Conducting China market research is the first step companies need to take to decide if China is the right market to expand into. Most companies entering into the China market for the first time make the fatal mistake to only research the number of potential customers and the level of interest of those customers in their product or service. The reality is that the above is just one-third of the actual research that needs to be done.
Deciding if entry into the China market is right for you depends on three key elements that you cannot afford to overlook – market opportunities, competitive intelligence, and cost of China entry. Miss any of these three elements and you may as well be going in blind.
The Complete China Market Research Must Include:
Many companies define far too broad a scope when searching for their target customers. There are a lot of people in China, which means that an overly broad search can lead to very misleading results. A good China consultant will help you understand that there are an extremely large number of niches and demographics and the best market research will be highly targeted to focus only on core customers. This give you a much more realistic number.
The effort of research on competitive intelligence should never be underestimated as you are likely encounter companies you are familiar with in China. The benefits of conducting the research on competitive environment include:
- Base your marketing decisions on what your competitors are doing.
- Learn from mistakes that your competitors have made in China.
- Discover untapped markets that your competitors may have overlooked.
- More importantly, estimate the investment required to stand out in the competitive environment.
Cost of China Entry
Cost of entry into China is the third element in China market research that cannot be overlooked. More often than not in my experience working with companies making the move to China the actual cost of China entry is under-estimated. The cost can occur in the following activities:
- Regulatory compliance.
- Obtaining market data.
- Retaining specialists.
- Hiring business development teams.
- Building brand awareness.
- Building trust with local customers.
- Local office set up.
- Unexpected investment for market and regulatory changes.
In summary, there is much to think about over and beyond just the number of prospective customers and their level of interest. You must really take a deep look at your assumptions about market segmentation, keenly analyze both local and foreign competitors, and accurately assess actual costs. China market entry is challenging enough. You don’t want to go into it with a blindfold across your eyes, so it’s very important to work closely with a China consultant that can help you make the best assessment for your business.
Casey W. Xiao-Morris is China Business Consultant at Leverage China, LLC, specializing in capturing China’s market opportunities for American companies. Casey can be reached at cxmorris@LeverageChina.com