CHAPTER 1 INTRODUCTION
This research is to investigate Hong Kong’s young female consumer buying behavior towards cosmetics. In this chapter, the background of study, rationale, objectives, scope of study, research methodology and limitation will be stated. The scope of study will be narrowed to color cosmetics and young generation due to research limitations and difficulties encountered.
1.1 Background of study
According to the report of USA department of Commerce in 2009, the Hong Kong’s cosmetic market size is significant increased from US$815 million in 2007 to the estimated US$985 million in 2009. As the expansion of cosmetic knowledge, raising the education level and changing the social perception of female consumers that making the demand of cosmetics increase, and its consumption value also grow up continuously. Moreover, many cosmetic advertising have always been found on fashion magazines e.g. Jessica and Cosmopolitan. They not only analysis the makeup trend and introduce the latest cosmetic products, but also teach people how to makeup, thus female can obtain the cosmetic information and learn the makeup technical easily. In addition, cosmetic is regarded as a courteous symbol. Cosmetic has become an everyday tool to make women more presentable (Gibbs, Kerry, 2007).
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However, the blooming cosmetic industry in Hong Kong causes a lot of competitors entering, many companies are now facing a fierce competition. Fortunately, most of them can still survive because of the changing of consumer lifestyle which provides the chances for retailers to expand their market. In Hong Kong, many international cosmetic brands like Shiseido, Lancôme and Maybelline have already established their speciality stores and counter in Hong Kong over a period of time and got a certain amount of loyal consumer. And, in the current year, a lot of foreign brands have launched in Hong Kong such as DHC and Skin Food. Their target groups are different due to different lifestyles they have. For example: DHC targets young people with strong fashion sense, and female who concerns about the natural ingredient is the target group of Skin Food. So it shows that lifestyle is an important element for marketers to find out what target consumer they should have.
Furthermore, there are different market segments which have their own lifestyle’s buying behavior. Among them, the young segment is the study target in most fashion consumption research (Workman and Kidd, 2004). Marketers are increasing their interest on young people’s consumption behavior in recently year as their spending power has become larger which comprise a profitable market. Understanding their buying behavior is important for developing effective and efficient marketing strategy.
As per above mentioned that the local cosmetics market has growth dramatically. It becomes one of the important industries in Hong Kong, and many retailers and marketers are attracted to join in. In order to increase market share and defeat competitors, it is necessary to do marketing research for segmenting the market and obtaining information about the consumer buying behavior.
This research has several objectives which are listed as below:
To analysis the current cosmetic market in Asian countries.
To investigate the buying behavior of Hong Kong female consumers with different lifestyle towards cosmetics
To recommend marketing strategies for cosmetic companies.
Scope of study
This survey focuses on the buying behavior of young female towards cosmetics through lifestyle analysis.
Hong Kong young women who are aged from 18 – 29 were selected as the sample in this study. Under observation, it finds that most of them are particularly appearance-oriented and always spend their time on leisure activities such as shopping and travelling. Their purchasing power and disposable income are higher than other age range, so marketers regard them as a huge potential target segment.
In this study, exploratory research method such as literature review and descriptive research method such as consumer survey were used.
The information of literature review was sourced by journals, books, newspapers, magazines and Internet. Those of them were used to better understand the concept of this topic including cosmetics, young generation, market segmentation, lifestyle segmentation, AIO and so on that a research framework of this study can be formed easily.
For consumer research, questionnaire was adopted in order to find out the buying behavior of young female consumer towards cosmetics and their lifestyle. The target respondents are aged 18-29 years old. And the below objectives can be met by using questionnaire:
Data obtained from questionnaires after collection, and was inputted and analyzed by the software of SPSS. In this research, different analytical methods were used for arranging and grouping the date well.
This research may be hindered by the following limitations:
Young generation was chosen only as the target respondents, the result may not represent the whole population truly.
The lifestyle statement of questionnaire may contain too many words, respondents might be impatient to read them carefully, thus affect the answers.
The limitation of sample size for the survey that causing the consumer buying behavior might not be representative.
Chapter 2 Literature review
In the recent year, retailers are facing different challenges as consumers are becoming smarter and more knowledge (Keller, 2003). Many choices and higher expectation consumers have today. During the fierce competition and variety of promotion channels in the market, retailers are required to differentiate their products and design better strategies in order to attract more customers. To achieve this goal, they should understand their consumer’s needs and wants and buying behavior as well.
