Chapter I   Introduction

1.1 Research background

The  increasing  prosperity  of  commodity  economy  has  provided  board  commercial opportunities for the development of construction decoration industry, in the push of market  economy,  our  domestic  construction  decoration  industry  has acquired  faster development  comprehensively.  Construction  decoration  industry  is  the  people’s livelihood  industry closely  related  to  our  domestic  national  economy.  It  is  also  the industry  with  advantageous  competitiveness  in domestic  markets,  which  makes  the key  function  on  the  promoting  national  economic  development,  improving living environments,  providing  employment  opportunities,  increasing  the  income  of professional workers, constructing the well-off society, etc.

In recent years, building decoration industry develops rapidly and gradually forms a specialized  field,  which  becomes one of  the  domestic  consumption  hotspots. According  to  the  statistical  data  from  China  Building  Decoration Association,  the output value of building decoration industry has been increased by 388.9% from 0.43 trillion of 2000 to 2.1 trillion of 2020, which is higher by nearly 6% than 11.4% of GDP of same period. Of which, public building decoration output value (including the decoration  of  the  finished  houses  of  the  whole  building)  has  been  increased  to  1.1 trillion in 2010 from 0.2 trillion; while in the same period, the growth of residential housing decoration (independent decoration of separate unit) has been increased from 0.23 trillion to 0.95 trillion. In 2010, there are 148 thousand enterprises specializing in residential housing decoration. Although there is large scale of decoration market, the competition of interior decoration industry is intensive, enterprises compete to imitate, and single study on domestic decoration market, which causes serious influence to the benign development and its own survival of the industry, and changes the “blue sea” of interior decoration market into red. 

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1.2 Research Significance

The  interior  decoration  market  in  China  mainland  is  different  from  the  interior design  market  of  Hong  Kong, Macao,  Taiwan  and  overseas  developed  countries(regions), which  is  affected  by  economic  level,  educational quality  of  people  and  living traditional  custom.  On  the  one  hand,  there  is  not  enough  mature  degree  of interior decoration  market.  Interior  decoration  industry  develops  only  for  nearly  10  years. Small enterprises are in the majority of 100 thousand interior decoration enterprises throughout  the  country.  Besides,  Public  acceptance  is  not high  enough,  and  the market  is  still  in  the  stage  of  development.  In  face  of  such  big  market,  decoration enterprises generally take use of the marketing mode of “one size fits all” which is used all the time. This is the root of today's profit margins of enterprises is not high or even losses. Especially after financial crisis of 2008 and melamine accident, the interior  decoration  concept  of  general  consumers  is  becoming  more  and  more rational. People have been tired of the decoration project which is with little using value, and slowly pay more attention to the indoor function, service and quality, and the selection of green and low-carbon materials. Especially “only child family” that uniquely  owned in  China  as  new  generation  of  consumers,  they  are  young  and personalized, and they are internet e-age. They have fundamental different opinionswith  their  parents  on  housing  decoration  with  their  own  mind.  Meanwhile,  as the domestic population aging is more and more serious, and there are more and more empty nest old men, but old man of this generation is different from last generation. They  have  certain  economic  power,  focusing  on  healthy  life, and have  higher requirement to the daily living environment. And the delay of update, renovation and transformation of old houses (especially the second-hand house) is not ignorable.  

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Chapter II   Literature Review and Comment

Market segmentation and consumer behaviors are closely related, both of which are hot research subject in the field of marketing. This section will make review and analysis on western market segmentation method and Chinese consumer market segmentation based on previous studie

2.1 Summary of Market Segmentation

Market  segmentation  means  that  business  N  divides  the  overall  market  that  is  all customers  and  potential customers,  into  a  number  of  customer  groups  with  similar characteristics in order to select the exact target market and buyers in accordance with the  diversity  of  the  Bank's  demand  and  behavior  differences.  This  concept  is  first proposed  by  American  market  expert  Wendell  Smith in  the  mid-50s  of  the  20th century (1956). It is new development of corporate marketing in which seller's market is  transformed  into  buyer's  market,  and  it  is  more  of an  inevitable  product  of differentiated  consumer-centric  marketing.  Having  looked  at  the  development  of western market  segmentation,  we  can  divide  the  development  of  the  concept  of market segmentation into three stages. The first stage is the proposal of the concept of market  segmentation.  This  concept  drew  a  lot  of  attention  in western  marketing, academia  and  industry  and  it  has  become  an  important  part  of  the  future  marketing theory;  the  second  stage  is  the  development  of  the  concept  of  market  segmentation. During this stage, in the 1990s some scholars put forward the theory of super market segmentation,  which  subdivided  market  into  each individual,  and  provide  each consumer  with  personalized  services,  thereby  increasing  customer  loyalty  and enabling them to become lifelong consumers.

The third stage is the new understanding of the concept of market segmentation. The implementation of one to one marketing in the second sage has many limitations, and therefore  anti-segmentation  theory  appeared  which  put forward  that  subdivided markets should be refined to lower costs and meet the needs of a larger segmentation Market. From the above-mentioned three stages of market segmentation development, we  can  know  that  differences  and similarities  of  consumer  demand,  and  enterprise limited  willingness  are  the  basis  of  market  segmentation  theory. The  purpose  of market  segmentation  purpose  is  to  maximize  the  profits  of  enterprises  and  get consumers maximum effect. The function of market segmentation can be summed up in  four  areas:  1  in  favor  of  choosing the target  market  for  enterprises;  2  in  favor  of locking  market  opportunities;  3  in  favor  of  making  appropriate marketing  strategies for enterprises to improve competitiveness; 4 in favor of improving customer loyalty, stability  and expansion  of  the  market.  Thus,  we  can  clearly  see  that,  faced  with different  demands  in  different  markets, enterprises  should  make  effective  market segmentation to control the different subdivided markets.

