Chapter 11
China: Promotion => Customer Relationships and Culture
The general who does not advance to seek glory, or does not withdraw to avoid punishment, but cares for only the people's security and promotes the people's interests is the nation's treasure.
—Sun Tzu, The Art of War
As defined earlier, the 4th P, Promotion (Customer Relationships and Culture), refers to the communication of information about a product with the goal of generating a positive customer response. The two key elements of this P that we will focus on in this chapter are the Customer and Communications. More specifically, we will explore China's application of Promotion in its global expansion activities.
Customer Relationships
In this section we will look at the ways in which the Chinese acquire customers, how they build and nurture customer relationships, and what motivates emerging entrants to invest more time with certain customers versus others.
Let's consider an up-and-coming challenger from the East that does not have a known quality product with a familiar brand. The Chinese challenger, or emerging entrant, is competing with an established Western supplier and needs to work harder to compensate for product shortcomings and/or for customers' lack of desire for, and confidence, in, a product.
The following tactics and approaches have been key contributors to the rapid transformation of industry outliers into significant players in emerging markets.
Customer Reference Accounts Are Key
Earlier, we stated that the Chinese are very strategic and deliberate about whom they target and why. They are good at identifying primary accounts that they deem to be important to their long-term, overarching strategy, and they use them to build credibility when targeting other accounts. These are referred to as must-win battles, that is, accounts for which they pull out all the stops in order to win the business.
High-Touch Customer Relationship Model
Emerging entrants are very good at building customer relationships and nurturing these connections over the long term. This is often a key success factor for them. While they might fall short on product superiority, they make up for it with a high-touch customer model. This means investing in direct selling when strategically viable, as discussed in Chapter 10. Customers love it!
Unlike many Western sales models, in which account ownership resides under a primary account manager/salesperson, the Chinese take a broader team approach to their account management and selling strategy.
They may establish one dedicated customer relationship management team under the marketing organization and emphasize a business development philosophy as opposed to one based strictly on selling and meeting revenue numbers. As part of their annual objectives (also known as MBOs, or management by objectives), every account team will include a few must-win battles (MWBs) to their annual or quarterly account planning that are based on technology, territory, and hierarchy. Management will then allocate all resources possible to help the account team to win the MWBs or key accounts.
A cross-functional team is assembled in order to meet as many of the customer's needs as possible and to win the deal in a holistic manner. The team will include technical experts, financial people, sales representatives, support teams, and so on. The assigned team members will also span the hierarchy vertically, with strong senior executive coverage and leverage government officials when appropriate.
The Chinese account team is not pressured weekly to bring in sales, as they are in some Western companies. They take a longer-term view with quarterly or annual goals, allowing ample time to build and nurture strong customer relationships, which increases trust and ultimately results in the choice of the Chinese vendor. This approach works particularly well for targets such as emerging markets and cultures that place a high value on relationships in their decision-making process.
Attaining High Customer Satisfaction
How do Chinese companies get the prospective customer on their side, win them over, and eventually gain their trust, and in turn, their business?
High Levels of Attention and Listening
Whether it is cultural or simply the enthusiasm of a new entrant trying harder and wanting to please, being attentive to customers and their needs is almost always a certain success factor. And paying attention to overlooked or neglected customers, such as those in emerging markets, has an even stronger impact. Listening to what a potential customer really needs and wants—as opposed to forcing your existing offer on them despite incongruent market and environmental conditions—makes it much more likely you will achieve success.
Chinese companies are excellent at listening and at respecting the needs and wants of a new customer base. They engage with humility and have an eagerness to please, and a customer may value this respectful and attentive approach more than the safety of a known product or brand. In fact, a minister in an emerging-market African country told me just that. They decided to go with the Chinese (as opposed to the United States) because they liked their approach and trusted them more.
Being a new market entrant also means you have the desire, flexibility, and ability to accommodate customer requests, because you are still starting out. You are open, ready to learn, and ready to accommodate, because your goal is to make a mark in this new market or industry. You do all that you can to please this new potential customer. And you are in a more flexible position to modify product-development plans. Let us not forget that part of your humility comes from the fact that you are still coming up the learning curve, whatever cultural affinity you may have with other emerging markets because of this trait. The new entrant needs and wants the practice. There is no latitude for disappointing the customer.
