学校代码： 10246

学 号：12210690780

硕 士 学 位 论 文
（专业学位）

Marketing Communications of Chinese Luxury Skincare

and Cosmetics Products: An Examination from the
Perspective of the Country-Of-Origin Effect

院 系： 管理学院
专 业： 工商管理
姓 名： Angel a Mae Sy
指 导 教 师： Pr of . Song Yi pi ng
完 成 日 期： 2014 年 3月 28 日
 Marketing Communications of
Chinese Luxury Skincare and Cosmetics Products:
An Examination from the Perspective
Of the Country-of-Origin Effect

Angela Mae Jean Sy

ID # 12210690780

II
TABLE OF CONTENTS
Chapter 1 Introduction……………....…………………...………………………………..1
Chapter 2 China Luxury Skincare and Cosmetic Facts/ Environment……………...…….4
2.1 Luxury Market in China………………………………………………………….5
2.2 Skincare and Cosmetics Industry………………………………………………...7
2.3 Marketing Communication Perspectives………………………………………...10
2.4 Building Brand Equity…………………………………………………………...10
Chapter 3 Country of Origin Effect on Luxury Buyers…………………..……………...12
3.1 Country of Origin Effect: Introduction and History…………………………….12
3.2 COO Weakness and Literature Review…………………………………………13
3.3 CETSCALE and Ethnocentric Bias………………………………………....…..15
Chapter 4 Consumer Biases and Market Study………………………………..………...18
4.1 Demographic and Psychographic of Female Luxury Buyers……………...……18
4.2 Size and Buying Power………………………………………………………….21
4.3 Access to Information and How Prejudices Form………...…………………….22
4.4 Exposure to Internet and Social Media…………………………………….……23
4.5 Buying Channels………………………………………………………..…….…23
4.6 The Made In China Revolution………………………………………….………25
Chapter 5 Case Studies………………………………………….………………………..26
5.1 Dorissiderm…………………………………………………………………..….26
5.2 Herborist……………………………………………………………....…………28
Chapter 6 Methodology and Research Questions……………………………...…………29
6.1 Survey……………………………………………………………………………30
6.2 Focus Group Discussion……………………………………..…………………..31
6.3 Results and Analysis……………………………………..………………………32
Chapter 7 Effective Marketing Communications……………...…………………………46
7.1 Changes in Marketing Communications in China……………………....……….46
7.2 Differentiation for Local Brands………………………………………...……….46

III
 7.3 Communication Suggestions and Strategies………………………….………….48
Chapter 8 Conclusion……………………...…………………………………………….49
8.1 General Findings…………………………….…………………………………..49
8.2 Implications…………………………………..………………………………….51
8.3 Limitations and Future Research Direction…………….………………………..52
Appendices………………………………………………………………………………..54
Bibliography……………………..……………………………………………………….62

IV
LIST OF TABLES
Table 1. CETSCALE Factors………………………………………………………16
Table 2. CETSCALE Results………………………………………………………17
Table 3. Cultural Dimension Scores………………………………………………..19

LIST OF FIGURES
Figure 1. Chinese Mainland’s Luxury Market………………………………………9
Figure 2. Frequency of Product Use………………………………………………..32
Figure 3. Awareness of Product Origin…………………………………………….33
Figure 4. Relevance of Product Origin……………………………………….….....34
Figure 5. Preference for Chinese-made Skincare Products…………………….…..34
Figure 6. Response to Friends’ Recommendations…………………………...……35
Figure 7. Source of Information……………………………………………..……..36
Figure 8. Confidence in Five FGD Brands…………………………………...….....37
Figure 9. Doubt in Five FGD Brands……………………………………........……38
Figure 10. Estee Lauder Pleasures Ad……………………………………………...39
Figure 11. La Mer Moisturizing Gel Cream Ad…………………………………....40
Figure 12. Herborist Moisturizing Cream Ad………………………………….…...41
Figure 13. Cle de Peau Fall/Winter Ad……………………………………….…….42
Figure 14. Christian Dior Dior Show New Look Mascara Ad……………………..42
Figure 15. Shu Uemura Holiday Collection x Wong Kar Wai Ad…………………43
Figure 16. Estee Lauder Time Zone Ad……………………………………….…...44
Figure 17. La Roche-Posay Brand Ad………………………………………….......45
Figure 18. Fancl Mask Expert Ad……………………………………………….….45

V
Abstract

This paper will touch on psychological factors that affect consumer perceptions
when purchasing luxury cosmetics and skincare items. We will lift preliminary theories
and passages from existing Country of Origin Effect literature, to be tested on random
sampling of female luxury buyers in China.
Although this effect exists in almost all products, this paper will concentrate on
luxury skincare and cosmetics because of the interesting dimension the consumers possess.
The female demographic of luxury skincare and cosmetics are certainly different than other
consumers of luxury brands, whether male or female. These products are applied liberally
on faces and bodies, so attention and assurance of quality is a must. Then again, studies
show that women’s appraisal of a product’s quality hinges on recommendation and other
viral marketing venues, and not necessarily factual higher quality. We will look at the
many factors that influence women to make purchase choices, and identify how Country of
Origin effect affects them in accordance to this demographic’s own personal culture (we
have specified this study only for Asian women, with a focus on Chinese, but even in this
continent various dispositions and cosmetic attitudes abound).
We also look at two real case studies to provide more insight and structure to the
thesis. This paper aims to provide recommendations on how a luxury skincare or cosmetic
brand should communicate in terms of their marketing efforts and how to position their
products given the psychographic and preferences of the target market.

Key Words
Chinese consumer behavior, luxury skincare and cosmetics, country-of-origin effect

VI
Abstract (Chinese)

本⽂文将提及影响消费者购买⾼高端化妆品和护肤⽤用品时的⼼心理因素 。我们
将对中国⼥女性消费者进⾏行随机抽样测试，并引证原产地效应的理论。  
   
虽然⼏几乎所有的产品存在这种效应，但因为⾼高端护肤品和化妆品的消费
者，不论男性或⼥女性都拥有不⼀一样的考虑因素， 所以本⽂文将集中在这类
型的产品上  。这些产品都是直接⽤用上的脸和⾝身体，所以消费者会⾮非常注
意产品的质量。有趣的是，研究表明⼥女性护肤品消费者做出购买选择时
往往取决于朋友、⺴⽹网上的评价或⼲⼴广告，⽽而不是实际的⾼高质量。  
   
本⽂文将重点研究影响⼥女性护肤品消费者的因素，并确定原产地效应对她
们个⼈人的影响（这项研究只针对在中国的⼥女性，但就在中国⽽而⾔言， 不同
区域的消费者对化妆品的态度也很不⼀一样）。  
   
我们会从两个真实的案例中，为论⽂文提供更有说服⼒力的论证。本⽂文的⺫⽬目
的是为⾼高端化妆品和护肤品牌提供营销策略的建议，如何给⾃自⼰己的产品
定位，了解⺫⽬目标市场的消费⼼心理和偏好并建⽴立有效的沟通。  

Key Words
中国的消费⾏行为，奢侈品护肤品和化妆品，原产地效应

VII
Chapter 1 Introduction

International research shows instances where country of production or origin gives

way to consumer bias, whether good or bad. France, for example, leads the way in
reputation for wine while Germany leads in engineering. This also leads to the obvious
opposite effect, for example, when toy products are labeled made in China are regarded as
inferior and even hazardous.

It is then a question of how a new product faced with an existing origin country’s
biases will have to tailor its communication strategies. It is certainly arguable that a lesser
quality Swiss-born watchmaker will have an easier time marketing his products simply
because they are Swiss-made, compared to an expert watchman in, for example, the
Philippines, a third-world country that is hardly known for engineering or watch
craftsmanship.

Marketers have long studied this prejudice in “Made in-” branding, where
consumers will inevitably question where a certain product is manufactured or originated
from.

China’s wealthy has spanned a lot of literature and focus in the global media. From
the ostentatious flashy, to the cultured finicky, it is a topic that has no shortage of viral
anecdotes and documentation. For the Chinese who were born during the economic furor
in the 70s, they are now still aware of the importance of being frugal and less materialistic.
But their children and the new Millennials are brought up in a new world—one where the
RMB is fast rising as a powerful currency and Chinese manufacturers have reached a
global scale. Prosperity and fast rise in income also account for a unique perspective on
wealth and luxury of the modern Chinese.

