Archive for the ‘Qualitative Research’ Category

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Market Research - Commodity Or Consultancy? - Part 1

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Here at B2B International, we pride ourselves on being able to convert data into intelligence. We know that if we can get people, whose responsibility it will be to execute the actions, to own the data, we will achieve a positive outcome for getting action.

Here is an interesting extract taken from AQR’s (Association for Qualitative Research) www.aqr.org.uk ‘In Brief’ September edition by Andy Dexter, Truth. It argues the case that is it time to restructure the market research industry into volume agencies that concentrate on quantitative volume, qualitative specific agencies and consultancy advisers.

We are all in the business of market research. Agencies exist to make money. Clients buy research to make (or save) money. Clearly this works, or there would be no agencies, and precious few clients. But ‘how’ does it work?

At this years BIG, I examined the research industry from a ‘business’ perspective. In turn, this provoked questions about the economics and business models underpinning it and led to three main observations

We measure our industry as an ‘industry’ not a service.

Market research statistics have traditionally focussed on turnover: the amount charged by agencies to clients. It’s how manufacturing and retail industries benchmark themselves – by sales. Yet practitioners in sectors that researchers usually compare themselves to – advertising, PR, brand consultancy, etc. – are more interested in measuring fee income.

This focus on the top line means we tend to measure ourselves in a way that lends itself to industrialisation and commoditisation. This is a global phenomenon. And to reinforce this, we have designated ourselves and ‘industry!

The P&L account of our industry looks production rather than service oriented.

Looking at profitability or research agencies, and the underlying business models that drive them, there is clearly a dominant economic model in the research ‘market’. This is more analogous to production-oriented sectors than consultancy professions.

Similarly, it is clear that acquisitions, economics of scale and cost management – rather than true revenue growth – enables the larger players to maintain profits.

Distinct segments in our market reflect different financial dynamics at play.

In any sector there are three basic ways to make money on the supply side. Firstly, sell lots of stuff very competitively and make production and delivery highly economically efficient: ‘Volume’. Secondly, sell high value, high prestige stuff and ensure it is appreciated accordingly: ‘Value’. And thirdly, sell an idea; create demand for specialist new stuff that may not even exist yet: ‘Vision’.

Readers will have an immediate view on where particular agencies or agency types might sit. Thinking beyond our sector, under (1) we would typically find manufacturing, retail, and production businesses; product and volume-oriented; whose business is cost control and efficiency –led. Under (2)2 and (3) we would find advisory business, with a less pyramid-like structure. So, if there are two different markets, where is qual heading?

My initial instinct was to assume that, as a ‘sub sector’, qual would naturally fall under the heading of the advisory business model rather than the production-oriented ones. But this might not be the case…

This article continues tomorrow..

Posted in Quantitative Research, Qualitative Research, Market Research, Industry News |
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Conducting Business-to-Business Research In China - Part 6 of 7

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What Can and Can’t Be Asked?

The subject of what can and cannot be researched in China is a contentious one, and – as with data collection methods – there is a tendency for the ‘uniqueness’ of China to be exaggerated in this respect.

In terms of subject matter, the truth is that there is very little difference between what can be researched in China and what can be researched in Western countries. Culturally, there is no great reticence in terms of providing information, and as the Chinese become increasingly aware of market research, obtaining their views is, if anything, becoming easier.

Most of the areas in which it is difficult to obtain information are similar to those that are difficult in the West. Company’s financial data, such as profit and loss information, is an obvious example, and this can be as much to do with lack of knowledge as lack of willing on the part of the respondent. It is true that certain areas of social research are closely monitored, as are attempts to seek details from Government on contentious issues. The Government is, however, seen as more of a help than a hindrance by most agencies, particularly due to its comprehensive documentation of regulations, policies and industry trends, all of which make environmental analysis of a market far easier than in most Western markets.

An area where there is a difference between Chinese and Western respondents is in the types of questions that can be asked. Chinese respondents are particularly honest about what they do and do not know, making them extremely reliable in market assessment projects where hard facts and statements are required. In contrast to respondents in many Western countries, Chinese respondents will not make up answers in order to avoid looking foolish. The flip side of this is when qualitative research is being conducted, and the researcher requires ideas rather than statements of fact. Projective questions such as, “in an ideal world, what would be the qualities of the perfect supplier? tend to work far less well than in Western markets, as do speculative questions, such as, “by approximately how much do you think the market will grow over the next year?Whereas in Western markets these questions may result in the most comprehensive answers in the study, in China they would often be met with a curt “I have not thought about it? and “no-one can tell? respectively.

For more information on market research in China, visit the website for B2B International China.

