Cha l l e n g e s f o r Ma r k e t i n g I n C h i n a Prepared for: Prof. Heming, Dept Of Economics, OUC
Prepared by: Ashish Jude Michael, Student PGPEx (IIM Shillong+OUC )
Date: 29-‐11-‐2012
Proposal #: Project Report for Chinese Business Environment
(This report is written only for academic purpose)
2 Challenges for Marketing in China
Table of Content 1. What is marketing?
2. Growth Of Chinese Market
3. Importance of marketing in China
4. How is marketing In China is different?
A) B2B Channel
B) B2C Channel
5. Why marketing In China is different?
A) B2B Channel
B) B2C Channel
6. Challenges faced during marketing In China
A) B2B Channel
B) B2C Channel
7. How to overcome the challenges faced during marketing In
China
A) B2B Channel
B) B2C Channel
8. Conclusion
Bibliography
Challenges for Marketing in China 3
What is marketing? If we answer this question in words of Dr. Philip Kotler Marketing can be defined
as “Marketing is the science and art of exploring, creating, and delivering value to
satisfy the needs of a target market at a profit.”
We can say the following activities can broadly constitute marketing:
• Designing the product so it will be desirable to customers by using tools
such as marketing research and pricing.
• Promoting the product so people will know about it by using tools such as
public relations, advertising, and marketing communications.
• Setting a price and letting potential customers know about your product
and making it available to them. However the key processes of marketing
are:
(1) Opportunity identification
(2) New product development
(3) Customer attraction
(4) Customer retention and loyalty building
(5) Order fulfillment.
Figure 1
4 Challenges for Marketing in China
The above figure gives summaries the key elements of marketing and their
relationships. We can say marketing can be divided into three major streams:
1.Marketing Audit consists of Market Analysis, Market Segmentation and Market
Strategy.
2.Market Research consists of Qualitative and Quantitative Analysis and
Consumer Tests.
3.Marketing Mix consists of Product, Price, Place and Promotion generally known
as 4P’s of marketing.
Generally we divide marketing into two channels:
B2B Marketing: It means business to business marketing, describes commerce
transactions between businesses, such as between a manufacturer and a
wholesaler, or between a wholesaler and a retailer. It imply that the buyer is not
necessary the end consumer. For example machinery purchase by a company.
B2C Marketing: It means business to consumer marketing, describes
transaction between business and consumers. The buyers are generally end
consumers. For example Head & Shoulders shampoo to a consumer.
Growth Of Chinese Market
Why is China taking off now? If we consider B2B channel China has the
reputation of being World Factory and where dose the technology & machinery
for this factory comes? From developed countries like US, Japan, Germany &
Europe. Today when we observe the balance of payment account with other
countries we can see that it has trade surplus with all countries except Japan
from where it imports major portion of technology. Still the western countries
are eyeing this market and are yet not successful to grab important place. The
Challenges for Marketing in China 5 estimated value of B2B market in China expected to be more that US$320bn out
of which US$ 50bn is being spent over the Internet in B2B market segment in
China and China's online B2B market is larger than B2C market.
In case of economic slowdown as faced in 2009 the Chinese economy was
severely affected as they have very low private domestic consumption if we see
Figure 2
in figure 2, the domestic consumption as a % of GDP is very low at 37% which
make its economy very valuable to performance of its exports. China’s
consumption-‐to-‐GDP ratio has dropped by nearly 15 percentage points since
1990 and continues to fall in the aftermath of the financial crisis. While falling
consumption rates are common in developing economies, the speed and
magnitude of this decline have no precedent in modern history. In the United
States, private consumption always remained above 50 percent of GDP even
during the full-‐scale industrialization drive of World War II. In Japan and South
Korea, consumption remained was always above 50 percent during periods of
rapid industrial development. The sources of China’s low consumption rate are
both behavioral and structural set-‐up. The country’s households have an
extraordinarily high ability to save: the average Chinese family save around an
astonishing 25 percent of its discretionary income, about six times the savings
rate for US households and three times the rate for Japan’s this makes, China’s
savings rate is 15 percentage points above the GDP-‐weighted average for Asia as
a region.
