China will have to be known for high quality products

Chinese qualityLast summer I wrote about the idea that few Chinese companies have embraced a dedication to making best-in-class products.   In my many visits to factories in China over the past five years I was almost universally asked about quality control and how it might be implemented. I quickly realized that in most cases the Chinese factory was not really interested in better quality since it would result in higher cost that those companies were unprepared to invest.

Almost all the Chinese companies I have visited are no closer to successful exportation of their products to the U.S. The main reason is that being the lowest cost provider does not work any more in a country where annual percentage wage increases are consistently in the double digits.

Shaun Rein of China Market Research wrote about this in his book ‘The End of Cheap China’ two years ago.   Not only has Shaun proved to be prescient and correct he also indicated the path to success for Chinese export enterprises – making higher quality goods.   There’s good reason to have confidence in Chinese companies once they dedicate themselves to producing consistent high quality goods. It’s not as if the Chinese people don’t have a long history of paying attention to the most miniscule details (think Chinese art and calligraphy for example).

Undoubtedly the Chinese have the knowledge to make high quality products (and affordable ones at that). It’s simply that up until this point there’s been a lack of general desire to make Chinese goods that are admired as the best around.   Yes as I noted Lenovo is an exception and there are others but the overall ”let’s make the best” Chinese business approach has yet to develop.   It will happen sooner than later. It has to since the only other outcome is losing market share to newer, more nimble competitors in other countries in Asia and beyond.

Have you heard of Haier? How about Huawei? Some westerners know Tsingtao Beer but how about Li Ning sporting goods?   All of these companies make excellent quality products but for various reasons have not made great progress in the U.S.   Part of the problem is a lack of understanding on the part of U.S. consumers as to what those brands stand for.

Chinese President Xi Jinping without a doubt has his hands full with a host of domestic and international issues.   However what might be one Mr. Xi’s most important roles will be the behind the scenes work to change the Chinese factory mindset from ‘find a corner and try to cut it’ to ‘make a great product, each and every day and price at a fair market value’.

I think the wheels are already in motion and look forward to working with companies that have that forward thinking mindset. I hope I do not have to wait too long for that opportunity.

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The most expensive marketing is the marketing that does not work

E-mail marketing puzzleI have had a number of conversations as of late with people that either run companies or who are responsible for overall company performance including driving sales.   Without fail our conversations always touch on email marketing as a customer acquisition tool.   The reasons for leading with email marketing are obvious (to them), but often their reasoning is, well, wrong.

True email remains an inexpensive tool to distribute an offer (or offers) to prospective customers.   Inexpensive when compared to traditional direct mail, print advertising, television and radio advertising, email for customer acquisition offers an environment where marketers can test a number of lists and creative options (i.e. subject lines as well as offers themselves) and do that all for less than $10,000. It is very difficult to invest under $10,000 and have enough reach and impact in television, radio or even print compared to highly targeted capabilities available in email marketing.

So why are these veteran business folks wrong when they think email first?   Because they are counting on converting a certain amount of what they see as easy sales.   Send out some emails, customers go to our website and then order the product.   It’s simple right? Not so fast.   While it’s true that if 25,000 emails are sent out to targeted lists of potential customers that have shown a proclivity to both respond to emails and to buy products like yours, there will be conversions to customers, but there will also be those that need more than one touch to be convinced.   The life cycle to convert certain prospects may not be days, weeks or months, it could take years and multiple rentals of the same prospect’s email address.

Keep in mind that every time you wish to reach a prospect via email you need to re-rent the name from the list owner.   Once the prospect responds (even if she does not order) that name then becomes your property and you are able to email that name in the future until the prospect asks you to stop.

After I explain the above aspects to interested parties I ask them how they envision the prospective customer journey.   I get a lot of blank looks on this one. Where will your prospect click to when she responds to your email? The website Home page (really?). The shopping cart (this is a popular one)?   The idea that people might be so motivated by your killer offer that when dropped in the shopping cart they will just put in their order and payment information is wishful thinking at best.   How about a landing page on the site that offers concise information regarding the offer and an easy way to order the product (one click) that then takes you to the shopping cart?   That will help increase conversions but does not guarantee your email marketing campaign will be ROI successful.   Creating interest on the part of a prospect may be the first step to conversion but it’s not going to be a slam dunk on the first shot.

