The document discusses the challenges of marketing in China. It begins with definitions of marketing and describes the key elements. It then discusses the growth of the Chinese market, noting the large business-to-business (B2B) and business-to-consumer (B2C) markets. However, China's economy remains vulnerable due to its low levels of domestic private consumption compared to other countries. The document goes on to explain how marketing differs in China compared to other places and the specific challenges that must be addressed.

1. C h a l l e n g e s
f o r
M a 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. 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

3. 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

4. 4
Challenges
for
Marketing
in
China
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

5. 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. 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.

7. 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. 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

9. 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. 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

11. Challenges
for
Marketing
in
China
1
1
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

12. 12
Challenges
for
Marketing
in
China
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.

13. Challenges
for
Marketing
in
China
1
3
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.

14. 14
Challenges
for
Marketing
in
China
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.

15. Challenges
for
Marketing
in
China
1
5
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. 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

17. Challenges
for
Marketing
in
China
1
7
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. 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

19. Challenges
for
Marketing
in
China
1
9
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. 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.

21. Challenges
for
Marketing
in
China
2
1
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:

22. 22
Challenges
for
Marketing
in
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.

23. Challenges
for
Marketing
in
China
2
3
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

24. 24
Challenges
for
Marketing
in
China
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.

25. Challenges
for
Marketing
in
China
2
5
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