In order to boost the private domestic consumption the government has given
6 Challenges for Marketing in China the people the right to go shopping. In 2011, China begins its 12th five-‐year plan,
shifting its economic focus from export-‐led sectors to increasing domestic
consumer demand. The plan, passed by the government in mid-‐March, 2011, is
designed to develop the country into a major consumer marketplace. It plans to
increase consumer product imports, promote urbanization, and optimize the
consumer market for consumption. That the Chinese consumer is driving global
growth is well known. The statistics are arresting: ten million new Chinese
consumers enter the market each year. In 2010, China’s consumer market was
estimated to be worth $1.7 trillion. Credit Suisse projects that the burgeoning
domestic consumer market could grow to nearly $16 trillion within a decade. But
while the consumers are there in droves, brands don’t necessarily know how to
reach them.
Still there are some interesting facts on China’s B2C market:
• There are more than 420 million Internet users in China, a number growing by
the minute. The advertising and marketing landscape in China is rapidly
changing to adapt to dynamic media and communication technology trends.
• There are five times as many people in China learning English than there are
people living in England. There is an implication here for marketers—the
younger generation has a lot of exposure to, not to mention interest in, the West.
• Chinese consumers spent $9 billion on luxury goods in 2010, second only in
magnitude to the United States.
• The consumer in China has become significantly more sophisticated than ever
before. Simon Pestridge, global brand director for Nike, said, “There is no
difference between the consumer in China and the consumer in the U.S. They are
incredibly proud and savvy, which is different from 10 or 15 years ago.”
Importance of marketing in China
Marketing is just like first step which you make while you enter any market. And
when that market is as big and important as China that first step is really
important. In China things work basically by relationships or “Guanxi” and
marketing plays an important role for initiating this relationship. There has been
several example when the marketing strategy of MNCs even such as Coca-‐Cola
after initial hiccups learnt the lessons and localized their marketing strategy.
Challenges for Marketing in China 7 Coke changed its name to KeKouKeLe in which Ke Kou means tasty , good to eat
and Ke Le means be happy. And this made Coca Cola a great advantage on Pepsi
its arch rival in Chinese market.
Another point, which MNCs get wrong about, is thinking China as a single
market. Actually there no single market but actually two markets one Urban &
other Rural and both totally different from each other. And one should market
products differently in each of them. MNCs like Google failed at the hands of
Baidu in China just as they were not able to formulate a good marketing strategy
for Chinese Market where the major Internet users were youth and students and
Google just targeted working professionals. Finally Google shut down its China
Operations. This shows that marketing is very important for surviving in Chinese
Market.
How is marketing In China is different?
The question of how to market and sell in China is one that is debated endlessly
by foreign companies seeking to profit from the huge potential of the country.
Views expressed by business people claiming to know the secret of success in
China vary wildly, from those (generally newcomers) who say that marketing
and selling in China is ‘just like home’ through to those (usually those with at
least a couple of years’ experience in China) who exaggerate the unique nature of
Chinese business and Chinese people to such an extent that selling in China
sounds like an impossibility. The reality is that these two positions are both
equally correct and incorrect – there is no reason why a Western company with a
flexible, patient and ‘listening’ approach to marketing and sales should not
succeed in the Chinese market.
B2B Channel As Chinese companies have developed over the past decade, they have rapidly
become more sophisticated in their business systems and practices, creating
both opportunities and challenges for Western businesses. Although ongoing
East-‐West cultural differences continue to pose challenges to foreign enterprises
carrying out marketing in China, companies that make an effort to understand
such variations and integrate them into their marketing strategies stand a
greater chance of succeeding in the China market.
8 Challenges for Marketing in China When discussing Chinese attitudes towards marketing and sales, it is important
to make the distinction between the different types of companies operating in
China. Marketing staff employed by western multinationals typically have more
heightened awareness of marketing concepts than local Chinese companies,
often employing expatriates or returnee overseas students with MBAs in senior
marketing positions. With such large variations in marketing practices among
different types of companies in China, foreign companies are best advised to take
a flexible approach to sales and marketing.
