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Luxury in the digital age: the challenge of balancing “slow time” and “fast time”

At Luxe Pack Shanghai 2017 held in April, Ifop CEO Stephane Truchi and Luxurynsight CEO Jonathan Siboni shared their views on how luxury brands should adapt to the digital era in a conference entitled “The Digital Transformation of Luxury”.  

While 50% of Chinese domestic luxury consumption will be generated online by 2020, it is of the utmost importance that luxury brands remain abreast of digital innovations and place them at the very heart of their development strategies.

Although luxury brands are forever more accessible and time has speeded up subsequently to the development of digital technologies, Stephane Truchi places emphasis on how important it is for luxury brands to maintain their focus on the traditional values of luxury which include one to one relationships with clients, a physical point of sale, sensoriality and paying close attention to clients’ needs in particular through advice and direct contact.

In this way, the challenge facing brands today is to bring these two worlds together and create a balance between “slow time” and “fast time”, while preserving the essential dimensions of luxury such as mystery, rarity, excellence, expertise and occasionally keeping a distance from the digital universe by focusing on interaction, dialogue and ephemeral actions.

Finally, Stephane Truchi closed the conference by outlining three key strategies to ensure that luxury brands maintain their exclusivity in a digital world accessible to everyone:

  • Create an irresistible desire – brands need to expand their range of visual, written and video materials with remarkable content, thereby revealing unknown facets to clients, fostering intimacy with new generations (millennials), and opening new channels via influencers.
  • Deliver a unique experience via new technologies and initiatives to ascertain a seamless service, while creating an opportunity for interaction between the digital and the physical worlds and tapping into social interaction.
  • Foster a close relationship with clients based on the latest advances in technology such as chatbots, thus encouraging automatic interaction between clients and the brand, ensuring personalisation of support services and providing the opportunity for real-time interaction with a community.
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Hot trend in China: Live-streaming apps turn Nobodies into Internet Celebrities and offer unique money-making opportunities.

 

A pretty woman casually dressed, eating noodles and talking about the makeup she is planning to buy. A handsome man gazing at the webcam in silence. A lady singing a cappella in her living room. What do they have in common? Hundreds of thousand followers.

The Live-Streaming craze is sweeping across China. Millions of regular people are now sharing bits of their lives with the world seeking for fame and expecting to gain cash.

Yizhibo, Xiandanjia, Douyu and Ingkee are some popular apps among the 80 apps for live streaming available in China, and the number is growing all the time.

Why these videos which seem meaningless have so much success?

These apps allow people to peek into the lives of strangers and interact with them to an unprecedented extent. The viewers can send pop-up messages to the streamer and “tip” them with virtual presents they buy from the apps. The streamers can then exchange their presents for cash.

On Ingkee, one yuan (0,10€) buys 10 “diamonds”. Tipping a beer will cost you 1 diamond, a Ferrari 1200 diamonds and a yacht 13140 diamonds.

Competition between streamers is fierce, a raking based on the number of followers and the number of “diamonds” is accessible. Some accounts have reached many millions of diamonds.

It is necessary for brands to conquer the Live-streaming world.

These Internet celebrities are highly influential leaders among the young generation and they receive money from brands for broadcasting their products.

The apps are already used for commercial purposes. Individuals and companies use them for selling makeup and skincare products.

Celebrities also broadcast to interact directly with fans.

L’Oréal has a live-streaming account and offers sessions of live show with the brand’s muses.

Ingkee, is only one year old but has been ranked No. 1 on Apple’s China app store multiple times. Ingkee says over 50 million users have downloaded its app. Douyu claims 120 million active monthly users.

Live-streaming apps are a great opportunity for brands to reach customers beyond geographical limitations and at low costs.

Article written by Thi My Nguyen, Market Research Manager at Ifop Asia.

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The Evolution of Leisure In China

 

Today Chinese society is in a flux. Both the economic growth as well as the pace of growth of the past 35 odd years has had a massive impact on not just on the economic wellbeing of the Chinese people but also on the society in general. With the increasing affluence levels, higher disposable incomes, access to new product categories and increasing integration into the wider world, has meant not only have the people’s lives changed but also the way they relax, unwind and spend their leisure time.

