Common market research methods when entering the Chinese market
Co-authored by: Celeste Pacioni & Zara Kukkamaa
Introduction:
Market research is the process that helps identify how customers and potential ones perceive a company’s business and how to fulfill customers' expectations. Market research in China can be conducted through techniques such as surveys, interviews, focus groups, online data collection, desk research, and observations that can help businesses make informed decisions . Its purpose is to allow businesses and organisations to explore the Chinese market for the first time and find your targets in it, or simply improve their existence in it.
1. What is market research history related to China?
Before the mid-1980s, market research in China was handled exclusively by the State Statistical Bureau and it was regulated by the government departments. At that time, all types of industries were state-controlled, private industries were forbidden by the communist party, and the research conducted mainly included statistics on expenditures and production. In 1985 the first non-governmental consumer research project in China was conducted by a multinational company who provided branded products ranging from snacks to washing powders, called Procter & Gamble. Their need for market research information led them to open the first research agency in Guangzhou in 1988. Procter & Gamble gave birth to the modern Chinese market research industry in China. By 2000, there were more than 800 registered companies in China that were both Chinese and joint-ventures who were conducting market research in China.
Today China’s market is growing very quickly, and the value of its market research industry is approximately U$D 500 million. This service is not only provided by consulting companies based in China but also by companies settled in Westerner countries. Nowadays, despite the fact that the Chinese market is evolving into a modern economy, it is important to keep in mind that its size and complexity make it impossible to consider it as a coherent entity.
2. What are industries which require market research in order to enter the new market?
All industries are recommended to do business research in China before entering the Chinese market especially automotive, petrochemical, IT, telecoms, pharmaceutical and medical, and financial services. Nowadays a significant amount of market research projects tend to focus on market assessment studies in which the clients (in most cases foreign companies) require from consulting companies access to distribution networks, an explanation of how the Chinese market is structured and sized, and who are the main potential competitors, what are the technological trends, and regulatory environment.
3. How many types of market research analyses there exist?
There exist several types of market research that need to be covered in order to make a client’s business plan succeed in China. Some of them are market survey, ethnographic research, product development research, market assessment and situation analysis, brand strategy research etc.
Market survey is an online and offline customer satisfaction survey that can help any foreign company to identify Chinese customers' expectation and demands, market prospects, future trends, and competitive landscape. Market surveys are very useful since they provide the basic information for client mapping, consumer segmentation, brand equity, benchmark, profiling, and U&A and are based on proven tools and formulas.
Ethnographic research is an anthropological study that aims to help companies regulate information based on research’s analysis on dissimilar Chinese cultural environments to make them learn and comprehend potential Chinese customer’s value, appreciation, and practice. This type of research is very useful to understand how a particular Chinese customer would integrate a new product into his daily life.
Product development research is about making sure whether a product could succeed or not when expanding in the Chinese market. Online research and quantification are used to establish whether the penetration and take- up of a new product is likely to happen or not.
Market assessment is a service that aims to provide a “market map” through the analysis of five main forces which characterize the market itself : the CAGE framework helps analyzing the cultural, administrative, political, geographical and economic differences between the target market and the home based one; PORTER’s five forces are useful to evaluate the competitive environment; PESTEL analysis is used to understand the trends and dynamics of the Chinese market; SWOT analysis helps to discover what are the competitive advantages and disadvantages; SEGMENTATION is the basis of the target segment.
Brand strategy research and brand architecture research are types of examinations that aim to enhance a brand portfolio. The basis of this research is to increase a brand’s growth and avoid the jeopardy of cross-brand cannibalization, and the overlay of marketing or product development expenses. The approach normally used in this case involves the Emotional Engagement Ladder made of four different levels: trust, empathy, enrichment and finally eminence. Trust is considered as the first and most important step in the ladder, it is very vital for a brand to be trusted in order to enter the consideration set. Empathy represents the second step and stands for the buyer or user needs, pain points and desires. Enrichment is the third step and relates to the fact that a brand makes a substantial impact on the buyer’s experience and empowers the customer to achieve more. Eminence is the last step and normally refers to the high esteem that customers have for certain brands.
4. What are the tips for conducting market research?
First of all, it is of supreme importance to consider market research in China as an investment, not a cost. Some of the tips are:
It is necessary to keep in mind that market research is an ongoing process whose purpose is to help the business’ owner to find out who its Chinese potential customers are and what their wants and needs are.
When about to look for answers, it is essential to have very clear in mind what are the business’ objectives before starting any type of research. Once this point is made clear, it is recommended to apply and rely on more than one method when conducting research projects such as surveys, group focus, interviews etc.
A way to gain more confidence in your deductions and to boost the potential of your investment is to rely on a market research analyst who is an expert of the Chinese market. The analyst who is specialised in his or her job can help the business’ owner apply these methods and even engage deep connections with appropriate stakeholders.
Accepting all kinds of perspectives from the Chinese clients can be very useful, even critics can represent the most valuable feedback received.
Being open to new opportunities and needs can eventually lead to unexpected results.
Final thoughts:
Having a broad knowledge of what market research in China is about and following the tips listed in this blog article can be useful for any kind of business who aims to enter the Chinese market for the first time or simply improve its existence there.
Hohot Consulting Oy supports global partners in market research in China. With a strong knowledge of both the international and Chinese market and with bi-lingual Mandarin-English speaking consultants, we are looking forward to facilitating your business success in China. Learn more here.
A little bit about the author:
Celeste Pacioni is an Italian sinologist who is very passionate about China and Chinese culture. She has a bachelor’s degree in Oriental studies with a focus on the Chinese language and culture. After spending one year in China, a semester in Hangzhou and five months in Canton, she obtained a master’s degree in “International Business in China” from LUM Jean Monnet University of Milan. She is keen on helping Western companies to build their success stories in China when dealing with Chinese procurement and market research.