Marketing and Selling to Chinese Businesses

Western suppliers of Chinese businesses must understand and market to local needs to be successful.by Matthew Harrison and Mark HedleyThe opportunities presented by the China market are becoming increasingly difficult for Western businesses to ignore. With China expected to become an engine for global economic growth over the next decade, many Western companies are realigning their global strategies to put a stronger emphasis on China and other Asian markets. In addition, Chinese companies are becoming more sophisticated, and their expectations for quality are rising. At the same time, competition in China is increasing, making the question of how to sell and market effectively to Chinese companies more important than ever.

Chinese attitudes toward marketing and sales

Marketing tends to be less widely valued within Chinese businesses than it is in companies from more mature markets. Many Chinese companies view marketing as a task for the sales department—a function that sometimes involves little more than managing the company logo and brochures as part of sales promotion. Engineers are responsible for product, sales departments make pricing decisions, and senior management makes distribution decisions. At times, marketing departments are derided as spending departments that offer a poor substitute for the personal relationships that heavily influence Chinese business decisionmaking.

In contrast, salespeople and salesmanship are widely respected in China. A good salesperson must be able to adeptly forge business relationships and friendships with potential customers. This emphasis on relationship building tends to lead to a long sales process that requires patience, continual learning, and an on-the-ground presence.

How Chinese companies want to be approached

A 2008 B2B International survey comprised of 100 in-depth interviews with Chinese business owners and senior purchasers in Beijing and Shanghai revealed strong preferences for how they would like to be contacted by potential suppliers (see Figure 1). Respondents worked for companies with at least 250 employees in a variety of industries. All respondent companies worked with Western companies.

Conferences and exhibitions

The highest number of respondents (almost 40 percent) preferred to learn about supplier offers at an event. Conferences and exhibitions are excellent ways to make initial contact with customers and to move a relationship forward relatively quickly. They allow potential customers to ask questions and establish the face-to-face contact that Chinese buyers value so highly. More important, foreign-company willingness to spend time and money to participate in these events demonstrates that companies are committed to the local market.

E-mail

E-mail is now the primary means of communication among Chinese businesses—and more than 35 percent of respondents favored learning about supplier products and services in this way. E-mail is particularly important at the introduction stage of a sales relationship—buyers tend to react positively to a personalized e-mail as a prelude to face-to-face discussion. Western companies will be most successful if they make a telephone call before sending company details by e-mail—”cold,” non-personalized messages are even less likely to be taken seriously in China than in Western markets.

Websites

Thirty percent of respondents said that websites were among their most favored ways of learning about new supplier products and services. The number of Internet users in China exceeds 400 million, making China the world’s largest online community. A clear and attractive website that conveys a company’s offering is vital to generating interest from Chinese businesses—and it can set a foreign company apart from the local competition. Many Chinese buyers are critical of Chinese companies’ websites and believe that they are poorly designed, lacking in information, and generally unprofessional. A well-designed, Chinese-language website enables Western companies to communicate with a wider target audience and demonstrate their commitment to the China market.

Social networking sites

Companies should consider engaging potential customers through social networking sites. Ninety-two percent of Chinese netizens use some form of social media, and many consumers post messages regularly on online forums or blogs. A mistrust of traditional media channels and advertising, along with the heightened importance of social networking within Chinese society, makes China especially suited for online business networking. Many Chinese buyers and technical staff use online communities to evaluate products and services they plan to buy. Most of the social networking sites used widely in China are homegrown—such as QQ, 51, and Baidu—rather than those popular in the West.

Face-to-face meetings

In-person meetings in the workplace are an essential step toward making a sale in most business markets, and more than one-quarter of respondents said that this was a favored way of hearing about a product or service. Being able to speak at least basic Chinese is a good way to impress, show respect, and build rapport with a potential customer. Though being able to speak Chinese fluently is helpful, many senior Chinese executives at larger companies can speak English, and interpreters can be used to avoid any linguistic misunderstandings.