In general, the principle of ‘marketing’ in business-‐to-‐business markets is less
widely recognized in China than in more mature markets. Commonly, marketing
is viewed as a task for the sales department, its role sometimes viewed as little
more than taking care of the company logo and brochures. In short, marketing is
defined by many in Chinese businesses as consisting of only the ‘promotion’
element of the 4 Ps. ‘Product’ is the job of engineers, ‘price’ the job of salesforces
and ‘place’ the job of senior management. At worst, marketing departments are
derided as ‘spending departments’, their apparently superficial output seen as a
poor substitute for the relationships that are so important in a Chinese business
environment.
Figure 3
In contrast to some Western markets, the salesperson and more broadly the
principle of selling are more widely respected in China. Two issues perhaps lie at
the core of this fact: firstly, the entrepreneurial spirit of the Chinese people, and
secondly the great importance placed on relationships in business decision-‐
making. A good salesman must be adept at forging not only relationships, but
also friendships with potential customers. The importance of relationship
Challenges for Marketing in China 9 building tends to imply a long sales process, requiring of salespeople patience,
continual learning and an on-‐the-‐ground presence.
How do Chinese Companies want to be targeted?
As per a study made by B2B international the following was the result
Figure 4
We can clearly see that Chinese Companies like Exhibitions & Conferences. For
initial phase they are comfortable with emails & websites too. But for finalization
they prefer networking and workplace interactions.
B2C Channel Perception and awareness
According to executives responding to the survey, consumer awareness in China
is king; raising consumer awareness is one of the three most-‐frequently cited
goals for the near-‐ and mid-‐term. About a third of Chinese (35%) and non-‐
Chinese (32%) companies are focused on brand awareness, making it the most
commonly cited marketing goal for the coming year. But brand perception is
critical too, and the top focus of non-‐Chinese companies—27% of Chinese
companies and 36% of non-‐Chinese companies named positive brand perception
as a top marketing goal for the next year. Brand awareness, however, may be
particularly challenging for non-‐Chinese companies looking to break into
industries in which there are already hefty domestic competitors. For example
Nike has built its marketing and branding strategy around basketball. As in China
basketball is very popular.
Change your brand for China
10 Challenges for Marketing in China Best Buy’s shift away from its core brand in China may be indicative of how some
non-‐Chinese brands need to approach the market. While operating a China-‐only
brand appears not to be the norm, the vast majority of non-‐Chinese marketers
(63%) indicated they believe they need to change their brand attributes for
Chinese consumers. (Fig. 3) In many cases, this may mean altering some brand
attributes to demonstrate alignment with local Chinese culture and local Chinese
tastes. For instance, western spirits brands have had to alter their scotch
marketing to account for Chinese cocktails that mix scotch with ice and green tea.
That is not to say that strong global brands need a complete brand makeover to
compete. The success of many global brands in China would seem to support
this: take Starbucks, McDonald’s, and KFC, for instance. Still, even if brands don’t
need a complete makeover, they might benefit from a few nips and tucks.
Online and mobile are the future
Moving forward, digital and mobile marketing will be a critical part of the mix for
all brands in China, as marketers seek to integrate their message across both
traditional and digital platforms. China has more than 420 million Internet users,
according to the China Internet Network Information Center, and its number of
mobile subscribers tops 850 million. Online marketing is extremely or very
important for reaching the Chinese consumer.
Why marketing In China is different? B2B Channel How Well Do Western Companies Choose Their Marketing & Sales Approaches In
China?
Figure 5
Challenges for Marketing in China 11
From the above figure we can see where exactly the western companies go
wrong.
First is the major at conference and exhibition where the general tendency of
western marketing professionals think its wastage of time, and commit the first
major mistake. Second is workplace interactions which western companies
indulge on only if deals are at very advance stage.
Now lets see the logic behind first phenomenon where Chinese buyer think that
exhibition it will be easier for him to see the available product to solve his
problem and he can physically see then also he can meet related sales persons.
