China Business

Discrimination Against Chinese Consumers

Global discrimination

Just read Consumer (& Brand) Discrimination (& Crisis) on the following incidents of alleged discrimination against Chinese consumers (I am using the word alleged because I do not know whether the facts are correct or not):

  • CCTV accused Apple of discriminating against Chinese customers by offering lower levels of service and charging fees for replacing back covers of faulty iPhones, which is done for free in other countries.
  • The claim made was that the hotel [in the Maldives] removed hot water kettles from the rooms of Chinese guests while leaving them in the rooms of European guests, ostensibly because Chinese were cooking in their room. The complaint received wide exposure on Chinese social media and calls for boycotting Maldives by Chinese tourists

All of this got me to thinking of how I’ve been told about a law firm that treats Chinese potential clients differently from how they treat potential clients from other countries. One of these law firms (based in Australia), charges $500 for its initial meetings with Chinese interested in hiring the firm for immigration work, but does not charge anyone else for this initial consultation. I heard about this years ago, so not sure if this firm still does this, but its reasoning was two-fold. First, the law firm had concluded that most of the Chinese that came to the initial consultation (when it was free) were doing so not to possibly hire the law firm for their immigration work, but to “milk” the firm for as much information as possible and then go off and do the immigration work themselves or with a considerably less expensive law firm. Second, this law firm was not really interested in getting Chinese clients because “they were always so difficult and time consuming anyway.”

The second law firm (and again this was years ago) simply does not return phone calls from Chinese companies and individuals interested in doing business in the United States. It made that decision after spending “huge amounts of time dealing with people that were simply never going to pay our rates.”

I have a U.S. lawyer friend who is fluent in Chinese and who works harder than anyone I know to get Chinese companies as clients in the United States. He was telling me how my law firm should be doing the same thing. His strategy is to excessively wine and dine potential Chinese clients at least once a month for a year before really making a play for their business. Then when he finally gets them in the door, he under-bills them for the first six or so months of the relationship to further solidify his standing with them. My response to that was that was all too difficult, especially since we are doing just fine with our existing client base. That’s just our doing a normal cost benefit analysis and ignoring the high hanging fruit, right?

What do you-all think?

For more on how what you do with or in China can impact your reputation world-wide, and vice-versa, check out China Business, Racism and Glocalization.

10 responses to “Discrimination Against Chinese Consumers”

  1. In my industry, clients from North America or Europe are typically given credit while clients from China or Nigeria pay in advance. And I don’t think it is shocking.
    The kettle example, though, is shocking (I think) because the hotel took an extra step to remove a feature.

    • That hotel in the Maldives denies the accusation and notes the former employee who made such a charge had been dismissed for incompetency after six months’ employment.

  2. Chinese are not the only people who will try to “milk” a free consultation for as much information as possible – with no intention of ever coming back to pay for services. I still have distasteful memories of giving away far too much to a couple of manipulative Americans back when I was considerably younger and more naive. That said, I believe you will encounter more Chinese doing this sort of thing than you will Westerners. (For the record, I have no idea how Chinese stack up against Indians, other Asians, Africans, Arabs, Latin Americans, whomever, in this regard.) China’s business environment really is law of the jungle in many ways and, when it comes to getting something for free, many Chinese are unabashedly unscrupulous.
    As for the lawyer who under-bills new Chinese customers: I tried offering (too) low prices to win first time Chinese business. This sometimes worked in the sense the customer did come back. But when they did they would want a discount off my already (too) low initial price because we had become “old friends”. I learned to quote Chinese prices that made sense for my business. It they signed with me, great. If not, time to move on.
    The fact is it is difficult to win Chinese business and, once you do win Chinese customers, they are almost invariably very demanding and difficult to service. In my case, today I will give away some information – certainly enough to demonstrate that I have the expertise needed – to any potential customer, Chinese or otherwise. But after an initial meeting or maybe two, I want to see some money coming in or I pull the plug. I don’t have time to chase high hanging fruit, as Dan puts it. The only difference between Chinese and Americans – I am somewhat quicker to pull the plug on discussions with Chinese. Because I “read” Americans better than I “read” Chinese, I am more likely to give Americans the benefit of the doubt and spend more time going after their business.

  3. Chinese are not the only people who will try to “milk” a free consultation for as much information as possible – with no intention of ever coming back to pay for services. I still have distasteful memories of giving away far too much to a couple of manipulative Americans back when I was considerably younger and more naive. That said, I believe you will encounter more Chinese doing this sort of thing than you will Westerners. (For the record, I have no idea how Chinese stack up against Indians, other Asians, Africans, Arabs, Latin Americans, whomever, in this regard.) China’s business environment really is law of the jungle in many ways and, when it comes to getting something for free, many Chinese are unabashedly unscrupulous.
    As for the lawyer who under-bills new Chinese customers: I tried offering (too) low prices to win first time Chinese business. This sometimes worked in the sense the customer did come back. But when they did they would want a discount off my already (too) low initial price because we had become “old friends”. I learned to quote Chinese prices that made sense for my business. It they signed with me, great. If not, time to move on.
    The fact is it is difficult to win Chinese business and, once you do win Chinese customers, they are almost invariably very demanding and difficult to service. In my case, today I will give away some information – certainly enough to demonstrate that I have the expertise needed – to any potential customer, Chinese or otherwise. But after an initial meeting or maybe two, I want to see some money coming in or I pull the plug. I don’t have time to chase high hanging fruit, as Dan puts it. The only difference between Chinese and Americans – I am somewhat quicker to pull the plug on discussions with Chinese. Because I “read” Americans better than I “read” Chinese, I am more likely to give Americans the benefit of the doubt and spend more time going after their business.
    (If this comment was posted twice, apologies – the first time it seemed to disappear from the moderation queue.)