I am all for acquisition testing email marketing as a channel for certain products and services both B to B and B to C. However very often email marketing is just one of the digital marketing efforts I might suggest.   Display advertising (again offer based), premium publisher site advertising and social networking advertising should also be considered and if appropriate, tested. Sometimes the per thousand cost of premium publishers and some social networks may appear expensive in contrast to RTB (real time bidding) digital advertising.   Yet you might find that the most expensive advertising on a CPM basis offers your highest response and conversion.

If a cheap advertising campaign draws little response or few conversions is it really the lower cost? Sometimes the lowest cost is actually the most expensive.

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Try in-store buy at home vs. buy at home pick up in-store

Chinese mallThe recent news regarding Chinese e-commerce giant Alibaba.com’s U.S. $692 million investment in Chinese department store operator, Intime Retail giving it a 25 percent stake in the company is quite possibly a watershed event in the marriage between online and retail sales. (Full disclosure – Alibaba.com is a recent client).

What Alibaba appears to be addressing is ‘reverse-showrooming’.   Theoretically Chinese shoppers would purchase items on their smartphones and pick them up from a retail store instead of using brick-and-mortar shops as glorified product displays for goods they ultimately purchase online.   Again theoretically as there is no direct statistical evidence this is actually occurring.

From an article in Pando Daily – ‘American web companies have long been rumored to open their own storefronts. Google has been rumored to be creating a store for its tablets, laptops, and other physical products since the beginning of last year. Amazon was expected to open its own physical stores in Seattle in 2012. Neither company has opened or hinted at opening such stores, but the rumors persist. Now it seems that Alibaba will beat them to the punch, just like it did with same-day delivery.’ (And to nobody’s surprise Amazon.com is considering the same idea.

The Wall Street Journal added, ‘Alibaba, whose Taobao and Tmall shopping sites dominate China’s e-commerce market, said in the release it would “explore opportunities to combine the strengths of Alibaba’s Internet commerce technology and platforms with Intime’s physical retail presence in high-end department stores and shopping malls.”

“Seeking to leverage its large caches of shopping data and advertiser network, Alibaba has been moving quickly to help shoppers pay for goods and services, not just online, but also in bricks-and-mortar stores. Known in the industry as ‘online-to-offline,’ a number of recent Alibaba investments have been aimed at expanding the company’s reach into China’s malls and restaurants.”

I’ve had a few conversations with friends and associates of mine living in China regarding buyer behavior and the idea that Chinese like (even prefer) going into a retail store to have first-hand experience in handling and experiencing a product yet go home to purchase the products online.    Sounds familiar right?  Reportedly that kind of showrooming is what brought down Circuit City and Borders Books (Best Buy was able to retool and revamp its offerings and remains a relevant if not a slightly wounded U.S. retailer).

Pando alum Hamish McKenzie wrote in 2013 that American e-commerce companies could learn from the same-day shipping prowess exhibited by their Chinese counterparts:

‘Same-day delivery – the Holy Grail for US ecommerce giants such as Amazon and Google – has been a reality for a while in China. Here, Meeker shows that Jindgong (formerly known as 360buy), the biggest threat to Alibaba’s Taobao, achieves that efficiency sometimes by means of bicycle. In China, ecommerce plays a more important role than it does in the US because the country’s bricks-and-mortar retail infrastructure is still under-developed, especially outside of the big cities. There’s also a lot of competition, forcing online retailers to go to greater lengths to attract customers.

One way these retailers manage to pull off such fast delivery is by employing multiple people who take care of different stages of a journey. In Shanghai, for instance, a man on a motorized scooter might hand off a package to someone who is waiting inside the turnstiles at a subway station. That person will then take the package to the appropriate stop, at which he meets another man with a scooter to whom he can pass off to the package, without having to leave the paid area of the station, for the final mile delivery.’

And what of Amazon’s efforts?   As Mr. McKenzie wrote?

