It’s all about the relationship
Editor’s note: Matthew Harrison is director of B2B International, a U.K.-based marketing research firm. He is based in the firm’s White Plains, N.Y., office.
The question of how to market and sell to companies based in China is one that is debated endlessly by foreign companies seeking to profit from the country’s huge potential. Views expressed vary wildly, from those who say that marketing and selling in China is “just like home” to those 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 crass and incorrect - there is no reason why a Western company with a flexible, patient and listening-based approach to marketing and sales should not succeed in the Chinese market.
This article aims to dispel some of the myths surrounding Chinese business and explores the reasons behind both successful and unsuccessful marketing and sales approaches in China. We do not seek to provide definitive, one-size-fits-all answers to companies looking to establish or increase their presence in China. Rather we aim to put forward some general guidelines for companies from outside China to bear in mind.
Our insights are based on 100 in-depth interviews with business owners and senior purchasers throughout Beijing and Shanghai. Companies of all sizes were interviewed, from those with sales of $1.5 million through to multinational companies. Companies were divided into quotas to ensure a cross section of different types of manufacturing and service companies.
Less widely recognized
The principle of marketing in business-to-business markets is less widely recognized in China than in more mature markets. Commonly, marketing is seen by many in Chinese businesses as little more than the promotion element of the 4 Ps. Product is the job of engineers, price the job of sales forces and place the job of senior management.
In contrast to some Western markets, the salesperson and, more broadly, the principle of selling are 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 importance placed on relationships in business decision-making.
What is a Chinese company’s preferred means of being targeted by potential suppliers? Unsurprisingly, a wide range of marketing and sales techniques can work and usually a combination of different methods is necessary (see chart and Figure 1).
Market-leading quality
Any marketing campaign should have at its core the communication of the target market’s needs. It is therefore essential to consider what Chinese businesses require from potential Western suppliers (Figure 2).
We have excluded price from our analysis, taking this as a given. Unsurprisingly, the main requirement Chinese buyers have from potential Western suppliers is to provide market-leading quality. Indeed, it is the minimum a Western company must do to justify its higher prices vis-à-vis the local competition. The company’s offering must add value in the eyes of the buyer.
Communicating superior value in Chinese B2B markets is far more difficult than even two or three years ago, as the premium that can be charged for Western products is decreasing quickly. First, increasing numbers of foreign companies are competing with each other, driving down prices; second, the quality of the local offering is improving rapidly; third, the ability of local companies to communicate their offering is increasing; and fourth, international companies based in China are recruiting more and more local staff into senior (buying) positions. Such staff are far more confident than their expatriate predecessors at “buying local” and managing cheaper local suppliers.
To a great degree business trust is developed through relationships. However, the first thing any Western company should do is prepare and present comprehensive case studies and client lists for the potential Chinese customer, in order to prove that they are established in the market and can demonstrate experience in dealing with similar companies (preferably in China).
This need to communicate relevant past experience cannot be overstated and relates to perhaps the biggest barrier facing any Western company (particularly new entrants) in China: the time and effort required to gain the target market’s trust.
The challenge of gaining trust can be turned into an advantage if the Western company leverages its brand to the maximum. When approaching a potential customer for the first time, a company’s brand can communicate experience and credentials in the same way as a case study or reference. Even if the company is unknown in China, the brand of “The West” can be a real plus, and at the very least generate curiosity in the company’s offering. In many cases, the Western brand represents quality; therefore in at least one respect most Western companies enter the market at an advantage.
Of course over time, any company would want its brand to refine and develop a personality of its own in China. Nevertheless, Western companies’ cost bases are such that entering China without quality at the core of a branding strategy and other communications is virtually impossible.
Extremely demanding
Reliability is linked to quality, articulating to a large extent quality of service as opposed to quality of product. Chinese buyers are extremely demanding in terms of their service requirements, on issues as diverse as lead time (which tends to be shorter), availability after hours (a much more frequent requirement) and technical service (particularly when dealing with Western companies, Chinese businesses feel they are paying for top quality, and when technical issues arise they therefore expect them to be dealt with quickly and efficiently).
A key challenge here is communicating that the Western supplier has an established and permanent presence and infrastructure within China. There is a great deal of wariness regarding Western companies who are happy to export their products to China and charge significantly more than local competition but who then have little interest or ability when it comes to after-sales service, ongoing relationships or even rectifying small issues with the product that has been sold. The latter point also explains the prominence of local presence as a requirement from Western suppliers.