As Chinese people are much more comfortable after the physically see the
product. But western companies don’t understand this.
Now lets see the second phenomenon if we consider decision in western
countries it looks like figure 6.
Figure 6
Here we can see that after completion of one activity only the other start. Now let
us see the decision making in Chinese companies in figure 7.
Figure 7
12 Challenges for Marketing in China
Here we can see that there are many parallel activities such as supplier input
scoping, Supplier input evolves into a series of increasingly specific proposals
along with Customer refining of needs are all going in parallel. It may also
happen that the buyer is simultaneously be speaking to other suppliers.
B2C Channel Chinese middle classes believe that with the right competitive tools, they will
find an opportunity to transform their lives, in contrast to a blue-‐collar laborer,
who sees his social and economic status as more or less fixed. It’s the difference
between basic needs of survival and physical safety and a need to satisfy social
status requirements. The middle class engages with society to get recognition for
financial success.
It’s important to note, though, that this is not about arrival, it’s about being on
the right journey-‐-‐they see theirs as a continuous struggle upward, and there is
an acute awareness that all could be lost in the blink of an eye. Civic institutions
are unreliable; there is no political representation; wealth is not protected
institutionally; the safety net, particularly health insurance, is incomplete. People
say that all they want is to be happy and to be in control of their destiny, but at
the same time they understand that this ideal is not truly practical.
The middle class seeks to create something sustainable, reducing the chances of
falling off the middle-‐class pedestal. While China’s middle class is becoming more
modern and international, it is not becoming more Western.
A brand’s success is rooted in an appreciation of people’s fundamental
motivations—and in China this means that a premium-‐priced product must be a
tool for social advancement. And the range of product categories perceived
to achieve this objective has expanded significantly. For example in the fifteen
years since DeBeers entered the market, the penetration of diamond engagement
rings has risen from 8 percent to 80 percent. The company achieved this by
understanding that marriage is perceived differently among Chinese than
Westerners. While the latter like to believe that passion and romance last
forever, the former see commitment as persistent, not love as such. De Beers
gave the Chinese man a tool to demonstrate his reliability.
Challenges for Marketing in China 13
THE JOURNEY OF SUCCESS
This journey is the materialistic & societal success of a person at his different
stages of life. Today, the middle-‐ and upper-‐middle, as well as wealthy classes
have all achieved critical mass. The strategies of brands targeted to each must
shift accordingly.
Acceptance: Young college graduates are unproven, in search of acceptance.
They need acknowledgment of their potential, not admiration for their
achievement. For example Wrigley’s Double Mint chewing gum asks, “Are you
really ready?” and presents fresh breath as a shield against coworker alienation.
For individuals just out of the starting gate, brands can sharpen their basic
survival skills—to pounce on opportunity or demonstrate their potential.
Rejoice shampoo links dandruff-‐free hair to having the confidence to approach
the boss when a chance to translate English arises. Ariel detergent links clean,
white shirts with an ability to “rise and shine at the office.”
Recognition: Once strivers are in mid-‐career, they must be recognized for both
their past achievements and their capacity for further advancement. Products
play an active role in their winning the game by demonstrating their advanced
survival skills. For example in one ad, Sony Handycam associates digital
transmission capabilities with resourcefulness by, somewhat ironically, enabling
a vacationing professional to delay returning to work. Technology brands from
Motorola to NEC to Hewlett Packard are productivity weapons, competitive
advantages deployed on the business battlefield. As people scale their work
hierarchies, it also becomes increasingly important to them to sharpen their
internal tools—for example, “determination to face the future” (China Mobile’s
Go Tone network).
During the middle stages of advancement, a happy family is an important factor,
a necessary-‐but-‐not-‐sufficient prerequisite to being taken seriously as an adult
constructively engaged with society. That’s why many automobile ads targeted
to business people feature parents with their (only) child and Epson commercial
printers dramatize color accuracy by depicting a father educating his daughter.
