Market research is growing fast in China as both local and foreign companies look to better understand the local environment

----By Rebecca Jarschel

China's unprecedented economic growth has led to double-digit expansion in its research industry. The value of market research commissioned in China accounts for approximately US$500 million (€360 million, ranking 10th in the world). The entire industry is growing about 20 percent per year. Market research in China covers booming industries like automotive, pharmaceuticals, construction, IT, telecom and consumer goods. Demands for fast-moving consumer goods (FMCGs) and industry research is expanding exponentially beyond big cities and into second- and third-tier cities.

The current value of business-to-business (B2B) research conducted in China is around US$50 million, growing around 25 percent per year. In other words, overall business value will more than double within the coming four years. Western research agencies have been operating in China for almost two decades now, following the arrival of big kid on the block ACNielsen in the 1980s. In fact, around 50 percent of all full-service agencies have Western clients wanting reliable and trustworthy information as well as effective client liaison with English-speaking or Western managers. Over the past five years, internationally operating B2B research firms have arrived in China, whether as joint ventures or wholly owned companies, mainly focusing on market assessment and market entry consultancy. Customer satisfaction, acquisition and partner assessment studies are increasingly being asked for. The upside of working with foreign research firms is the fact that they are able to tackle the Chinese market from a local angle on the one hand - without losing the international perspective. Trained and supported by their mostly European headquarters, a good half of the 53 ESOMAR-registered agencies based in China are foreign-owned, including a mixed workforce of local and expatriate managers.

Incentives and compensation

Salaries and living costs vary enormously throughout China, not only by region but also by job level. Although salaries are generally much lower in China than in the West, incentives are significantly high when compared to their Western counterparts. In automotive research, for example, respondents can make up to RMB1,000 (€100) while their equivalents in consumer research, especially when it comes to premium brands, can ask for RMB200-300 per session; Chinese doctors participating in medical research are commonly paid up to RMB300 per in-depth interview or focus group. Opinion leaders will obtain RMB800 at least. It can be sometimes difficult to get people to "speak out" in surveys without offering direct incentives - a significant number of "professional research groupies" even live exclusively off attending B2B focus groups and interviews, managing to make around RMB2,000 per month - the average salary in Shanghai. Unlike in other countries, Chinese respondents prefer receiving cash instead of gifts or gimmicks. Though monetary compensation is key, respect for the respondent is decisive for qualitative research. In order to show respect to their status and expert rank within the industry, respondents feel they need to be adequately compensated.

The most common operation methods are telephone interviews and focus groups. More than 50 percent of data are gathered from computer-assisted telephone interviews. Focus groups are commonly conducted within a frame of four to seven participants. High-level interviews are still conducted face-to-face, though; top management respondents usually require a higher attention level and a time frame of about one and a half to two hours and even longer, with high monetary compensation as an incentive. Telephone-based interviews are preferably conducted from in-house call centre facilities, where quality can be assured by permanent staff members.

In coming years more and more data will be collected online. Web-based focus groups and blogging research will gain importance. Online research in China has many upsides, especially considering the country's vast size. As most marketing professionals and researchers are based in top-tier cities like Beijing, Shanghai and Guangzhou, conducting online research means cost-effectiveness and easy logistics. In Western market research, online tools like eye-tracking and scanning are already up and running. Psyma Business Research China is currently conducting a consumer satisfaction study on major European auto brands, analyzing their websites targeted to Chinese consumers. Initiated in 2006, we are already conducting its second wave in China, welcoming several new brands.

Currently, the hottest industries commissioned for business research are health care (17 percent), engineering and machinery (20 percent) as well as petrochemicals (14 percent). The pharmaceutical and medical sector accounts for a fifth of the current business volume. According to IMS, China's pharmaceutical market is growing around 13 to 15 percent a year. An increasing focus on international pharmaceutical standards and the government's ambition to make China a hub for bioscience R&D makes this industry worth following. Common research topics revolve around distribution and sales, pricing, market analyses and prescription studies. A wide range of "over the counter" medical research covers advertisement and concept tests, customer satisfaction and competitor analysis. With China's hunger for medicine, especially in the fields of cardiovascular heart diseases and oncology, more and more local pharmaceutical companies are commissioning research.

Environmental study

Among the rising stars in industry research are companies engaged in environmental services like waste management, water purification and alternative energy. According to the 11th five-year plan, which ends in 2010, China will reduce energy use by 20 percent and major pollutants by 10 percent. Facing mounting international pressure to solve issues like environmental hazards and energy shortages, the rise of alternative energy and environmental service providers is crucial.

Research firms in China will face a trend towards green energy and pharmaceutical research and are forced to expand their presence into second- and third-tier cities. A need to incorporate online data collection methods like online focus groups and blogging research into traditional research approaches will be key in order to prosper and cater to the needs of multinational as well as local clients in need for due diligence business research.