As just about everyone knows by now, Chinese companies are generally not terribly good at marketing and sales, particularly in the United States. For every Haier or Lenovo, there have to be at least ten thousand Chinese companies with good products with no really differentiation from their competitors. How many of you living outside China can in two minutes or less name even five Chinese companies.
Those of us who do work for Chinese companies are constantly bemoaning the difficulty in getting Chinese companies to listen to us as to what it takes to do business in the United States. We see our Chinese clients failing to fulfill their promise in the United States and it greatly frustrates us. For some common reasons for these failures, check out this post, “Ten Reasons Chinese Companies Fail In The United States.”
So when I read today’s Wall Street Journal article, “Chinese Firm Meets Global Branding,” I was beaming for two reasons. First, with a bit of “hey I know those guys” pride, and second, with a bit of relief that there may in fact be some light at the end of the proverbial tunnel.
The article is about a Chinese company called Changzhou Asian Endergonic Electronic Technology Company, which had the good sense to listen to its U.S. advisors and re-name itself Züuma(pronounced zoo-ma) for the U.S. market. Now before you laugh, let me stress this is no small feat. A few years ago, I worked on a joint venture deal that made complete sense but never took off because the Chinese company refused to market its home products in the United States using anything other than its own completely unpronounceable Chinese name, right during the zenith of the Chinese pet food scandal.
Züuma (I have to confess I am not a big fan of the umlaot, but I’m guessing they are using it to convey German-ness/Swedish-ness) has been making GPS mounts and selling them to North American and European importers who market them under their own brands. Züuma makes about 40 cents off each mount, which typically sell for about $30 at retail.
Züuma’s owner, Jack Yang, was smart enough to realize that if his company was to greatly increase its profit margins it would need to develop its own brand in the United States and, more importantly, that it would need to bring on top-notch American assistance to accomplish that. As Mr. Yang himself put it, he lacked the necessary knowledge of the U.S. market to conquer it on his own:
“It’s not that small- and medium-sized Chinese companies don’t want to develop global brands,” he [Jack Yang] said in a phone interview in Chinese. “We don’t know how. We don’t understand the U.S. market, culture or business model.”
Yang ended up using Scott Markman of Chicago advertising agency Monogram Group, to help him “create his own brand and to get a richer margin.” I have known Scott for years and we have spoken more than once about what Chinese companies must begin doing if they are to succeed in the United States.
Markman pulled no punches with Yang, telling him, “You’re very passionate about your product, your invention. Why make such a small margin?” Yang bought into the idea and Markman then brought on Michael Zakkour (with whom I have had similar conversations about Chinese companies developing as viable international businesses), managing director of China BrightStar, a China-sourcing company, to oversee marketing and distribution. To get around Mr. Yang’s reluctance to pay full American rates, “Messrs. Markman and Zakkour reduced their fees and agreed to take a commission based on units sold.”
The WSJ article then talks about the Americans jousting with Mr. Yang regarding the Americans putting long term goals over the short term profits Mr. Yang seems to crave, leaving readers to think the jury may still be out on this relationship. But hey, it is a start and I know that Scott and Michael have the U.S. expertise combined with the China knowledge to pull it out.
In my experience working with Korean and Russian companies, their willingness to do the right things to succeed in the United States pretty much went from “no” to “yes” without all that much forewarning. I always describe it as being like a light going from off to on.
So maybe the light for Chinese companies has not yet been pressed, but this story at least lets me know that they at least realize they are in darkness.