14 Challenges for Marketing in China
Admiration and Iconization: Toward the top of the hierarchy, the laoban, or
boss, requires unanimous respect and deference. Given the ubiquity of rival
factions and impatient upstarts, power is conditional. Authority, therefore, must
be self-‐evident—hence premium Ballantine scotch’s tagline, “When success
speaks for itself, there is no need to show off,” or BMW’s call to “Reflect your
inner leadership spirit.”
In China, iconic stature is the best defense against corporate maneuvering. Icons
are paragons of wisdom, masters of the system. They are revered because they
both lead and teach. This is why the most premium products often base their
appeal in “shared mastery” and “artistic connoisseurship” potent demonstrations
of internalized confidence.
The middle class is on a perilous journey of advancement, both material and
societal. In this context, brands should enable strivers to achieve surer footing
every step of the way.
Major challenges faced during marketing In China B2B Channel Poor ability to listen An inability to listen is a common criticism of Western companies amongst
Chinese buyers. The importance of this cannot be overstated, and this relates
partly to the need to show respect to any potential customer. Most importantly,
only by studying customers’ requirements and how they evolve in China, can any
company hope to engage with and meet the needs of Chinese companies.
Challenges for Marketing in China 15
Therefore, Western companies are prone not to communicating their message in
the wrong way; rather they tend to make a far more basic mistake: they refuse to
listen, and therefore communicate completely the wrong message.
Unwillingness to negotiate
Just similar to unwillingness or inability to listen is a similar ill disposition
towards negotiation when it comes to western companies. This may well relate
to the fact (already discussed) that definition of the customer’s needs and
definition of how to meet those needs tend to happen concurrently rather than
sequentially in China. This can make Western companies feel unsure of exactly
what they are negotiating about, something they tend to try to resolve by
insisting on more structured negotiations.
Western companies are also prone to showing a sheer unwillingness (rather
than inability) to negotiate, even walking away when ‘the going gets tough’,
wrongly assuming that all differences are irreconcilable. This is absolutely the
wrong approach in China, where negotiations are extensive and the opening
price is almost never the price the customer ends up paying.
The Chinese approach to completing deals usually involves many rounds of
negotiation, and often a large number of people from different levels within an
organization will be involved in the negotiating process. Even when tacit
agreements are in place, contracts can often be redrawn several times before a
final agreement is in place, which can be frustrating to foreign businesspeople
unfamiliar with Chinese negotiating practices.
Ignoring the importance of Marketing in Product Life cycle
Some of the ‘mistakes’ made by Western companies in terms of their marketing
and sales approaches and messages can be explained by the fact that their
Chinese activities are relatively new. Companies are providing solutions to needs
which have only just emerged, and mutual understanding between buyers and
suppliers is still developing. There has been a strong tendency for Western
companies to undervalue the importance of marketing in China, seeing it as
something that takes place not at the beginning of the product life cycle, but once
channel access and market penetration have been achieved. This is extremely
surprising, given the sophistication of marketing techniques in the West, and
may result from a lack of knowledge of the target market, as well as a lack of
16 Challenges for Marketing in China confidence that marketing techniques will be successful.
Focus on product, channels and price, rather than promotion
If Chinese companies tend to regard promotion as the only aspect of marketing,
there is an opposing tendency for Western companies in China not to pay
promotion enough attention. Many Western companies entering the market first
carry out some kind of channel (place) research, as well as an examination of the
likely prices the market will bear. They have usually given a good level of
consideration as to which products will appeal, albeit with insufficient thought to
how these will need refining. Company resources have been thrown into
understanding the size and nature of the market opportunity, with much less
emphasis placed on how that opportunity should be communicated directly with
the target market.Figure 8 shows the priority of expectations which Chinese
Buyers have from Western or companies outside China.
Figure 8
“We know best”
A valid criticism made by Chinese businesses of their Western counterparts is
that they sometimes appear hard-‐wired into thinking that everything they do is
automatically superior to the local competition. Essentially, Western companies
forget that marketing is about the profitable satisfaction of needs, and that if a
need is different in China to the West, then the value proposition must also be
different. There is often a tendency to try to ‘re-‐educate’ Chinese buyers, rather
than simply providing a value proposition that meets the market’s existing
needs.