The high levels of attention also mean looking beyond just the immediate deal. It includes helping the developing (and sometimes developed) market with its economic-development objectives. This might be done through local manufacturing or by using local labor pools. It may also entail free trade agreements and contributions to nationalistic goals. We will talk more about this later.
One can never go wrong with listening, being attentive, being consistent and regular with communication and interactions, and being local and present. So often, Western vendors will fly in and fly out. Presence is a big deal. Being present for questions, implementation bumps, and the like is a great help.
Pulling Out All the Stops
This essentially means doing all that you have to do in order to close the deal. This includes getting to know your customers on a personal level, perhaps inviting them to holiday celebrations, family affairs, and weekend outings. Our Chinese friends, and other emerging entrants, do this. It is harder to reject a request for proposal (RFP) from a friend than one from a generic vendor that is 5,000 miles away and only comes to visit for the pitch and the signing of the contract.
Pulling out all the stops also means ensuring customer satisfaction at all levels. It means new product development if necessary and feasible. It also includes visits by higher officials and executives to demonstrate the importance of the prospective partnership. And that is how it is viewed—as a partnership.
This also means extensive customer support, on-site or locally. Historically, as we have mentioned, Chinese companies have had the luxury (or advantage) of large and low-cost employee pools, which allows them to assign many employees to a customer challenge or request. However, quantity is sometimes a substitute for quality or expertise, particularly when they are assimilating into a new industry. This can sometimes become frustrating to customers, despite the flattery of the gestures and attention being provided.
Gifts
It is a cultural trait in China to create a sense of hospitality and respect with prospective customers or partners. Gifts are a token of appreciation and esteem and are part of most business interactions. Gift giving is a warm gesture appreciated by most. Certain cultures, particularly in those emerging markets, share the same practices, and therefore such overtures are expected and valued. You may also have to consider the economic situation of a particular customer group. If the market segment is particularly challenged financially, the gifts, kickbacks, and special treatment are valued even more.
Western traditions are usually not in this vein. In fact, gifts are almost considered to be a negative or less than ethical gesture, an attempt to buy a customer's favor toward your offer.
Fully Expensed Trips
Trips, for example to a company's headquarters in China, are also part of the gift giving—and they include invitations for spouses, nice dinners, visiting the facility, meeting executives, touring the city, and so forth.
Political Support
Taking the quest to impress further is the involvement of political figures to emphasize the commitment to and importance of the prospective customer. High-ranking officials, who make a point of meeting with a customer, demonstrate the importance of the business not only to the vendor but also to the country. This goes a long way in building relationships.
Free Fries and Extra Ketchup (Again)…
Sometimes what the customer values most is simply special treatment. Naturally, a supplier that has high marks in both areas—the substance of an excellent product along with extras such as free support, special treatment, and the like—would be ideal. However, customers in emerging markets usually have minimal infrastructure and challenging environments, such as regular power outages. They are used to the experience of things not working perfectly all the time, and therefore products that don't necessarily meet a five-nines quality standard are acceptable—and expected. So when a supplier enters and actually pays them a lot of attention and respect, and holds their hands through the process and buys them gifts, and…and…and…well, the conclusion and choice is clear.
It Backfires Sometimes: Know Your Limits and How Far You Can Stretch
Despite all the positive aspects of the Chinese customer relationship–building approach and their business-development successes, they have also been known to overpromise and underdeliver in their eagerness to win the business by saying yes and hoping to figure out the details later. As a result, disgruntled customers, especially if they are government customers or high-profile national accounts, will allow the news of failure to get into the press. We saw such headlines from customers in Africa and Thailand regarding the performance of our emerging competitors.
One such disappointment is cited by the CEO of an African company about a Chinese vendor's after-sales service in a letter: “When there are equipment problems later, the Chinese run for the door, and matters are made worse by the language barrier.”
