Hallyu – An Effective Method for Marketing and Advertising in Asia

In 2012, A Korean song called “Gangnam Style” went viral on YouTube with more than a billion viewers at the time. People in western countries including America started to pay attention to South Korean Music. However, for young people in South and Southeast Asian countries, KPOP or Korean Pop Music was not something new to them. As a matter of fact, KPOP has dominated in many Asian countries since the early 21st century.

KPOP, together with Korean TV dramas and movies, is referred to as Hallyu or Korean Cultural Wave in Asia. The popularity of Korean TV dramas, Korean pop music, and their associated celebrities has made a strong influence on the Asian consumer culture. When travelling to China, Thailand, or Vietnam, it is very common to catch a high school student decorating her backpack with pictures of a well-known Korean pop star.

Especially, Korean TV dramas are very popular not only among teenagers but also among adults in Asian countries. When a popular Korean drama is aired in an Asian country, people tend to buy any products that are used by their favorite characters in the drama. The Korean products, from electronic products to food, therefore quickly become popular in many Asian countries. Understanding the big impact of Hallyu in Asia, many Korean companies has collaborated with Korean leading entertainment companies such as SM and YG in order to use the famous celebrities from these companies to endorse their products. Hallyu or Korean Cultural Wave therefore has become an effective method for marketing and advertising not only for Korean companies but also for any international corporation that plans to enter the South and Southeast Asian markets.

The reason KPOP has become so popular in Asia is that it features Korean idols that are good-looking and have independent personalities. Korean pop stars are also the symbols of beauty and fashion for their young Asian fans to follow. The Korean stars are extremely good at communicating with their fans in order to be close to them through social media. They like to reveal their normal lives to their fans to show how they live and what they eat, wear, or use in daily days. International companies can use their “fan services” as a tool to promote their products. For instance, a fashion company can contract with a KPOP star to wear their clothes either on stage or in daily activities. Food companies can also take advantage of this “fan service” as well. For example, a fast-food restaurant company can contract with a South Korean channel to have their restaurants appear on its up coming TV drama. If the drama turns out to be a hit when it airs, then the promotion campaign will be successful not only in Korea but also in many other Asian countries.

The Korean Wave has become a global idea for marketing and promoting in Asia. However, when using the image of a well-known Korean star to promote and advertise in another Asian country, companies must necessarily make changes in the campaigns in order to better fit the traditions and cultures of a specific country like China or Malaysia. The reason is that different countries have different cultures and traditions, and the promotions need to be adjusted into these traditions and cultures no matter how famous the Korean Cultural Wave is. One more thing to be noticed, the price for hiring a famous Korean celebrity is of course very high. Companies need to plan carefully before launching a marketing campaign with a well-known Korean star. Up to now, the use of Korean stars for promotion is most effective in prosperous countries like China and Japan. For less developed countries like the Philippines or Vietnam, the payoff may not turn out to be very well even though the Korean Cultural Wave is also very popular in these countries.

Expanding Internationally – What Makes a Good International Channel Partner?

It’s easy to look for channel partners overseas and there are many countries where they will all be clamoring over you but how do you know which ones are any good? They will all tell you who they know and how they are connected to very senior dignitaries of high ranking, high profile people – I have even had guys show me photographs of them standing side by side some high flyer and claiming to be his old school pal. Don’t get fooled so easily, these are the front men many of the less than professional companies send out to get us foreigners on the hook. Another ploy I encountered one time was getting a phone call in my hotel room about 3 hours before my departure flight from a guy who told me he had an imminent order to place for  similar goods and needed to see me immediately. It turned out he was the cousin of a guy I had been talking to a few days earlier from another company and he was trying to steer me to his company away from his cousin – it didn’t take me long to realize I was been toyed with and I dropped both of their companies from my list but things like this do happen.

So how do you avoid being fooled by the sharks? Well to start with make sure you conduct lots of good market research or have professionals do this for you. Contact your local trade mission in the country you are interested in and get their advise and recommendations, use valuable networking contacts from people that have years of experience in these markets, attend trade shows specific to your industry in their country to see which companies are prominent and professional.

To get really good partners you have to think like they do, put yourself in their shoes. If you are thousands of miles away and 6 to 18 hours time difference what would you be looking for from your principle. What motivation would you need to choose your supplier over that of the competitors? Having worked for a very successful overseas high tech distribution company I can tell you – in short they are looking at products or services that they can introduce to their market as if they were launching their own market leading brand. The detail behind this and what I have encountered personally will hopefully provide you with a better understanding of what makes a good International channel partner can be categorized as follows:

Channel Partner Expectations

o    A good channel partner will want his supplier to be a leader in their respected home and/or international market place. The company I worked with would not even touch any supplier that was ranked below number 3 in terms of their home market share.

