We test for the long-term impact of experiencing “prosperity in youth” (PIY) on non-traditional category consumption. Using unique twenty-year panel data of individuals from nine Chinese provinces with varying levels of per-capita GDP and rates of per-capita GDP growth, we find robust evidence for the PIY effect. We find both a direct effect of one’s own prosperity and an indirect effect of the prosperity of one’s province during youth on long-term consumption. In particular, the indirect PIY effect is driven more strongly by individuals with low incomes during youth — suggesting that norms and aspirations created by the consumption of non-traditional categories by the rich during one’s youth have significant impact on long-term consumption — almost the same magnitude as the direct effect. The analysis also highlights the importance of separating cohort effects from life cycle effects for taste based products. We highlight the marketing implications for non-traditional categories in emerging markets.
We test for the long-term effects of experience during youth on consumption in nontraditional taste-forming categories. A unique dataset that tracks individuals over twenty years from 1992-2011, residing in nine Chinese provinces that vary widely in both income levels and rate of economic growth, helps us identify cohort and intra-cohort “prosperity-inyouth” (PIY) effects on consumption. We first demonstrate that non-traditional category consumption increases strongly among cohorts that entered adulthood during China’s boom years. We then show evidence of the intra-cohort PIY effect, controlling for individual level experience by leveraging the heterogeneity in the timing and rate of growth in prosperity across Chinese provinces. We find that the PIY effect has two dimensions– a direct effect of one’s own prosperity and an indirect effect of the prosperity of one’s province during youth. The indirect effects suggest that norms and aspirations created by the consumption of nontraditional categories by the surrounding rich during one’s youth have significant impact on long-term consumption—almost the same magnitude as the direct effect. We conduct a large number of robustness checks; in particular, we rule out potential supply side and attitude based explanations for the PIY effect. Our results imply that segmentation and consumption forecasts based on birth cohorts and experience of prosperity can be effective for taste forming non-traditional products in emerging markets.