An understanding of their needs
Chinese buyers state emphatically that they want Western companies to show an understanding of their needs but also a willingness to listen to and learn from the buyer. A frequent comment is that Westerners spend far too much time talking about what they can offer and far too little time building up their understanding of what the customer requires and what is driving that requirement.
Chinese buyers do not expect suppliers to understand their needs immediately; in fact they tend to believe that doing so is impossible and perhaps even belittles the uniqueness of their challenges and requirements. Rather they want suppliers to listen carefully to the issues facing the business and commence a dialogue which begins to identify their needs and put forward ways of meeting these needs. Suppliers who claim to have an immediate solution are seen as crass, naïve and untrustworthy.
As well as being reliable in a business sense, Chinese buyers want suppliers who are easy to deal with and who personally engage with them. Business relationships in China can often be distinguished by the way they go beyond the workplace and impinge on the participants’ social lives. Companies that do not wish to take the discussion outside the workplace are often seen as unfriendly and - more significantly - hard to get to know, perhaps willfully so. The latter can be fatal to a potential business relationship in an environment where gaining trust is fundamental.
Language and other barriers clearly make expanding relationships beyond the workplace difficult for many Western suppliers. However, this, as well as the requirement to show a general interest in customers as people rather than as just customers, is often essential.
Doing their utmost
It is clear that Western companies are doing their utmost to market themselves to Chinese businesses. Over half of all companies included in our study state that they have been targeted by 20 or more Western businesses within the last year alone. Forty-one percent of companies maintain that they are targeted by Western companies at least as frequently as they are by Chinese companies. And respondents said they are now being targeted on a large scale not only as low-cost suppliers but also for their burgeoning purchasing power.
It is true that the most effective way of targeting a potential customer is not necessarily the way in which that potential customer asks to be targeted. Nevertheless, it is informative to compare the approach of Western companies with the preferences of the Chinese target market (see Figure 3).
On a positive note, Western companies are seen as excellent in terms of their ability to communicate through new media. Their efforts in communicating in Chinese are recognized and Westerners are seen as presenting themselves extremely professionally and clearly.
A typical remark made by a Chinese businessperson in our study was “Western companies are excellent at using their Web sites to tell you exactly what they offer and how it can benefit you. They get straight to the point. Chinese companies tell you about their people and what industry they are in but don’t really tell you what they do.” This view of Western businesses (and Westerners in general) as being extremely direct is widespread in China and is often not seen as a positive characteristic. However, in written business communications, absolute clarity is a distinct benefit and one which Western companies are using to their advantage.
Perhaps unsurprisingly, Westerners’ interpersonal abilities are seen as lacking. This manifests itself in a perceived unwillingness to attend events or visit the client’s workplace or even to make phone calls (of course linguistic limitations are part of the reason for this). Good as Westerners’ written communication is, complementing this with verbal and particularly face-to-face interpersonal contact is essential. One of the most commonly-mentioned and extreme differences between supplier-client contact in Western companies, in comparison with China, is Westerners’ tendency to think that “work is work” and is therefore limited to the workplace. In China, relationship-building and negotiations often take place not only during the working day but also at a restaurant afterwards. Taking a business guest for a meal is a basic common courtesy.
A particular area where Westerners place insufficient emphasis on interpersonal contact is in recognizing the importance of exhibitions and similar events. The prominence of these has been noted; however, many Western companies see insufficient tangible benefit in attending. Westerners must understand that the right exhibition in the right location can be more valuable than almost any other aspect of the promotional mix.
Wants to hear
Perhaps more important than their communication methods is the question of the messages Western companies actually convey and how well these correspond to what the target market wants to hear.
Most Chinese buyers start from the position that the offering will be high-quality when they begin to evaluate a Western company, and that usually turns out to be the case. It would appear, therefore, that Western companies are doing a good job overall in terms of meeting their clients’ product and service requirements.
General professionalism is seen as a key distinguishing factor between Western and local Chinese companies. This manifests in many ways, ranging from the product itself through to company literature, appearance and knowledge of staff, and paperwork.
An inability to listen is a common criticism. 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 Western company hope to engage with and meet the needs of Chinese companies.
