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LAI HUIWU 505

Published on .

BEIJING-Lai Huiwu is proof that there's little difference between a good Communist and a good capitalist in China.

Before 1989, Mr. Lai was a Communist Party official in Huxian County in Shaanxi province, helping oversee economic planning and foreign trade. But that year, he opened a factory manufacturing his own brand of Chinese herbal medicine products and started up a business that has made him one of China's new millionaires and most successful mass marketers.

Since then, Mr. Lai's China Xianhang Health Products Factory, with its 505 brand, has stayed atop the marketing heap, building business by appealing to the traditional concept that internal diseases can be treated with the external application of herbs.

Sales in 1993 for the company-named 505 after the theory that health and well-being is based on a balance of five key elements, metal, air, fire, water and wood-hit $15 million, up from $1 million in 1990.

"[Mr. Lai] is very aggressive at marketing his products and making a name for himself," says Li Jinming, who owns a Chinese medicine company in Beijing.

Mr. Lai's products include special belts for adults and children worn over the midriff for treatment of colds, stomach problems, diarrhea and a host of other maladies. His product line also includes a pillow for insomnia; knee, wrist and elbow pads for arthritis; undershirts for rheumatism and even sanitary pads.

The company's 1993 success was helped by the growing craze for traditional Chinese medicine on the mainland and abroad, spurred by new prosperity rooted in China's market reforms and a spreading cultural awareness among ethnic Chinese living overseas.

But it's also the payoff for Mr. Lai, who started peddling his products door-to-door in the early 1980s and now has 25 sales offices in major Chinese cities. It's also attributed to his captaining of one of the most aggressive corporate advertising campaigns in China, spending a phenomenal $6.5 million.

The company invests $3 million a year on his testimonial ads in the biggest national newspapers with circulation over 500,000, including People's Daily, Guangming Daily, China Daily and China Youth Daily.

Mr. Lai also spends $1.5 million annually in radio and TV commercials on Central China Television and shells out another $2 million publishing a special promotional "newspaper" distributed by the sales offices, donates to universities, public works and welfare programs and sponsors health seminars and cultural and sports programs.

For his ad work, Mr. Lai experiments with five different Chinese agencies including Future Advertising Agency, China International TV Advertising Corp., Eastern Art Advertising Co., Hengmei Advertising Company and Great Wall International Advertising Corp.

He explains that using different ad agencies gives him access to different media since advertising companies often are set up by TV stations and newspapers to handle their work exclusively or enjoy special relationships with certain media.

"Here [in China] the agency is the go-between," says Mr. Lai. "So you have to go through different agencies in order to get access to different media."

Whatever. The agency, the strategy, and the high ad spending are all working well for Mr. Lai. "Every family in China knows about 505," he boasts.

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