Phone calls

More respondents disliked phone calls than liked them as a way of hearing about products and services, but using the telephone remains an effective way to make an initial introduction and identify key decisionmakers within an organization. The high turnover rate of Chinese employees, even in senior positions, means that buyers change frequently, and a quick phone call is often useful to confirm the name and contact details of the key personnel before sending an e-mail.

Mail

It is increasingly acceptable—perhaps even expected—for company literature to be sent electronically. Hard-copy brochures and presentations are used widely but generally only during in-person meetings. Receiving quality company literature by mail is such a rare occurrence that companies that do it well can make a good impression.

Relationships and networking

Drawing on personal networks (or guanxi) is critical to doing business in China, where business relationships can often transform into personal friendships and vice versa. Many Chinese businesspeople spend a great deal of time and energy nurturing such relationships—often through entertaining or gift-giving—activities that can seem onerous and unnecessary to many Westerners. Though a relatively low number of respondents said that guanxi was their favored means for learning about supplier offers, the importance of guanxi is likely understated, as it is often a basic requirement to be used in combination with other types of marketing and outreach.

What Western suppliers should communicate to Chinese customers

Western suppliers are targeting Chinese businesses on a large scale, but Western companies’ marketing does not always align with Chinese buyers’ preferences. In fact, based on the B2B International survey, Chinese companies perceive Western companies as having strong communication through online media but weak interpersonal communication (see Figure 2).

One Chinese respondent’s remarks reflect broader respondent sentiment about Western companies’ strengths: “Western companies are excellent at using their websites 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.” In written business communications, this directness and clarity is a trait that many Western companies can use to their advantage.

Other traits and attitudes Western companies should emphasize when communicating with potential Chinese customers include superior quality, experience, and service.

Superior quality

Good quality is a “hygiene” requirement—the minimum a Western supplier must provide to justify prices that tend to be higher than those of the local competition. Differentiating and extracting superior value in Chinese business-to-business markets is extremely challenging because competition has driven down prices, local companies are improving their quality and are better able to communicate their offerings, and foreign companies based in China have localized management and procurement positions, resulting in a greater willingness to buy local. On the other hand, most Chinese buyers assume a Western offering will be high quality, which usually is the case. General professionalism—from company literature, appearance and knowledge of staff, and paperwork—is also seen as a key strength of Western companies.

Experience and credentials

Western suppliers must prove that they are “established” in the market and demonstrate experience in dealing with similar companies, preferably in China, to gain the trust of their target audience. From the earliest stage in the relationship, a Western company must prepare and provide comprehensive case studies and client lists, presenting itself in the best possible light and showing that other customers are satisfied with its products and services.

Brand

The challenge of gaining trust can be turned into an advantage if the company leverages its Western brand to the maximum. A company’s brand can communicate experience and credentials in the same way as a case study or reference. To Western companies’ advantage, many Chinese buyers still appear to associate Western brands with quality.

Service

Chinese buyers have extremely demanding service requirements on issues as diverse as lead time, availability after hours, and technical service. When dealing with Western companies, Chinese businesses feel that they are paying for top quality and expect technical issues to be dealt with quickly and efficiently. Companies that can demonstrate a track record of customer satisfaction in this area will have an advantage.

Willingness to listen

Most Chinese buyers do not expect suppliers to understand their needs immediately. Suppliers who claim to have the solution as soon as they begin talking are seen as crass, naive, and untrustworthy. Suppliers who listen, absorb, and suggest are considered to understand the problem, be qualified to offer a solution, and be willing to work for the benefit of the customer.

Respondents frequently said that Western companies do not listen well, indicating to the Chinese buyers that the supplier is not interested in their needs. This perception can be particularly damaging, and it often stems from the way Western companies conduct pre-sale negotiations. In general, the process leading up to the sale of a product or service in Western markets is clearly structured: A need is identified and a specification prepared; after some discussion the proposal is prepared, fine tuned, negotiated; and ultimately a purchase decision signed. Briefing documents are rare, as are structured tender procedures.

