Archives for October 2012

Increasing customer retention with discount cards in China

It had been a hectic week, and my back was not happy about it. My shoulders had locked up and my upper back was screaming. I decided to go to the spa across the street, a respectable chain with locations throughout Shanghai, for a 90 minute massage. They don’t offer the cheapest massage in the area, but it’s one of the best, isn’t shady, and is reasonably priced.

After my massage I stumbled to the front desk to pay; I was so relaxed it was hard to walk straight. With my defenses down, they decided to make the pitch I hear with surprising frequency in China: “Would you like to pay 3000 RMB today for a prepaid discount card, then we can give you 20% off this and future massages.” I gave my usual response, “Maybe next time.”

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Competing in China’s e-commerce market requires a startup mentality

Xin Wang of Brandeis University International Business School and Z. Justin Ren of Boston University School of Management wrote an interesting article about How to Compete in China’s E-Commerce Market for MIT Sloan Management Review. They analyze why companies like eBay, Groupon, and Google have struggled in China.

They offer advice relevant to both entrepreneurs and large companies: understand your customers, make decisions quickly, and pay attention to your competition. As The Startup Owner’s Manual and The Lean Startup point out, the entrepreneur’s mission is to understand their customers’ needs, test hypotheses by gathering customer feedback, and iterate quickly based on their findings. When doing this, you’ll have to discover how to solve your customers’ problems better than your competitors do. And since you are testing and iterating, you’ll have no choice but to create a culture of quick decision making.

As Blank and Dorf point out, “a startup is a faith-based initiative”. It’s important for large companies entering China, or other new markets, to remember they are also “faith-based initiatives” — even though they are market leaders at home, their approach is unproven in the new market. They need to think like a startup.

When entering a new market, make sure you understand the competitive climate and your target customers’ needs. Then, alter your offering to carve out your own piece of the market. Otherwise you may end up another example of large company hubris leading to failure in a new market.

Using extraordinary service as a competitive advantage at Hai Di Lao

Creating a sustainable advantage in any industry in China is difficult, especially when competitors promptly copy anything that works. Hai Di Lao, a hot pot chain, uses extraordinary service to draw large crowds to its many locations and offers lessons for entrepreneurs in China on how to create a sustainable competitive advantage.

Hai Di Lao was founded in 1994 and now has over 50 locations throughout China.[1] Due to their success in China, they are planning to expand into the US and Singapore.[1] They are renowned for their high levels of service and high-quality food, and for customers waiting hours for a table on most nights.

Hot pot around every corner

Hot pot restaurants are as abundant in China as Starbucks are in the US — or as Starbucks are in most other countries for that matter. If you’ve never eaten hot pot (you may know the Japanese version: Shabu Shabu), I can offer a simple explanation: they bring a pot to your table, put it on a burner, and then you order vegetables, thinly-sliced meats, fish, or anything else to cook in the boiling broth. The most common style includes a pot with chicken broth on one side, and chili oil on the other. It’s delicious simplicity, and comes in many forms throughout China.
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