o    The product or service has to be competitive when put out to the local market. This also filters back down to the transfer price or distributor discount they will expect. The margin a channel partner will expect to make depends on the volume and value of sales, i.e. if they are selling many thousands of pc’s then a very low margin, often less than 10% but if it is lower volume higher priced goods then it will be much higher. At my company we were selling the latter and we always looked to make a gross margin of between 33% and 40% after landed and cleared costs.

o    Quality has to be in line with market expectations – if you are supplying to a Japanese company who is going to OEM your product they will probably want to send their QA people over to your manufacturing plant to conduct their own audit and recommend changes.

o    Local warranty obligations must be met – some countries demand 2 years and so if you only give 30 days in the USA you will need to factor this. Some suppliers agree to ship an excess of products to cover this e.g. ship 102 for every 100 ordered.

o    They will expect to receive excellent back-up and support services and be treated as if they are an extension of your ‘family’, which in a sense they are as they are representing your interest in their country. This applies across the board to all aspects of contact with them from sales management, tech support through to warranty back-up and service support and sometimes even access to your in-house maintenance and fault logging and tracking systems.

o    They will expect first class references of other users of your products/services and to be able to put these forward to their client base. Occasionally this might even mean one of their clients requesting a visit to one of your customers somewhere in the world.

o    They will expect to ride on your marketing campaigns and have access to your marketing materials and literature copy. They should be taking full advantage of this in their local advertising, promos and trade shows.

o    Today many channel partners expect their international suppliers to have a well documented ‘Partner Plan or Program’ which clearly sets out the expectations and obligations of both parties.

o    They expect to be successful and will not be interested if it is uphill work to get there.

o    They don’t want obvious channel conflict. If you are appointing multiple channel partners in one country then try and differentiate between them e.g. one selling to government only another to automotive industry only or by geographical coverage.

o    They want access to your senior management, this may be for escalation purposes but very often in Asia it is a cultural issue and they will not get sign off until peer level executives have met, looked in to each other’s eyes and feel comfortable.

o    Day to day channel management will be anticipated to be done by one of your mature professionals and not passed on to an office junior the moment the contracts are signed.

o    They expect to succeed! They are not doing this for you, they are doing it for themselves and to make money out of your resources.

o    They do NOT expect to be usurped. No channel partner will commit to a venture if they were to even think that if they made it a success that you would then enter the local market directly and cut them out.

Channel Partner Profile

o    They should have a good track record of successfully introducing other ‘like’ products or services into their local market. Hopefully you will not be their first overseas supplier and they will have done this before and know how to trade with other international companies.

o    They will be major players in your industry sector in their country.

o    They should NOT be representing any of your competitors, feel free to ask them this direct. The last thing you need is to sign a lengthy contract only to find out they are gate-keeping your product out of the market.

o    They should be an established and solid company – get your financial guys to check them out and run appropriate financial checks. Of course this should be a prime function of appointing any third party channel partner.

o    They should be respected by the end user client base – do some research by getting in touch with customers direct and asking their opinion of the ‘XYZ company’, would they be happy to buy from them if you appoint them?

o    They should have a good public profile and be recognized as an ethical company.

o    They must have great networking and contacts with the right level of people.

Channel Partner Commitment

o    They must be prepared to commit resources – where I worked the management put in a new team of 6 recruits to focus on the new product we signed up for.

o    They must be financially committed – this doesn’t mean giving you a good initial stocking order (although this is nice) but committing through their management hierarchy to support this whole venture. It means funding training, which could be overseas, possible product localization and translation of manuals and literature, marketing, product launches, road shows, trade shows, advertising, sales initiatives and campaigns etc.

o    They must commit to an after sales support function for servicing clients and providing warranty obligations. Ideally they should integrate your products into their existing service management structure.

o    They should be results driven and want a quick return on their investment, the keener they are the sooner you will see results.

I have worked on both sides of the fence and been responsible for global expansion by appointing channel partners throughout Southern Africa, Western Europe, the Middle East and the Far East. I have always taken on the task with a project based approach and because I understood their motives and drivers and what makes them tick was a tremendous asset to me. The most successful channels have all been dedicated and committed to long term success and not just in it for a quick buck. I’m not saying you will find exactly the right match as we all need to compromise at times but if you set out your stall up front then you will be much closer to selecting the best available partner(s). Good Luck!

If after reading this you find it might be too much of a daunting task don’t panic – there’s lots of companies looking to expand internationally and there’s lots of help out there for them, this is exactly why I created Expand Internationally. Feel free to drop me a line!

Right-Sizing Channel Partners for Your Newest Products

In the electronic component market today, precious little money is available to invest on inventory that has little chance of moving off the shelf. With operating margins in component distribution under increasing pressure, the battle over bin space and inventory spend is not getting any easier.