2.1.1 Reasons of studying cosmetics
Cosmetics are luxuries. Unlike food, they are not necessary for survival. They do, however, seem to be tied up with our images of ourselves and our sense of group identity – both powerful forces (Tom Conry, 1980).
People whom first notice someone is how beautiful or ugly they are and what kind of clothing they are wearing. So, the first impressions from people are usually what others use to base their personal judgments. In the world, people are expected to dress appropriately and carry themselves appropriately which reveals that better looking people can gain more advantages than their peers. Obese women are discriminated against because of their larger appearance. Sadly, how one dresses and appears is often the determinant of the amount of respect one receives.
So, make up plays a vital role for women everywhere. Many women are wearing cosmetics frequently, even everyday. They believe that make-up could improve their appearance to become more charming and beautiful in order to build up the self-esteem and confidence of an individual. Moreover, beauty has provided women with a means for increasing the socio-economic scale traditionally. Thus, cosmetics become as a way of striving for success and acceptance.
2.1.2 Reasons of studying lifestyle
In this study, lifestyle will be adopt for better understand the female consumer buying behavior. Lifestyle segmentation becomes a trend for retailers to segment market (Solomon, 2004).
In the past, retailers were based on demographic characteristics to do market segmentation such as age, gender, income level and education level. But it cannot clearly identify the consumer’s needs and wants. Consumers have the same demographics variable may not have the same characteristics and needs (Walker, 2004). So most of retailers prefer using lifestyle segmentation to demographic now.
2.1.3 Reasons of studying young people
Today’s young poeple have grown up with a greater degree of affluence than any generation before them. They are defined by two things: time and money. Because, in most cases, both parents of young people work outside the home, they have been able to provide their children with four times as many toys when they were growing up as were provided to children of 20 to 30 years ago (Gronbach, 2000a).
Accroding to Roy Farris (2002), now spanning 15 to 25 years of age, these young people have US$150 billion in direct purchasing power today which more than their parents duing the same age, and about US$500 billion as indirect purchasing power such as ask family to buy a luxury bag to them. Their income has estimated to be US$119 billion in 2009, and it has been projected to grow to $136 billion by 2011.
Gronbach, K. (2000) stated that young poeple spent US$153 billion in 2008, 8.5 percent more than 2007. Also, many of these young people are, and will be, living in broken and blended families, having extra sets of grandparents who are happy to add to kids’ pocket money (Alch, 2000).
It is suggested that the youth of this generation remains one of the most influential groups of consumers in fashion (Gaudoin, 2003). Young people are less worried about money and willing to spend much money on clothing freely. They are also interested in experimenting with products and start to establish the habits they like to continue when they grow older. So understanding their preference is important to marketers for an effective product development, therefore, identification of the consumption behavior of the young generation is necessary.
2.2 Market Segmentation
Market segmentation was innovated by Smith Wendell R. in 1956, and it becomes one of the most important consideration elements for retailers and marketers while they are developing market strategies.
2.2.1 Definition of Market Segmentation
“Market segmentation is the process of identifying groups of people who behave in similar ways to each other, but somewhat differently than other groups.”(Engel et al, 2006)
“It is the process of dividing a market into distinct subsets of consumers with common needs or characteristics and selecting one or more segments to target with a distinct marketing mix.” (Schiffman and Kanuk, 2004)
“Where the larger market is heterogeneous and can be broken down into smaller units that are similar in character.” (Mike.E, 2002)
“A way to identify and profile distinct groups of buyers who might require separate products or marketing mixes.” (Kolter, 2003)
When market segmentation is adopted, the group of people with similar behavior can be identified, and marketers can choose one or more segments to be their target markets. It enables marketers to think of the appropriate marketing strategies in order to meet the group’s specific needs and wants. Moreover, the marketing resources can be allocated evenly by using marketing segmentation, thus, the cost will be eventually reduced.
2.2.2 Bases of Segmentation
According to Kotler (2003), there are four types of variables that split the market into actionable segments.
1. Demographic variables
It based on age, gender, ethnicity, income, education, family size, nationality, life stage, marital status, occupation, religion and living arrangements to divide customers into groups.
2. Geographic variables
National boundaries, state, regional boundaries urban versus rural and zip code are used to divide market into different geographic units.