Unlike in the past where the favorite pastime of most Chinese people was confined to what was acceptable within the social realm, now the same has evolved with the changes in the society. What is acceptable and not acceptable is now more a domain of the individual with the focus firmly on more balanced, engaging and diversified lifestyle.

Consequently we observe evolution of leisure options beyond traditional restaurants, stroll and activities in the neighborhood parks and KTVs to leisure travel, health & beauty, shopping and even online indulgences. This evolution signifies a move away from more basic motivations of safety, nutrition (health) and tradition to more mature-exploration, experience, authenticity, and value proposition.

The Chinese government too has had a hand in this evolution. The government has pushed to increase domestic consumption by providing more days off for Chinese people to spend on leisure activities. In 1995, the government introduced 5-working-day week, providing people with 2 days a week of leisure and rest. In 1997, the golden week and the national day were introduced as additional measures to boost domestic spends. Finally, the new labor law in 2008 was enacted to provide yearly 5 days of paid leave to make Chinese people to connect more with their families and in the process boost the economy.

Explore and Experience

Traditionally for Chinese people, food (a major leisure indulgence) used to be more about nutrition and health. With increasing affluence and consequently travel becoming more common, food is becoming more about experience, authenticity and exploration. Cheese and regional wine are riding high on this wave. 94% of Chinese consumers say they have tried French cheese and were likely to eat some again. Definitely, times are evolving.

While travel on the other hand was previously considered as a leisure activity with a focus on destinations (been there, seen that), it has now shifted more to qualitative and “out-of-time” experience where people want to live the present moment, enjoy  the experience, explore and exchange.

A study conducted by IFOP has shown that Chinese people save for difficult times, for their children’s education and… for travel. In first tier-cities (Shanghai, Beijing and Guangzhou) travel even emerges as the primary motivation for saving.

Travelling agencies noticed this shift and have tried to seize this new market by offering for instance journeys focused on particular themes such as gastronomy, relaxation (cruise), or sport (hiking) and in the process work on people’s motivation of experience and explore.

Other emerging trends

The younger travelers focus more on independence when it comes to travel and we also see solo or non-tour group travelers on the increase. They are no longer interested just in running from one scenic/tourist spot to other and endure endless bus rides in the process. They now want to experience and live the moment.

Travel aside, we observe rise of health and beauty based leisure avenues. There is a common Chinese belief that to be successful in life, one needs to look good (and of course healthy). This belief is leading to increasing focus on keeping fit and also quick fixing perceived bodily negatives. This aspect is also seen part of leisure and Chinese people are going all for benefiting from options that cater to these needs. While the elderly have the gym and dance in public parks, most young people are hooked to the gym.

People are also opting to go abroad to seek medical attention. It may be for more serious medical conditions or for cosmetic surgeries. This trend has given rise to new travel trends such as medical tourism (e.g. plastic surgery). Countries like Korea, Thailand are hot destinations for Chinese people to travel to get medical attention and also in the process enjoy visiting the country.

Kings of Shopping

Shopping is considered an integral part of leisure activities of Chinese people. To them it’s more than buying. It’s an experience and a social activity. Rise of malls is an example of this trend that caters to these requirements. Chinese people spend a lot of time living the experience of shopping. For instance, when they want to buy a premium beauty product, it all starts with talking to each other (social occasion). It’s followed by an online search for information (personal engagement and involvement) and actual buying of the product in physical stores in China or abroad (experience). It’s not surprising that online channels are now trying to replicate the physical store experience on the website to engage more consumers.

At the same time, shopping malls are becoming a lifestyle and provide a wide range of services to enhance the shopping experience: game rooms, restaurants, beauty salons, and cinemas are much more numerous than in our malls.

Even when it comes to travel, shopping in the world’s biggest cities remain the top motivation irrespective of age or gender. The voracious appetite for shopping can be seen in duty free stores in the world’s major airports as well as high streets.

Digital

Talking about online, the digital revolution especially the rise of social media and e-commerce has had deep impact on the way Chinese people conduct their lives and also their leisure habits. Nowadays, it’s very common for Chinese people to explore leisure ideas, discuss travel plans, look out for promotions for hotels, book tours, all using just their smart phones. Smart phones have made information accessible in a magical way and the Chinese people are using it like no other people elsewhere. As a consequence, possibilities are endless and spend time on wechat or weibo is now considered as leisure.