“Marketing is a ‘Western’ discipline – it’s less important in China”
Some Western companies, many of them guided by Western market entry
consultants, tend to overstate the importance of relationship-‐building or
“Guanxi” in China, in that they see it as a substitute to marketing effort, rather
Challenges for Marketing in China 17
than complementary. Good salespeople are sometimes left stranded alone in a
small representative office, with no marketing capability to complement them.
Communication problems
It cannot be denied that there remains a significant language barrier between
Chinese and Western companies, albeit one that is closing as huge numbers of
Chinese businesspeople learn English and increasing numbers of Westerners
learn Chinese. Once companies need to interact at an operational rather than
strategic level, linguistic difference can often cause miscommunication and result
in problems.
B2C Channel China is still an emerging economy, and marketers often feel they don’t have the
research they need to target these new consumers. Furthermore, regional
differences across China are pronounced but poorly understood, particularly by
foreign firms. And as incomes of Chinese in second-‐, third-‐, and fourth-‐tier cities
rise, their consumption patterns will drive market dynamics in unprecedented
and unpredictable ways. Still we can divide the major challenges faced by
Foreign companies in B2C segment into three main challenges:
Driving down prices
As we know the Chinese Market is not similar to western or developed countries,
here the per capita income (PPP) is nearly one-‐fourth of US which comes to
about US$8466 as compared to US at US$48,442. And the saving rate is very high.
The disposable income is very less.
Hence China is a market with low margins and high volumes. There is also a
saying that one is often negatively surprised on margins, but positively surprised
on volumes. China’s intensely competitive markets are price sensitive and the
high cost of distribution has made it very difficult for MNCs to achieve the
margins which they are accustomed. But there exists an opportunity in terms of
enormous volume which MNCs can target only thing is that they have to tap the
fastest growing pool of consumers and build relationship with them.
Deepening geographical penetration
China is a vast country, precisely the 4th largest country in terms of land area and
18 Challenges for Marketing in China largest in terms of population. South eastern and costal part of China is densely
populated where else the north and central part is having a low population
density.
Most of the MNCs are well established in Teir 1 and Teir 2 cities, but are
struggling to go into Tier 3 cities. Income is rapidly growing in smaller cities
though they are sizeable as per world standards. Building capabilities in these
areas require investment and local partnership. There are 136 Tier 3 cities
spread across China, this presents difficult decisions in terms of which cities and
regions are to be prioritize. Even after problem of Tier 3 cities is solved the
challenges will be posed for serving Tier 4 cities, as these cities are important for
companies to capture middle class.
Learning about the new middle class
China is a market of Middle Class. There is a niche market for luxury, which a few
affluent people can purchase. But a large number of MNCs are targeting the
middle class. As we have discussed earlier how the person’s phase of life decides
his purchasing behavioral. Similarly for targeting middle class MNCs have to
learn about the middle class. A recent survey by McKinsey’s China Consumer
Center of 6000 consumers, including many from smaller cities, shows striking
variations in taste, attitudes and brand loyalty both among members of different
income class, as well as across cities and region. Successful MNCs have to
develop a deep understanding of the consumers, who may not be able to afford
company’s products today but be able to do so in future. And also they have to be
willing to innovate and adapt to meet the needs of these rising consumers.
The above challenges became more complicated and uphill tasks for MNCs
because of the following limitations:
Lack of reliable market research
The overwhelming consensus is that there is a dearth of good market research
on the Chinese consumer and market. There is a lack of reliable market research
on Chinese consumerism general. Given China’s breadth, its unpredictability, and
the diversity of regional tastes, a lack of understanding of consumer preferences
Challenges for Marketing in China 19
could seriously hinder marketers.