‘Amazon realizes it can’t keep losing money on buying customer loyalty. Amazon Prime is already driving up overall shipping costs, which will in turn add to Amazon’s delivery costs, prompting higher Prime fees. If that happens, Prime looks less and less like a bargain. Shoppers find better bargains on other sites and opt for the discount over Amazon’s fast shipping. In that case, revenue growth keeps slowing, while shipping and digital-content costs rise.

So it’s not so much that Amazon’s revenue growth is slowing, it’s why. If it’s something Prime can reverse, Amazon’s future looks bright. If not, it will mean customer loyalty may be too slippery a thing even for Amazon to grasp for long. The quest for the best deal may be more powerful than Amazon realizes. So Amazon spends and spends, but it’s not enough to keep enough shoppers coming back.’

It’s a major issue for Amazon.com and with the advent of the new Amazon Fire TV module the company continues to make efforts to create more value for Amazon Prime members.

What’s most important to keep in mind is that the trend behaviors of Chinese consumers and U.S. consumers are so different in their origins that they cannot and should not be used as a road map for the future. What works in the U.S. will not likely work in China and the same is true in reverse.

Same day delivery is indeed the retail holy grail.   Are you ready for it?

 

 

 

 

Posted in Best business practices, Brand Advertising, Business in Asia, Business in China, Consumer Behavior, International business | Tagged , , , , , , , , , , , , | Leave a comment

The New York Times new Premiere a lesson in how to further fleece its highest paying subscribers

do-not-treat-customers-badlyLast week the New York Times announced a newly released feature called Premiere. What really got to me was that the New York Times is planning on charging its print subscribers (we have both a daily print and digital subscription) $10/month for the service.   Keep in mind that the yearly 7-day subscription for the printed New York Times is roughly $700.   Apparently that’s not enough for the New York Times thus the additional 17.5% premium was created for dwindling print subscribers.   If I sound annoyed it’s because I am.

From the NY Times – The Times Premier subscription will cost $45 for four weeks, or an extra $10 for the same period for home delivery subscribers. The subscription, which also includes special content like access to compilations of articles from The Times’s archive and additional crossword puzzles, is shareable with two family members, and includes three 12-week all-digital-access gift subscriptions each year.

The benefit to print subscribers of sharing with two family members is meager at best. 12- week digital gift subscriptions not much more than a lead generator for subscriptions.

Treating your best customers shabbily is always a sucker bet.  Sure there will be dedicated NY Times print subscribers that will pony up the $10/month. The Times no doubt has a model as to how many print subscribers will pay the additional fee for ‘lite’ curated digital access.   As I am both a print and digital subscriber I cannot believe The Times  would ask me to pay those additional fees for the Premiere access.   The Times has done dumb things like this before in its attempt to build paywalls – http://gigaom.com/2011/08/12/the-nyt-doesnt-have-a-paywall-its-a-line-of-sandbags/

At the end of the day maximizing per subscriber revenue is apparently too tempting to resist for the New York Times.   To me anyone that pays $700+/year for a print subscription should get every damned thing the Old Grey Lady has to offer and then some.   Eventually the Times will figure this out but why does it always have to be done using the long route?   Drilling your best customers is not the way.  Ever.

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Does the definition of Native Content mean not being sure if it’s paid media?

Lorca coffee shop - Himes and MartinMy local paper The Norwalk Hour is a small circulation daily newspaper that has an improving if not lightly-used website.   The Hour prints a paper each and every day.   It’s a light and quick read and I normally do not read it for anything other than local stories that I would not find elsewhere.   The printed version is still far superior to the digital version.

As I leafed through the Sunday paper I noticed the following article:

Himes, Martin pay visit to Stamford coffee shop

The article bylined by Matt Kiernan highlighted the recent visit by Connecticut congressman Jim Himes and Stamford mayor David Martin, to local coffee shop LORCA owned by Leyla Dam.  The story was positioned as ‘news’ and not designated as any kind of advertisement or paid media.   Which makes me want to nominate Ms. Leyla Dam for an award since somehow she was able to get a full page seemingly editorial story all about her restaurant complete with a listing of the address, website, hours and phone number of the restaurant.

Several questions came to my mind.  Did Ms. Dam pay for this article?   Why would The Hour run an article like this in the first place?   Is it to be part of a series of articles featuring local businesses?   (If so that’s a great idea since that’s what local papers should be about).   Why would this place be chosen and not the place across the street or around the corner?  Would their stories be less interesting?

