Meeting Western needs in an Eastern setting
Editor's note: Matthew Harrison is director, and Alaric Fairbanks is head of Asian research, at B2B International, a U.K.-based marketing research firm. Harrison is based in the firm's White Plains, N.Y., office. Fairbanks is based in the Beijing office.
For companies wishing to conduct or commission research in China, the opportunity is enormous. Here we have a huge, diverse, growing, increasingly affluent and innovative economy, which is eager to share its ideas with potential investors. China might not be the easiest country in which to conduct research, but for the research buyer, the value of the information obtained is likely to be substantial.
This article seeks to provide the reader with a picture of how research, particularly business-to-business research, is conducted in China and the issues that should be borne in mind when commissioning research in the country.
We will define business-to-business research as market research in which the views of businesspeople are sought in order to facilitate a business decision. We include not only businesspeople in the traditional sense but also anyone else who contributes to a study in the context of their employment. We therefore include, for example, projects in which the views of government officials (of which there are many) are sought, and medical or pharmaceutical projects in which organizations seek the views of physicians or surgeons.
Estimates of the proportion of Western market research markets accounted for by business-to-business research usually put the figure at around 10 percent. In China, however, the proportion is estimated to lie at around 25 to 30 percent. It is this business-to-business sector of the market that is expected to see the most growth over the coming years, with Chinese companies increasingly open to the idea of obtaining the views of businesspeople, and Western companies more and more hungry for Chinese business opinion.
No clear record
It is worth noting at this juncture that the concept of business-to-business research within China is even newer than the concept of consumer research. There is no clear record of exactly when or how this part of the market developed. Beginning around the mid-1990s, the market appears to have evolved gradually, as projects commissioned to explore consumer opinion gradually incorporated the views of businesspeople. Since the turn of the millennium, there has been a surge in business-to-business research and many of the senior people within Chinese agencies who previously led operations within Hong Kong have moved to the mainland.
Across industries, the type of research commissioned is markedly different from the situation in Europe and North America. In the West, research reflects the objectives of companies operating in mature markets who want to establish customer loyalty, achieve differentiation through branding, monitor the satisfaction of their employees, develop new concepts or segment their target audience. Typical research projects are therefore customer and employee satisfaction studies, branding studies, concept tests and segmentations.
In China, the picture is very different, in that a high proportion of research projects (around 60 percent) are focused on market assessment studies, in which clients (often foreign companies) are asking for a comprehensive explanation of how markets are structured, who are the key players and what is the market size. Whereas in the Western economies research buyers generally seek intelligence that will help them progress in existing markets, in China much of the research is about entering new markets or indeed entering China itself.
Lower risk
Any company seeking to commission research is advised to stick to the national and international players, where the research is of a high standard and there is a much lower risk of the agency running into difficulties.
No matter which supplier you choose, they will likely have to rely on the network of local fieldwork agencies and “one-man bands” that do most of the respondent-level data gathering.
With the exception of one or two newly established offshoots of foreign agencies, these companies are largely provincial rather than being located in the leading cities of Beijing, Shanghai or Guangzhou. The companies fall into two main categories: (1) companies focused entirely on fieldwork, as opposed to full-service fieldwork agencies who design and analyze research, and (2) one-man bands who may offer a kind of full-service offering but where every aspect of the business is based on one or two people. A third, less prominent group is small companies with a broad remit, of which occasional market research interviews are a small part.
The first group, the local fieldwork agencies, is critical to the survival of the whole industry, as these are the foot soldiers of the industry, the companies that collect most of the information from outside the big cities on behalf of the larger agencies. In many cases, any company buying research from a national or international agency is relying not only on that agency’s intrinsic research capability but also on the quality of its network of local fieldwork agencies. Put simply, many of the larger companies subcontract most fieldwork that is located away from their base. It is recognized more or less universally that no one agency can research every single part of a country as vast as China. As a result, companies in the Chinese research industry have a higher degree of interdependence than similar companies elsewhere in the world.
There are at least 1,200 local fieldwork agencies and one-man bands, 80 to 90 percent of which turn over less than 1 million RMB ($150,000) per annum. Essential as some of these companies are, and accepting that many are of good quality, it is unlikely that such agencies will be user-friendly in terms of dealing with Western organizations. The ability to speak good English is extremely rare, and this part of the market should essentially be regarded as part of the agencies’ supplier base, rather than agencies that are likely to meet the needs of clients in business.
In summary, there are less than 50 full-service research agencies in China with a national capability, and as already stated, this national capability is obtained through networks rather than in-house resources. If regional players are included, there are maybe 100 full-service agencies in the country. This relatively low number of market research agencies is indicative of the fact that we are talking about a relatively embryonic industry.
High-level view
We hesitate to generalize about the “typical” agency, as every Chinese agency has its own unique points, just as would be the case in any other country. Nevertheless, we feel it is useful to present the reader with a high-level view of what a typical Chinese research agency with national capability looks and feels like.