1
 Chinese women, and arguably most of other Asian women, have skincare and
beauty regimens that are different from their Western counterparts. They have multiple
steps, and the entire program is quite strict and is taken very seriously. A quote from
Wharton marketing professor Barbara Kahn explains this well:

“One of the key differences between China – and Asia, in general – and the U.S. is
the importance of skin care products. If you look at a typical drugstore, even a Sephora in
Asia versus one in the U.S., you will see a larger percentage of the store devoted to [those
items. They are generally more sophisticated in this category than the typical American
consumer.”

Another Wharton marketing professor, David Reibstein, gives his thoughts on

trends in Asian beauty, stating that:

“A strong desire to be beautiful, with a heavy concern about skin care; a desire to
be on the leading edge of fashion and skin care [as shown by] designer clothes, shoes and
cosmetics all coming from other parts of the world; and a desire for, and intrigue with,
foreign brands [as shown by] the popularity of some of the most visible fashion brands."

The purpose of this paper is to explore the answers to our research questions. Are
female luxury buyers aware of where the products they buy originate from? DO foreign
brands have a higher rating on perceived quality compared to local Chinese brands? What
should Chinese brands do to compete?

It is worth mentioning that this industry is no longer just targeted to females. In

fact, male use of cosmetics are on the rise too. It will do well to specify that this paper will
only look at the female psychographic and general Chinese luxury consumption, without
much emphasis on male consumers.

2
 The potential of this study is quite plenty. This study has implications for brands
that may want to enter the Chinese market, and simply want to refine their marketing
communication strategy. A brand may also be looking into repositioning a existing product
that is not performing as well as one may hope. Also, this can be beneficial to a foreign
company with existing brand values and want to know which points to highlight in their
marketing strategies.

The method we used for this study is a comprehensive literature review of relevant
studies conducted on the luxury market in China and subsequent reports on the Country-of-
Origin effect. After collecting all the studies and theories, we take our learnings to
formulate a survey which is then circulated to our perceived target market, that is,
relatively mid- to high- income women who periodically buy luxury skincare and
cosmetics products. These women are also between 25 to 45 years of age. We then go into
a more in-depth one on one session with these women, carefully dissecting their sentiments
and points of view towards our findings.

The structure of this paper begins with a literature review, then uses two case
studies to further illustrate our thesis. The first is the typical case of a brand that wants to
enter the Chinese market, and are facing indecisions as to how to position their brand. The
second case is a strategic case that shows how a brand successfully positioned itself and
yet has to fight international brands based on a more preferential country of origin
perspective when it comes to luxury skincare and cosmetic brand. We then go into the data
collection and analysis of the target market, before ending with out conclusions and
implications. We end the analysis with recommendations for brands that want to enter the
Chinese market or reposition themselves in an existing market within China. Subsequent
appendices provide supporting tables and photos of the activities and literature that have
contribute to the completion of this paper.

3
Chapter 2 China Luxury Skincare and Cosmetics Industry

China has famously enjoyed a big leap in luxury spending, as is documented in

numerous studies. Behind the impressive numbers is a widespread belief that Chinese
psychographics differ from their Western counterparts, in terms of motivations, reasoning
and cultural beliefs. These inherent attributes shine through in their luxury purchases. We
must, however, identify what factors make up the stark differences between the general
luxury brands market to the luxury skincare and cosmetic industry.

While China has had a long running love affair with luxury, there are a lot of
literature that speak of the distinct nuances of Chinese attitudes towards their purchases.
Chinese are predominantly quite impressionable, and love brands that show off one’s
power, wealth or status in society. In other words, luxury has become a tool—a shining
beacon that says: “I am awesome.” The merits of this thinking are arguable; whether it is
detrimental or dismissible comes down to the brand itself. If one brand prefers to simply
generate sales then this is not a problem. If a brand wishes to maintain the most
prestigious, most admirable brand persona, then this may be a problem because
ubiquitousness of a brand goes against the label of it being a “luxury” item.

Luxury in itself is expected to form a kind of loftiness, a pedestal that is

aspirational. If everyone can afford or manage to get you, you are no longer a luxury but a
mass product that is available for any one. Brands then have to decide for themselves
exactly what it is that puts them on this pedestal. These pedestals are manifold: some can
be gained from craftsmanship, some from absurd prices, some from availability issues.
Take the Hermes Birkin, for example, which at its peak required women to be waitlisted. It
was not because Hermes ran out and had to wait for manufacturing. It was a message of
scarcity made to weed out merely those who can afford, to those with enough clout and
influence to get their hands on a bag. When we see celebrities carrying a Birkin and know

4
that no matter how much money I have I would have to be waitlisted, it presents a clear
distinction between must-haves and can-haves. This is the essence of luxury.

2.1 Luxury Market in China

China is currently the world’s second largest market for luxury goods. The
unstoppable force that is the newly riche and brand voracious Chinese consumer has
accounted for 14% of global luxury sales in 2008 and was initially expected to reach 34%
by 2015 (Fung Business Intelligence Centre, 2013). The Chinese have a love affair with
luxury brands and what has been dubbed conspicuous consumption because of the
attraction of latching on to global and westernized trends. This culture of flashiness and
ostentatious spending has been a massive force on the global luxury economy. China has
now overtaken Japan as the top spender in Asia, and now the second largest market since
2012 (Fung Business Intelligence Centre, 2013).

The Chinese attribute their love for luxury with a new “social protocol” that
identifies self-worth and power via the brands one attaches to your body (Chadha and
Husband, 2007). Buying into luxury brands are like an outward signal that you are
someone who matters, as opposed to Western sentiments of buying into brands that reflect
similar personal values. It is why a woman will buy an Hermes but not a Kate Spade, or
why someone will prefer Miu Miu to Prada. These brands outwardly communicate the
kind of woman who will buy them, and if you feel you are properly represented, the buyer
feels a personal satisfaction in being able to identify that.

In recent years, however, a government crackdown on luxury gift giving and

corruption has held the luxury spending back. Ever since a mid-level Chinese official Yang
Dacai was photographed sporting several expensive watches, that were curiously
unaffordable by someone with a supposed 15,000 RMB monthly salary, went under

5
investigation and found guilty of corruption, was thrown into jail with a 14-year sentence
under his belt (Kaiman, 2013), the Chinese have learned how to be more discreet with their
love affair with luxury.

The Chinese spent 15% less in 2013 on luxury goods compared to the previous
year. Studies from consulting firm Bain & Company also reported a slowing growth of 7%
in the Chinese luxury market, compared to the booming rate they were rising in 2011 at
30% and 27% in 2010 (Fung Business Intelligence Centre, 2013). This paper’s product
category focus, however, (cosmetics and personal care products) has enjoyed a growth in
2012 and beyond, up 15%.

The Chinese, while now curbing the spending, will take a lot more than this public
scrutiny to halt their penchant for shiny baubles. Chinese are now jetting off to Europe, US
or nearby Hong Kong to make their purchases. An estimated 60% of total Chinese luxury
spending in 2012 was made outside the country. The top reason for this migration of
spending is that luxury goods are cheaper abroad, and there is more variety outside China
(World Luxury Association, 2012).

In a specialized study on luxury spenders in China, researchers have identified the

main differences between Chinese and Western luxury buyers. While Western counterparts
buy these luxuries for reasons like a perception of self-worth, or a prize from working
hard, the Chinese’ motivations are primarily for social status and to activate self-worth in
the eyes of their peers (Chevalier and Lu, 2009). In other words, luxury is a way to look
good and show everyone how well you are living.

It is in this vein that we go more specifically to luxury skincare and cosmetics. To

the Chinese market that purchase to look outwardly good, what are attitudes towards

6
products that are two-for-two: a brand that activates self-worth and is a tool to make you
look better literally?

While bags, clothes and wristwatches are all popular and the most representative of
luxury spending, a lot of research has already gone into them. Luxury skincare, in
particular, has a lot of nuances and therefore subject to misinterpretation. Women will
never stop using skincare or cosmetics. Evelyn Lauder, the Austrian businesswoman and
Senior Corporate Vice President of Estee Lauder Companies, famously quoted “I never
leave the house without putting on lipstick.” In skincare, girls have been taught by their
mothers from a very young age to always apply moisturizer. Makeup artist for Guerlain
Ara Fernando is also a top supporter for staying faithful to a moisturizing scheme. “When
you reach 25, you have to start moisturizing everyday. And this is just for Asian skin. If
you are European, it’s better to start as soon as you hit 21,” she shares, “Often people wait
until they see wrinkles but moisturizing is designed to be preventative. It is never too early.
That’s why the beauty industry is my chosen industry. Everyone, even men, can and
should use skincare products. In the beauty industry, the world is our market.”

