When Liftomatic Material Handling Inc. was contemplating entering the Chinese market in the 1980s, Todd Berg, the company’s VP-sales, heard a prediction: By 2010, the People’s Republic of China will have 200 cities with populations of 2 million or more people.
The forecast will likely fall short, but it correctly anticipated China’s populous agrarian society flocking to its industrial cities. For Liftomatic, a small company that makes equipment to handle barrels on factory floors, China seemed an ideal place to secure a foothold. In 1988, Buffalo Grove, Ill.-based Liftomatic began selling its products in China. "We were profitable the first year," Berg said.
Nearly a decade and a half later, China, despite its notorious reputation regarding human rights, is more attractive than ever for b-to-b marketers. Companies considering this huge Asian market range from small businesses such as Liftomatic to giants like Oracle Corp. and United Parcel Service of America.
China has finally been accepted as a member of the World Trade Organization, which will require it to reduce its barriers to foreign business. Additionally, it is investing mightily in Beijing’s infrastructure as that city prepares to host the 2008 Summer Olympics.
Direct foreign investment in China totaled $33.5 billion between January and June 2001, an increase of 38.4% from the comparable period a year earlier, according to the United States-China Business Council. The council’s data also indicate that China’s imports from the U.S. grew to $16.3 billion from $12 billion a year earlier, an increase of 36%.
"It is one of the largest untapped markets in the world," said Peter Tan, UPS’ marketing manager in Asia.
As b-to-b marketers invade China, they face a classic marketing problem, albeit on a massive scale: How do they find the specifiers of their products and services among 1.3 billion Chinese?
The U.S. companies are finding a country full of contradictions, a system struggling to combine capitalism with a state-controlled economy. It’s a country where there are 30 million Internet users, but where the vast majority of the population are not online. And it’s a country where mobile phones outnumber clothes dryers.
"The visual picture of China is like an early 1900s U.S. city," said Grant Prigge, COO of eSinoMed, a company launching Ophthalmology Times China through a joint venture with Advanstar Communications (see story, this page). "There are clothesline everywhere. You see laundry hanging from overpasses."
What’s familiar about China for b-to-b marketers is the wide variety of media options: trade publications, newspapers, television, the Internet, trade shows and conferences. It remains difficult, though, to determine how well a company is reaching its audience.
"In China, it’s still not a very mature media market," said Venus Lai, FCB Beijing account director on Compaq Computer Corp. "Basically, we depend on the readership profiles by the media companies."
Like many b-to-b marketers, Oracle prefers local Chinese newspapers to magazines launched by U.S. media companies. "For the reach of the audience and so forth, the Chinese publications are more widespread and hit a broader audience overall," said Chris Hummel, Oracle’s VP-marketing Asia-Pacific. "The Western magazines and journals still have relatively limited distribution."
Oracle also relies heavily on the Internet to disperse its marketing messages. In December it announced that it would begin translating the Oracle Technology Network, its online community for developers, into Chinese. "The technology audience [in China] is becoming quite savvy in its use of the Web and the use of online marketing," Hummel said.
A presence in China is very important to Oracle. "Oracle has been in China for over 10 years," Hummel said. "We have more than 300 people in China, and that number keeps going up." In part to emphasize its commitment to China, Oracle will hold its Oracle World Conference in Beijing in June.
Shippers on board
UPS has bolstered its physical presence in China in recent months. The company has done business there since 1988 through its partnership with Sinotrans, the transportation arm of the Chinese government. Recently, more branded brown UPS trucks and uniformed drivers have appeared on Chinese streets. Perhaps more importantly, in April 2001, UPS aircraft began flying to and from Beijing and Shanghai. UPS supported the introduction of these flights with media briefings, advertising on TV, print and billboards ads, and direct mail with incentives.
The most recent advertising has focused on UPS’ "credentials" by emphasizing its status as the largest shipping company in the world, said John Flick, the company’s international spokesman.
UPS has taken this message to the Chinese market using Chinese characters that represent the company’s brand attributes—such as speed and reliability—in both English- and Mandarin-language publications. The company also has a Web site with text in Mandarin.
The marketing effort, Flick said, has paid dividends. In fourth quarter 2001, UPS’ volume of packages from China increased 40% over the same period a year earlier.
FedEx Corp., which entered the Chinese market in 1984 and began operating its own aircraft there in 1996, has begun to tailor its marketing to various segments, such as small businesses and multinationals.
Finding accurate market information from external sources is difficult in China, acknowledged Raj Subramaniam, FedEx’s VP-marketing and communications Asia Pacific. "It takes a lot of legwork," he said.
Publishers test waters
IDG first entered the Chinese market in 1980. Today, with publications such as China Computerworld and PC World China, "we have more publications in China than in the U.S.," said Hugo Shong, managing director of IDG Asia.
Global Sources is another company with U.S. roots publishing trade magazines in China. The company, which was founded by an American businessman as Asian Sources more than 30 years ago, publishes Electronic Buyers’ News China and Electronic Engineering Times China, a joint venture with CMP Media.
Both IDG and Global Sources are finding success beyond print with road shows and the Internet. "Private events for companies are growing very fast," observed Shong, who said that IDG had produced such shows for Hewlett-Packard Co., Intel Corp. and Cisco Systems Inc. "We found that the more focused the event, the more attractive to our vendors."
Because business travel is limited in China, American marketers are finding that regional marketing can be critical. "There’s no national market 1.3 billion people strong," eSinoMed’s Prigge said. "It’s a regional economy: There’s Shanghai and Beijing and Guangzhou."
Global Sources is taking its most successful trade show, the International IC Conference & Exhibition, to Beijing, Shanghai and Shenzhen in April. The show, aimed at design engineers, began 10 years ago as a conference for fewer than 200 design engineers and now attracts 18,000.
Liftomatic’s Berg estimates that China accounts for 25% of his company’s revenue, and the company’s business there grows about 50% annually. "In 10 to 15 years it will be our No. 1 market," he said.
Liftomatic communicates with its market in China via trade shows and print advertising—in both local newspapers and industrial trade publications, such as Mechanical Industry China. The company is currently revamping its Web site to add Chinese- and Spanish-language versions.
A key to Liftomatic’s sales cycle is a demonstration, either in-person or via video. In the U.S., it has used VHS tapes to demo its products. In China, Liftomatic’s distributor, Wuhan Liftomatic Material Handling Inc., has leapfrogged VHS tapes and moved directly to DVDs. "Last year, we sent out about 300 pieces with DVD disks, and almost 50% responded," said Wuhan’s Yan Zheng Xiang.
It’s one reason why Berg is bullish on China. "I believe the coming century will be owned by the Chinese," he said.