Challenges for marketing in china

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


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


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


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.


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.


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.


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


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


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.


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:


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.


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


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.


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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Challenges for marketing in china