Posted in Quantitative Research, Qualitative Research, Market Research China, International Market Research, Market Research |
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Marketing and Selling to Chinese Businesses - Part 5 of 7

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How Well Do Westerners Get Their Message Across?

It can therefore be seen that the means by which Westerners seek to communicate with potential Chinese customers leaves room for improvement. Perhaps more important is the question of the messages Western companies actually convey, and how well these correspond to what the target market wants to hear.

There are a number of messages that most Western companies communicate extremely effectively, and others where the correct message is not being heard. On the positive side, Western companies are seen as synonymous with high quality and professionalism, something which is exemplified not only in the products and services being bought, but throughout every aspect of the organisation. Conversely, Western companies are seen as inflexible in a number of ways, ranging from the product or service specification through to negotiations and procurement procedures.

High Quality Products and Professionalism

Most Chinese buyers start from the position that the offering will be high quality when they begin to evaluate a Western company, and that usually turns out to be the case. In other words, it would appear that Western companies are doing a good job overall in terms of meeting their clients’ product and service requirements. A typical comment by a Chinese buyer in our survey was as follows:

“We are discussing with British company, we feel its service is better and more normal than local providers.�

General professionalism is seen as a key distinguishing factor between Western and local Chinese companies. This manifests in many ways, ranging from the product itself, through to company literature, appearance and knowledge of staff, and paperwork. Many Chinese buyers and business owners describe Western companies as more systematic and organised than their Chinese counterparts:

“German companies are extremely polite, professional and systematic. The paperwork is always in order and the products are well made and durable. They work seriously with strict principles.�

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.

In general, the process leading up to the sale of a product or service in Western markets is clearly structured (see Figure 7 below). It begins within a department inside the ‘customer’ company, where the need for a particular product or service is identified and then broadly scoped. This typically gives rise to the construction of a briefing document or ‘spec’, in which the broad requirement is more closely defined. Thirdly, potential suppliers are searched for, and the ‘spec’ discussed with or sent to a number of them. This may lead to some fine-tuning of the spec. Proposals are then prepared, there is sometimes a little more scoping and negotiating, and then the decision is made.

Figure 7 – Decision Making In The West

Within Chinese companies each stage of this process runs more or less concurrently. Typically, the initial contact with potential suppliers happens at a relatively early stage, when the definition of the customer’s need is still developing. It may not even be certain that the product or service in question is actually 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. Briefing documents are rare, as are structured tender procedures. Indeed, there is a huge opportunity for the company that successfully assists the Chinese business in the definition of its need, in that there is a high likelihood that the same company will be asked to meet the need it has just defined.

Figure 8 – Decision Making In China

Of course, there are a number of unknowns. The Chinese buyer may well be speaking to a number of other potential suppliers, who will be defining the customer’s need in entirely different ways, meaning that the nature and extent of the ‘competition’ will remain something of a mystery.

The role of suppliers as definers of their potential customers’ needs is one reason for the longer sales process in China and other Asian markets. Almost by definition, the initial enquiry to the supplier is rather vague, meaning that a number of interactions between supplier and buyer will be necessary before it has even been decided what the customer requires. This in turn elevates further the importance of trust and an ability to establish a strong and trusting relationship with the potential customer. All of this means that the successful sales person will be the person who listens to and takes account of the client’s constantly evolving requirements, rather than the person who ‘dives in’ by specifying a solution and writing a proposal as soon as an enquiry has been received.

“Many Western companies don’t know our requirement; indeed they promote their product blindly. Of course, we want the machinery with comprehensive and precise function as much as possible. However, they always emphasise that their products are good looking. As for low prices, we care for it definitely, but quality is the most important for us�

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.

Tendency Towards Exaggeration

Whilst the quality of Western companies’ marketing communications and the knowledge of their salespeople is seen as a real strength, there is a feeling amongst Chinese buyers that this can lead to a tendency to exaggerate the qualities of the company, product or service in question. This can damage trust, something which usually proves fatal to any attempt to sell to a Chinese business.

Chinese businesses are now experienced at dealing with Western companies, who have been contacting them as potential suppliers or customers for a number of years. This has led Chinese companies to look out for early signs of potential problems, and many are particularly wary of new entrants from the West whose infrastructure or product offering may not yet to be established in, or tailored to, the Chinese market. Chinese buyers are particularly adept at asking questions that get to the core of exactly what a supplier’s offering is, and equally good at picking up exaggeration, something which is seen as symptomatic of a new entrant desperate for a sale.

Unwillingness To Negotiate

Linked to Western companies’ perceived unwillingness or inability to listen is a similar ill disposition towards negotiation. 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 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.

