Starting out at the top

Tan said that when he decided to move up the ladder, there were several other motivating factors.

"I realized that if I continued to position Days Inn as a budget hotel, it would be harder and harder to do business in China.

"Property prices were also soaring, along with higher labor and utility costs. If we remained as a budget hotel, we would have to keep our prices low, thereby leaving hardly any room for profits."

Dale Preston, managing director of retail measurement at Nielsen in China, said: "There is no doubt that other developing countries are also going through the same process, which we call 'premiumization’."

Preston said that while it is normal for people who are getting wealthy to have higher aspirations, they also need to back it up with good market research.

Chinese consumers are not at all savvy when it comes to the branding strategies of Western brands, said Preston, adding that they often get carried away with the name.

"When the brand drops to the next tier down, a lot of people cannot really tell their status unless they go online and do thorough research. But unfortunately, they are not doing the research yet," Preston said.

Jeff Gong, director of Beijing Vogue Glamour Brand Marketing Inc, a brand consultancy, said many foreign brands have taken advantage of this mindset among Chinese consumers. Gong’s agency has helped introduce many European brands, especially clothing majors, to set up shop in China.

"There are several stages in consumer behavior like following, self-experiencing and cultural identity," Gong said. "Due to the lack of information on luxury goods and the relatively late development of the consumer market, Chinese customers are still in the 'following’ stage," he said.

Gong said that the best example of the blind trend can be found in the Chinese obsession with luxury products sporting big logos.

"Most of the affluent people tend to buy what looks good and expensive, especially in the case of imported products."

While positioning for higher sales numbers is the most common strategy adopted by companies, in some instances higher re-branding is necessary for companies to make up for higher market entry costs.

"I don’t think they do it intentionally, but the Chinese market is the most fragmented in the world. With such a big size and population, marketing in China is like marketing in the whole of Europe, and one has to take into account the different preferences across different regions."

In addition, running a national advertisement campaign can also be prohibitively expensive, he said.