busy street scene in Shanghai, China
PHOTO: Hanny Naibaho

For many American businesses, the Chinese market is a siren song, tempting brands large and small with the promise of a booming economy and 1.4 billion potential customers. However, as many mythical sailors discovered, a siren song can be deadly if it blinds you to the rocks, currents, and other obstacles you’ll encounter along the way.

As strong as the lure of the Chinese economy is, American businesses need to approach it very carefully, because China is nothing if not unique. For those who do their homework and develop a customized plan, however, the Chinese market can be extremely lucrative.

What Makes China So Challenging?

Chinese Companies Have an Impressive Head Start

Imagine if Amazon, PayPal and Netflix got married. Between infrastructure, algorithms, and the sheer amount of data they have, they could extract highly accurate consumer insights, allowing them to offer personalized content on the right channels at the right time. Few foreign companies would stand a chance — unless they were very, very smart.

That’s an apt metaphor for China’s business scene:

Baidu, Alibaba and Tencent (BAT)

  • Baidu is China’s Google.
  • Alibaba is China’s (and the world’s) biggest online commerce company, including an online marketplace, an online and mobile payment platform that can handle 256,000 payments per second, and an online video content platform. It’s the parent company to Taobao (comparable to eBay), TMall (similar to Amazon), Alipay (similar to PayPal) and Youku (similar to Netflix).
  • Tencent is the wizard behind the curtains, leading China’s digital transformation. The company’s products include social platforms, digital content and seamless mobile payment solutions. Its partnerships with other Chinese companies extend its reach into cloud computing, big data and artificial intelligence. Its social platform is similar to Facebook, and it owns the hugely popular WeChat app.

These three companies are often referred to as a single entity — BAT — and have data that far surpasses anything American companies have. Not only do American companies not have as much data, they don’t have experience analyzing data on such a massive scale.

Related Article: Goodbye Copycat: China Returns to Its Innovation Roots

It’s all About the Data, and China Has It

Chinese consumers love to shop. In fact, Chinese millennials spend about 70% of their income on socializing and dining out.

But it’s not just the data about what Chinese consumers buy that’s important; it’s also about how they buy. In China, shopping is very mobile and very social, and personal recommendations carry a lot of weight. So do recommendations by influencers and key opinion leaders (KOL), which means trends in China change on a dime.

The bottom line is that China is bursting with opportunity — it is, after all, the second largest economy in the world. But it’s also a unique environment with challenges that are far different from those American companies are used to. In other words, there are many things that you don’t know you don’t know.

How to Win in China

Despite the challenges, it is possible to succeed in the Chinese market. But you need to have a detailed plan in place. But you also have to be ready to ditch that plan and act quickly if the data tells you it’s not working.

Develop Your Plan

Forget your success in other markets, and pretend you’re starting from scratch (because you are!):

Hire an Advisor With Experience in the Chinese Market

Having an advisor on the ground in China is just as important as having a native translator. However, instead of translating language, this advisor will be translating the ins and outs of the Chinese marketplace so that you can learn about and master things like:

  • Bold, disruption-friendly marketing approaches.
  • The importance of AI marketing.
  • Rapid development and piloting.
  • Fostering cross-functional, agile market delivery.

Research the Regulatory Environment

The advisor you hire should be familiar with Chinese regulations, but you have to educate yourself, as well. Before making a big investment in China, for instance, you should know that data on Chinese citizens can’t be transported outside of China, meaning you’d have to build a server farm in China or “rent” servers from Chinese companies.

In addition, while there are laws protecting the private information of Chinese citizens from foreign and domestic organizations, the Chinese government has access to everything. This is another area where a trusted advisor can help you with concerns about intellectual property, proprietary company information and more.

Here are a few resources to check out:

Your plan should also reflect the international political climate. The discussion is worthy of a separate, in-depth examination, so we won’t get into that here. But pay attention to the headlines and realities on the ground. Both should influence your plan.

Related Article: Let 'Ethical by Design' Guide Your Use of Consumer Data

Use AI and Machine Learning to Develop Your Marketing Strategy

This is the big one for businesses entering the Chinese market. People in China speak almost 300 different dialects, belong to 56 ethnic groups, and have access to varying degrees of wealth.

And — they all expect personalization.

The CRMs, CDPs and social media platforms you’ve used in other countries simply aren’t up to analyzing the massive amount of data generated by Chinese consumers. There are millions of data points to include: traditional metrics like sales and foot traffic as well as digital-specific data, like searches, online purchases, abandoned carts, social shares, and the numerous conversations across multiple social channels (which include important cultural nuances).

It’s a tremendous opportunity if you can figure out how to take advantage of it. But finding relevant insights within all of those data points is beyond the reach of typical analytics. It requires sophisticated AI and machine learning to deliver actionable insights in real time, so that you can turn on a dime when needed. Not only will this type of rich insight tell you when you need to change something, it can also tell you what and how to change. You may even decide you want automated alerts when your brand is trending down or someone gives you a negative review.

Even with an airtight plan customized for the Chinese market, ongoing success depends on extracting actionable insights in real time from massive amounts of data. If you’re going to devote time and resources to enter the Chinese market, make sure to budget for cutting-edge AI, machine learning and the right partners. You won’t last long without them.