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Selling Into China: Rules of Engagement


Views expressed by businesspeople claiming to know the secret of success in China vary wildly, from those (generally newcomers) who say that marketing and selling in China is ‘easy’ to those 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 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.



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.


The principal aim of this article is to dispel some of the myths propagated about Chinese business, and explore the reasons behind both successful and unsuccessful marketing and sales approaches in China.


Chinese Attitudes Towards Marketing And Sales


When discussing Chinese attitudes toward 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 returning 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 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: first, the entrepreneurial spirit of the Chinese people, and, second, 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-building tends to imply a long sales process, requiring of sales people patience, continual learning and an on-the-ground presence.


How Do Chinese Companies Want To Be Targeted?


Conferences And Exhibitions


In many Western markets, conferences and exhibitions are often derided as a waste of time and money. In Asia, and particularly China, nothing could be further from the truth.  In most industries and market sectors, attendance at exhibitions, conferences and similar events can be essential for any company looking to achieve substantial or sustained success in China.


It is also worth remembering that exhibitions are an indirect form of marketing and seldom result in immediate sales leads in the short term. The benefits of attending such exhibitions can seem frustratingly intangible to Western companies, since there is no way to assess their true impact on sales. It may be the case that Chinese businesspeople are culturally disposed to over-emphasize the importance of trade shows and exhibitions, although it is also the case that companies that fail to attend key exhibitions can create a negative impression with customers just by virtue of being absent.


Websites


The number of internet users in China now exceeds 400 million, which makes China the world’s largest online community. As such, most Chinese companies have a website and are increasingly using online and digital marketing as the principal means through which they communicate with their customers. A clear and attractive company website that conveys a company’s product or service offering is therefore vital to generating interest from Chinese businesses. As with direct email and fax communication, having a Chinese version of company websites is also essential, enabling the company to communicate with a greater target audience and clearly demonstrating the company’s commitment to the China market. Having a well structured, navigable and informative website can also help differentiate Western companies from local competition, since many Chinese buyers are extremely critical of the standard of Chinese companies’ websites, seeing them as badly designed, lacking in information and generally unprofessional. An informative homepage is therefore an unmet need that Western companies are well placed to meet.


Face-to-face Meetings In The Workplace


Face-to-face meetings in the workplace are an essential step toward making a sale in most business markets.  Only when a face-to-face appointment is secured can it be assumed that the enquiry is a serious one. As in the West, Chinese buyers are busy people and prefer for suppliers to visit them at their offices, unless negotiations are at an advanced stage and the client wants to visit the supplier’s production facilities to look at the scale of the operation.


Relationships And Networking


Chinese guanxi is critical to how Chinese companies do business, although the whole concept can be alien to many foreigners.  Guanxi refers to one’s network of personal relationships, which can be drawn on in a business context. Similarly, the concept of guanxi means that business relationships can often transform into personal friendships, and indeed many Chinese businesspeople consciously spend a great deal of time and energy nurturing such relationships. This can take the form of banqueting, evening entertainment or gift-giving – activities that can seem onerous and unnecessary to many Westerners.


Although such networking and relationship-building is clearly important to the sales process in China, there is a tendency among some commentators to overemphasize its importance when trying to penetrate the Chinese market. As in any market, building strong relationships is extremely important to achieving market success, although guanxi is no substitute for a strong product offering or a trustworthy supplier. What Western companies sometimes have difficulty coming to terms with is the way in which this trust is gained, and the time it often takes to convince the customer that yours is the product or service that best meets their needs.  The overriding piece of advice for Western companies would be to understand the importance of establishing relationships when targeting Chinese companies, and to be prepared for the patience required for this.



What Messages Must Western Businesses Communicate?


Communicating Superior Quality


Unsurprisingly, the main requirement Chinese buyers have from potential Western suppliers is to provide market-leading quality. This is the minimum a Western company must do in justifying 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.


Communicating superior value in Chinese business-to-business markets is more challenging than it once was. In large part due to their higher cost base, most Western companies tend to target the top end of their markets, although in many business-to-business markets the premium that can be charged for Western products is rapidly decreasing. Although these trends vary greatly between different markets, in general four key reasons can be identified for this:

Increasing numbers of foreign companies are competing with each other, driving  down prices
Improving quality of the local offering, eroding Western companies’ competitive  advantage
The improved ability of local companies to communicate their offering
International companies based in China localizing management and procurement  positions, resulting in a greater willingness to ‘buy local’
Communicating Experience And Credentials


As previously noted, ‘business’ trust in China is often developed through relationships. However, important as these are, 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.  Most Chinese people continue to associate Western brands with quality, and this confers immediate advantages in terms of brand perceptions, regardless of how accurate this is.



Communicating Reliability


Reliability typically refers to 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, availability after hours and technical service. 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 with respect to 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 are not willing to offer on-the-ground, after-sales support.


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, and prefer 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. Companies that are unwilling 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.


Chinese Buyers’ Experience Of Western Companies


Means Of Communication – How Well Do Western Businesses Perform?


It is true to say that a company that perceives a supplier to be approaching them 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. 


Strong Communication Through Online 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 online media.  The efforts made by Western companies to communicate in Chinese are recognized, and above all Westerners are seen as presenting themselves extremely professionally and clearly.


Weak Interpersonal Communication


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 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. 


Poor Ability To Listen


An inability to listen is a common criticism of Western companies among 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.


Of course, there are a number of unknowns.  The Chinese buyer may well be speaking to various 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. Equally, for more defined product requirements, supplier benchmarking is a standard practice among Chinese buyers, and foreign companies should be aware that receiving an RFQ does not necessarily mean a buyer has a genuine interest in its product offering.


The successful salesperson 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.


Unwillingness To Negotiate


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.


Why Do Western companies get it wrong?


There are a number of reasons for this lack of understanding about how to market in China, most of which largely stem from a lack of experience.


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.


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 at 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.


“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 in China, in that they see it as a substitute for marketing, rather than a complement to it.  Good salespeople are sometimes left stranded alone in a small representative office, with no marketing capability to complement or assist 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.


Tips For Successful Selling In China


So, based on our own experience with selling in China, and, in particular, the experience of our Western clients, are there any ‘golden rules’ that can be used by foreign companies looking to market and sell in Chinese business-to-business markets?  The answer is, of course, that there are differences by industry, geography and a host of other factors.  However, we would argue that it is perfectly achievable for a Western company to succeed in the Chinese market, so long as it remembers the basics of marketing and is prepared to adapt these to the local environment:

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.
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.
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.
Relationships – Focus, but do not over-focus, on relationships.  Any salesperson must be prepared to be ‘friends’ with a potential supplier. 
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.
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.
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..
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.
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