Study Of Reference Group Effect On Luxury Herding Behavior In China

With the rapid economic growth and huge population, China has become the world’s largest consumer of luxury goods, surpassing the Japan in 2012, accounted for 28% of the global luxury market with an annual growth rate of 20%. This paper aims at examining why and how the herding effect is engaged in the Chinese consumers’behaviour in purchasing luxury goods. Separately speaking, on one hand, this paper focuses on why the herding behaviour can be taken into action during the luxury purchase; on the other hand, it tells about three herding reference groups’ effects in terms of intimacy of the interpersonal communication: online customers, friends and families, celebrities.The total structure of this thesis can be divided into 6 parts:introduction, literature review, herding behaviour within different reference groups, methodology, conclusions and implications, references. Among them, the inherent characteristics of different groups and herding research are the paper’s core contents. For the luxury industry, the author found that the motivating factors are mainly considered to be individual’s internal needs and external ones. Therefore, when analysing this market in China, the influence of culture that is based on social relationships is more influential in promoting the development of China’s luxury market. Due to different application areas of statistical analysis software, we do the binomial test and the test for equality of means between series. The test for equality of means is the way approaching the question of whether the herding behavior is contributed to luxury purchase or how many persons who have luxury buying experience are characterized with herding. The binomial test is mainly for doing comparisons of impacts on herding behavior between each two-reference group and figuring out the least and the most influential reference groups. How to get the data that can well explain the phenomenon is the key. One of the best choices is the questionnaire that well organized not only to describe luxury-buying motives in detail but also to relate these behaviors with herding and different reference groups.Based on the conclusion we reached from these studies, we have reached some practical implications in terms of the three reference groups:Herding behaviour is rooted in large amount of luxury consumers in China. The celebrity has less impact on luxury herding behaviour than the online consumers. However, both the online customers and friends and family may have relatively strong influence on luxury herding behaviour. As to the celebrity group in China, luxury companies should be aware of the fact that the utility of celebrity advertising is mainly to the extent of drawing consumers’attention but not necessarily translate to purchase behaviour. In terms of online consumer effect, luxury products that sell mostly through online channels should concern more on the online consumers’reviews, goods recommendations. In a word, a mix of online and offline WOM information should be well detected to help improving the brand perception and customer purchase. Taken family and friends effect into consideration, a good customer relationship management system may be quite important in China because of the strong effect on luxury herding purchase. The fruitful results the study documented can be used as inputs in developing efficient marketing strategies in Chinese Market, especially after acknowledging the characteristics of these different groups and the relationships among them. As is known to all, the luxury consumption behaviour is more complex than other buying behaviour. Especially in China, the culture-based specific characteristic and the interpersonal relationships have given herding more doubts and attractiveness. Of course, there are limits to this finding:based on data obtained from the questionnaire, these conclusions can be meaningful within the scope of application, which are among the young white-dominated society and the emerging middle class. They constitute the main customers in the Chinese luxury goods market; their attitude is both internationalization and traditional. How to comprehend this group and get their brand recognition and attract their attention is the main direction of future research. Although this paper presents relatively meaningful conclusions, but not proceed with the specific marketing strategies, so future research would be better to strengthen this analysis.