3. Psychographics variables
Activities, interest and opinion are used to divide customers into groups.
4. Behavioral variables
Customers are divided into groups by purchasing and consumption behaviors such as shopping location preferences, frequency of purchase, media used, price sensitivity, brand loyalty, benefits sought, how used and rate of use.
However, Kotler (2003) stated that above variables are not all meaningful, so the following criteria are used to determine the attractiveness and effectiveness of a market segment.
Information about the size, nature and behavior of a market segment can be obtained, and they must be measurable directly in order to formulate and implement marketing mix strategies.
It is the degree to which segments can be reached, either through targeted advertising and communication programs or through multiple retail channels.
It refers to the size of the market. If the market segment is small, it may be unable to pay the production, development and distribution costs which involved to satisfy that segment. So the more substantial segment, the better market targets can be made.
Segments need to react and distinguish differently when different kind of marketing mix strategies have been launched.
5. Action ability
Established the effective programs are necessary to attract and serve the segments.
In this research, psychographics segmentation has been used in order to analyze the lifestyle of Hong Kong young female on buying cosmetics behavior. It based on social class, lifestyle or personality to divide consumers into different groups. By adopting psychographics segmentation, more information about consumers can be provided, so it is better to use psychographics segmentation rather than demographic segmentation.
2.2.3 Importance of Market Segmentation
In Hong Kong, different people have different buying behavior, needs and wants that causing retailers and marketers are difficult to target their customers. So most of them tend to use market segmentation in order to select one or more segment to be their target market.
There are several advantages can be achieved by segmenting the markets:
1. Customer needs can be matched better
After segmented the market, consumers who have similar behvior are grouped together. It enables marketers to develop and launch the appropriate marketing mix for satisfying customer needs as easy as possible.
2. Communication can be increased
The target customers can be reached easily when marketers deliver messages to the market. However, if the target market is too bored, the key customers may miss that messages and the cost of communication between marketers and customers will be higher.
3. Higher market share
Smaller firms are lack of money to support production, development, marketing and distribution costs. By careful segmentation and targeting, the firm can gain a competitive production and marketing cost, and become the preferred choice of customers and distributors.
Moreover, segmentation can help marketers to develop the niche marketing strategies which are difference from other companies. It gains competitive advantages and improves the relationship between suppliers, wholesalers and customers. Furthermore, the brand and profit will be enhanced that make marketers have a chance to increase market share.
4. Stimulate the innovation
Segmentation can help to split the whole market into smaller units with similar behaviors and needs. It enables marketers to develop the new products or improve the existing products for further satisfy those customers. And, they are willing to pay for the product with higher price if their expectation can be met or exceeded after value added, thus, the profit will be increased as a result.
2.3 Lifestyle Segmentation
Lazer was the first one to introduce what is lifestyle segmentation in 1963, and in the recent year, marketers are concern about the information of lifestyle very much while they are making the marketing decisions.
“Lifestyle segmentation is used to sort people into different groups based on what people like to do, how people like to spend their leisure time and how people spend their disposable income.” (Solomon, 2004)
Lifestyle segmentation has become a popular method and been adopted by some high fashion brands gradually such as agnès b. Casual, relax and simple are the agnès b’s target group after using the lifestyle segmentation. In order to satisfy those customers, agnès b not only sell men’s and women’s wear, but the store of accessories, flower, chocolate and even restaurant are also launched in the current years. Simple design, casual, relax are their major selling point and those customers will be attracted to buy the products because they think that agnès b’s products are situatable for them due to the same lifestyle they have. Therefore, lifestyle segmentation is one of the reason why agnès b can be success.
2.3.1 Definition of lifestyle segmentation
“Lifestyle is defined as patterns in which people live and spend time and money.”(Engel et al, 2006)
“Lifestyle segmentation research can be used to gain insights into consumer motivation, for turning on creative ideas, and as enrichment to demographics or geo-demographics segmentation.” (Bryant, 1986)
“Lifestyle as dealing with everyday, behavioral oriented facts of people as well as their feelings, attitudes and opinions.” (Plummer, 1974)
“An adaptation where people change themselves by altering their way of thinking, feeling or behaving, in an effort to manage and incorporate change.” (Walker, 2004)
“Lifestyle has been simply a how one live and includes the products one buys, how one uses the, how one thinks about them and how one feels about them.” (Wind and Green, 1974)
“Lifestyle is the consumption pattern of how people spend time and money” (Solomon, 2004)
In the past decade, demographic segmentation was a common method for marketers to segment their market through age, gender, income and so on which cannot realize and understand the actual needs and wants of customers. Psychographics segmentation will focus on why consumers buy the products, but demographic segmentation only focus on who buy the products, so using psychographics segmentation is more useful and functional than demographic segmentation. Therefore, in this study, lifestyle was used to analysis the buying behavior of young female towards cosmetics.
