Director Matt Harrison spent a year in China, setting up the B2B International office in Beijing in January 2007. Here, in his second Thursday Night Insight post, he reflects on the wonders of rickshaw travel and what it taught him about the value of market research.
It was snowing and minus 10 degrees. It was dark. I had tonsillitis. I also had 3 boxes of belongings that had just arrived from England and they needed to be taken to our apartment. This shouldn’t be a problem because taxis are everywhere in Beijing. In fact if you walk across the road there’s probably an 80% chance that the car that kills you will be a taxi.
So I tottered down from the office with 3 huge boxes shielding my line of vision, confident of finding an immediate lift home. And I was right, there were lots of lifts home…the problem was that as soon as anyone saw me staggering towards a taxi whilst carrying my own weight in boxes, they ran in front of me and took the taxi for themselves. Again…and again…and again, I would see a taxi, head for it and get beaten to it.
This distressing ritual lasted twenty to thirty minutes, before I eventually decided I’d have to start walking home. Within a couple of minutes, a moving oasis appeared on the horizon, in the form of a man with a 1930s bike-cum-rickshaw. It was comfortably the worst ‘vehicle’ I had ever seen, and it hardly had room for me let alone three boxes.
Cold, desperate and naïve, I decided to go for it – and what an experience! The poor rickshaw driver had to peddle like mad to tow one 75kg Englishman and half his belongings through the slush and rush-hour traffic. Shielded from the cold by one of those dust sheets you use when you decorate, my teeth were chattering, my hands were in serious danger of dropping off, my mouth was dry from the traffic fumes, and we were meandering with little progress…just think of the poor driver.
I eventually arrived home, my frozen tonsils coated in gasoline, my pulse fading and my backside glued to the rickshaw. However, one final indignity awaited me. Feeling so sorry and so thankful for the poor driver who had towed me through the ice and traffic, I offered him what I now know was three times the going rate for a ride from our office to home. He looked at me like I was a miser and demanded 50% more. Naïve and cold, and unable to think of anything other than a hot bath, I doubled my initial offer and apologised for getting my exchange rates confused.
I can’t really blame my driver for the happy look on his face as he peddled off with a week’s wages in his pocket. But, in retrospect, I really could have done with more information before making the purchase decision. Here at B2B International we hammer home the importance that understanding your market carries:
Point 1 – market assessment: I did not have enough information about the options available within the Beijing transport market, or how to make sure that I accessed the most appealing opportunities. As a result, my more knowledgeable competitors beat me to it, leaving me to make do with a poor substitute.
Point 2 – pricing research: I had no prior knowledge of the going rate within the market and so left myself open to uncertainty, confusion and overpaying!
Point 3 – segmentation: The shrewd rickshaw driver knew from years of experience that his offering appealed to different segments in different ways. Firstly there would be the tourists, who would often be foreign and could be charged a premium price for the pleasure of being immersed in Beijing life, with a commentary provided by a local expert. Secondly there would be the local commuters, uninterested in being immersed in local life or the local expertise of the driver, and simply wishing to get from a to b as quickly and cheaply as possible. This segment would be more price sensitive but larger in number. And finally, probably the smallest segment but without doubt the most lucrative – perhaps we could call this the desperate segment. This refers to customers who are buying a rickshaw ride as a distress purchase, because they know little about local conditions and are desperate to get from one place to another. By employing price discrimination between segments as well as tailoring the way he treated different customers according to their needs, my rickshaw driver instinctively knew that segmentation is at the core of marketing as it allows us to extract maximum value.