“Their attitude to working is active, but they always make the same mistake that our disagreement can’t be resolved in time, and walk away.�

Rigid purchasing procedures are a frequent complaint, as is a tendency for companies to regard certain issues as simply ‘out of bounds’ at the negotiating table. Payment terms is one example of this, but so, surprisingly, are many aspects of product or service specification. Too many Western companies are unwilling to make their offerings sufficiently bespoke to the Chinese market.

Posted in White Papers, Industrial Research, Quantitative Research, Qualitative Research, International Market Research, Market Research China, Market Research |
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Marketing and Selling to Chinese Businesses - Part 4 of 7

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Chinese Buyers’ Experience Of Western Companies

It is clear that Western companies are doing their utmost to market themselves to Chinese businesses. Over half of all companies included in our study state that they have been targeted by ‘20 or more’ Western businesses within the last year alone. 41% of companies maintain that they are targeted by Western companies at least as frequently as they are by Chinese companies. Whatever the views we arrive at in terms of the execution of Western marketing and sales campaigns in China, the determination of Western companies is beyond doubt. Chinese businesses are now being targeted on a large scale not only as low-cost suppliers, but for their burgeoning purchasing power.

Means Of Communication – How Well Do Western Businesses Perform?

It is true to say that the most effective way of targeting a potential customer is not necessarily the way in which that potential customer asks to be targeted. Nevertheless, it is informative to compare the approach of Western companies with the preference of the Chinese target market. If nothing else, a company that perceives a supplier to be approaching him in a suitable fashion is more likely to be well-disposed towards that supplier, particularly when it is a supplier that has not been used before. Figure 6 shows how Western selling approaches correspond to the main means of communication desired by the target Chinese audience.

Figure 6 – How Well Do Western Companies Choose Their Marketing & Sales Approaches In China?

Strong Communication Through New Media

When comparing the communications approach of Western companies with the preference of the target Chinese businesses, it can be seen that Westerners’ strengths and weaknesses fall into two distinct areas. On the positive side, Western companies are seen as excellent in terms of their ability to communicate through new media. The efforts made by Western companies to communicate in Chinese are recognised, and above all Westerners are seen as presenting themselves extremely professionally and clearly.

A typical remark made by a Chinese businessperson in our study was “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.� This view of Western businesses (and Westerners in general) as being extremely direct is widespread in China, and often not seen as a positive characteristic. However, in written business communications, absolute clarity is a distinct benefit and one which Western companies are using to their advantage.

Weak Interpersonal Communication

Perhaps unsurprisingly, Westerners’ abilities are seen as lacking in terms of interpersonal contact. This manifests itself in a perceived unwillingness to attend events or visit the client’s workplace, or even to make phone calls (of course linguistic limitations are part of the reason for this). Good as Westerners’ written communication is, complementing this with verbal and particularly face-to-face interpersonal contact is essential. One of the most commonly mentioned and extreme differences between supplier-client contact in Western companies, in comparison with China, is Westerners’ tendency to think that ‘work is work’ and that it is therefore limited to the workplace. In China, relationship building and often negotiations take place not only during the working day, but also at a restaurant afterwards. Taking a business guest for a meal is a basic common courtesy. The comment below is typical:

“The British don’t understand Chinese culture. Their technology and quality check system is mature and comprehensive, and they are professional in their field and everything they do. They are polite, but that is not enough. We’d like to invite them to join our supper after finishing working, but they can’t understand and will go back to the hotel directly.�

A particular area where Westerners place insufficient emphasis on interpersonal contact is in recognising the importance of exhibitions and similar events. The prominence of these has been seen; however many Western companies see insufficient tangible benefit in attending. Western companies must understand that the right exhibition in the right location can be more valuable than almost any other aspect of the promotional mix.

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Marketing and Selling to Chinese Businesses - Part 3 of 7

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What Messages Must Western Businesses Communicate?
Successful marketing communicates to a target audience that its needs can be met by a particular supplier’s offering. Any marketing campaign should have at its core the communication of the target market’s needs. With this in mind, it is essential to consider what Chinese businesses require from potential Western suppliers. We have excluded ‘price’ from our analysis, taking this as ‘a given’.

Figure 5 – Main Chinese Requirements From Western Businesses (Other Than Price)

Communicating Superior Quality
Unsurprisingly, the main requirement Chinese buyers have from potential Western suppliers is to provide market-leading quality. Indeed, this is a ‘hygiene’ requirement, in that the minimum a Western company must do is justify its higher prices vis-à -vis the local competition. In other words, the company’s offering must add value in the eyes of the buyer.