Within Chinese companies, each stage of this process tends to run concurrently, while the whole process from beginning to end is longer. Typically, initial contact with potential suppliers happens at a relatively early stage, when the customer’s need is still being defined. It may not even be certain that the product or service in question is needed. The potential supplier therefore becomes a participant not only in the definition of how the need can be met but also in the definition of the need itself. Though the Chinese buyer may speak to a number of other potential suppliers during the supplier process, the company that helps the Chinese buyer define its need typically has an advantage and will often be asked to meet that need.

Friendliness

Chinese buyers want suppliers that are easy to deal with and that engage them on a personal level. Westerners’ abilities are seen as lacking, however, in terms of interpersonal contact. This manifests itself in a perceived unwillingness to attend events, visit the client’s workplace, or even to make phone calls. One of the most commonly mentioned grievances is that Westerners tend to think that “work is work” and therefore limited to the workplace. Companies that are unwilling to take the discussion outside the workplace are often seen as unfriendly, and—more significantly—hard to get to know, perhaps willfully so. This perception can be fatal in an environment where gaining trust is crucial to success.

Willingness to negotiate

The Chinese approach to completing even relatively simple sales deals usually involves multiple rounds of negotiation, with many people involved in the negotiating process. Even when parties have agreed verbally, they can often redraw the contract several times before reaching a final agreement.

From the Chinese perspective, Western companies tend to avoid compromise during negotiations, have overly rigid purchasing procedures, and regard certain issues as “out of bounds” at the negotiating table. Chinese companies also tend to perceive many Western companies as being unwilling to tailor their offerings sufficiently to the China market, whether in terms of product specification, lead time, payment terms, or other customer requirements.

Such inflexibility 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. Procurers are expected to walk away with the best deal, and a Western company that allows the Chinese negotiator to gain “face” by taking home a last-minute price reduction will often gain a loyal customer.

Take the time to create an effective approach

Chinese and Western companies have different approaches to marketing, selling, and conducting business. Western companies that have some knowledge and awareness of these differences—and that tailor their approach to highlight their strengths, introduce flexibility into their sales processes, and take the time to get to know and listen to potential Chinese customers—can succeed in the China market.

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Main Chinese Requirements for Western Businesses Other than Price

From most to least important

• Quality of product or service
• Company reputation
• Reliability of delivery or service
• Experience working with similar companies
• Understands and wants to meet needs
• Easy to work with
• Local presence
• After-sales service

Source: B2B International
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Tips for Successful Selling in China

In such a vast and diverse country as China, there are, of course, differences by industry sector, region, and a host of other factors. Nevertheless, several general rules apply across the China market.

• Remember the marketing basics of product, price, place, and promotion. All of these should be researched before and after market entry to ensure that the value proposition meets and will continue to meet the target market’s needs.
• Patience is required when applying the marketing basics. The sales process is longer and more complex in China, and it will take time to convince local buyers that a Western company has the “local” credentials to meet their needs.
• Listen and adapt to understand and thus be able to meet local market needs. Chinese companies rarely want a product or service that has come straight off a shelf in the West.
• Relationships are important, but do not over-focus on them. Any salesperson must be prepared to be friends with a potential supplier, but this should complement the marketing mix, not replace it.
• Be confident and market quality, because Western companies are usually assumed to have excellent quality. Focus on the value added and be prepared to explain why the product or service can add value in China specifically.
• Be flexible on issues such as product, service, payment terms, and price. Western 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.
• Negotiate when selling to Chinese businesses. First proposals are unlikely to be accepted. Keep in mind that buyers may be deliberately benchmarking suppliers, and always try to reserve sufficient margin for further price reductions.
• Avoid exaggeration and focus on business credentials rather than exaggerating to make up for perceived deficiencies. Chinese companies want, above all, to trust their suppliers.

—Matthew Harrison and Mark Hedley
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[author] Matthew Harrison ([email protected]) is director in B2B International’s White Plains, New York, office. Mark Hedley ([email protected]) is Asia business development and research manager for B2B International’s Beijing office. [/author]