The African customer purchased equipment from a Chinese company, but the deal was too good to be true. The Chinese company reneged and only delivered half the equipment promised in the contract. The African CEO went to China personally, eventually got the CEO of the Chinese company to admit that they had lied, and then forced the Chinese company to cancel the contract. The letter goes on to quote the African CEO as saying that he (the customer) was later pressured by his own government officials to reinstate the contract with the Chinese company—clearly the influence of politics was in full force.
Invest in Customers
The Chinese are exceptionally good at not just building relationships with customers but investing in the relationships for the long run. Their approach is a more encompassing, multidimensional one, from which we can all learn. More effort in their customers up front results in heftier returns over time.
Long-Term View and Approach
The Chinese appreciate longevity in a relationship and value establishing long-term expectations and security with their customers. For them, the customer is more than a short-term deal—they expand business interactions into personal relationships. This builds trust. Trust results in business. It is that simple. And it is not just business for the current deal at hand or for this one company. It is building a relationship while representing their country, so when other opportunities arise for other Chinese vendors, even in other industries, there is a positive reputation associated with its people.
The building of personal relationships includes extending invitations to cottages on the weekends, inviting customers to holiday parties, acknowledging special occasions, and being available when the customer needs support and guidance, oftentimes at varied hours. This requires a local presence—an investment in local employees and facilities.
Western companies need to get better at building customer relationships. Not just flying in and flying out, making the pitch, coming back to check if the customer is ready to sign—but building and nurturing a relationship over time and creating a greater sense of trust. (More on this in Section III.)
It's true that the Chinese can take a longer-term view and minimize the pressure of short-term gains because they also don't have the (Wall Street) stock market type of pressures that Western companies have, which demand accountability for quarterly results. Private Chinese companies have even more leeway in managing their strategies because they don't have to deal with shareholders; not having to report or show a profit is a big advantage.
China thinks long term, and not just with respect to developing countries. Chinese companies are patient and have a very long-term strategy when it comes to penetrating developed countries as well, despite significant resistance and barriers due to security concerns and the like. They are not deterred and they chip away slowly and quietly. Rejection and an answer of no are only temporary in their minds. And they are not preoccupied by the short-term costs of this time line.
They are extremely persistent in trying to gain the trust of a customer and country. They often do this by winning smaller customers in a developed country and using them to demonstrate reliability and success. Politics also play a heavy hand in developed countries when it comes to Chinese companies wanting to participate commercially. (More on this in Chapter 12.)
Short-Term Pains for Long-Run Gains
Emerging entrants are also willing to accept lower profit margins in the short run in order to satisfy their market penetration goals. Western companies are often obsessively concerned with pleasing shareholders and managing their margins and profits, at the expense of R&D and investment in new market expansion that might take longer to deliver a return. This shortsightedness is costly from a competitive point of view.
The bottom line is that emerging entrants look at closing a deal as not just signing a purchase order but as part of building a relationship. When you are cultivating a friendship, for example, you look to demonstrate value and a caring attitude—because you are hoping that the relationship will last and be more than a one-time encounter. The Chinese approach a business deal in the same way: They look at all of the possible elements that would facilitate the decision-making process and close the sale. They approach the engagement and the building of the customer relationship as an opportunity to build trust and make a longer-term investment.
Influence at All Levels
The assertiveness of the Chinese in pursuing influencers at all levels within the organization and beyond is part of not taking no for an answer. They don't accept rejection from one source or even multiple sources. They will continue to pursue different constituents with different care-abouts in order to win the deal.
They understand how decision making works. They understand the many dimensions of making something happen. They know that it often isn't the buyer who is the ultimate influencer or decider. And so they build customer relationships at all levels—technical decision makers, business decision makers, buyers in purchasing departments, CFOs, CEOs, political figures—up to the president of a country! They use trade agreements to promote the solutions of their national companies regardless of how suitable these solutions may be. Their proposals are so compelling that the political officials of the targeted country may force their solutions on customers despite their protests.
This is where Western companies often fall short. Western companies need to get better at selling to many different influencers within organizations and within different departments, an approach that requires different sales pitches or messages for different constituents. Furthermore, they often don't address or consider the political dimension of the sales-influencing process. We will cover this further in Section III.