2.2 Luxury Skincare and Cosmetic Industry

We must first and foremost differentiate between prestige or luxury skincare and
mass cosmetics. While two of the biggest players are well known by any woman (or some
men), Estee Lauder and L’Oreal have one glaring misalignment. While L’Oreal gets 60%
of its global sales from the mass market, Estee Lauder solely focuses on luxury skincare
and cosmetics. For this paper, we will only focus on the latter. Estee Lauder is the second
largest cosmetics company in the world and as such is a massive player in this global $160
billion industry.

7
 Several factors serve as differentiator of this industry in the bigger scope of luxury
selling. First of all, most products will be topically applied. This alone brings these
products into an extremely personal level. It is not just an accessory that one can carry
around and/or replace. This is a product that will reflect your status on a deeper, more
intrinsic level. SK-II users will be known to boasts of bright, white, flawless skin. La Mer
users speak of the gentle formula made from the essence of the sea, to a price tag that
seems to reach higher up than normal sea level.

Another factor is that these products are intrinsically tied into appearance, even
after every inch of accessory has been taken off. It speaks to the inner confidence of a
woman and is more important, in this author’s opinion, than any bag or piece of clothing
that can simply be taken off. Similarities abound as well, however. The key is to make
your product into an object of desire; there is no difference from a wait-listed bag to a rare
pot of skin cream.

The global beauty market has grown 5% annually since 2003, but specifically the
Chinese beauty market has expanded a whopping 12% per annum. Luxury skincare and
cosmetics, in particular, grows about 20% each year in China. Clearly there is a booming
trend in this industry. In China, 82% of total beauty sales came from the premium facial
care spectrum (Sol, 2013). This growth is quite auspicious in terms of Chinese women’s
beliefs and perceptions of beauty and being attractive. There is an unspoken premium on
well-maintained skin that is far more modest and less ostentatious that covering one’s self
with branded handbags and designer labels from head to toe. At the same time, there are
nuances of how these brands communicate their products in such a way that targets both
the “Lost Generation” and Millenials.

According to a study by consulting firm Bain and Company, the luxury categories
of cosmetics, perfume and personal care grew consistently, although in a decreasing

8
manner, from 2011. The growth at 2011 was high at 22%, 15% at 2012 and 10% 2013.
While this may seem like a stagnating downward growth, one can compare to other
categories that experience negative growth (such as watches and men’s wear) and see that
there is much potential in this category.

There is a hefty tax on these luxury goods, however. Cosmetics and personal care
can be slapped with as high as 30% consumption tax and 6.5%-150% import tariff. This
makes for products that are roughly double the price as when they are sold overseas (Fung
Business Intelligence Centre, 2013).

Figure 1: Chinese Mainland’s Luxury Market

9
 2.3 Market Communication Perspectives

Looking at present advertisement and communication materials of the leading

luxury products, we find there are predominantly two big umbrellas of advertising: by
communicating intrinsic values, or by extrinsic value of product.

Intrinsic values will be factors that are inherent in the product itself and enrich its
quality. These are factors such as ingredients or special formulas. We all see products that
speak of “secret” formulas such as SKII’s Pitera or La Mer’s special essence of the sea.
There are also those the focus on a certain regional quality, such as Vichy and Avene, who
rave about the spring waters in their products.

Extrinsic values are added value details that have little or nothing to do with the
product itself. These are factors such as country of origin, special celebrity endorsers, or a
kind of emotional niche target segmentation. For example, Cover Girl has used an
extensive list of celebrities to be their brand ambassadors. These real “cover girls” portray
the fresh-faced radiance of the products, and tell the consumer that you can be like them if
you use our products.

While ideally brands must combine both intrinsic and extrinsic values to their
marketing to some degree, this paper shows that more often than not, women are becoming
more value-oriented and give less importance to superficial motivations.

2.4 Building Brand Equity

There are two ways consumers will prejudge a product: by its extrinsic and intrinsic
values. Extrinsic values are those characteristics that are possessed by the product, namely

10
price, perceived quality, brand image, country of origin etc. Intrinsic values are simply
physical appearance or characteristics of the product (Olson and Jacoby, 1972).

Brand image is important because this is how buyers will associate certain visual
cues with this brand. In building an emotional connection, buyers will often bridge their
perception of the product with their own self-concept, this making the physical and
emotional attributes of the brand story integral to marketing this product.

Building a brand in any product is infinitely different when you are doing it for a
luxury brand. With an FMCG, for example, you are essentially communicating brand
awareness and making sure this awareness aligns with desirable consumer behavior, that
is, the consumer buys it. With luxury, however, this decision process takes a different,
more emotional tone. With luxury, brands are selling a dream (Kapferer and Bastien,
2009). Buying luxury speaks of acquiring class and the outward declaration of taste and
culture. There are also predetermined luxury dream factors which was enhanced into an
actual measureable formula (Dubois and Paternault, 1995):

The dream equation: Dream = -8.6 + 0.58 Awareness – 0.59 Purchase

This luxury dream is measured by presenting a situation where one can purchase
top luxury brands without fear of obstacles, such as price or availability. It is the first step
to visualizing the situation that one’s dream is attainable. The dream is “a function between
brand awareness and rate of owners of the brand.” This effectively means that the more
people have access to it, the lesser the dream is desirable and the more it is diffused,
diminishing the total aspirational effect.
Before any of the acquisition, a brand is required to be known. Brand awareness is
key and is the first integral step to formulating this dream for the audience. If no one
knows your brand, no one will even begin to desire to associate one’s self with it, whether

11
or not they are able to. This is why these brands, to attain this level, must be media-savvy
and know how to communicate. Media advertising is key to getting a brand out, and
positioning in a relatively unattainable level. This separation between awareness and
attaining is what boosts the dream. The chasm between groups of people who want to
attain and those than can, is what elevates this dream.

Finally, when awareness is high and acceptable, the further the distance between
awareness and the capacity to attain creates and cements this dream. It is why as luxury
brands, one must communicate exclusivity and increase obstacles to accessing this brand.
Using marketing or media communication, brands must make the clear distinction between
a brand that everyone desires, to a brand only a few select can experience.

Chapter 3 Country of Origin Effect on Luxury Buyers

3.1 Introduction to Country of Origin Effect

The Country of Origin Effect is simply the judgment and perception of a product or
service in correlation with where they come from. Many experts have coined other terms
such as “made in marketing” or “made in label” effect, but for purposes of this paper, we
shall refer to this phenomenon as COO effect or just simply COO.

These prejudices may arise from certain products, national reputation, economic
and political background or even history. As globalization has grown and takes a bigger
hold on the world, preconceived notions of products manufactured or originating from the
other side of the world are existent in Asia. Globalization has only helped make this effect
more significant, particularly for developing and emerging markets like China and other
Asian countries.

12
 In very simple terms, it is the belief that a product manufactured from a third world
country is an inferior product to one that is produced in a developed country, such as the
United States.

The COO effect affects consumers and producers in different ways. Producers and
brands now choose to enter foreign markets and have to face internationalization issues.

There is both a positive and negative COO effect, and these effects differ
depending on the product and the recipient. Some studies even preface that COO effects
don’t entirely mean good or bad, it “has the effect of stimulating the consumer’s interest in
the product to a greater degree.” (Solomon, 1999)

One of the most succinctly written coverage of the COO effect was in 1982, when
researchers compiled all the existing research on the time (Bilkey and Nes, 1982). They
evaluated over twenty studies and collated results to provide a comprehensive account of
all the learnings. They concluded that yes, COO does indeed influence buyer behavior but
also posited that there are several considerations to take note of. In particular, one of their
biggest concerns was how general this belief was and how global can the effect span? This
means that while research show considerable existence of COO, there was no way to
conceivably establish the prevalence of the effect in respect to time or geographical
constraints.

3.2 COO Weaknesses and Literature/ Research Review

Despite myriad studies on COO beginning all the way from Schooner’s pioneering
paper in 1986, there are studies that argue that effects of COO are too generalized and are
in fact not at all meaningful to today’s consumers. It has been argued that consumers do
not in fact know much about their purchases, and that realistically the COO factor is not a

13
very important variable and is less influential than previously posited (Shimp, Samiee and
Sharma, 2001). In this paper, researchers say that previous experiments to test COO effects
were conducted in “experimentally manipulated country-of-origin cues in controlled
laboratory studies,” that were also quite “heavy-handed.” These tests also operated under
the imperative that consumers understood and were perfectly aware of a brand’s origin
upon purchase, which is simply inconclusive.

