It is always interesting to compare CRM in Greater China and CRM in the United States. The main differences are the quality of data—or lack thereof; the differences in uniform prosperity; and even the way CRM is viewed. Still, there are similarities. The same vendors seem to lead the market, and there is a blurring between local business and multinational corporations.
As we begin a new year, here’s how I see the shape of CRM in Greater China in terms of five challenges for the market.
The credit card penetration rate is under 1 percent in China, compared to more than 90 percent penetration in the United States, according to Visa International (2004).
Data quality in China is a matter of extremes. Ask anyone who works in data management in China, and he or she will tell you how difficult it is to get clean data and how frequent and dynamic the changes of Chinese people are, no matter what their economical status, geographical moves or demographical changes.
If you have a business in China, you can expect half your data to go obsolete in 12 months. This is why credit card penetration is so low. However, if you are willing to buy data at all costs, regardless of the types of channels and your purpose for the data, you could get almost any level of data. That’s because there is a loophole in the data privacy law, and the general public does not have strong sense of privacy protections. Because data is of primary concern when you’re dealing with CRM, it can be a thorny issue.
Disparity in prosperity
The difference in the gross domestic product of the first-tier Chinese provinces is 13 times that of the bottom-tier provinces, according to the National Bureau of Statistics of China and International Monetary Fund. This is compared to Europe, where the GDP of the first-tier countries is 3,000 percent of the bottom-tier countries.
More and more foreign enterprises realize they’re not only entering into a big country, but also they’re entering into a European-style market with diverse and dispersed segments. Consider the different levels of wealth, customer maturity, infrastructure, culture, languages, customs of different regions in China, not to mention growth, and you might have trouble surviving. You can’t apply one single policy or strategy to a market of more than a billion people. The fast and unbalanced economic development and growth of customer maturity further accelerate the gaps and intensify the two ends. The demand of on-target segmentation is another challenge for CRM in China.
Tough (but not impossible) road for local enterprises
Six foreign and four Chinese brands ranked in the top 10 of advertisers in 2004, according to Nielsen Media Research.
When you consider that, the competitive advantages of multinational corporations compared to local enterprises become a blur. In the past decades, the MNCs had the advantages of global branding, expertise and capital wealth over local enterprises. Nowadays, the gaps between the two are narrowing. With more and more capital influx from being listed in various stock market and more resources spent on building and enhancing brands; innovating new products with their own design; recruiting high profile professionals with global and MNC experiences, local enterprises are improving and expanding very quickly. On the other hand, the MNCs are gaining advantages in channel management while picking up local market knowledge. As the differences between local enterprises and multinational corporations lessen at the same time as customers are becoming more mature and expecting quality as well as low prices, companies large and small must focus on customer experience to win loyal customers and good profits.
Foreign vendors controlling all but niche industries
The reported sales revenue in 2004 of Oracle was $12 billion (in U.S. dollars); Siebel was $1.34 billion; and SAP was $2.8 billion. The top three Chinese software companies had a combined sales revenue of only $300 million or just 2 percent of the three foreign vendors, according to the Chinese Ministry of Information Industry.
Local vendors are too weak to compete with the foreign corporations, no matter which market segment you’re talking about—even in many industry-specific areas. They are just too weak in R&D, branding and professional industry experiences. Big ticket projects will still be won by ERP-oriented CRM vendors, benefiting SAP and Oracle. However, there is some room for local vendors that specialize in some niche industries—like real estate, telecom, media—that require unique local experiences and relationships to break the ice and close the deal.
Perception of CRM as an application
CRM sales revenue in the China market will have hit $54 million (in U.S. dollars) in 2005, according to the Chinese Center for Information Industry Development. That’s still less than 1 percent of global spending ($8.8 billion in 2004, according to Center for Information Industry Development).
Just as people often mistakenly perceive only advertising builds a brand, quite a large portion of people still think CRM means software or even a call center. So what are the natural results? The truth is no brand could be built successfully if you focus only on advertising, and no successful CRM can be done if you focus only on software or the call center. My opinion is that the perception in China that CRM is nothing more than software is too strong for simple education to change. There are two ways out: Change the term "customer relationship management" to something else or be patient and wait for enterprises to learn bitter lessons before they "get it." China enterprises have to invest (translate: lose) more before they learn those precious lessons.