In conclusion, undertaking leisure activities is becoming more and more commonplace among Chinese people. We can fairly say that Chinese people have truly come off age when it comes to their leisure activities and are now looking to further their experience by spending on numerous avenues that offer them such indulgences.    

Article written by Manohar Balivada, Vice President, Ifop, Shanghai. Published in Connexions magazine N.77  

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Have Chinese Women Started to Look Beyond Beauty Products?

 

 

In China, the importance of beauty can’t be overemphasized especially for women. The concept of beauty which is traditionally dictated by fair and pale skin (boiled egg complexion and tone) is now morphing into emphasis also on sharper and fuller facial and bodily features. The belief that skin care products can only do so much to make one look beautiful is taking roots with women looking for quick fixes such as micro or cosmetic surgeries to achieve perfection in their quest to look beautiful.

According to current market estimates, until 2013 only approximately 5 million Chinese women did one or the other form of cosmetic surgery.  By 2015 this figure rose to over 7 million and by 2018, it’s likely to touch 11 million. Although the figures are minuscule compared to the size of the population, but the growth is estimated to be stronger going forward despite government regulations and societal constraints.

To contextualize, it’s estimated that between 80 to 90% of Chinese women use skincare products and up to 40% use color cosmetics. Assuming the latter group is more into beauty, and as a consequence more likely to undertake cosmetic surgery, the full potential of this market becomes more obvious. A study by Chinese lifestyle magazine SELF and IFOP Asia estimates that approximately 15% of Chinese women are considering doing micro/cosmetic surgery in the future. Considering this figure of 15% who intend to undertake a surgery in the future, the size of the category skyrockets to nearly 40 million potential consumers in the next 5 to 10 years. (15% intenders among 40% color cosmetic users of the total Chinese women population).

In fact, in comparison to their counter parts in more mature neighboring markets, Chinese women undertake such surgeries on a greater scale than even their Japanese counterparts across all treatments/procedures. However the Chinese women get trumped by Korean women although in terms of interest and intent to undertake these treatments/procedures in the future, they in turn trump the latter.

This category predominantly attracts younger females although in recent years Chinese men too have started going under the knife. This is only likely to add to the huge potential of this category. The acceptance of more comprehensive and multiple surgeries are also on the increase. As of now, the popular surgeries are double eye lid  as well as nose job. In the next few years with wider acceptance of the practice, surgeries on other parts of the body too could be commonplace.

The macro reasons for this staggering growth among others, are the increased competition in the job market, the changing societal values, increasing disposable incomes, integration into the wider world and ever more emphasis on personal looks.

According to the SELF & IFOP Asia study, compared to last few years, micro/cosmetic surgeries have become more popular, acceptable and even admired. The study states that micro reasons are multi fold but mostly to do with the continuous propagation of the message in public media, increasing acceptance in the society, open mindedness to having a surgery & the ever increasing desire to look more beautiful and having more youthful skin, both of which are never fully satisfied in spite of increasing spends on beauty care products.

Women of different ages consider these surgeries for different reasons. Fresh graduates, who account for lion’s share of the surgeries undertaken in China, do it predominantly for enhancing their career prospects by building their self esteem (through appearance). A study done by JAMA facial plastic surgery also alludes to this and also suggests that such women also observe an increased level of self efficacy (confidence in ones abilities) compared to before.

The middle aged consumers (25-30 yrs) do it mostly for anti-aging and whitening purposes whilst those who are little older do it for not only anti-aging but also to remove wrinkles, freckles, pigments and bags under their eyes .

Another trend that is also catching up is undergoing cosmetic surgeries abroad. Chinese consumers are also seeking these types of surgeries more and more abroad for both costs as well as safety considerations. According to the Korean Healthcare development institute, in 2012 Chinese consumers accounted for 20% of foreign patients who went to Korea for any medical service and 36% of them sought cosmetic surgery with an average spending of US$1,600. This proportion is only likely to increase given the trends we observe in this market.

With the increasing acceptance and popularity of cosmetic surgery, this industry is only likely to explode in the coming few years with implications for both cosmetic surgeons as well as beauty brands. The need for ‘quick fix beauty’ is increasingly becoming commonplace and more importantly being accepted especially by the younger generations. Beauty brands would do well to think and act on this likely surge of the need for quick fixes. Depending on how they react, this trend would either be a boon or a bane for them.