Brand Origin Knowledge (or BOK) is how a buyer or consumer is able to

effectively identify a brand’s origin. A research conducted on 5,000 adults in the USA
came back to the observation that respondents’ knowledge on the natural origins of brands
were not at all comprehensive. Only slight higher than one third of all brands were
correctly identified (M=35%; sd=16%), out of 84 well known brands. The average of 44
foreign brands came back with only a fourth of correct responses (MF-BOK=22%; sd=14%)
(Shimp Samiee and Sharma, 2001).

A focus shift from country of manufacture to country of brand is also significant.

This complex evolution of the COO speaks of how consumers are intelligent enough to
know that it is unlikely for a branded product to be manufactured in said brand’s country
(Aoun, 2012).

Other variations of this theory posit that it is not just a product’s origin country that
must be taken into consideration. Other origin factors apply to such as country of design,
country of assembly or country of mother brand, sometimes even country of original
invention.

Of course one must argue then to what extent women in the Asian demographic
will be aware of their skincare or cosmetic’s origin. In most cases, they will know exactly

14
where it was manufactured or will take the effort to know beforehand. This hypothesis will
be part of the framework for this research paper, to be discussed further in latter sections.

A study in Wuhan University of Technology performed a similar experiment

hypothesizing whether COO really did affect consumer behavior, this time specifically to
Chinese consumers. They surveyed 200 people with high income and are capable of
consuming luxury, both male and female. They found that overseas luxury brands
generally did have more advantages over local ones and significance was particularly high
in the category of luxury cosmetics and perfume (T test t=8.042, p=.000<0.05). Their
explanation was that this category of luxury brands has its own special country of brand
with its own reputation value that was difficult to copy or fabricate, and these are attributes
they connect with their own social status (Dan, Yani and Jintao, 2011).

Inasmuch as theories abound supporting, dismissing or simply wishing to improve

the COO effect, one can confidently say that certain products and/or services will have its
favorable country of origin where consumers feel most assured of quality. France, for
example, leads the way in cosmetics and wine, German in technology and Chinese with
silk.

3.3 CETSCALE/ Ethnocentric Bias

Analysis of how a consumer group’s has the tendency to be ethnocentric has also
garnered a lot of interest. Consumer Ethnocentric Scale or CETSCALE (Shimp and
Sharma, 1987) for short has received a lot of attention simply because the original 17-item
scale posited how a consumer group’s attitude was measureable towards local products and
their tolerance or preference for foreign products.

15
 Several studies have been made around the world. A study made for China (Hsu
and Nien, 2008), Shanghai specifically, found consumers in Shanghai had a mean score of
35.39, statistically significant at 5 percent significance level. The researchers also found
relatively moderate patriotism in Shanghai. Their first factor used in China’s CETSCALE
was called Conservative Patriotism, while the second was Defensive Patriotism. Their
second Hypothesis stated that consumers in Shanghai who had positive attitudes towards
domestic brands were less likely to purchase foreign brands, and these were primarily older
consumers. They also found that income levels did not have any influence on
ethnocentrism. The brands were ranked for respondents as placing local products first, then
Korean brands, US brands and Taiwanese brands last.

Table 1
CETSCALE FACTORS FOR SHANGHAI
Factor loadings of consumer ethnocentrism dimensions

16
Source: Hsu and Nien, Who are ethnocentric?, 2008

Table 2
CETSCALE RESULTS FOR TAIPEI AND SHANGHAI
Segmentation of respondents by ethnocentrism

Source: Hsu and Nien, Who are ethnocentric?, 2008

17
Chapter 4 Consumer Bias and Market Study

4.1 Demographic/ Psychographic of Female Luxury Buyers

In beginning to discuss our demographic and consumer behavior, one must

highlight the existence of low-context and high-context cultures. Majority of researchers
are in agreement that Western cultures are more low-context while Eastern/ Asian cultures
are more high-context. These characteristics will also affect appropriate advertising efforts
(Dongxin, 2012).

Asian consumer behavior also shows a stark difference from Western in terms of
concept of self and others. Asian concept of self is primarily more collectivist, where
group values are favored as opposed to Western individualistic. This explains partly the
love for luxury as a tool of social assimilation.

One of the pioneers of cultural differences is Geert Hofstede, who surveyed about
177,000 people in 66 countries to profile the differences in values between cultures.
Hofstede used initially five dimensions: power distance, individualism/collectivism,
uncertainty avoidance and masculinity/femininity, and long term orientation.

Power distance is the extent of how inequality is observed and accepted by people.
Individualism/collectivism speaks of how people are naturally orientated towards group
dynamics rather than singlehood. Uncertainty avoidance is a culture’s acceptance of
ambiguity or things that are unknowable. Masculinity/femininity refers to the distribution
of male and female emotional roles in a society. Finally, long term orientation suggests
whether the society focuses their efforts on the future, present or past.

18
 Table 3
Culture Dimension Scores for Ten Countries

PD=Power Distance; ID=Individualism; MA=Masculinity; UA=Uncertainty Avoidance;

LT=Long Term Orientation H=top third, M=medium third, L=bottom third (among 53
countries and regions for the first four dimensions; among 23 countries for the fifth)

PD ID MA UA LT

USA 40L 91H 62H 46L 29L

Germany 35L 67H 66H 65H 31M

Japan 54M 46M 95H 92H 80H

France 68H 71H 43M 86H 30*L

Netherlands 38L 80H 14L 53M 44M

Hong Kong 68H 25L 57H 29L 96H

Indonesia 78H 14L 46M 48L 25*L

West Africa 77H 20L 46M 54M 16L

Russia 95*H 50*M 40*L 90*H 10*L

China 80*H 20*L 50*M 60*M 118H

Source: Hofstede, 1993, p.91.

Source: Adapted from Hofstede and Bond, 1988, p.12-13.
Source: Wong, Edward, The Chinese At Work.

19
 China, along with Singapore, scored high on power distance, collectivism and long
term orientation. However, studies have found that these scales may have been outdated
and the new modern Chinese collectivism has to be separated in two dimensions:
workplace and private life (Wong, 2001). There is an apparent evolution of a “growing
spirit of Chinese-style” individualism”, wherein the younger generations are combining
Eastern traditions with Western thinking (Ralston, Gustafson, Cheung and Terpstra, 1993).

As consumers are bombarded day to day by products and services asking to be

bought, they have developed their own attitudes towards these products and thus know
how to weigh these purchases versus parting with money. These attitudes were initially
outlined by four motivations, that is: (1) utilitarian function, (2) value-expressive function,
(3) ego-defensive function, and (4) knowledge function (Schutte and Ciarlante, 1998).

The utilitarian function refers to how a product or service gives one pleasure in the
purchase. For example, one can think of the motivation buy fried chicken or a slice or
pizza. A bite, while generally accepted to be fattening and unhealthy, also gives the
consumer pleasure because it just tastes so good.

The value-expressive function refers to how a consumer perceives this product or

service to reflect his own characteristics and values. The perfect example for this are all the
Apple products that reflect the intrinsic values of a modern, artistic, confident individual.
As Scott Sineck famously put it: people don’t buy what you sell; they buy what you
believe.

The ego-defensive function refers to how a product or service gives the sense of
defense or protection from intrinsic factors. A perfect example would be diet pills, because
they communicate the advantages of looking your best and not feeling overweight and the
social implications surrounding it.

20
 The knowledge function refers to how a product or service provides a solution to a
complex problem. Complex, of course, is quite subjective. The perfect example would be
ERP systems for corporations, or even a high-powered vacuum cleaner that can rid your
house of that thick coat of dust.

In terms of the communication of luxury skincare and cosmetics, most prestige

brands will latch on to a combination of value-expressive function and ego-defensive
function while mass or masstige products will predominantly employ the ego-defensive
function.

4.2 Size and Buying Power

The number of Chinese luxury buyers is larger than other countries’, and they are
also younger. The average age of individuals who have assets of more than 10 million
RMB, henceforth referred to as High net Worth Individuals of HNWIs, in China is 39
(Roland Berger, 2012).

Females also make up the majority of luxury buyers in China. And because of the
rapid progress of China’s economy and standard of education, women are becoming more
and more independent and have increasing spending power. In a market study by Hurun,
women made up 40% of the 1.02 million people with personal wealth of 10 million RMB
and above. A Boston Consulting Group also reported that women’s luxury spending
increased from 46% in 2012, compared to a respectable but lower 25% in 2010.

21
 4.3 Access to Information and How Prejudices Form

Marketers have performed their job well, in terms of working with the COO effect.
Some brands will mask an unfavorable country of origin for their industry with a name that
sounds like a more favorable country of origin. For example, Korean company
Amorepacific has a luxury skincare brand called “Laneige”, which means snow in French.
France has always been top of mind for beauty products in terms of the COO effect. This is
just one of the examples of masking a less than favorable COO using branding schemes.

