Editor’s note: Barton Lee and Tony Zhao are managing director and manager of strategic planning, respectively, of East Marketing Research, Ltd. (EMR), Guangzhou, China. David Tatterson is the U.S. representative of EMR.
In the November 1996 issue of Quirk’s Marketing Research Review, we provided an overview of the marketing research industry in China. However, China is a rapidly growing and constantly changing market. Significant changes occur in short periods of time. With this in mind, we submit the following update of our previous article.
The marketing research industry in China started less than 10 years ago. Before 1990 there was only one professional marketing research firm in the whole of China. This situation changed quickly. In 1993 there were approximately 20 firms and today there are over 300 professional firms. Most of these firms are concentrated in the large cities. Guangzhou, for instance, has over 30 firms. There is at least one firm in the capital city of each province. Many of these have evolved from the statistical departments of various government agencies. In addition, marketing research services are also provided by numerous other organizations, e.g., universities, advertising agencies, information service companies, government organizations, etc. Field support service firms are also present in the large (Beijing, Guangzhou, Shanghai, etc.) and secondary (Wuhan, Chengdu, Harbin and Fuzhou) cities. Overall the industry has developed quickly and continued rapid growth is expected.
Foreign joint ventures
SRG, the first marketing research joint venture, was formed in 1992. Since then many foreign joint ventures followed, particularly in the last three years. Gallup International, Market Behavior, Ltd. (MBL), Market Facts, Research International, A.C. Nielsen, Sofres Group and NOP Group all formed joint ventures with domestic Chinese companies. This trend is expected to continue. Currently only five domestic firms over five years old remain independent. These joint ventures introduced many new research techniques which domestic research companies quickly adopted.
Development of the marketing research profession
The rapid development of the marketing research industry has attracted people with a wide variety of academic backgrounds into the profession. Initially, marketing research professionals were government statisticians who had ready access to data collected for measuring economic production and growth. More recently, many highly qualified persons with backgrounds in sociology, psychology and economics have entered the field. Many of these people have advanced degrees including an MBA. Many have also studied abroad and worked for large multinational corporations such as Procter & Gamble. The domestic marketing research profession has benefited greatly from this influx of diverse backgrounds.
The talents required also vary with client. Foreign clients require data collection and tabulation (fieldwork skills). Domestic companies also require fieldwork skills. However their needs are greater. They need data analysis and interpretation skills as well as the ability to develop a marketing strategy based on the results.
More products researched
Initially, marketing research studies focused on daily consumer products such as laundry detergent, shampoo, beer, tobacco, etc. The past few years have brought changes here also. Today high-tech products (medicine, mobile phones, automobiles, data networks, etc.) are being evaluated by manufacturers prior to entering the marketplace. In the near future, we expect service industries such as banking, insurance and real estate will seek marketing research services.
The entrance of foreign products into the Chinese market forced domestic Chinese companies to begin to rely on marketing research data to guide their marketing efforts. International advertising agencies such as Ogilvy & Mather and Saatchi & Saatchi aided this process. They quickly acquired domestic clients and taught them the value of research in guiding their advertising. Some of the large domestic companies now maintain their own marketing research departments. The next step for Chinese manufacturers is to begin using foreign marketing research firms in the countries to which they export.
Trade associations
ESOMAR (the European Society for Opinion and Marketing Research) held its first East Asia Conference in Hong Kong in 1996. While many Chinese research firms belong to ESOMAR and participated in the conference, it drove home the importance of an association to the development of a healthy research industry. Chinese marketing research firms have been meeting and plans are currently underway for a domestic research association. It would not be surprising for one to be announced within the year.
Average billings remain small
There is much room for growth in the Chinese industry. In spite of the rapid growth of the marketing research industry, the billings of the typical research firm remain modest. Very few research firms (approximately 5 percent) have billings exceeding $1.25 million. Most of these are joint venture companies which attract foreign business. In medium to large companies (approximately 15 percent of research firms) annual billings are in the range $125,000 to $1.25 million. Many small companies (80 percent of research firms) average only $25,000 to $75,000 in annual billings. It is estimated that national billings for all firms in China is only $65 million. This is very small compared to more developed markets such as Japan where annual billings were estimated at $970 million in 1997.
New approaches
Traditional methods such as door-to-door, central location and focus groups remain the backbone of the research tools in China. Phone surveys are gaining acceptance as a larger percentage of households acquire them. Cellular phones are driving this trend. Phone surveys are currently used in business-to-business studies. More advanced techniques such as panels, omnibus studies, car-clinics, off-air testing of advertising and in-home achievement tests are making inroads. Demographic data books characterizing the products and services purchased in China’s large cities are now available. These are popular with advertising and marketing research firms. The widespread use of computers are making e-mail surveys feasible, particularly in business-to-business studies.
Growing and developing
The marketing research industry in China is growing and developing as fast as the market itself. Recent economic reforms in Beijing strengthen China’s move to a market-based economy away from a planned economy. The Asian financial crisis notwithstanding, we foresee these research trends continuing. The chief drivers are increased competition and a more sophisticated, demanding consumer. As a result, both domestic and international corporations are demanding more and more market information.