As already discussed, no agency has in-house fieldwork coverage of the whole of China. However, most major agencies do have three offices - one in each of Shanghai, Beijing and Guangzhou. Head offices are spread across the three cities, although there are more in Shanghai than in Beijing or Guangzhou. Companies with a strong business-to-business focus tend to be headquartered in Beijing, reflecting the importance of speaking to government officials in such studies. The most common model is for the majority of research executives and management to be located at the headquarters office, with a limited management presence at the other two offices. It is common for the Guangzhou office to consist of fieldwork operations only, the role of this office being to cover the requirement for Cantonese interviewing in Southern mainland China and Hong Kong. Clients will find themselves liaising with just one office, depending on the location of the executive carrying out their particular project.
Most agencies are located in tower blocks, usually near to the city center. Offices are almost always equipped not only with a set of CATI stations but also with an in-house focus group viewing room. This is in contrast to most U.K. agencies, which rely on specialist external viewing facilities.
Emphasis on quality
The big-city Chinese research agencies place an extraordinary emphasis on quality. Whereas, for example, U.K. market research standards decree that 5 percent of all interviews conducted should be listened-in to, it is not uncommon for Chinese agencies to listen to 50 percent or more of telephone interviews as they take place, with recordings of the remaining interviews also listened to. Agencies often read through every single completed questionnaire, insisting that respondents be re-contacted as appropriate. Full-time quality management teams often number six or seven people.
This focus on quality is complemented by an embracing of new technology, which agencies use to their full advantage. Indeed, technology is an integral part of the quality-assurance process, with digital recording of interviews and randomized monitoring systems used for telephone fieldwork. Face-to-face interviewers typically use MP3 players to record their interviews. Significantly, there is no secrecy law in China, meaning that interviews can be recorded without the knowledge of respondents. There is, however, an increasing tendency for respondents to be made aware if they are being recorded, as agencies recognize the importance of maintaining the trust of target markets (this is particularly the case in business-to-business research).
Quality is such a key issue for Chinese agencies that research buyers may well find themselves having company quality procedures recited to them during the initial stage of scoping a potential project. With such a focus on this issue, potential research buyers should be reassured about the very high reliability of research produced by the national and international agencies in particular.
Reliance on face-to-face
Data collection in China, and indeed elsewhere in Asia, has traditionally been distinct from that in Western countries, in that there has been a reliance on face-to-face interviewing in consumer and business-to-business research alike. It is estimated that in the year 2000, around 90 percent of all research interviews were conducted in this way. Since the turn of the millennium, the role of face-to-face interviewing has decreased markedly however, and it is currently estimated to lie at just over 60 percent. This is of course significantly higher than in most Western research agencies, where less than 10 percent of all interviews are conducted face-to-face.
The use of face-to-face interviewing is particularly prominent in relation to certain target respondent groups. In business-to-business research, the more senior the respondent, the more likely he or she is to require a meeting to discuss his or her views on the market. Middle- to senior-level managers and most government officials are the main respondent groups to fall into the face-to-face category. This is partly due to respondents’ natural curiosity as to whom exactly they are giving information, but, perhaps more importantly, also due to a cultural perception that high-level discussions merit the time and effort that goes into a face-to-face meeting. It should be noted that this perception is often as prominent within the research agencies as it is among target audiences.
The view that important discussions “deserve” to be conducted face-to-face is well illustrated by the fact that, in complete contrast with research conducted in the West, it is extremely common for business respondents to come to the premises of the research agency in order to participate in the research. Such interviews typically take place in the agency’s focus group viewing room, and are often observed by clients. Usually, a thank-you is presented to the respondent in the form of a small financial incentive (this is far more common than in Europe but less so than in North America). This approach is good news for the client, who can expect to receive a DVD recording of the interview in its raw form, and of course the fact that the interview takes place on-site means that it is subject to all of the usual quality procedures.
The main reason for the trend away from face-to-face interviews is the growing understanding and acceptance of market research among Chinese target respondents, who are increasingly willing to discuss business and other matters over the telephone. The market research industry is becoming increasingly respected within China, and, in contrast with Western markets, access to respondents is increasing rather than decreasing.
Focus groups are used in China, albeit less so than in Western markets. There is an almost unanimous view in the market that Chinese respondents - particularly businesspeople - prefer to provide information on a one-to-one basis rather than in the company of their peers. The exact reason for this is unclear, although the balance of opinion suggests that this is a cultural issue more so than a matter of concerns about confidentiality. When focus groups are conducted, they are commonly carried out in a mini-group format of three or four people; groups of eight to 10 respondents are very rare.
While Chinese agencies are extremely techno-savvy, the only technological area in which they tend to lag behind their Western counterparts is in their use of online data collection techniques. This appears to be due to the relatively low Internet penetration in China, and in particular the lack of familiarity of the target audience with the very interactive sites that are necessary for data collection.