Research also shows that it is not simply a predisposed impression of a brand that
customers will bring into their shopping experiences. It is also important to know what
purpose they bring with them upon entering the store. Information provided while
customers are in the store will have different effects as well, in relation to how consumers
process the information. Research suggest that in the case of products where customers
will generally have some knowledge before going to make a purchase, it is best to provide
a point of comparison for other products while in store, especially if it is a new brand
(Bettman, 1979).

Women buyers also give a lot of importance to word of mouth. They will generally
believe in a brand or product once friends or key influencers in their lives recommend
these products. This also provides that the said friend or key influencer has actually tried
and tested this product, and has come away with positive feedback. When it comes to
looking for feedback, women also go to the Internet to read up on reviews on selling sites
or blogs. C2C selling sites such as Taobao provides an excellent feedback system where
people who have purchased a product can provide ample information to the quality and
usage. Dedicated beauty blogs are also plentiful, especially in Hong Kong, where some
girls will test products and post their findings on these sites. Another channel for influence

22
is with social media applications like Weibo were, similar to blogs, girls can rave and post
about new beauty buys.

4.4 Exposure to the Internet/ Social Media

Micro-blogging is rampant in China; arguably more so than any other country in

the world. In a count of top 500 meaningful keywords among Weibo tweets posted by over
8,000 netizens, 13% of tweets from those born in the 80s were about healthy and beauty,
compared to 7% of tweets from those born in the 90s. In the tweets about health and
beauty, 28% were about skincare and 22% were about makeup. In the same study, 43.8%
of netizens say the main reason for their activity on social media sites it to “acquire
valuable info”. Weibo is the favorite site for “getting news and acquiring information
about brands and organizations” (Kantar, 2014).

Female buyers will faithfully check a product’s peer reviews on Weibo and similar
forums before making the purchase. A study by DCCI show that 51.87% of micro-bloggers
will search the products they see online, 49.91% will go to the product homepage.

4.5 Buying Channels

In a recent study by an independent PR firm, they found that the most widely-used
channel for purchases for both Mainland Chinese and Hong Kong residents was online. A
whopping 36% of Mainland Chinese said they buy mostly of their luxury goods online,
while for Hong Kong it was a close 34%. This was a 22% increase from the survey from
the previous year of 2012 (Ruder Finn and Ipsos Group, Inc., 2014). The study covered
1,800 luxury consumers in both Mainland China and Hong Kong.

23
 Aside from online, the Chinese prefer to make their purchases abroad. An
estimated total of 60% of luxury spending from China was made overseas in 2012 (Bain
and Company, 2013). This is especially prevalent during the National Holidays, during the
Chinese New Year. In February 2013, Chinese spent as much as $8.5 billion on overseas
luxury purchases, which is a hefty 18% increase from the year before.

Ease of getting visa requirements is a new occurrence for the Chinese and this has
led to a big increase in overseas consumption. According to KPMG, 72% of Chinese
travellers will definitely purchase luxury items as soon as they arrive in another country
(KPMG, 2013).

There are two major ways for luxury brands to sell online: one is through self-
regulated platform like a website with e-commerce capabilities. The other is through third
party websites that cater B2C like the famous T-Mall and yihaodian.

The main difference is for the self-regulated websites, brand owners and companies
manage their own operations. They are responsible for their own marketing activities,
promotions, deals, after-sales customer service, and liaisons with shipping and delivery
schemes. For B2C, not all of the products available on these sites are authorized to be sold
by the mother companies. Since sites like Taobao allow C2C transactions, virtually anyone
with access to these products when they go abroad can resell for under Chinese suggested
retail price and earn still a respectable markup. Therefore, after-service for the consumer
rests solely on the third party seller. There are also the risks of counterfeit products being
sold, with no official authorization from the parent company.

Aside from online, brands have dedicated stores scattered in upscale venues in
China, such as the tourist-favorite Nanjing Roads. There are also shopping malls with an
entire beauty section where brands can set up a section or booth to show off their wares.

24
Then there are smaller third party beauty stores such as Mannings, Watsons and Sasa,
although these are generally more for mass-marketed brands. Sephora is an exception, as
they also carry high end brands like Kiehl’s and Dior/ Sephora is a good channel for these
luxury skincare and cosmetics brands because the core brand positioning of Sephora is
international and high quality, so this image transmutes itself on the products it carries and
vice versa.

Another channel worth mentioning are the companies that go into direct selling
such as Mary Kay, Avon and Amway. This channel, however, is more suitable for mass
products and therefore not applicable for our thesis.

4.6 The Made in China Revolution

While the Made in China tag has effected varied reactions around the world. After
massive toy recalls, melamine-tainted milk and various other poisonous food scares, the
world is now quite skeptical about goods made in China.

In the luxury skincare and cosmetic industry, however, a brighter outlook presents
itself on this outward-looking trend. Certain domestic brands have latched on to two rising
interests in the luxury skincare and cosmetics market:

1. Chinese women opt for more natural-based ingredients in their skincare and
cosmetic products; these are termed cosmeceuticals.

While standard benefits like whitening have always been popular, these are not
exclusive to foreign brands. Shanghai Inoherb has always incorporated natural and Chinese
medicine-related formulations in their products. The cosmeceuticals market has been
growing in China. According to HKTDC, more than 170 enterprises have tapped into this

25
market and they estimate this sector to grow to 20% in three to five years and reach sales
of over 20 billion yuan (HKTDC, 2012). The sales growth in the past until 2012 was
double the rate of the European and US markets. Some of the other domestic companies
tapping into this sector are Dihon Pharmaceuticals, Jawha and Beijing Tongrentang
Cosmetics.

2. Brands making Asian-specific products are rising and enjoying support from
local market.

International brands are now making Asian-targeted cosmetics. Estee Lauder

launched Osiao late last year, marketing it as specially formulated for Asian skin. Osiao
stands by its belief that beauty comes from within, and its products want to bring out a
natural radiance.
Of course this marketing message is nothing new. The original Chinese pioneer in
local cosmetics is the legendary Yue Sai, whose brand promise was “Nobody knows
Chinese skin better than Yue Sai.” The brand enjoyed being the number 1 cosmetic brand
in China back in 1998, before it was acquired by L’Oreal in 2004.

Chapter 5 Case Studies

5.1 Dorissiderm

Dorissiderm is a Hong Kong based brand that has been in the market for about
eight years. They have a strong following, their own websites and numerous features in
magazine advertorials. The owner and scientist behind the formulas is one Dr. Kendrick
Ng, and has viable connections with famous celebrities who willingly promote his
products. Generally, women who’ve used Dorissiderm say that the products work quite
well and they are happy to recommend them to their friends.

26
 Some of the issues with Dorissiderm is that the name in itself is quite a mouthful
and does not in any way communicate the benefits or virtues of the brand. While the suffix
–derm communicates it as a product for the skin, (e.g. short for epidermis or the topmost
layer of skin), what exactly is a Doriss? This question burns through the brand’s marketing
team until they decide to go for a makeover. The name does not say anything about the
virtues of this brand or what makes it unique from the market.

Another issue is that the number of products in Dorissiderm’s line up looks quite
similar, even if they all have different functions. For example, a tube-type facial wash
packaging is the same one as their overnight gel and exfoliating mask packaging. Three
very different products are in the same packaging, with only copy to differentiate them.
The same applies to the rest of their product lines. Their moisturizing line of dropper-type
bottles share this bottle type with four other products, again only differentiated by copy on
the box. A user interviewed said that, “Sometimes I get confused and pick up the wrong
product because the packaging is different. I even share it with my friends but one of them
picked up the anti-wrinkle instead of the acne cream because they were in the same
bottle!”

Dorissiderm is planning to launch in Mainland China by the end of 2014. This

leaves them with a dilemma: change the name to one that is more fit for the Mainland
Chinese market, or keep the old name and look and preserve the brand equity they have
garnered in the past eight years in Hong Kong?

Dorissiderm asked a brand consulting company in Shanghai to come up with a

solution. This author was a part of this project and as such has performed countless testing
and strategizing in remaking this brand to be a better fit for the Chinese market.

27
 The first order of business was to rework the name to communicate the benefits of
this product. The team highlighted the unique selling proposition of the brand, which is not
replicable or does not exist in any other brand. They decided to focus on the maker
himself—Dr. Kendrick Ng. This is an intrinsic brand asset that is unable to be replicated
but other brands. Granted other science-backed brands will use similar branding strategies,
such as the famous Dr. Perricone MD or Obagi series. It is a niche that is not without its
competitors. But in terms of identifying the intrinsic value to the product, this is a clear
way to differentiate.