Native advertising is putting contextually relevant stories within the framework of the surrounding content.   It works best when it feels like part of the fabric since there would be interest in those relevant stories.   The problem with the above story in the Hour is that in no way is it portrayed as being anything other than straight editorial content – which it is decidedly not.

I don’t have a problem with advertising content being spread around editorial content but when bylined by a staff writer as if it is a ‘news’ story it strikes me as being duplicitous.   But that’s me.

What do you think?  Is this an acceptable practice or a wolf in sheep’s clothing?

The article bylined by Matt Kieren highlighted the recent visit to local coffee shop LORCA owned by Leyla Dam. The story was positioned as ‘news’ and not designated as any kind of advertisement or paid media.  Which makes me want to nominate Ms. Leyla Dam for an award since somehow she was able to get a full page seemingly editorial story all about her restaurant complete with a listing of the address, website, hours and phone number of the restaurant.

Several questions came to my mind. Did Ms. Dam pay for this article?   Why would The Hour run an article like this in the first place?   Is it to be part of a series of articles featuring local businesses?   (If so that’s a great idea since that’s what local papers should be about).   Why would this place be chosen and not the place across the street or around the corner?  Would their stories be less interesting?

Native advertising is putting contextually relevant stories within the framework of the surrounding content.   It works best when it feels like part of the fabric since there would be interest in those relevant stories.   The problem with the above story in the Hour is that in no way is it portrayed as being anything other than straight editorial content – which it is decidedly not.

I don’t have a problem with advertising content being spread around editorial content but when bylined by a staff writer as if it is a ‘news’ story it strikes me as being duplicitous.   But that’s me.

What do you think? Is this an acceptable practice or a wolf in sheep’s clothing?

Posted in Advertising, Advertising to Millenials, Best business practices, Native advertising, Newspapers | Tagged , , , , , , , | Leave a comment

Digital Media Lacks Accountability

Really right on post from my partner..

 

Digital Media Lacks Accountability.

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Russia’s gambit is an opportunity for China and the U.S to get cozier

US China flagsDuring the Cold War most Americans viewed the U.S.S.R. and China in a similar vein.  There were memes such as ‘Better Dead than Red’ depicting the ideologies of Socialism and Capitalism as being juxtaposed.   When the Soviet Union dissolved in 1989-90, China was already on the road set by Deng Xiaoping transforming a nation of farmers and peasants to becoming  (today) the second largest economy in the world.

Russia’s recent actions resulting in the annexing of Crimea squarely positions Russia and the U.S in a retro-Cold War like environment.   While The U.S. – Russia standoff (if that even is the right term) is not a ‘war’ of ideologies as was the case in the 1950’s-70’s, it is an effort to achieve regional hegemony.  China is interested in its own version of regional hegemony.  With the U.S-Russian relationship headed to the penalty box, China is presented with a real opportunity to raise its status with the world community by standing with the world and not sitting the entire situation out as it usually does.

U.S. First Lady Michelle Obama is currently in China to kick off a weeklong, three-city tour of China that analysts said will further advance relations between Beijing and Washington. Chinese first lady Peng Liyuan will join Obama on a visit to the Forbidden City on Friday and welcome Obama, her daughters Malia and Sasha, as well as her mother Marian Robinson, for a private dinner event, according to the White House. This will be the first visit to China by a US First Lady without the accompaniment of the US President. The Obamas will also tour the Great Wall; see the Terracotta Warriors of Xi’an, capital of Shaanxi province; and visit a panda reserve in Chengdu, Sichuan province. Michelle Obama will also deliver speeches on bilateral cooperation in education during the tour.

The timing of the trip is coincidental but not without significance.  The U.S. and China have sparred over spying, human rights, and the floating of the Chinese Yuan.   That sparring will continue for the foreseeable future but should not deter the two superpowers from taking the opportunity to collaborate even more closely on economic and environmental issues.   China is no happier than the U.S with Mr. Putin’s land grab in Crimea.

Of course just because it might make sense hardly means greater collaboration between the U.S. and China will follow.  Both countries are interested in their own agendas more than they are in collaborating.  But if they did would it be a good idea?

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