Currently, online surveys are limited to certain groups such as IT managers and teenagers, and online focus groups are yet to be introduced to any audience. Agencies are so unconvinced of most respondents’ ability or willingness to take part in Web surveys, that, when asked by Western agencies to conduct the Chinese element of an international online survey, they have their interviewers conduct telephone interviews with respondents. As the respondent provides his or her answers over the telephone, the interviewer enters them into the online survey.
No great reticence
The subject of what can and cannot be researched in China is a contentious one, and is a subject around which a number of urban myths appear to have developed. The truth is that there is very little difference between what can be researched in China and what can be researched in Western countries. Culturally, there is no great reticence in terms of providing information, and as the Chinese become increasingly aware of market research, obtaining their views is becoming easier.
Most of the areas in which it is difficult to obtain information are similar to those in the West. Company financial data, such as profit and loss information, is an obvious example, and this can be as much to do with a lack of knowledge as a lack of willingness on the part of the respondent. It is true that certain areas of social research are closely monitored, as are attempts to seek details from government on contentious issues. The government is, however, seen as more of a help than a hindrance by most agencies, particularly due to its comprehensive documentation of regulations, policies and industry trends, all of which make environmental analysis of a market far easier than in most Western markets.
Perhaps the key fact to remember is that Chinese agencies are not in the habit of promising information that is impossible to obtain. On the few occasions that cultural, legal or practical issues make obtaining a certain piece of information impossible, agencies are usually extremely frank in stating what can and cannot be achieved.
Two key trends
Over the next five years, two key trends will happen in terms of data collection. Firstly, it seems certain that the move toward more telephone-based fieldwork will continue, as acceptance of this method increases among the target market and clients alike, and as demand for research outside the main cities grows. Within a five-year time frame, telephone interviewing will constitute the main data collection method in China. However, face-to-face interviewing will remain prominent, as it is firmly entrenched in the culture of research in China, and, it should be mentioned, not enormously more expensive than telephone interviews (this is certainly not the case in Western markets, where face-to-face interviews can be at least 10 times more expensive than telephone interviews). Secondly, the emergence of the Internet as a viable means of data collection appears certain to occur, again based on the acceptability of this method to clients and respondents alike. The high demand for large-sample projects within China means that Web surveys will be the first and the most widespread of these techniques, with substantial growth predicted to begin within two years.
Daunting task
The language issue alone makes conducting desk research in China a daunting task for Western organizations, and this is frequently added to with the complaint that desk sources in China are hard to come by. While the language issue is beyond doubt, there is no lack of desk resources for the researcher.
In fact, if it is industry statistics and details of regulations that you are looking for, then it is doubtful that any country makes more information available than China. The National Bureau of Statistics (www.stats.gov.cn/english/) provides economic information for free on a monthly basis. The National Development and Reform Commission puts in place regulations designed to develop different Chinese industries, and these regulations can be found on http://en.ndrc.gov.cn/ . A whole host of ministries and administrations exist within the Chinese government, all of which are listed on www.china.org.cn. Many of these will provide information on the industries and activities within their jurisdiction, either online or sometimes through direct contact. Increasingly, information is provided in English and other European languages.
In addition to direct government departments, most industries within China have at least one association, which will be closely related to government. These associations are excellent sources of market information, and indeed of potential target companies within their industries. Chinese agencies all possess the Chinese government’s massive and thorough two-volume directory of government departments.
In terms of search engines, the main tools used are www.google.cn and www.baidu.cn .
As with primary fieldwork, researchers operating within China must steer clear of certain information areas, relating in particular to government and social policy.
Developed enormously
Data analysis techniques have developed enormously in recent years, with techniques such as customer satisfaction and segmentation statistics commonplace (albeit less commonplace than in the West). Agencies typically have in-house data processing and quantitative analysis departments, often consisting of around half a dozen people. Some of these departments contain an advanced statistical analyst; others rely on outsourced labor for what is still a relatively rare requirement.
Agencies also have an increasing ability to provide strategic insights in their research projects. Indeed, the line between consultancy and market research is rather blurred in China, and many companies have business licenses for both activities. To an extent the requirement for strategic conclusions has been driven by Western organizations, with a number of Chinese agencies stating that Western clients “demand more insight, whereas Chinese clients prefer to provide the insight themselves.” Whether this is true or not, it is certainly the case that many of the leading Chinese research agencies are on a par with their Western counterparts in terms of their ability to provide strategic insights.
Great potential
This article has sought to introduce the reader to the main characteristics of the Chinese market for market research, and above all highlight the great potential for any research buyer to consider commissioning market research in this fast-growing market. With the right agency, research in China is good-quality, detailed, insightful, cost-effective, and, above all, an excellent aid to decision-making.