 

Article written by Manohar Balivada, Vice President, Ifop, Shanghai  

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Capitalizing on opportunities offered by lower tier cities in china

China is not only the world’s second largest economy but also its dominant engine of growth. However in recent years this economic growth has come under pressure because of multiple reasons, both internal as well as external. This decline in growth rate is having a consequent impact on the way the Chinese government sees as its best way forward. It is striving to increase domestic consumption, encourage services sector and keep a check on inflation.

Adding more complexity to this business context is the more crowded and fragmented market, maturing Chinese consumers, impact of digitalization and smart phone and not to mention declining consumer enthusiasm.

Until recently business opportunity in China was limited to big 3 cities and handful of tier 2 for most multinational companies. The above dynamics means the attractiveness of this opportunity is increasingly fading and multinational brands are being forced to look deeper in to the Chinese landscape for new emerging and hitherto untapped markets in lower tiers.

Are the Lower Tier Cities Next Eldorado?

So this begs the question, do lower tier cities offer the same opportunity as that of their higher tier counterparts? In fact, the opportunity that lower tier cities offer is humungous compared to what their higher tier counterpart’s offer and moreover it remains untapped to a large extent.

Over the last decade or so, Chinese government has embarked on a mission to increase domestic consumption and thereby lower China’s reliance on exports. In the process, they have increased their investments in lower tier cities even in the central and western parts of the country and emphasized urbanization by providing housing and civic amenities.

These efforts have paid dividends. According to one estimate, tier 1 and tier 2 combined only accounts for 17% of the national GDP i.e. to say lower tiers combined account for a whopping 83% of the GDP.  However, given the higher tier fixation of most multinationals, it means the focus has been too long and too much on higher tier cities.

Although Tier 3 and 4 have a disposable income half of Tier 1 but given a population approximately 10 times over, it means the potential is not only huge but waiting to be tapped into.

However Opportunity Doesn’t Directly Translates Into Profits

The big question is how to capitalize on this huge opportunity. The challenges are numerous and not very obvious. To begin with, the sheer number of such cities in lower tiers with a million or more is in excess of 200. So which all cities can a brand focus on?

Are these consumers like their higher tier counterparts or do they shop differently with different motivations and preferences? From my experience I can do say that they are definitely different given the context and circumstances that differ across tiers.

So is there a better way to target these consumers? The answer is yes and it’s everywhere around to see.

The Internet Can Make It Possible

Huge proportions of the Chinese population are not only online but are willing to go the extra mile by engaging in it. Lately social media and e-commerce boom has engulfed the country, fueled in part by the high smart phone penetration and also with the more prominence of big players in the market like Wechat, Taobao and Jingdong.

The lower tier cities are not lagging behind on this bandwagon. In fact they are taking to it like a duck takes to water. According to one estimate, the proportion of lower tier city households with internet access is in excess of 50%. This figure is only like to go up and go up fast considering around 85% also have access to a smart phone. These consumers are using internet not just to communicate, exchange or explore but also to buy products and services.

All of the above means, the lower tier cities have opened up for business and are not inaccessible the way they were a few years ago. With a right business strategy and fresh mindset, it is indeed possible to capitalize on this opportunity offered by lower tier cities.

There are as many ways to do it the right way as there are ways to do it wrong. The success depends on the way a brand will understand these consumers, customize its offering and then make itself available through relevant channels.

 

Article written by Manohar Balivada, Vice President, Ifop, Shanghai  

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China’s outbound tourism is growing despite the economic turmoil

More than 109 million Chinese travelled abroad for leisure last year and currently 1 in 10 international outbound travelers is Chinese. This number is only expected to rise.

An Ifop report shows that 30% of the Chinese are planning to travel abroad over the next 5 years and saving for traveling is the 3rd saving concern after saving for a rainy day and kids’ education. The National Population and Family Planning Commission has recently released projections, estimating the population of China to peak at 1.39 billion by the end of 2015 and remain constant over the next 5 years. Needless to say that the potential is huge for the tourism industry to meet the needs of these 400 million Chinese travelers!

1st tier cities are the engines of this growth while 2nd and 3rd tiers are catching up.