  4. What’s missing from your post, Dan, and from the criticism of these firms’ behavior, is that 1) Chinese consumers and culture DO milk the system (whatever system) for whatever the can get for free, and that is seen as commonsensical, and 2) Chinese companies and the Chinese government structure their offerings to take this into account.
    Thanks to well-known history, China is a somewhat dysfunctional market (this blog is a tacit acknowledgment of that, I think). Should non-Chinese (and Chinese) firms treat the market differently? If the market participants are behaving differently to those elsewhere it would be foolish not to.

  5. This is the standard bargaining problem that all professional services firms face: how much information & expertise do we have to give away in order to attract the right sort of attention?
    Any informed strategy will take into account the many people will use your information as a way of leveraging their deal with their current provider. You will not get the sale, but your prospect will be made better off using your information.
    With the Chinese, it appears that since they currently they value goods more than services, solving the bargaining problem may take a different form.
    I don’t think that your lawyer friend’s solution is going to work: he simply devaluing the cost of his services.

  6. http://shanghaiist.com/2013/03/21/vera_wang_china_charges_3000_yuan_fee_to_try_on_clothes.php
    I recently I read on Shanghaiist that you Vera Wang is “screwing” her customers in Shanghai by making them pay 3k RMB to try on wedding dresses whereas elsewhere you can try on dresses for free. I’m not sure if this is treating Chinese customers poorly though, since they’re clearly willing to pay the price, and the line is still long. Capitalism: you charge what customers are willing to pay.

  7. It’s not a form of discrimination, but rather an evoloved form of dealing with clients who abuse the system. This is no different from retailers who black list certain people for buying and returning too much stuff – read an article on this years and years ago that TJ Maxx, Target, and some others routinely block certain shoppers whom they identified as abusing the system.
    The Chinese are mostly thrift and will “milk” whatever is free. We get unlimited refills at many fast food and restaurants, whereas in China you’ll very rarely find that, and even then the cup they give you is the size of a sippy cup for a toddler, and the service staff will start giving you the “dabianlian” once they feel you’re getting too much free stuff.
    The Chinese do it to themselves, I say it’s their own cultural problem, business are just adapting to dealing with them.

  8. I agree with most of the comments below especially regarding initial consultations (most certainly not just Chinese clients) and the question that Michael, so pertinently asks below.
    My company is a premium priced service provider in political, integrity and security risk advisory. Its an industry where intelligence, regional & global reach & local/regional/national knowledge is absolutely paramount to winning & retaining MNC clients. Not too different from international law firms (who also happen to be clients).
    We do not seek out Chinese clients in China. This is primarily for two reasons; 1) they – in a general sense – do not value the services we provide & most certainly would not entertain the fees we charge. This is especially true with regard to pre-transaction due diligence. We don’t offer free consultations with Chinese companies, even larger corporations – our experience is no different what Dan describes. We certainly do, to a limited degree, with large companies/MNC’s but for us it seen more as a chance to establish a relationship.
    The notable difference is that we actively seek out and are very successful in attracting Chinese clients that are active in overseas markets, in particular Africa, South America, Middle East etc. Once these companies, including major SOE’s, are out of China – their home environment, they are happy to pay premium fees on the basis that they feel comfortable that we do have the best knowledge, intelligence, reach etc. in those areas. The services we provide are simply an extension of this. In fact, it is our experience that the larger companies – yes, even the SOE’s – consider only working with premium providers in these types of overseas markets.
    It’s an interesting development on the old ‘Chinese companies don’t value and want to pay for services’ conundrum that many firms face here, especially in early days.
    With Chinese companies operating/planning to operate overseas, we will offer free consultations, however, this is really just establishing the relationship in the Chinese sense. We can provide information/knowledge but both parties know that if they want to get the best use of that knowledge, they need to engage us for the services aspect.
    It’s no different to finding a dance partner. If you think they are/could be a fabulous dancer – you’ll spend time to woo them. And only by dancing, will you understand each other’s peccadilloes. If you’re lucky, then you’ll have a partnership. Just make sure they’re in it for the season, and not just one song!

  9. Its actually quite funny to me. Chinese always demand that you need to change your business practices to meet Chinese culture. So when firms adapt thier business practices to the reality of Chinese culture, the Chinese get angry. This “anger” is just another Chinese bargaining tactic to try to get more for free. Chinese have no problem over emotionalizing the situation, or even throwing out groundless accusations in order to try to run a hard bargain. This is just another example of shrewd Chinese barganing tactics done on a grand and public scale.

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