• The pricing strategy:

Most Chinese consumers are sensitive to price and will usually choose less expensive products.
In China, price competition is the practice most frequently employed by enterprises to compete for market share.

Many Chinese companies believe in the strategy of low profit margin and volume sales based on the assumption that lower price will increase the speed of turnover and eventually generate higher profit.
While the low-price strategy is widely adopted, some marketers use a high-price strategy, taking advantage of the conventional wisdom that pian yi wu hao huo (cheap is no good) and yi fen qian yi fen huo (each additional cent paid is associated with additional value).
Foreign branded products or imported products are generally high priced and perceived as superior products*.

It is interesting to observe the unique characteristics of psychological pricing practices in China, which go beyond simple considerations. Some Chinese people have a superstitious belief in lucky numbers and marketers price their products in such a way that the numbers denote good luck.
For example, a piece of furniture may be priced at 1199 to indicate chang chang jiu jiu (long and lasting), or 4451 meaning shi shi ru yi (everything is as you wish).

  • The sales and negotiation practices:

The old days when products were produced and allocated according to government plans have gone.
Companies have to rely on their own marketing teams to now face multiple choices of ways to market their products, including direct and indirect marketing.
Direct selling used to be commonly exercised by both domestic and foreign firms in China.
Unfortunately, criminal exploitations and abuses of this system such as price frauds, sales of fake and smuggled products, seriously affected the interests of the consumers and the normal economic order and lead the Chinese government to issue a ban on direct selling.
Recently, direct marketing tools such as telemarketing, TV sales and internet marketing, are relatively new to Chinese consumers and have not yet proved to be very successful.
Indirect marketing channels are all used in China where there are over 1.36 million wholesalers and nearly 14 million retailers of consumer products.

Manufacturing enterprises are using diversified channels of distribution to get their products to the consumers.

Foreign managers easily agree that negotiating a contract with Chinese is definitely not the same as in the West. Moreover, Chinese negotiators are now behaving much more like their Western counterparts.
Negotiations tactics most often used by Westerners are cooperation (win-win situation) and defensiveness (standing firm) while, the negotiating style of Chinese are cooperation and sudden demands or changes*.
This confirmed that China representatives are tough negotiators.

  • Advertising practices:

Many Chinese enterprises believe that advertising will automatically generate sales*.
A recent example is the exorbitant advertising expenditure of Qinchi Liquor, who spent US$38.55 million for prime time advertising on CCTV (China Central Television), but failed to increase its sales*.
Advertising theory seems to be unfamiliar to most local advertising decision-makers. For many years, most advertising dollars have gone to television media, as they are seen as the most effective channels of communication to create product awareness among potential consumers in China.
The lack of reliable ratings data is another problem that makes it difficult for advertisers to make decisions and evaluate the effectiveness of their advertising efforts.

  • Promotion practices:

Both retailers and producers use consumer oriented promotion techniques.
These practices range from coupons, premiums and deals to prizes, lucky draws, and contests.
Obviously, these practices reflect the level of intensity in consumer market competition. When employing promotion techniques, it is important to develop appropriate consumer insights, which are extremely critical in a market that is large in territory, diverse in consumer preferences across regions.

Some research results have indicated that consumers are pragmatic in their attitudes toward promotion exercises. Buy one and get one free, price reduction or discount, discount coupons and premiums seem to be favored by consumers.
However, marketers need to be very careful when designing promotion strategies and extreme situations should to be taken into consideration.
The practice of free product offers has caused chaos in some instances when unexpected numbers of people come to claim free products that could not be supplied.

  • Influences on Brand Building:

The lack of well-known brands may be one of the weaknesses of Chinese manufacturers.
The government is actively promoting national brands to drive domestic consumption and home grown businesses but the majority has not yet made much progress in breaking away from the images of a local brand. Some brands have established national recognition, like TCL, which is now one of the world’s largest mobile phones manufacturers.
Local marketers have a tendency, as they do with numbers, to favor brand names that convey luck, happiness, longevity and prosperity. While some local marketers are trying to use brand names that have a foreign touch, foreign marketers are struggling to find a proper Chinese name for their brands.
Indeed, it is often very difficult to translate a western brand name into Chinese. Ideally, a brand should both have phonetic similarity and good meaning.
A classical example of this is Coca-Cola, which is phonetically translated as Ke Kou Ke Le with the meanings of “deliciously enjoyable” and “bringing about happy laughter”.
Brands such as Philips, Nokia, or Sony, recognizing the difficulties in translating their brand, avoided the effort of associating the name with any particular Chinese meaning and successfully established brand recognition.

* Doing Business with China, Fifth Edition, Global Market Briefings (GMB Publishing Ltd), June 2005
* Stewart & Keown, Talking with the Dragon: Negotiating in the People’s Republic of China, Colombia Journal of World Business, 1989
* Advertisers on spending spree, http://www.chinadaily.com.cn/en/doc/2003-11/19/content_282852.htm