While some may argue we are on the upside of recovery after a long and deep recession, distributors are looking forward and seeing many red flags when it comes to doing business in the new year. First, if short- or long-term debt are part of your operating scenario, it seems likely that your cost of capital will be going up soon as interest rates begin to climb from levels they’ve been for the past couple of years. Sure, large distributors can carry lots of inventory, but manufacturers had better be sure it’s going to move if they want distributors to take it. And with distributor margins continuing to get condensed, the decision on which parts go on the shelf becomes a fairly easy one. With new products, not only are manufacturers asking distributors to cover the cost of inventory investment, they have no guarantees that the parts will actually find a home among design engineers looking to develop their own next great product. And what’s that Mr. Customer, you want to EXTEND your payment terms? If I’m going to spend a penny on it, it better have legs.

Consider this situation from the perspective of the supplier. In a rotten economy over a two-year period, component manufacturers have stayed busy, feverishly developing new parts which they hope will sustain them until a solid recovery is under way. As these products begin to come out of development and into the market, the component supplier needs a distribution channel willing to accept new- and possibly unproven- products, as well as to help carry the burden of inventory investment, demand creation, order fulfillment and marketing. After all, he’s the manufacturer. His distributor partner should take all of his parts and put them on the shelf gladly, right?!

Don’t hold your breath Manufacturer. First, consider industry in US history. Look at any mature manufactured product in the US and you quickly find a pattern. You can start at the beginning and look at the paper and textile industries. Follow those with any other industry you choose. Furniture, maybe? How about cars? Calculators, TV, electronics, computer, software, etc. Not convinced. Maybe drill down a bit more then: capacitors, printed circuit boards, fabricated sheet metal, molded plastics. It is starting to happen in earnest with even the stalwart old power connectors which were never on the radar of the consumer products focused Asian manufacturers. The path toward the maturity of the market as well as the broad decline of the domestic market associated with these industries is the same- and they all lead to Asia. Notice, though, our choice of terms: “decline”. Go back to our start. You see, while it has been reported, for example, that the paper business is dead in the US, this industry is actually on a comeback. Why, you may ask? Specialization and focus on specific- and high margin- business. Sure, they took a beating by Asian countries able to manufacture the same product at a much lower cost. But ingenuity, investment and a significant amount of re-tooling has allowed them to refocus their businesses on segments that offer better margins. Segments that, up until a few years ago, didn’t even exist within the paper industry “target customer” profile.

Any product is susceptible to aggressive competition from overseas manufacturers. None is more susceptible, however, than a product which shares a few key similarities: high volume; made using plentiful, well-trained, low-cost labor; being built on well-developed equipment with repetitive processes; can be easily shipped. Despite the hopes of the US in the early part of the 21st century, this is now true for high technology products, medium volume products, as well as medical products. Where it isn’t yet true is on higher margin specialty, niche or new products looking to be designed into, used, or sold to customers here in the US.

Now consider the typical supply chain against this same backdrop and it is remarkably consistent. Large distributors continue to focus on transaction volume as they work to increase their inventory turns on “A” moving parts. Limited resources require sales efforts to focus on the higher volume customers. As EMS business grows exponentially, large Asian distributors are becoming larger and gaining increasing shares of the market. As these Asian distributors grow larger, they continue to pressure margins and gain marketshare, as domestic distributors see the onset of broad declines.

Distributor: Let me get this straight, you have a new part that has never seen the light of day, and you want me to invest in inventory on the chance that it could be a winner?

Supplier: Yes. How many will you take?

As the Manufacturer, you already know how difficult it can be to get the attention and mindshare you need from the large distributors on your latest products. After all, you do have your broad line suppliers. Perhaps they are a national or even an ultra-national or multi-national. Suffice it to say, they are big, they are dependable and they take and move product. But when it comes to new products, you know you have a hole.

What to do? Right-size.

That’s right. You remember right-sizing when it first hit the lexicon during the recession in the late eighties. Back then, companies were adjusting their workforce to match the requirements of the situation and economic times. Well, that’s what we are talking about here as well: match your needs with those distributors who are out there focusing on specific products and specific markets. You wouldn’t hire a municipal salt truck to sprinkle salt on your asparagus. So don’t ask the Big Disty’s to present your product to their customer list. With 500+ suppliers all trying to get the same amount of attention from the large distributors, you are going to get lost in the sludge.

Today’s smaller, regional, specialized and niche distributors are focused in on the social media shift which has suddenly made the playing field surprisingly level. These distributors have the resources available to them now to immediate get your message out to users across multiple social media sites and forums used by engineers, buyers, tech writers and other users. What’s more, you are a big fish to these smaller distributors. A little attention paid to these distributors can go a long way to getting a toehold in the customers where these companies do very well. There are hundreds of these smaller distributors who are willing to share the burden of new products. With parts on the shelf, salespeople on the street and a willingness to move new product for a higher-than-market margin, right-sizing can be exactly what your new products need to get their very own set of legs.