Marketing in China

Sunday, April 25, 2010

Is marketing in today’s China different from marketing in the West? Prof. Dr. Willem Burgers, a permanent faculty member at the China Europe International Business School in Shanghai and visiting professor at Nyenrode’s Europe China Institute, shares his views. 
 
In a general way, are markets in China different from Western markets? If so, how do Chinese markets differ from Western markets?
“Markets in China are much more competitive. The number of competitors in most industries vastly exceeds what we see anywhere else. There are some 300 local beer companies, for example, but in addition some 50 foreign beer companies have entered the market. In the United States there are 25 pharmaceuticals distributors; in China, there are well over 24,000. The pesticides industry includes 2,800 licensed manufacturers plus maybe 3,000 unlicensed manufacturers and copycat manufacturers. There are more than 100 car companies trying to become the next GM, and so on. Therefore, it is not surprising that margins in China are likely to be low, very low, especially in industries that are open to competition from private and/or foreign companies. The often hugely profitable state owned enterprises tend to operate in more protected industries such as the oil sector, shipping, steel, telecommunications, and other such presumed strategic industries.”

 
Is marketing in China different compared to the West? Could you give some examples?
“One key difference is that in many markets the Chinese consumer is making his or her first-ever purchase in the category. People are buying apartments for the first time; they are buying cars for the first time. Their parents never owned an apartment or a car. People have very little context or idea on how to make these types of decisions. For example, car buyers have no clue where or how to buy car insurance, or what to insure against, so they end up buying insurance from the dealer. Marketing has a very important educational role to play, and communication strategies need to focus on providing helpful information. Unfortunately, many companies, Chinese and foreign, tend to copy today’s Western advertising approaches, which are aimed at symbolically positioning the product. Consumers have little use for this sort of advertising. I often show advertisements from the 1950s to Chinese managers and advise them to copy those ads, not today’s sophisticated – but for novice consumers incomprehensible – ads.”

 
Why is it important for managers to learn more about marketing in China?
“If managers have direct or indirect responsibility for marketing in China, it is critical that they develop some level of sensitivity to some of the significant differences that do exist. Many failures by Western companies in China were avoidable. I increasingly see examples of marketing practices and ideas in China that are really quite innovative. The high pressure competitive environment and fight for survival faced by companies does lead to much greater openness to innovative ideas. Product innovation is not so strong here because of problems with intellectual property rights protection, but business model innovation, not measurable in R&D dollar spending, may be much stronger in China. I think that a manager learning about marketing in China might pick up some pretty interesting new ideas for marketing in the Netherlands or Europe.”

 
Could you give a few examples of mistakes that are commonly made by Western companies in relation to marketing in China?
“A lack of careful research prior to entry may be the main source of mistakes. Another frequent mistake is the arrogance companies have believing that with the better product, the Chinese consumer will be willing to spend his money. But no effort is made to explain to the consumer why the more expensive product is the better product. In fact, more often than not it isn’t really better. Another aspect, although not so relevant today but definitely in earlier years, was the speed with which companies entered the market. Only post-entry would we look around and wonder how we got ourselves into this mess. Actually, mindless imitation among foreign companies might be the worst mistake. It is surprising to see how many companies, perhaps all using the same consulting and market research companies, come to China only to implement identical strategies, identical advertising appeals, identical channel strategies, identical pricing strategies. Foreign beer companies in particular have been a great example of this.”
 

 
Please mail your comments on this article to: insights@nyenrode.nl