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2.3.2 Measurement of lifestyle – AIO
2.3.3 Advantages of lifestyle segmentation
2.3.4 Lifestyle research
2.3.5 Investigative framework of lifestyle
Determine the investigative objective
Develop the investigative model
Find out the investigative variable
Design the investigative tool
2.3.6 Application & Function of Lifestyle
2.4 Relationship between lifestyle and consumer behavior
2.5 Reason of Makeup
2.6 Color Cosmetic
2.6.1 Definition of color cosmetic
Color gives a way to express mood, attitude and style in society. Color cosmetics can do all that and fit into a purse. As in the beauty business, color cosmetics go through trends which from the intense blue eye shadow of the ’80s to the natural look of the early 21st century (GCI Magazine, 2009).
The make-up for the face with the color cosmetics such as:
a) Skin Makeup
Foundation used to smooth out the face and cover spots or uneven skin coloration, its usually a liquid or cream.
Concealer used to cover any imperfections of the skin.
Powder used to set the foundation, giving a matte finish, and also to conceal small flaws or blemishes.
Blusher used to bring out the color in the cheeks and make the cheekbones appear more defined.
b) Eye Makeup
Mascara is used to darken, lengthen, and thicken the eyelashes with brown, black, blue, pink, or purple color.
Shadow and Liner used to color and emphasize the eyelids.
Brow Definer used to color and define the brows.
c) Lip Makeup
Lipstick, Lip Gloss, Lip Liner used to add color on lip.
Color cosmetics can pessimistically be seen as a group of products which feeds on either people’s insecurities or egos. Optimistically, it can be a product such as Foundation, Mascara and Lip Gloss to help people bringing their best face forward. It can also change people image, and make them become more attractive.
2.6.2 Current Color Cosmetics Market in Hong Kong
18.104.22.168 Color Cosmetic industry
22.214.171.124 Market Size
126.96.36.199 Distribution Channel
188.8.131.52 Purchasing Pattern
2.6.3 Color Cosmetics for Young Generation (Population of female & Population projection of female)
The group of youth market is growing significantly,
even more than people begin using color cosmetics at an early age. Young women have become the largest users on the color cosmetics products. Many of them are willing to devote a lot of time to caring for their appearance and they spend more money on purchasing color cosmetic products than any other group. Learning how to use makeup has become part of a young women’s initiation into the rites of womanhood, that cause them to accept cosmetics as an essential part of their life begin even earlier.
Young people know exactly what they are looking for and can honestly assess a product. At the same time, they are more able to afford upscale or adult-type cosmetics than young people in the past (GCI Magazine, 2009).
It’s not surprising that more effort and time is going into understanding the young generation. Advertisers will find it increasingly difficult to reach this group as the decade progresses (Beale, 1992).
Marketers are foucs their marketing strategies and attention on young people as they are considered to be the largest purchasing power’s segment. This group can help products to earn credibility which generates interest among the older age segment that lead to get a long term growth in turn (Marketing Week, 2004).
Underwood (1996) stated that young people are becoming the key drivers of new design, advertising and prodcuts in order to find a way to other demographics. She also adviced that university students who have part time job are the influencers and the most important component in cosmetics sales.
There are evidences that a lot of efforts are placed by many color cosmetic companies in order to reach the young generation:
“Companies such as Lancôme, Elizabeth Arden, Estee Lauder and MAC are all competing to meet the young generation growing trend, creating skin care and colour cosmetics ranges that cater for different skin colours and textures” (Louise Prance, 2007)
“Many colour cosmetics companies now create premium ranges in smaller, more affordable sizes for this growing consumer segment” (Underwood, 1996).
“Heavily influenced by the celebrity culture, premium products such as Britney Spears cosmetic lines and fashion label products such as Dior makeup products are key drivers for the younger consumer” (Kapferer, 1997).
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