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2.2 Target Market Selection and Target Market Positioning

2.2.1 Target Market Selection

After  evaluating  market  segmentation,  it  analyzes  the  resources  and  targets  of enterprises  from  market  goals, company  strategies,  technology  level,  competitive advantages and investment direction and selects the matched target markets according to the resources of enterprises.(Tab.2-3)

2.2.2 Target Market Positioning

After enterprises select targeted markets, they shall make the choice of how to enter the  markets.  Market  positioning is  usually  called  as  product  positioning  or competitive positioning. Market positioning is to determine the distinctive, bright and differentiated  personality  or  image  of  enterprise  products  according  to  the  market position  of competitors  that  anterior  to  products  and  the  attention  attitude  of consumers  on  product  properties,  convey such  image  characteristics  to  targeted customers  vividly  and  adversely,  and  make  them  accept  it  so  as  to determine  its powerful market position.（Tab.2-4）

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Chapter III Case description ..................... 21

3.1 Background Information ....................... 21

3.2 Current development status and problems of XY Decoration Co. ........... 22

3.3 Outdoor marketing strategies of XY Decoration Co. ........... 23

Chapter IV Development patterns of Chinese Home Decoration Industries and market opportunities of XY Decoration Co. ........  24

4.1 Chinese Home Decoration Industial development status...........24

4.1.1 Six characteristics of Chinese Home Decoration Market ........... 29

4.1.2 The development trends of Chinese Home Decoration Industry ........... 33

4.1.3 Main problems in Chinese Home Decoration Industry ............... 36

Chapter V Market Segmentation and target market strategies of XY Decoration Co..........45

5.1  Market  segementation  strategies  of  the  demand  characteristics  of  each segmenting consumer groups ........ 45

5.2 The analysis of main competitor marketing strategies of XY Decoration Co..........54

5.3 The target market selections of XY Decoration Company ......... 54

Chapter V   The Market Segmentation and Target Market Strategy of XY Decoration Company

5.1  The  Market  Segmentation  Strategy  of  XY  Decoration Company  and  the  Features  of  Needs  of  Different  Segmented Consumer Groups

It can be seen from the analysis above that the home design market in China is huge. It is hard to occupy a fairly large market share alone in face of such an home design and  decoration  market  with  tremendous  potentiality.  After  all, the  home  design  and decoration  market  is  pretty  much  segmented  and  scattered.  Nevertheless,  today’s Chinese decoration market is still a “red sea” which is mainly engaged in price war. In order to free itself from the price war, XY Decoration Company has to segment the consumer market.

Nowadays,  psychological  description  is  commonly  adopted  by  both  Chinese  and foreign researchers to study the consumer behaviors, including “using psychological, sociological and anthropological factors…to determine the way of how to segment the market according to the inclinations of different groups in the market, as well as make sure the reasons to some specific decisions made, or certain attitudes held or certain medium  used  of  different  groups  for  products, individuals  and  ideologies.”  However,  most  of  today’s  psychological  segmentation  researches  are  using  the combination  of  three  types  of  variables  –  acts,  interests  and  opinions  –  i.e.  the so-called  AIO  to  distinguish consumers.  With  the  use  of  big-sample  data,  marketers may  conclude  the  forms  of  consumers  which  share similar  acts  and  product preferences.  One  of  the  typical  methods  for  the  lifestyle  to  classify  consumers  is VALS2TM  values  and  the  lifestyle  system,  of  which  the  key  lies  in  three  horizontal dimensions  of  self-orientation  (principle-orientation,  low-position-orientation  and action-orientation). VALS2TM has already become an effective method to understand consumers,  therefore  it  is  necessary  for  us  to  design  a  similar  VALS  system that applies to China. 

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Chapter VI Conclusion and Enlightenment

6.1 Conclusion

Based on the reference of existing research result of market segmentation, this thesis further  discusses  market segmentation  method  and  the  connotation  of  consumer’s behaviors. With the guidance of relevant theoretical model, the author makes a deeply analysis  on  the  present  situation  of  the  Domestic  Home  Decoration  Industry  and consumer  segmentation  of  decoration  market,  and  introduced  XY  decoration company’s  case  to  discuss  the relevant  problems  such  as  consumer  segmentation  in the Domestic Home Decoration Market. Although it only analyzed several decoration enterprises, which has certain inspiration for setting out market segmentation strategy of  the whole  Home  Decoration  Industry.  It  acquires  the  following  research conclusions through analysis and demonstration. 

(1) The Home Decoration Industry has huge development potential, especially in its segment market.

The  decoration  market  in  China  is  in  fast-growing  every  year.  According  to  the requirement of Chinese housing development planning per capita, the urban housing per  capita  in  2020  should  be  32  square  meters.  That  is  to say,  the  urban  completed residential  area  between  2003  and  2020  shall  reach  14  billion  square  meters.  In addition  to  currently  existing residential  housing  in  area  of  11  billion  square  meters will  enter  into  maintenance period,  the  market  scale  of  housing  decoration  will continually  enlarge.  Except  the  scale  of  new  built  house becomes  larger  and  larger, second-hand house market will further push the development of housing decoration. home decoration  and  ornament  industry  currently  has  become  one  of  the  industries withthe most development potential in China building decoration decorate industry.  Seen from the development status of decoration adornment industry, the direction and regulation of market segmentation is gradually clear. Holding different segmentation area  by through  the  completion  measures  of  consumer  market  segmentation  is  an effective  way  to  occupy  larger market  share  and  get  higher  profit  margin.  Has experienced  the  baptism  of  the  financial  crisis,  more  and more enterprises  have realized that paying attention to the consumer market segmentation is the inevitable trend in the decoration industry.

reference(omitted)