Missteps can be costly, both in terms of the bottom line and brand equity. Yet
even large brands have made serious mistakes by not getting the right consumer
data. For example, when it opened its Shanghai outlet, retailer Marks & Spencer
assumed sizing would be similar to its established Hong Kong store. But it soon
found that smaller sizes were selling out and larger sizes were sitting on the
shelves. It had failed to foresee the regional difference. In addition, marketers do
not appear overly satisfied with market research providers in China.
Lack of transparency
A lack of transparency in the Chinese marketing communications industry has
the potential to hold them back. The issue of transparency is less about
responsible business than it is about consistent standards among agencies. In
particular, this transparency needs to relate to some of the less “obvious” facets
of agency operations, such as media research, media planning, and media buying.
While Western agencies typically have created processes to make these areas
less opaque, Chinese agencies often are not yet at that level.
Finding the right skills
Talent is an important issue for both Chinese and non-‐Chinese marketers,
particularly as they begin ramping up their Chinese operations. But with this
growth, companies are rightly concerned that they may not be able to take
advantage of the business opportunity in China because of a shortage of qualified
executives and managers to drive the process. The consumer opportunity in
China may be great, but it is vital to remember that China is still a developing
market, without a long history of management training. It’s not a matter of
finding a person to take a key role, but finding the right person.
When it comes to talent, both Chinese and non-‐Chinese companies are looking to
create the right balance of East and West. For their marketing leadership,
companies appear more concerned that the executive come from within the
company than that the executive is from China or not. Chinese companies, as
might be expected, are most likely to recruit Chinese nationals from within the
company as their marketing leaders, but still, a significant are recruiting non-‐
20 Challenges for Marketing in China Chinese leaders from within their ranks.
In three years, interestingly, the situation flips. Chinese companies are more
likely to recruit non-‐Chinese from outside their company as their marketing
leaders, while non-‐Chinese companies are more likely to be looking at Chinese
from outside their company. For marketing staff, both Chinese and non-‐Chinese
companies are looking to recruit Chinese nationals. Today, they are looking
primarily within the
company, and in three years they expect mostly to be recruiting from elsewhere.
How to overcome the challenges faced during
marketing In China B2B Channel There are a few points to keep in mind and I feel then things can me made much
more easier for dealing with Chinese Buyers in B2B channel.
1. Remember the marketing basics – Product, price, place and promotion are
all important. All should be researched before and after market entry, in order to
ensure that the value proposition meets and continues to meet the target
market’s needs.
2. Patience – Patience is required when applying the marketing basics to the
local market. In particular, the sales process is longer and more complex than in
Western markets, and local buyers will take time to be convinced that a Western
company has the ‘local’ credentials to meet their needs.
3. Listen – Only by listening will you be able to understand and therefore meet
the local market needs. Chinese companies do not want to buy a product or
service that has come straight off a shelf in the West.
4. Relationships – Focus, but do not over-‐focus, on relationships. Any
salesperson must be prepared to be ‘friends’ with a potential supplier. However,
this is as well as, not instead of, the 4 Ps of the marketing mix.
5. Be confident in your quality – Western companies start from a strong
position, in that they are usually assumed to have excellent quality. Focus on the
value you add, and be prepared to explain why you can add value in China
specifically.
Challenges for Marketing in China 21
6. Be methodical – One of the qualities that defines Western businesses is their
methodical approach to doing business. It is clear that when this turns into a
dogma about how business should be done, Chinese companies quickly lose
interest in your offering. However, do not be afraid to highlight the methodical
nature of your offering, as this is something that is valued by Chinese
businesspeople and seen to be lacking in some Chinese businesses.
7. Be flexible – Flexibility on issues such as product, service, payment terms and
price is vital for success in the China market. Foreign companies should do their
best to identify and meet Chinese customers’ real needs rather than assuming
these needs mirror those of customers in the West.
8. Be prepared for plenty of negotiation – Any potential supplier should be
prepared for plenty of negotiation when selling to Chinese businesses. It is
almost inconceivable that first proposals will be accepted. Keep in mind the fact
that buyers may be deliberately benchmarking suppliers, and always try to
reserve sufficient margin for further price reductions at a later stage.
