ABACUSsmall.JPGIf obtaining reliable macroeconomic statistics on China is difficult, getting detailed western-style marketing data is next to impossible.

Yet every western company before embarking on its China adventure feels the need to slice and dice data, if only to get a handle on the huge market opportunity that supposedly awaits.

CMO Magazine, in a refreshingly down-to-earth special report on China, describes some of the problems facing chief marketing officers (CMOs) at western firms engaging with China.

Obtaining reliable information about the world's most populous country has been an elusive goal since Marco Polo's first business trip to China seven centuries ago.

Even China's government has huge problems surveying the nation's 1.3bn people because of underdeveloped internal infrastructure and an inbuilt distrust of people asking questions. So, for western marketing execs, trying to get detailed demographics or marketing data on China is a Herculean task:

For the new breed of CMOs schooled on metrics and data analysis, developing a marketing plan for China is akin to time travel, back to an era when guesswork, estimates and gut feel ruled the day.”

Nevertheless, these challenges haven't kept western companies away. Far from it.

One Billion Customers: Lessons from the Front Lines of Doing Business in China (Wall Street Journal Book)Senior management see the China opportunity as too big to ignore and they trot out familiar mouth-watering numbers on China, such as the 40 Chinese cities with populations of more than 1m, or the World Bank data showing the Chinese economy growing at 9% annually.

At first sight, the numbers do seem too big to ignore. But dig more deeply and a different story emerges. Visions of mass markets and healthy profit margins are replaced with the sobering reality that making money in China is hard — and next to impossible if you see China as a huge homogeneous market.

Companies that have succeeded in China have looked at the country not as one mass market but as a large number of very small markets.

James McGregor, author of One Billion Customers: Lessons from the Front Lines of Doing Business in China, tells CMO Magazine:

If you go into China with a big bang theory and saturate the whole country at once, you may as well give your money to charity because you're just going to lose it.”

The magazine quotes a couple of well-worn examples, namely McDonald's and Disney, and their strategies to attract Chinese consumers.

More interesting, perhaps, for EngagingChina readers is the case of Amdocs, the US billing software giant and a company I know well.

Amdocs was under a lot of pressure from investors and analysts to ride China's telecom boom. But the company couldn't convince itself that there was money to be made in China. That's because its software and services are mostly aimed at telecoms markets where customers are prepared to pay extra for value-added services.

Initial research showed that the Chinese mobile phone market was still at an early stage and most consumers had little interest in new services.

But Amdocs knew the market was developing rapidly and so it decided to regularly monitor the average revenue per user (ARPU) of four Chinese telecom service providers – it partnered with a local billing company, Beijing-based Longshine, to help in the task.

Initial ARPUs were disappointing at less than $5 a month, confirming Am docs' reservations. But soon ARPU climbed to $10 a month, the magic figure at which Amdocs decided the market was ripe for taking.

In August 2005, it pounced. It publicly announced its entry into mainland China by acquiring Longshine, which counts three out of China's four largest service providers as customers.

The billing software industry has been consolidating for many years and Amdocs has a good track record in integrating the disparate billing software platforms of the companies it acquires. Nevertheless, it will be interesting to see if Amdocs can make the numbers add up in China. We will keep you posted.

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