While the quality of Western companies’ marketing communications and the knowledge of their salespeople is seen as a real strength, some Chinese buyers feel there can be a tendency to exaggerate the qualities of the company, product or service in question. This can damage trust, something which usually proves fatal to any attempt to sell to a Chinese business.
Signs of potential problems
Chinese businesses are now experienced at dealing with Western companies, who have been contacting them as potential suppliers or customers for a number of years. This has led Chinese companies to look out for early signs of potential problems and many are particularly wary of new entrants from the West whose infrastructure or product offering may not yet be established in, or tailored to, the Chinese market. Chinese buyers are particularly adept at asking questions that get to the core of exactly what a supplier’s offering is and equally good at picking up on exaggeration.
Western companies are prone to showing a sheer unwillingness (rather than an 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.
Rigid Western purchasing procedures are a frequent complaint, as is a tendency for companies to regard certain issues as simply off-limits at the negotiating table. Payment terms is one example of this, but so, surprisingly, are many aspects of product or service specification. Too many Western companies are unwilling to sufficiently tailor their offerings to the Chinese market.
Room for refinement
We have devoted a lot of time to critiquing Western companies’ ability to market to Chinese businesspeople. But how do Chinese companies compare? Despite the experience they have of dealing with target clients in their own country, there is much room for refinement and improvement. Below is a summary of the key criticisms Chinese buyers level at their local suppliers:
• inconsistent product quality;
• general lack of professionalism;
• unsophisticated approach to marketing and promotion, with Web sites, brochures and other promotional materials seen as poorly presented and uninformative;
• disorganized approach to paperwork;
• surprisingly, Chinese companies are seen as not willing enough to attend conferences;
• written communications seen as vague rather than direct;
• specific mention was made of some Chinese companies’ tendency to turn up at the customer’s office uninvited - this is often seen as extremely impolite and unprofessional.
The above criticisms highlight two key issues. Firstly, Chinese buyers and business owners assess suppliers on their merits and are as willing and able to criticize Chinese companies as they are to criticize foreigners. Secondly, it is clear that there remains an opportunity for good-quality Western companies to enter Chinese markets, usually on the basis of a high-value-added, high-price offering. Western companies must recognize, however, that their competitive advantage on quality and professionalism issues is eroding and it will continue to do so, making innovation and efficiency increasingly important requirements.
Lack of understanding
There are a number of reasons for Western companies’ apparent lack of understanding of how to market; many of these are self-evident and all stem from a lack of experience in China.
Some of the mistakes made by Western companies can be explained by the fact that many of 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 rather 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 poor knowledge of the target market as well as a lack of confidence that marketing techniques will be successful.
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. Western companies entering the market have frequently conducted 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. However, analysis of the market assessment research being conducted by market research agencies in China will tell you that the fourth P, promotion, has often been completely ignored. 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.
Automatically superior
A valid criticism made by Chinese businesses is that their Western counterparts sometimes appear hardwired in 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. Westerners tend to try to reeducate Chinese buyers rather than simply providing a value proposition that meets the market’s existing needs.
In addition, some Western companies, many of them guided by Western market entry consultants, tend to overstate the importance of relationship-building in China; they see it as a substitute for the marketing effort rather than a complement to it.
And, 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, mutual linguistic understanding can often be lacking.
Looking to succeed
In closing, we offer some general recommendations to Western companies looking to succeed in the Chinese market:
Remember the marketing basics. Product, price, place and promotion are all important. All should be researched before and after market entry to ensure that the value proposition meets and continues to meet the target market’s needs.
Patience. Patience is required when applying the marketing basics to the local market. Local buyers will take time to be convinced that a Western company has the local credentials to meet their needs.
Listen. Only by listening will you be able to understand and 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.
Relationships. Any salesperson must be prepared to be “friends” with a potential supplier. However, this is as well as, not instead of, the four Ps of the marketing mix.
Be confident in your quality. Western companies start from a strong position here, but remember to focus on the value you add and be prepared to explain why you can add value in China specifically.
Be methodical, but flexible. 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 can 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.
Be prepared for plenty of negotiation. The Chinese approach to completing deals relies heavily on many rounds of negotiation. It is almost inconceivable that your first proposal (particularly your first price) will be accepted. Consider the price you are willing to accept for your offering but never open negotiations at this level.
Avoid exaggeration. Focus on the credentials you have rather than exaggerating to make up for perceived deficiencies. Chinese companies want above all to trust their suppliers.