Relationships with Greater Intentions (Ulterior Motives)
Chinese companies may also build certain customer relationships to acquire intellectual property (IP). As discussed in Chapter 9, people often wonder how Chinese companies can afford to manufacture an abundance of products at such low costs. The fact is that at times they actually do lose money but have accepted the loss in order to acquire ideas and know-how from more advanced companies. Once they have the IP, they replicate the products and sell them at higher prices to secondary economies that, believe it or not, tend to pay higher prices for goods out of China.1
Partnerships to Aid in Market Penetration
Chinese companies have also been known to partner with or acquire companies that have technologies competing with or complementary to their current offerings. At other times these acquisitions or partnerships are simply to demonstrate good faith through sustaining or investing in the local economy, or to get a foothold in a particular market. One example of the latter was Huawei's attempt to buy Motorola's network services in order to penetrate the U.S. market.2
Communications
Another key component of the promotion is communications. As market followers with the aim of catching up to the other established market leaders, the Chinese are excellent at learning from the best and emulating the brand strategies of successful companies. In order to establish themselves as worthy vendor choices in specific industries, they manage to look like they fit in by playing the part. They “fake it until they make it,” as some would say, by providing a glossy front that covers the less substantial back end. Meanwhile, they are working hard behind the scenes to catch up and become effective deliverers of winning solutions.
By at least appearing like worthy contenders, they slowly win customer confidence and are invited to customers' negotiating tables. The smoke and mirrors buys them time as they ramp up product quality, innovation, and the ability to fully deliver on expectations.
Marketing and Conferences
The Chinese have taken a skill that makes them good at manufacturing—producing a product from a given prototype—and transferred this skill to marketing. It is uncanny how similar their marketing and advertising campaigns are to those of market leaders. They have excellent intelligence sources and sometimes come out with almost exactly the same campaign at the same time as the market leader—sometimes even before! The graphics, messaging, and even the simplicity of the layout and overall positioning will all be astoundingly similar. Why create your own when you can follow the best?
This tactic is another part of their accelerated penetration strategy for new markets, especially new markets in which they are less experienced. It adds to building customer confidence and encourages the selection of their lower-priced solutions that seem to be so similar to those of the market leaders' premium branded offers.
Associations and Standards Bodies
The Chinese are very good at establishing a presence in forums that will support their growth goals. And because they are forward thinkers and investors for the long term, they take a proactive approach. This tactic is another part of their credibility-building strategy. For example, emerging markets in Africa are key targets for them, and not just from a commercial perspective but also from a national goals perspective. So they demonstrate presence by sending large delegations of representatives and speakers to government-endorsed associations and other important gatherings.
They also sponsor conferences, donate heavily at them, and have many individuals sitting at the table influencing policy, giving talks, and so on.
Brands
In the initial chapters we mentioned that China, along with many other emerging countries, has not traditionally had strong global brands of its own. The Chinese revere brands coming from the West, particularly from Europe, and pay big money for the prestige of owning a branded product. Women's handbags are one example, and this attitude applies to higher-end purchases, such as vehicles, as well. Some Chinese will pay the extreme import tax premium for the British Land Rover instead of buying the same vehicle that was made in China at a much lower price because they do not want the obligatory Made in China label displayed on the back of the vehicle. And some even go so far as to scrape off the Made in China engraving.3
In order to overcome this lack of prestigious national brands, they will acquire established and sometimes dormant brands (some call the latter zombie brands). Western brands are being purchased and revived by Chinese companies; for example, the Polaroid brand was bought and reignited by RCA (which is itself a brand controlled by TCL, a Chinese multinational). However, the power of brand association can also be a negative, as happened with the high-tech Chinese company Lenovo. Even though it purchased IBM's PC division, the relabeled PC with the Lenovo name was still not very popular in China because of an association with the legacy Chinese brand.
On the other hand, there are some Chinese brands that have recently succeeded globally, including Haier (appliances) and Huawei (the telecommunications manufacturer), the latter of which broke through as a recognized brand by shifting their concentration to the consumer market with mobile handsets.