The next step will be how to communicate benefits and value for buyers. The
followers of Dorissiderm have established that they are aware from long-time use that this
product is especially suited for Asian skin. As such, the branding team came together to
work on a strategic marketing plan to highlight the focus of this product.

5.2 Herborist

Shanghai Jahwa boasts as being one of China’s oldest companies. Jahwa is the
leading local cosmetics company in China, owing to a large portfolio that allows for brand
diversification and also multiple distribution channels. Established 110 years ago, Jahwa is
now one of the biggest and most successful domestic cosmetics companies in China.
However, that does not really say much in the face of burgeoning foreign competition.
Local Chinese cosmetics only account for roughly 10% of the total market (Mobius, 2013).

Jahwa launched the brand Herborist in 1998. Herborist’s brand identity was
composed of a very eastern stance on beauty and skincare. They use traditional chinese
herbal medicine in all their products, and as such has marketed themselves as a very
Chinese-specific brand. Channeling China’s centuries-old traditions of drawing from the

28
healing powers of plants and natural ingredients, Herborist has made for itself a very solid
brand identity in heritage, natural benefits, localization and specialization.

Although Herborist and Jahwa itself has been very successful in China, 1995 had
the company setting its sights on the foreign market. They established a state of the art
research team to further improve and modernize their “traditional” products, and prepared
to go into the international market. They first targeted the center of the global cosmetic
industry: Europe and in particular, France.

Today, Jahwa has invested a lot of money in high tech, state-of-the art
technologies, combining eastern traditions with modern scientific expertise. Jahwa
partnered with six universities, one of them renowned Shanghai Medical University, to
establish numerous joint research facilities and improve on in-house product development.

Chapter 6 Methodology and Research Questions

This research seeks to discover how women make their choices in evaluating and
buying luxury skincare and cosmetics and whether country of origin affects their choices at
all. We used two different methods of gathering original data: surveys and focus group
discussions.

According to past prescribed research methodologies in COO generalization, one is

advised to effectively measure two dependent variables: perception of quality and purchase
of intention. Both are tied around consumer behavior and product prejudice. Of course,
both concepts are quite distinct from each other. Perception of quality naturally precedes
and is determinant of purchase of intention. These two categories are justified by numerous
studies (Johansson and Nebenzahl, 1986).

29
 The study was conducted between November 2013 and March 2014. This study
used exactly 91 Mainland Chinese and Hong Kong females who habitually bought luxury
skincare and cosmetic items. The sample was collected from a mixture of social media
postings, to direct liaison with friends and family members. Twenty-four of these women
were part of an in-depth Focus Group Discussion (FGD), while the remaining 67 answered
surveys both verbal and online. Their ages ranged from 21 to 45. Their net monthly income
is a minimum of 12,000 RMB, which allowed them to indulge in luxury skincare and
cosmetic products. The survey helped us posit some quantitative data for our purpose and
became the building blocks of more in-depth interviews in the second stage of data
gathering, the Focus Group Discussion.

6.1 Survey

We used a sample of 67 women to answer our survey for this paper. We provided
several questions that would give us a better idea of general attitudes towards foreign
luxury brands in comparison to local brands. The survey provided us a quantitative look at
our market, effectively measuring their attitudes towards brand preference and comparison.
This is a more general look at attitudes and habits of these target luxury users, and their
concerns when it comes to luxury purchases.

We will be using a mixture of Likert scale and multiple choice to rate the
constructs. The women were asked a short series of 10 questions to gauge the over all
attitudes towards their favorite skincare brands, with respect to local brands. We also asked
about their usage and habits, as well as their preferences when it comes to local brands.

In this part of the research, we want to discover the general measureable qualities
of these women. We want to find out their attitudes towards their purchases and how big of
a percentage actually pay attention to the details in their purchases, such as country of

30
origin. We also want to find out how big of a gap exists between domestic and
international brands, and whether we can collect a bird’s eye view of what appeals to
women versus what causes doubt.

They survey was conducted both online and in person. The author disseminated the
survey to her contacts, ensuring all who answered would fit a certain criteria in terms of
age, interests and net income. The survey circulated online was posted on blogs like
Twitter, Weibo, Facebook and via email blasts.

6.2 Focus Group Discussion

While the survey gives us definite constructs on where our target market
perceptions are, we still don’t have enough subjective or in-depth information when it
comes to attitudes and psychographics. We need further exploratory and descriptive study
on how women actually interact with brands and go from observer to purchaser to avid
user. Thus, we must find a way to engage women in a more descriptive assessment of
thought processes and find a way to perform a more qualitative analysis of behavior.

A separate Focus Group Discussion was then formulated to provide us with more
insight. The group engaged with was 24 Hong Kong and Chinese women. These women
were interviewed in how they perceived certain brands and why they are habitual users of
the ones they like now. These women were also interviewed regarding the most famous
brands’ marketing material and which ones caught their eye and attention. They were also
asked what messages and communication are most effective in terms of brand impression
and perception of quality.

In this part of the research, we want to answer which marketing materials appeal to
these women. We also want to discover how women perceive brands based on certain

31
extrinsic qualities such as name and country of origin. We also want to discuss with the
women about which marketing elements they found attractive and eye-catching. After
which, we also asked which elements on the other hand they found confusing or non-
attractive.

6.3 Results and Analysis

According to survey answers, the most prominent results were the following:

When asked how often they use skincare and cosmetic products, 90% answered
daily.

Never,  0%   Twice  a  week,  

10%  

Everyday,  90%  

Figure 2. Frequency of Skincare Product Use

32
 When asked whether they were aware where the products they used were made
from, 62% answered vaguely, while only 29% answered that they knew where all their
products were from.

No,  9%  
Yes,  all  of  them,  
29%  

Vaguely/  Some  
of  them,  62%  

Figure 3. Awareness of Product Origin

33
 When asked if it mattered where their products were made from or manufactured,
46% answered it depended what product it was, 31% answered yes.

It  matters  
Not  really,  8%  
greatly,  6%  
A  little,  10%  

Yes,  31%  

Depends  what  
product  is,  
46%  

Figure 4. Relevance of Product Origin

When asked whether they buy local Chinese skincare and cosmetic products, 23%
answered they will never buy them.

Yes,  I  support  
Chinese-­‐
made,  6%  
Never,  23%  

Sometimes,  
71%  

Figure 5. Preference for Chinese-made skincare products

34
 When asked if they would use a product if a friend recommended it and even go as
far to replace a product they were using now, 77% answered they would only if the product
would work well with them personally.

Yes,  in  a   No,  only  

heartbeat,   foreign,  9%  
14%  

Depends  if  it  

works,  77%  

Figure 6. Response to Friends’ Recommendations

When asked where they hear about brands or how the build their perception of a
product, 78% answered from friends (word of mouth or personal recommendation). The
Internet option included blogs, posts and official websites. The advertising option referred
to billboards, magazine ads, and commercials. The friends option referred to word of
mouth or personal recommendation.

35
 Internet,  30%  

Friends,  78%  

Advertising,  
48%  

Figure 7. Source of Information

According to the FGD sessions, the participants were asked more in depth
questions about their preferences and initial attitudes to products. In these sessions, the
women observed were asked to explain carefully their knee-jerk impressions on certain
brands and marketing material.

In the first exercise, the women were shown two bottles of hand cream with the
labels removed. Each bottle had a corresponding card explaining the product ingredients
and benefits, without country of origin. The descriptions were phrased in similar style,
without marketing writing flair.

In the second exercise, the women were shown five bottles of hand cream with just
a name on each bottle: La Fontaine, Jalique, 美美, Inoflower and Yue Dai. The females
were not given any other information aside from the names of the “brands”. These names
are not real brands but were designed to sound like a certain language, both foreign and

36
local. La Fontaine and Jalique sound very European. 美美 is a representation of the
Chinese characters for beauty, and is pronounce “mei mei”. Inoflower is an ode to local
brand Inoherb, which manufacturers natural-based beauty products in China, while Yue
Dai is distinctly Chinese, and is reminiscent of a woman’s name. When asked to choose
which product they thought had the best quality, 93% said they were extremely confident
with Jalique. The second most popular with the women was Inoflower, which scored 72%
extremely confident votes.