This is a challenge for the tourism industry. Middle-class travelers are still seeking for shopping in hotspots but the affluent ones are shifting towards experiential travels, increasingly looking to venture off the beaten path and to share their moments on social media such as WeChat.

Resorts, Spas, restaurants and cruise providers would be the first ones to benefit from the change but retailers are not outdone. Shopping for fashion will always remain a must yet purchases of souvenirs and local specialties will increase as a way to extend the dream.

 

Article written by Thi My Nguyen, Project Manager Ifop Asia

 

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How “Made in…” impacts the attractiveness of products amongst Chinese consumers?

Ifop recently conducted a survey among the Chinese middle-class* in five main cities (Shanghai, Beijing, Guangzhou, Wuhan and Shenyang) to understand perceptions towards products made in different countries around the world. This study reveals the strengths and weaknesses associated to “Made in…” China, France, Germany, Italy, Japan, South Korea, UK and USA.

 

“Made in”: a key purchase driver

The country of origin is an essential information to Chinese consumers: 44% claim to “Always or most of the time” pay attention to it when making a purchase, 30% “Sometimes”. Also 70% consider it as “Very or somewhat” important when it comes to choosing a product or a service.

 

France is strongly associated with Luxury and the values attached to this sector

From the eight countries evaluated, France is the most associated with one particular field: Luxury. This strength in the field of luxury contributes to associating France to dimensions of know-how, creativity and ability to make one dream which are of high value. However, the association with this sector conceals other good things France has to offer to Chinese consumers and paradoxically this country is not much associated to automotive, energy or aeronautic sectors despite major assets in these fields.

French companies and brands obviously lack visibility there and need to better “educate” local consumers to raise their profile. Automotive maker Citroën shows the way with the success of its DS model positioned as a premium product playing with the codes of luxury: brand heritage, high scale service, extreme personalization, etc.

 

China is developing legitimacy in technology

Germany is strongly associated in Chinese people’s mind with automotive and technology, Italy with Luxury (but to a lesser extent than France), the USA with technology, aeronautics and Internet. In the field of fast moving consumer goods cultural proximity plays a major role as Korea and Japan are the most associated with Cosmetics while China and Japan are seen as leading countries when it comes to food.

In technological fields the USA and to a lesser extent Germany are perceived to be leaders, but China stands closely behind in its citizens’ view. Obviously China is becoming more and more confident about its own capabilities in the field of technologies, most probably thanks to the success stories of Alibaba, Huawei, Xiaomi and the likes.

One should notice that none of the investigated countries is clearly associated to sustainable development nor to high quality of service, two areas highly encouraged by the Chinese authorities and offering obvious opportunities to companies in today’s China.

 

This is an abstract from an article written by Christophe Jourdain and published in the Connexions magazine by the French Chamber of Commerce in China.

(*) With at least 5000 RMB monthly household income

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The Chinese luxury market is getting more mature

The Luxury division of Ifop recently published the results of the Luxury Trend Report, a yearly look at Luxury trends as evaluated by luxury professionals (general management of luxury houses, heads of brands, marketing and commercial directors, experts from agencies specialized in luxury, etc.) from all sectors of luxury.

This year, in a context of moderate optimism for the luxury industry as a whole, China appeared once again as the most strategic market among developing countries. It remains quite strong in terms of prospects, especially as compared to other BRIC markets, notably Russia and Brazil that are losing a bit of appeal in terms of strategic priority as compared to previous years.

While a year ago, due to a slowing GDP growth and to the impact of anti-corruption measures, a majority of luxury professionals were expecting the Chinese luxury sector to continue to slow down in growth, this year their perception is much more balanced and the general opinion is that we are heading towards a stabilized growth situation.

Luxury professionals generally agree that Chinese consumers are changing rapidly and most of them underline the fact that they are becoming more demanding and more critical towards major global luxury brands. This is a sign that Western brands cannot compromise their quality of product, service and purchase experience with Chinese consumers. It also implies that these brands are expected to be at the top of services that are common in China but may not be as critical in other markets such as e-commerce, home delivery, social media connection, etc. which is rarely the case today. In this demanding market, luxury brands must therefore not only keep their core promise of quality and uniqueness but also deploy it in locally sensitive areas of the brand-consumer relationship.   

