated as a benchmark for cosmetic companies to compare their own brand loyalty level with overall brand loyalty level to determine their positions in industry. At the same time, the brand with the highest brand loyalty level is able to be identified.1.7 Significance of studyThis study will be a significant endeavor in determine main factors contributing to brand loyalty in cosmetic industry. By understanding major elements affecting brand loyalty, cosmetic companies are able to develop their appropriate strategies to enhance brand loyalty to gain competitive advantages in fierce competition.This study will also assist cosmetic companies to utilize limited resources to target areas such as marketing research and development (RD) wher e critical affect brand loyalty in cosmetic market.Moreover, this research will provide directions for cosmetic companies to set down their human resource policies including recruitment, training, reward and promotion. For example, companies implement training programs so that employees are able to serve customer better.CHAPTER iiiMETHODOLOGY3.0 IntroductionThis chapter illustrates an in-depth description of the research methods used to implement this research. In this part, source of information, sampling techniques and research instruments are explained. This chapter is very important because it highlights adopted models and methods utilized to answer the research questions.3.1 Source of DataThere are two main methods available for information collection, the primary and secondary data collection methods. The primary data consisted of data collected by the research worker to ensure validity and reliability. Apart from conducting primary research, this study based its analyti c thinking on existing data from professional organizations such as HKTDC as supplements by published materials.This is because these organizations do extensive work in the clever areas of this research.3.1.1 Primary dataThis research uses quantitative data in the form of questionnaires. The quantitative data in form of questionnaires consist of close and open ended questions and also questions based on Likert-scales. The questionnaires cover all applicable areas needed for the research such customer demographic, main factors affecting brand loyalty of facial cream. Questionnaire is selected as a quantitative method for stack away data because according to Oppenheim (1972) Questionnaires are not merely just forms to be filled up, but also are scientific instruments for collecting and measure of data.Developing a research questionnaire is a bottom up process. Beside of questionnaire, a pilot study using interviews is conducted with 40 customers who are obtain in shopping mall. B efore they are interviewed, they are asked do they use facial cream. Only users are selected to do interviews. The aim of this pilot study is to develop the questionnaire for this research. According to the respondents, factors influencing brand loyalty of facial cream comprise of product quality, store environment, brand name and service quality. Besides, the nature of service quality dimensions directly relate to the industry under analysis. Information collected shows that salespersons professional knowledge, appearance (beauty) and responsiveness are more importance to customers to account whether the service provided is excellent or not that will affect their brand loyalty toward cosmetics. The information gathered from this pilot study paint a pictures that Olay (PG), Dabao, Avon , LOreal Ponds(Uniliver) are familiar facial cream brands. Furthermore, they also state brands like Shiseido, LOreal, Lancome and Olay (PG) are famous cosmetic brands. Moreover, respondents state th ey usually purchase facial cream around two to three month one time based on their own experience. Therefore these data collected are used to address circumstantial research problems in this study.3.1.2 Secondary DataThis refers to data that have been already collected and analyzed by other people. The main purpose of retrieving these data is to find a basis for the research and acknowledge the work of experts who had contributed to the pertinent literature on the subject matter. This study bases its analysis on existing data from professional organizations (e.g. HKTDC) that do extensive work in the areas of China cosmetic industry and brand loyalty in China. It provides information about overall development of China cosmetic market. Furthermore, it identifies which kind of cosmetics is usually used by Chinese customers. Hence, Im able to select object to conduct this study. otherwise secondary data sources used are journals, articles, dissertations, newspapers and textbooks. Jour nal articles help to place relevant variables and develop theoretical framework.3.2 MethodA self-administered questionnaire is directly distributed to 200 customers aged from 20 -50 years old. Sample size 200 should be suitable for exploratory study. The questionnaire is originally written in simple Chinese and then translated into English. According to national statistics, customers who are 20-50 years old are the largest group of cosmetic consumption in China. They account for around 76% of cosmetic consumption of whole country. This age group selected lead that savour can be more representative of the population. The surveys are conducted in Henglong shopping mall and Eastern shopping mall where respectively locate in Nanjing road and Xujiahui road that are the most important commercial centers in Shanghai. Because not only people in downtown come to these two shopping mall, but also a great number of people in suburban area and country like to shopping in there. Hence custome rs from different income groups can be accessed. In order to ensure customers from suburb and country can be targeted, surveys are done in Weekend. Compared to Weekday, proportion of customers from suburb and country on Weekend is higher. Because customers have sufficient time to travel to downtown on Weekend. Furthermore, Most of facial cream brands are available in these two shopping centers. Quota sampling (non-probability sampling) is utilized in this study. Gender is chose as control variable. Number of male is 80, others are female. Since female using facial cream is slightly higher than male. Customers who are visually estimated to be 20 to 54 year old are approached and asked to respond to the questions. To further ensure customers with different income level to be targeted, questionnaires are distributed in supermarket, specialty stores and beauty counters in shopping malls. To ensure only customers using facial cream would be respondents of this research, I politely ask th em first to identify whether they are the target population. 100 of them are from Henglong shopping mall, others are from Xujiarui shopping mall. Convenience sampling is the less expensive and faster and convenient method. Respondents are accessible, easy to measure and cooperative. The completed questionnaires are used for this research.3.3 QuestionnaireOverall, the questionnaire includes three parts. Firstly, the questionnaire deals with demographic variables of respondents. Variables such as age, education are considered. Second part relates to customer brand loyalty of facial cream, the last part is concerning factors affecting brand loyalty. The structure of the questionnaire is clear, easy to understand, and straightforward to ensure that the respondents are able answer the questions with ease.3.3.1 Brand loyaltyIn this research, I use attitudinal measures that are usually based on survey to identify the current brand loyalty level of facial cream in Shanghai. As mentioned abo ve, behavioral measures are more sensitive to short-run fluctuations. The most important demarcation of behavioral measures is that they make no distinction between brand loyalty and repeat buying. (Day, 1969). In this questionnaire, brand loyalty is heedful on brand preference, switching attitude toward loyal brand and purchase in intention. The unrestricted question is used to ask respondents to list out their favorite brands of facial cream. Then five Likert scale question is set down to identify respondents degree of preference. Next part questions examine switching attitude toward the loyal brand. Respondents are asked whether they feel comfortable when they switch to other brands. Furthermore, other question is relevant to respondents willing to change to other brands. Five-point Likert scale questions are also exercised to indicate respondents degree of agreement on each of the statement (1= strongly disagree 5=strongly agree). Regarding to purchase intention, respondents are asked to state how likely are they purchase favorite brands in future. (1=no chance, 5=certain). grade how many female and maleTarget on customers of different income groupIncome based on report ()3.3.2 Factors affecting brand loyalty quartet above mentioned variables (brand name, product quality, store environment and service quality) are measured on a five-point Likert scale using close-ended questions. Two questions are relevant to brand name, four questions are about product quality, three questions are asked about store environment, while three questions relate to service quality. Respondents indicate the level of agreement with the statements that the best describe their feeling toward their favorite brands, ranging from 1= strongly disagree, 5=strongly agree.