100%  
90%  
80%  
70%  
60%  
50%   93%  
40%   72%  
30%   58%  
20%  
10%   16%  
2%  
0%  
La   Jalique   美美   InoTlower   Yue  Dai  
Fontaine  

Figure 8. Confidence in Five FGD Brands

37
 The least popular with the women was Yue Dai, with 64% saying there were highly
doubtful of its quality.

70%  

60%  

50%  

40%  
64%  
30%   58%  

20%  

10%   17%  
11%  
6%  
0%  
La  Fontaine   Jalique   美美   InoTlower   Yue  Dai  

Figure 9. Doubt in Five FGD Brands

In the third exercise, the women were shown fifty marketing material from recent
cosmetic ads released in 2013. The women were instructed to dismiss brands and only
choose for imagery. Amongst the ten or so that they initially chose, they were asked to
choose the one they would most probably buy.

38
The ads that caught the most “favorites” were the ones that featured a lot of ingredients and
natural imagery.

Figure 10. Estee Lauder Pleasures Ad: 2010

39
Figure 11. La Mer Moisturizing Gel Cream: 2011

40
Figure 12. Herborist Moisturizing Cream Ad: 2013

41
The next popular were the ones with models and celebrities and dramatic visual design.

Figure 13. Cle de Peau Fall/Winter Ad: 2007

Figure 14. Christian Dior Dior Show New Look Mascara ad: 2012

42
Figure 15. Shu Uemura Holiday Collection x Wong Kar Wai ad: 2011

43
The least liked ones were the ads with a lot of scientific imagery. The interviewees thought
these were a little too pretentious and did not fully understand all the claims.

Figure 16. Estee Lauder Time Zone ad: 2008

44
Figure 17. La Roche-Posay brand ad: 2010

Figure 18. Fancl Mask Expert ad: 2010

45
Chapter 7 Effective Marketing Communications

7.1 Changes in Marketing Communications in China

China has been bombarded with numerous ads and brand communication schemes
in the recent years. Following the boom of the luxury market, brands have known that
China was the next great frontier in terms of increasing sales.

Branding in China has now taken a more sophisticated tone. No longer are the
copies humorous phrases reminiscent of “engrish”, but of thought-provoking, accurate
sentiments. As incomes grow, so do tastes and cultured experiences.

One major change is the shift from Westernized to appreciation of local elements of
beauty. As outlined in the CETSCALE evaluation, Chinese are more ethnocentric than
other Asian counterparts and have a lot of admiration for local tastes. Brands, both
domestic and international, should communicate by focusing on the interests of local
demographic. This does not mean, however, to ignore the tenents of a global brand’s
standards because luxury is still on its own pinnacle of perception. It is not so much
localization but understanding and a subtle communication. While brand strategy and
positioning should remain lofty, brands have begun to understand that appealing to local
concerns remain key in entering the Asian market.

7.2 Differentiation for Local Brands

One of the key things to remember is to make bias work for you. Instead of
focusing on negative imagery, a brand must work on inherent strengths and communicate
these to the target market. We can see this in the selection of products based on ingredients
and benefits intrinsic to the product. We can also see this in the rise of cosmeceuticals

46
sector in China. There is no longer such a big focus on whitening, but an inner glow; a
healthy radiance. Chinese consumers define this healthy radiance with natural products and
are continuously making choices based on the attributes and benefits of the products.
While a fancy, French-sounding name will not hurt, being a domestic brand or even a
fellow Asian brand will not diminish market success if advertised to communicate natural,
healthy intrinsic values properly.

Herborist has maintained and stayed true to its brand value of “keep the beauty of
the earth”. They introduced a relatively fresh concept in their inception which combines
natural herbal ingredients and modern technology into their products.

Dorissiderm planned to combine two biases into one successful package. They
aimed to combine an International quality positioning with Asian skin expertise.

The first step to their strategy was to rename Dorissiderm into a name that was
easier to remember and communicated the Unique Selling Proposition. The team renamed
it to DRK which communicated the moniker for the founder Dr. Kendrick Ng. The name
was easier to understand and remember than the long original name of Dorissiderm and
was tested to have better recall among existing clientele.

The next change was the packaging. The design was aimed to make the products
look more scientific with the usage of a steely, light blue and white color combination. It
was clean and modern and communicated a highly reliable and scientific formulation
behind the product.

Another change that came under debate was from the parent company. Dorissiderm
heads wanted to highlight the fact that the formula was made in the USA. The brand was
based in Hong Kong and originally marketed there, but Dr. Kendrick Ng had laboratories

47
in Los Angeles. The company wanted to use this fact and reflect this on the packaging
because they felt that an international, Western tone would make it more trustworthy.
The branding company first argued that the one specializing factor of the formulas
was the fact that it was especially made for Asian skin and thus far was an inescapable
strength that should not be diminished by the perception that attaching a Los Angeles tag
would make it more trustworthy than it already is. The standoff lasted for a few weeks
before the two parties decided to go ahead with the new logo development with a line that
says –Los Angeles– at the bottom of the name.

The packaging is under the testing stage at this moment. It is still too early to say
whether adding the Los Angeles name would help in the product’s brand equity and
consumer perception. This case clearly shows the dilemma and thinking of most Asian
companies in why they try to attach Western influences or imagery to their products.

7.3 Communication Suggestions and Strategies

There must be a well-meaning shift from simple brand selling to holistic customer
experience. Strive to build “brand loyalty and lifelong relationships at each point of
contact. Every customer contact provides an opportunity to enhance an emotional
connection. A good experience generates positive buzz. It is essential… [to] see the world
through the eyes of the customer.” (Wheeler, 2006) This study finds that communicating
natural benefits coupled with unique visuals that clearly set your brand apart is the
predominantly successful way to market a new product in China.

In 2007, Herborist opened its Herbal Medicine Research Institute, which was
focused on developing effective and original formulations for their products. They
combined time-honored Chinese medicine with modern high-tech ingredients, thus
cementing their brand positioning as a local Chinese brand with international capabilities.

48
Shortly after entering the European market, they invested in recreating their new brand
image in 2009, which was also the brand’s 11th year anniversary. Still, they stayed with
their green thinking and positioning.

A crucial point in Herborist’s brand strategy was their commitment to providing the
best quality products to their loyal customers. Especially after the numerous quality control
issues China faced in recent years. Herborist knew that this was an important matter that
was not to be taken lightly. They introduced the ISO9001 quality management system that
allows them to maintain a stringent level of quality and professionalism in their products.

Brands can communicate a subtle specialization or expertise in Asian concerns,

while still upholding the loft ideals of a global brand. It is like taking the best of
ethnocentrism and the best of the COO effect together. While one can be argued as
mutually exclusive and actually quite opposite, making them work together in terms of
communication can be a new strategy to communication.

For example, Estee Lauder’s Osiao brand has done this exact thing upon their
release last year. They brought with them the prestige of a French brand (highest COO
reputation for cosmetics) and the scientific formulas of a product that is targeted for the
Chinese woman. The launch happened late last year so it may take a few more years to
gauge sales performance, but this is a new direction brands must consider going into.

Chapter 8 Conclusions

8.1 General Findings

A. Majority of female buyers have only a vague idea of product origin

49
 According to our survey findings, a large amount of respondents reported
they only had a vague idea of where the products they used were made from. This shows
that women make the distinction only between local and foreign, and not necessarily based
on specific country. However, this does not remove the fact that the distinction between
local and foreign is non-existent and in fact it is still all the more evident. A large amount
said they would never buy a skincare brand made in China and this is alarming since those
surveyed were all local Chinese women.

B. Foreign brands have a higher rating on perceived quality

Women will at the end of the day pick up cues from advertising and friends’
advice, but whether they will continue using a particular product depends entirely on its
performance. This may be tricky because women’s skin are all so different. One woman
may have hyper-sensitive skin, another may have dry skin and thus the same product will
react differently for them. In terms of brand response, a company must properly
differentiate and communicate which products are best suited for a woman. Ensuring high
quality performance is key to brand loyalty, regardless of how much you spend on
marketing.

One can take a page out of Jahwa’s book where they invested a lot of
resources on establishing a local dedicated center for their R&D. Focusing and investing
on what can improve your product is still the number one concern. Women will always
know if a brand has their beauty and skin health in priority, rather than one that simple
makes money.

C. Highlight ingredients and natural benefits

50
 From the FGD analysis of marketing materials and literature review, we can
conclude that Chinese female buyers are skewed towards and attracted to natural imagery
and herbal benefits. They like this form of product benefit more than scientific
formulations because the latter tend to have a “harsher” perception compared to gentle,
natural ingredients that heal the skin.

We can take a look at how Herborist brands itself as one who champions
age-old Chinese herbal methodologies in its ingredients. This brand positioning has
worked well for them and is perceived well even in non-Chinese markets.