Importantly, communicating superior value in Chinese business-to-business markets is far more difficult than even two or three years ago. Most Western companies target the top-end of their markets, in no small part because their higher cost bases force them to. However, in many business-to-business markets the premium that can be charged for Western products is decreasing quickly. There are a number of reasons for this: firstly, increasing numbers of foreign companies are competing with each other, driving down prices; secondly, the quality of the local offering is improving rapidly, eroding Westerners’ competitive advantage; thirdly, the ability of local companies to communicate their offering is increasing; and fourthly, international companies based in China are recruiting more and more local staff into senior (buying) positions. Such staff are far more confident than their expatriate predecessors at ‘buying local’ and managing cheaper local suppliers.

Communicating Experience and Credentials
Two of the top four requirements of Chinese buyers and business owners – the need for Western companies to prove that they are ‘established’ in the market, and the need for them to demonstrate experience of dealing with similar companies (preferably in China), illustrate the difficulty many Western companies have in gaining the trust of their target audience. As discussed elsewhere in this paper, to a great degree ‘business’ trust is developed through relationships. However, important as these will be, the first thing any Western company should do is prepare and present comprehensive case studies and client lists for the potential Chinese customer. These should be leveraged to the absolute maximum, and from the earliest possible stage in the relationship. This is in contrast to many Western markets, where past experience is often mentioned in the vaguest terms and references are rarely followed up.

This need to communicate relevant past experience cannot be overstated, and relates to perhaps the biggest barrier facing any Western company (particularly new entrants) in China – the time and effort required to gain the target market’s trust.

Leveraging The Brand
The challenge of gaining trust can be turned into an advantage, if the Western company leverages its brand to the maximum. When approaching a potential customer for the first time, a company’s brand can communicate experience and credentials in the same way as a case study or reference. Even if the company is unknown in China, the brand of ‘The West’ can be a real plus, and at the very least generate curiosity in the company’s offering. In many cases, the Western ‘brand’ represents quality; therefore in at least one respect most Western companies enter the market at an advantage.

Of course over time, any company would want their brand to refine and develop a personality of its own in China. Nevertheless, Western companies’ cost bases are such that entering China without quality at the core of its branding strategy and other communications is virtually impossible.

Communicating Reliability
Reliability is linked to quality, articulating to a large extent quality of service as opposed to quality of product. Chinese buyers are extremely demanding in terms of their service requirements, on issues as diverse as lead time (this tends to be shorter than in the West), availability after hours (a much more frequent requirement than in the West) and technical service (particularly when dealing with Western companies, Chinese businesses feel they are paying for top quality, and when technical issues arise they therefore expect them to be dealt with quickly and efficiently).

A key challenge in respect of such needs is communicating that the Western supplier has an established and permanent presence and infrastructure within China. There is a great deal of wariness regarding Western companies who are happy to export their products to China and charge significantly more than local competition, but who then have little interest or ability when it comes to aftersales service, ongoing relationships or even making good small issues with the product that has been sold. The latter point also explains the prominence of ‘local presence’ as a requirement from Western suppliers.

Communicating Understanding, and Willingness To Meet Needs
Chinese buyers state emphatically that they want Western companies to show an understanding of their needs, but also a willingness to listen to and learn from the buyer. A frequent comment is that Westerners ‘turn off’ buyers by spending far too much time talking about what they can offer, and far too little time building up their understanding of what the customer requires, and what is driving that requirement.

Chinese buyers do not expect suppliers to understand their needs immediately; in fact they tend to believe that to do so is impossible, and perhaps even belittles the uniqueness of their challenges and requirements. Rather they want suppliers to listen carefully to the issues facing the business, and commence a dialogue which begins to identify their needs and put forward ways of meeting these needs. Suppliers who claim to have the solution as soon as they begin talking to the potential customer are seen as crass, naïve and untrustworthy. On the other hand suppliers who listen, understand and suggest are seen as understanding the problem, qualified to give a solution and willing to work for the benefit of the customer.

Being Easy To Work With
As well as being reliable in a business sense, Chinese buyers state that they want suppliers that are easy to deal with, and who engage with them on a personal level. Business relationships in China can often be distinguished by the way they go beyond the workplace and impinge on the participants’ social lives. Companies that do not wish to take the discussion outside the workplace are often seen as unfriendly and – more significantly – hard to get to know, perhaps willfully so. The latter can be fatal to a potential business relationship, in an environment where gaining trust is fundamental.

Language and other barriers clearly make expanding relationships beyond the workplace difficult for many Western customers. However this, as well as the requirement to show a general interest in customers as people rather than ‘just customers’, is often essential.

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