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Understanding the art of Chinese Gifting

The evolution of gifting as a practice

China as a country is ever evolving in every sector and category of consumer market. The economic shift in the country’s fortunes has had a consequent impact on Chinese lives as well as their habits. So much so, that a practice of yesteryear would seem a mere passé in the current day and age.

Take for instance gifting as a practice. It’s a good barometer of how the society has changed and evolved over a period of time. For centuries, Chinese people have exchanged gifts as part of a tradition to show courtesy and enhance people’s connections for both business and personal purposes. With ever increasing disposable incomes – more people coming into the wealthy class every year – impact of western culture, new emerging technologies, rising pride of being Chinese, and last but not least by anti-corruption campaign, gifting as a practice has evolved, adopted and even gone digital.

Some manifestations of these changes in the gifting practice are very palpable. When gifting, a lot of Chinese people have now started to prefer low key but high quality products instead of gifts with an ‘in your face’ brand logo. For instance, comparatively low-key brand Bottega Veneta posted almost 30% growth in Greater China as opposed to Prada which has posted 30% decline in sales globally mostly in part due to declining sales in China.

Chinese consumers also seem to be adopting different cultures given the global integration of the Chinese society. They now celebrate alien festivals e.g. Christmas and Valentine’s day, and spend money gifting premium chocolates, imported wine and even upmarket lingerie.

Another aspect that is unique to China is the digital nature of the Chinese consumers. The popularity of “Wechat Hongbao” (sending each other lucky money on Wechat) in Chinese New Year is a good example that shows how new technology has influenced gifting habits. More than a billion red envelopes were exchanged through WeChat on Chinese New Year’s Eve alone.

However there is one big trend that seem to have had the most impact on Chinese gifting and more so on Chinese economic elite: the current anti-corruption drive. As a consequence of this, consumers have started to move to second rung of brands such as Micheal Kors, Balenciaga among others.  Another consequence we observe is the emergence of experiential luxury as a gifting choice. More and more Chinese people are opting for exotic spas, luxury vacations and even staycations as gifting choices.

 

The opportunity for brands

As an industry, Gifting has grown leaps and bounds over the years. This market is now valued at a whopping RMB 770 billion (Source: China gift research institute) and still growing. The categories that account for a lion’s share of this market are alcoholic beverages (eg. Baijiu, Cognac, Wine etc.), writing instruments (eg. Pen etc), accessories/watches/Jewellery, food/beverage (eg. Chocolate etc.), bone china, beauty & color cosmetics as well as experiential luxury (eg. Resort etc.).

Some of these categories have been traditional gifting sources where as some very new e.g. experiential luxury. As a gifting category, it was almost unknown until recently. However with maturation of the Chinese people coupled with need to be less boisterous given the anti corruption drive, categories of this kind are fast emerging as an alternative gifting choice.

 

Deciphering gifting as a practice to optimize brand initiatives

This change in the gifting practice calls for a thorough understanding of psychological motives rather than just studying behaviour. The prime reason being the fact that gifting at the very basic level tends to be more emotive rather than just a functional practice. Therefore understanding where the consumer is coming from is more insightful in understanding the stated behaviour rather than just knowing what the consumers do as a consequence.

Ifop Asia is currently undertaking a syndicated study on gifting to unearth insights into this fascinating world of Chinese gifting. The survey delves into not only quantifying behaviour with respect to gifting across categories of interest but also understand the motivations behind gifting.

In fact sizing the motivations behind gifting followed by mapping of categories and brands on those motivations is the starting point to understand the whole puzzle of Chinese gifting behaviour. This approach helps transcend categories and will let you know the motivation your brand is currently playing on, and if that is where you would like to continue playing. A decision on the same would need to be undertaken keeping the size of the motivation and the competition across categories in mind.

Moreover, the study also aims to understand the hygiene, drivers and differentiators of gifting practice in general and business/personal type of gifting in particular. An understanding of this is likely to help marketers to prioritize their effort to maximize their appeal to consumers.

This survey also aims to unearth trends in gifting, so that one can map the evolution of the categories and brands across the years and by occasions.

The subscription to the study is currently open and field work will be conducted in the month of April 2015. If you’re interested in subscribing, please do get in touch with Manohar Balivada.