9. Avoid exaggerations – Focus on the credentials you have, rather than
exaggerating to make up for perceived deficiencies. Above all, Chinese companies
want to trust their suppliers.
And finally the table below shows when to approach future Chinese
customers/buyer by which media for Western or companies outside China:
22 Challenges for Marketing in China
B2C Channel
Though regarding Lack of reliable market research, Lack of transparency
Finding the right skills MNCs have to either put their own efforts or get
professional help from the experts.
Now discussing about the basic three challenges of:
Bringing down the prices
MNCs can do this by formulating a strategy where they can use the Economies of
Scale and Localization concepts. I believe if both of these are used in a right way
MNCs can succeed in bringing down the prices.
Challenges for Marketing in China 23
Geographical penetration
With the rise of income levels in Second-‐Tier Cities & Third Tier cities MNCs can
use them as New Frontier for growth.Greatest growth opportunity in China is
beyond the First Tiercities of Beijing, Shanghai, and Tianjin. That’s not surprising
given that China has more than 100 cities
that have populations in excess of 1 million. Figure 9 shows the long tail of
Chinese Cities which have a potential of future markets. Or thought of in another
way, many of the so-‐called second-‐ or third-‐tier cities in China have a similar
urban population to global cities such as Amsterdam or Chicago.
For marketers, this means that the growth of China’s consumer class appears to
be taking place outside the
first-‐tier cities. Beijing and Shanghai may be approaching saturation, and a
regional presence will be very valuable moving forward. These second-‐ and
third-‐tier cities, after all, are where the majority of the population lives and as
the middle class gains more economic mobility, they’ll have more disposable
income. According to McKinsey, half of China’s 100 largest cities will experience
at least 50% growth in consumption between 2008 and 2015, and 25 will double
their consumption.
Figure 9
24 Challenges for Marketing in China
Learning about China’s New Middle class
The changing landscape of marketing and advertising in China just as globally,
advertising and marketing channels are in a dramatic state of flux, and that
situation is mirrored in China. While traditional advertising channels—such as
television and print—remain strong today, their predominance is likely to be
challenged in the coming years. Among marketers participating in the survey,
television is clearly the primary channel today for reaching the Chinese
consumer. Which new channels will emerge? Marketing executives at both
Chinese and non-‐Chinese firms foresee a rise in word of mouth, public relations,
online and social media,
and mobile apps as the most potent ways to reach Chinese consumers in the
future. Clearly, as marketers look to build brand awareness and perception
among Chinese consumers, television advertising will play its part. But as
marketing priorities shift away from brand development toward sales and
geographic expansion, other media are likely to play a critical role. In particular,
marketers will likely be formulating integrated
marketing communications strategies across a variety of Chinese consumer
touch points. But first, a caveat: While television’s appeal to marketers is
expected to drop off in the next three years, the exodus from TV is not universal,
and is likely to remain quite potent for certain consumer brands.
Conclusion Marketing is not a rocket science with some hard and fast formulas, which you
apply to a specific problem and you get results. It is what we learn from previous
experiences and present conditions. On similar lines we have seen that
Marketing in China specially for MNCs and Western companies is not so
complicated just we have to keep in mind a few points and remember each
country has its own culture and tradition and a good marketing manager molds
his marketing strategy as per requirement for a particular country or region.
I hope I was able to make out my point in this report.
Challenges for Marketing in China 25
Bibliography
1. Wikipedia 2. McKinsey Quarterly – August 2009 “A consumer paradigm for China” by
Janamitra Devan, Micah Rowland, and Jonathan Woetzel. 3. McKinsey Quarterly – March 2012 “Meet the Chinese consumer of 2020”
by Yuval Atsmon and Max Magni. 4. Fobes Insights “Marketing to new Chinese Customer” -‐2011. 5. “The Unique Cultural Challenges Of Marketing To China's New Middle
Class” by Tom Doctoroff. 6. “From Made in China to Sold in China: The Rise of the Chinese Urban
Consumer.” Published by McKinsey Global Institute.
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