The Chinese Market and Understanding your Customers (1)

As we’ve recognised before on the Market Research Blog (see here or here, for instance), growth in China and the ability to take advantage of new markets there is no longer simply a given. An increase in competition and the market pressures extant in any developing economy have meant that companies with links to China have had to sharpen their game in recent times.

The following article looks in more detail at specific issues currently facing the Chinese market: As a follow-up, tomorrow we’ll look at some key points for marketers bear in mind when formulating their business strategy, not only in China but elsewhere:

Growing Pains

It was only a matter of time before we would start to see the growing pains of China in evidence and increasing. Now they are there for all to see – growth demands outstripping supplies of raw materials and labour forcing prices of both to rise in response to increased demand and reduced or tightening supply. Purchasers continuing to apply severe pressures to try and keep those prices down, battling against the inevitability of market forces.

Those of us sitting in mature economies knew it as only a matter of time; we have experienced the same, lived through it and survived it. The time is ripe for an injection of real marketing excellence throughout the Chinese economy. Unfortunately there are very few local marketers who really know and understand the true depth of marketing excellence best practice.

A Wave of Consumerism

The signs have been there for a long time. There has been a substantial and growing segment of consumers in China who are willing to pay a premium for quality brands. It has been a small segment, maybe around 10% – and 10% of 1.5 billion is a lot of customers. This segment is growing rapidly.

The increasing wealth amongst the population is plain for all to see – the promiscuity of the workforce, chasing the next highest salary on offer to increase their disposable income and throw more fuel on the fire of consumerism that is sweeping through the country. The growing numbers of locals filling the Starbucks lounges and willing to pay the same prices for their coffee in the ambience of those lounges as others pay in London, New York and Zurich.

Environmental Concerns

The need for improved performance on environmental protection and an increased awareness of the environmental impact of products will force consumers and industrial customers alike to be more discerning in their purchases, which will also be reflected in a willingness to pay a premium for more environmentally friendly products and services.

Earlier this year at the National People’s Party Congress Premier Wen Jiabao spoke about missed environmental targets and put a much higher priority on future attention to pollution control. The government has a goal to reduce energy use per unit of GDP by 20% by 2010 – which is only two years from now. China received $220 millions in clean-tech venture capital in 2006. There are massive value-creating opportunities in connection with these priorities and investments, this is just the beginning.

Quality Factors Come to the Fore

It is not only in the consumer markets of China where there is a growing recognition of the value of quality, reliability, security of supply, reputation and relationship. The epidemic of recent product withdrawals forced by the discovery of incorrect products and materials being applied by unreliable or uncontrolled Chinese manufacturers will force western companies buying products in China to be more discerning and will ultimately be reflected in a willingness to pay for the peace-of-mind of reliability, security of supply, reputation and relationship.

So it’s time for those companies in China to wake up to the value of such things and to start investing in them and in developing the marketing and sales excellence skills to market those benefits to their western and local customers.

Some clients in China have been securing regular price premiums of between 15% and 30% over local competitors in B2B markets on the basis of reputation, track record, experience or uniqueness of offerings, which have been achieved thanks to the better marketing and sales skills of their people and the strength of their brands.

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