Business rules

Home / Business rules

Why does business in China depend on relationships

In traditional Chinese culture, the relationship between family and other bonds is more prominent than in Western countries.

For example, clan, hometown, education, and other shared experiences. But in business, China's "relationship transactions" are often seen as unfair factors in market competition.

Is it true? Do you have to rely on relationships to do business in China?

I try to clarify the critical position of relationships in Chinese marketing, hoping to point out the direction for establishing customer relationships in the market operation of the enterprise.

1. Be friends first if you want to do business

Most commercial transactions in Western countries use "commercial legal affairs" as the only standard; the signed contract is used as the basis for execution, and legal contracts are used to restrict multi-party behavior.

And we are also aware that there are many cases of failure to comply with the contract and no legal disputes in mainland China.

This is because, in China, business relations are also included under "friendship ethics."

In addition to contracts that can ensure the performance of specific transactions, friendship means a longer-term relationship of trust and loyalty. Therefore, you will find that having a foolproof arrangement is not enough to attract customers to do business in China.

"Why don't you trust me and don't trade with me when you have a contract?" It was once the most stupid question in the eyes of Chinese sales elites.

That's because the contract only guarantees performance during the execution of the agreement. Still, the Chinese often set the concept of "responsible to friends" for an infinite period.

Therefore, it is not difficult to understand that in addition to the explicit guarantee of the contract, trust and friendship are also topics that cannot be avoided before the contract is signed.

This cultural tendency means that good customer relationships in China will last longer. Compared with Western customers, Chinese customers are more loyal to their suppliers. In particular, studies have shown that Chinese in the Mainland have a much stronger sense of long-term responsibility towards friends than Chinese in Canada and Chinese in Hong Kong.

Therefore, when negotiators show advance preparation, patience, and sincerity, they will be more successful. Because this is a factor emphasized in Chinese relations. On this point, John and Pye agree. All successful negotiations require a high degree of trust and respect. Friendship is often a shortcut to gaining trust and respect in China.

Short story: Before the opening-up policy, all sales were conducted through 14 trading companies. In the 1950s and 1960s, Japan was China's senior partner or "old friend."

Therefore, even if the opponents of the United States and Russia gave better conditions and proved their own quality, China still signed the single to Japan.

2. The relationship between Chinese people is not only friendship but also face

When marketing variables are mixed in, the "relationship" becomes highly complicated.

For example, Chinese cultural tradition divides everything into different levels. The Chinese people's notion of a good face will encourage us to buy products with high grades or at least a good reputation. When purchasing top products, we will enjoy the satisfaction of superiority.

Research shows that if buying the most advanced products conflicts with friendship requirements, customers tend to choose more advanced products. Therefore, it is essential to establish a good brand image.

3. Building relationships requires market investment

In China, suppliers and customers are often connected by their interdependence. Therefore, companies need to arrange marketing methods to strengthen their relationship with customers. This is a marketing investment process. Or, to use Jackson's words, this kind of marketing investment serves to attract new customers and increase the conversion cost of old customers, which directly improves brand loyalty.

4. What is a relationship

The relationship is motivated by the desire of the two groups for economic gain and reduction of uncertainty. In short, it means making more money and less trouble.

For purchasers or customers, it must be clear that economic benefits are jointly evaluated by the value and efficiency of products and services. But, unfortunately, efficiency is ignored by many of my small, entrepreneurial corporate clients.

There are multiple suppliers for a project, and Party A's procurement manager does not understand the professional knowledge of the suppliers. In this case, it is difficult to produce effective communication. Therefore, the cost of communication within Party A's enterprise is exceptionally high, and this cost should not be ignored.

Companies can increase trust by identifying long-term partners/suppliers or identifying long-term brands for personal consumption. As the trust between the two parties increases, the resolution of common problems and mutual adaptation can reduce costs and enter the value-added chain of the other party.

The uncertainty in the relationship comes from differences in internal permissions, and one party's opaqueness to the other party's information and unsure of behavior.

Therefore, in building trust, the establishment of shared values ​​and behaviors is also extra important.

The actual manifestation is what we often call "tacit understanding," knowing the work process and persons in charge of both parties, knowing which product of this brand is most suitable for you, things will go smoothly.

5. Relationships make the project more flexible

In another procurement example of a Chinese foreign trade company, the Chinese procurement appraisal of Italians is respectful, elegant, and relatively flexible. At the same time, the description of British people is severe, polite, and dignified.

Therefore, the Chinese Purchasing Association believes that Italians are easier to get along with and worry that the British will be too rigid in executing the contract, so it chooses Italians.

At the same time, Chinese people will consider "cost-effectiveness" instead of simply pursuing high quality. They will be more flexible in the exchange of goods, sale of services, and technology transfer.

Therefore, product quality, sales staff's efforts, promotion, and service also options Chinese people fancy. Even if the competitor's quality level is not the highest, you can still get sales by improving advertising and service efforts. Because promotion and service efforts can generate customer relationships.

Establishing an intimate and harmonious relationship based on personal attractiveness may be rewarded based on the company's good quality. Even if this relationship does not meet the standard of traditional Chinese "friendship," it is enough to win good competitiveness in the market.

6. Conclusion

Whether it is from the macro marketing strategy or the micro sales process, doing business in China is much more complicated than skillful business negotiation alone.

It is not enough to build strong customer preferences through the product or service itself. Understanding customers, clarifying their needs and special requirements requires a broad and in-depth marketing model and good brand management.

Tags: Foreign companies in China