'Self-reward' may explain luxury purchases in China

An international high-end wine exhibition in Chengdu. In 2013 China became the largest market for red wine in the world. Provided to China Daily

Chinese consumers' insatiable appetite for luxury goods and services appears unstoppable, with just 2 percent of the Chinese population responsible for one-third of the world's luxury items.

As China's economic miracle continues and spreads across second- and third-tier cities, the market opportunities for all sorts of luxury goods and services are unfathomable.

Luxury consumption in China now extends way beyond well-known car, clothing and jewelry brands. For example, the luxury jet market in China is the fastest-growing in the world, even outstripping that of the United States, with a market share of 25 percent. This trend appears set to continue, with 20 to 30 percent growth expected in China, compared with only 2 to 3 percent in the US.

But more important, China's luxury jet market growth represents a major development in the private consumption of luxury items.

China's high-quality red wine market also provides tangible evidence of the growth in private consumption of luxury goods.

In 2013, China became the largest market for red wine in the world, even overtaking the French, with 1.86 billion bottles quaffed in China last year. Over the past five years, China's red wine consumption has grown 136 percent.

But far more attention is still paid to the visible signs of Chinese consumers' luxury shopping.

Public consumption of such expensive, sumptuous global luxury brands such as Prada and Armani is easily explained by the desire to "gain face" and publicly display social climbing through material possessions. Consequently, celebrity endorsement features heavily in the marketing of such luxury items

Private consumption of luxury items is, however, less well understood. According to my ongoing consumer research in this area, it is "self-reward" that lies behind consumer motivation in this area.

Chinese consumers who have experienced rapid financial and economic gains appear particularly prone to the need to reward themselves for their success. But this has little to do with "gaining face" and impressing others and much more to do with the need for personal contentment.

As a result, the marketing of privately consumed luxury items, from jets to red wine, needs to adapt from the strategies and associations often employed where public consumption is concerned.

Private consumption of luxury items is often a far more rational, planned and, therefore, deliberate process.

In consequence, it is imperative that tangible product features and attributes are central to any marketing campaign and that exciting emotional associations do not dominate.

The spectacular growth of high-quality red wine consumption by the Chinese probably has a lot to do with perceived health benefits, for example, in combination with typical emotional associations such as prestige and sophistication.

Luxury jets are also probably acquired for their immediate, rational rewards such as convenience and speed.

Private consumption of luxury items in China is also likely to represent a more calm and reflective experience, in comparison with the excitement and frivolity often key to public consumption.

As a result, celebrity endorsement and profligate use of bright, ostentatious colors should play little part in any private luxury building of brands in China.

Finally, the growth in private luxury consumption in China is set to continue in part due to the maturity of the Chinese consumer and advancement of Chinese consumer culture generally.