D. Ensuring product quality is unquestionable and excellent is critical

In surveys, FGD and literature reviews, all feedback point to the fact that at
the end of the day, female consumers will remain loyal to a product if its benefits and
performance is without question. The reason Chinese brands suffer from a brand
perception perspective is that, whether true or not, quality control is not stringent enough
compared to European brands. It is time to step up and ensure quality management is
upheld, whether by observing international standard certifications like Herborist or a
dedicated quality management department within brand headquarters.

8.2 Implications

This study is beneficial not only for target cases provided in this paper, but also to
other companies. Such companies may be in different phases of entering the Chinese
market. A company may be a foreign one that wants to develop brand positioning or
enhance existent positioning onto effective marketing material. A company may also be
looking into restructuring current product architecture and relook formulations from

51
another perspective. A company may also simply be launching a new product and is unsure
of how to tailor communication material.

8.3 Limitations and Future Research Directions

As with any research paper, it is advised to remain focused on a specific topic

rather than go into generalizations of a study. This paper has attempted to give light on
how luxury brands should try to skew their marketing communications, with respect to
capturing the market.

This paper looks mostly into the psychographic of women and their attitudes
towards their favorite brands. We do not go extensively into demographics, as is posited
that most wealthy in China have ascended so quickly that clear demographic standards are
blurring in the general ascension of net worth.

Another limitation is that this whole paper has focused on looking into the female
psyche, and completely disregarded the male side of the industry. Male-focused cosmetics
have been on the rise too and present a big part of the recent global cosmetics industry
sales, but we have chosen to forgo looking into this segment. A reason for this is that males
have a completely different outlook and set of motivations when it comes to products.
Future research perhaps can look more into male counterparts and their growth in Chinese
cosmetics interest.

Another future prospect will be to look into mass or masstige products, and not just
in luxury circle of cosmetics. There are more brands that capture the market in masstige
products, and understandable a bigger market would have to be studied when it comes to
this segment. Attitudes may differ, especially when it comes to country of origin.

52
53
Appendices

54
Appendix 1 Dorissiderm Rebranding Efforts

Original Packaging. Similar with copy the only differentiating factor.

55
Appendix 2
Dorissiderm Rebranding Efforts

Proposed New Packaging. Color coding to identify product lines.

56
Appendix 3
Dorissiderm Rebranding Efforts

Dorissiderm Original Logo

57
Appendix 4
Dorissiderm Rebranding Efforts

Proposed new logo for DRK with Los Angeles

58
Appendix 5
Herborist Naturals Line

59
Appendix 6
Online Version - Survey

60
Appendix 7
FGD Activities

61
Bibliography

62
Aoun, K.: 2012, ‘The Evolution of the Country of Origin Effect In the Era of
Globalization’

Bain & Company: 2013

Bettman, James: 1979, ‘Memory Factors in Consumer Choice: A Review’, Journal of

Marketing, (Spring) p. 49

Bilkey, W. and Erik Nes: 1982, ‘Country of Origin Effects on Product Evaluations’,
Journal of International Business Studies, pp. 89-99.

Chadha, Radha and Paul Husband: 2007, ‘The Cult of the Luxury Brand’ (London:
Nicholas Brealey International), pp. 3, 143-145

Chevalier, Michael and Pierre Xiao Lu: 2009, ‘Luxury China: Market Opportunities and
Potential, (John Wiley & Sons), pp. 16-200

Dan,W., Chen Yani and Han Jintao: 2011, ‘Research on the Influence of Country-Of-
Origin Effect to Brand Attitudes of Chinese Consumers on Luxury Goods’, Proceedings of
the 8th International Conference on Innovation & Management, pp. 1088-1092

Dongxin, L.: 2012, ‘China’s Ad Industry: Consumer Culture Strategy and Integration
Marketing Communication’, (Korea) pp. 65-77

Dubois, B. and C. Paternault: 1995, ‘Understanding the world of International Luxury

Brands’, Journal of Advertising Research, p. 35

63
Fung Business Intelligence Centre: 2013, ‘Luxury Market in China: Huge Growth
Potential Ahead’, (April), pp. 6-18

Fung Business Intelligence Centre: 2014, ‘China Customs’

HKTDC: 2012, ‘China Consumer Cosmetics Market’

Hsu, Jane and Han-Peng Nien: 2008, ‘Who are ethnocentric? Examining consumer
ethnocentrism in Chinese societies’, Journal of Consumer Behavior, pp. 436-447

Johansson, Johny and Israel D. Nebenzahl: 1986, ‘Multionational Production: Effect on

brand value’, Journal of International Business Studies, pp. 17-101

Kaiman, J.: ‘China’s ‘Brother Wristwatch’ Yang Dacai jailed for 14 years for corruption’,
www.theguardian.com/world/2013/sep/05/china-brother-wristwatch-yang-dacai-sentenced

Kantar: 2014, ‘China Social Media Impact’

Kapferer, J.N. and Vincent Bastien:2009, ‘The Luxury Strategy: Break the Rules of
marketing to Build Luxury Brands’, (London: Kogan Page Limited), pp. 127-136

KPGM: 2013, ‘Global Reach of China Luxury’, (January)

Mobius, Dr. Mark: 2013. ‘Understanding the Chinese Cosmetics Market’, Franklin
Templeton Investments, pp 1-3.

Olson, J.C. and J. Jacoby:1972, ‘Cue Utilization in the Quality Perception Process’,
Advances in Consumer Research, (Iowa: Association for Consumer Research), pp. 77-91

64
Ralston, D.A., DJ Gustafson, F Cheung, and R.H. Terpstra: 1993, ‘Differences in
Managerial Values: A Study of US, Hong Kong and PRC Managers’, Journal of
International Business Studies, Second Quarter, pp. 249-275

Roland Berger: 2012, ‘Chinese consumers report. Luxury: a brand awareness upgrade.
Welcoming a new era in the Chinese luxury market’, (October)

Ruder Finn, Inc. and Ipsos Group: 2014, ‘China Luxury Forecast’

Schutte, Hellmut with Deanna Ciarlante: 1998, ‘Consumer Behavior in Asia’, (New York:
New York University Press)

Shimp T.A., S. Samiee, and S. Sharma: 2001, ‘The Country of Origin Effect and Brand
Origin Knowledge: How Little Consumers Know and How Important Knowledge Is’,
European Advances in Consumer Research Vol 5, pp. 325-326

Shimp, T.A. and S. Sharma: 1987, ‘Consumer Ethnocentrism: Construction and Validation
of the CETSCALE’, Journal of Marketing Research, Vol 23, pp. 26-37

Sol, A.: 2013, ‘Asians Drive the Premium Skin Care Market’, Emerging Markets Insight,
pp. 9-15

Solomon, Michael.:1999, ‘Consumer Behavior: Buying Having and Being’, (New Jersey:
Prentice-Hall, Inc.), pp. 4, 288-292

Wheeler, Alina: 2006, ‘Designing Brand Identity’, (New Jersey: John Wiley & Sons, Inc.)
pp. 36-68

65
Wong, Edward: 2001, ‘The Chinese At Work: Collectivism or Individualism’, (Hong
Kong: Lingnan University)

World Luxury Association: 2012, Infographic study

66
 复旦大学研究生限制级（内部）学位论文申请审核表
申请人姓 专 业
名
学 号 学位层次 博士□ 硕士□
所属院系 导师姓名

论文题目

申请理由：

申请人（签名）： 年 月 日

导师意见
导师（签名）： 年 月 日

院系意见 负责人（签章）： 年 月 日

学位评定
分委员会
审核意见 分委员会主席（签名）： 年 月 日

负责人（签章）： 年 月 日
研究生院
审核意见
注：限制级学位论文的申请主要针对论文研究内容涉及知识产权、商业秘密、技术秘密、工作秘密、个人隐私
以及待申请专利等情况，保密期限为两年，制作论文时请务必在论文封面右上角学校代码的上方注明“限制级
：内部★两年”的字样。

论文独创性声明
本论文是我个人在导师指导下进行的研究工作及取得的研究成果。论文中除了

特别加以标注和致谢的地方外，不包含其他人或其它机构已经发表或撰写过的研究

成果。其他同志对本研究的启发和所做的贡献均已在论文中作了明确的声明并表示

了谢意。

作者签名： 日期：

论文使用授权声明
本人完全了解复旦大学有关保留、使用学位论文的规定，即：学校有权保留送

交论文的复印件，允许论文被查阅和借阅；学校可以公布论文的全部或部分内容，

可以采用影印、缩印或其它复制手段保存论文。保密的论文在解密后遵守此规定。

作者签名： 导师签名： 日期：

lxix