Part One of our Three Part Series on Navigating the China Software Market. Discover reasons that the China market may be underperforming your expectations and why small changes can drive outsized improvements.
Whether you are just entering the China market or already have some existing resellers, market, you will likely find yourself struggling with small orders, a lack of renewals, and too many perpetual license buyers. If the Chinese market is underperforming your expectations continue reading. To understand what is likely happening – and why small changes can drive outsized improvements.
Companies selling software in China without a local presence usually underperform their expectations and the reasons are not what most people think. It is not about localizing the product or building a pre-sales team or even having local support. Granted, such resources are nice to have, but they are not realistic for most companies—both in terms of finances and logistics. There are easier solutions and ways to help you tip the scales and win customers who likely want—and may already be aware of—your product, but just cannot quite say ‘yes’ for various reasons.
The root causes behind the underperformance usually come down to two major areas: 1) not making it easier for the customers to buy your products from you or your channels; and 2) fundamental problems caused by the types of reseller partner used and unexpected consequences by not managing them properly. In this article we will focus on the first.
B2B software companies selling in China want to win large deals. Ideally, these target customers are large enterprises with adequate, consistent budgets who purchase large multi-seat orders and are more willing to buy subscription models. However, these customers also have more complex procurement processes, are more risk-averse, and will face scrutiny for bad procurement decisions. Purchasing overseas products that are under-supported in the local market adds a whole level of problems that need to be overcome to gain their support.
To understand what makes China different, you need to understand some of the challenges target customers face. For instance, products are often not well known in the local market. It is difficult for an end customer to find and verify who the true Authorized resellers are (Just search on Baidu for any foreign software, and you will find hundreds of links to free pirated versions of the software in question.) The Chinese government and many companies are concerned because pirated software is far more likely to contain malware, which provides data and national security risks.
Going to a reseller’s website and seeing a software logo doesn’t provide any comfort that the reseller, even a reputable one, has a real relationship with the vendor. Many resellers list any popular software they know of in hopes a potential customer will reach out to them. If a customer shows interest, they will then try to find a real vendor; and buy it themselves from overseas, and then resell it to the customer. If the vendor says no, which they often do, then the reseller will tell the customer they can’t sell it, wasting the customer’s time, or simply trying to sell them a pirated version. And in some cases, the authorized resellers are actually diverting leads to another site (while selling pirated versions at full market price).
If all this sounds extreme, consider that many nefarious resellers have poached trademarks and copyrighted products and are posing as the real brand with “legal” evidence supporting their claims in China. Many resellers have created exact replicas of foreign websites to appear as legitimate sellers to unsuspecting buyers. As such frictions add up, it should come as no surprise that you are going to lose orders to competing solutions; or worse, to pirated versions of your own solution.
These are the formidable challenges companies face when trying to expand their business in China.
Everyone has heard the stories about the wild west Chinese marketplace. But what many don't realize is that larger buyers in China are equally scared to purchase. Incredibly, most foreign companies make little effort to address the issues discussed here. Why? Because they don’t understand the true blockers and what is happening and believe the myth that to grow sales they need a localized Chinese version of the product and a fully staffed local team invested in the China market – it is simply not true.
Bottom line: Get the basics right and you will see your sales increase without making major investments in the market.
Compare some of the challenges faced by a Chinese enterprise trying to buy global software in China vs. buying a local software solution. The following questions arise.
For those wanting to have better sales in China, all these questions need answering. That’s where ADG comes in.
If you want to learn more about how to address these issues in China, please follow our next articles, which cover the following topics: