Case Study: Leading the way in Industrial Marketing in China




            Arup Majumdar                                ...
Track: Marketing Communication, Industrial Marketing

Key Words: Integrated communication, Design Institutes, Central A/C
...
China Market Situation:

The major customers of the Chinese OEMs’ are real estate developers, who are investing and
constr...
(lower price) but would not be able to explain to customer the higher value proposition.
Emerson looked at the market stru...
Emerson’s objectives:

Emerson realized that the people to be influenced
                                       influenced...
conditioning.     It was important for these academicians to understand and positively
        endorse Emerson’s technolog...
advertising agency to create the plans for a 6 year campaign4 in 3 waves (one campaign with one
theme lasting 2 years).

F...
plunge and hired the first technical resource to provide technical/installation training to
dealers/installers. This techn...
4. Championing Energy & environment cause
      5. Leadership campaign

These initiatives would be taken through the aware...
Sources of information (Reference)
                       (Reference):

   1. China IOL
   2. Market Research # 1: Blue Ca...
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Leading the way in industrial marketing in china - An Abstract by Arup Majumdar

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Leading the way in industrial marketing in china - An Abstract by Arup Majumdar

  1. 1. Case Study: Leading the way in Industrial Marketing in China Arup Majumdar Don Newlon Global Program Director – A/C Modulation Vice President – A/C Marketing Emerson Climate Technologies Asia Pacific Headquarters 10/F, Pioneer Building 213, Wai Yip Street Kwun Tong, Kowloon Hong Hong SAR China P: +852 2860 6933 P: +852 2860 6917 Email: arup.majumdar@emerson.com Email: don.newlon@emerson.com
  2. 2. Track: Marketing Communication, Industrial Marketing Key Words: Integrated communication, Design Institutes, Central A/C Background of case study: This is a case study of Emerson Climate Technologies Asia Pacific, a manufacturer of air- conditioning compressors, who started from ground zero in Industrial Marketing in 2004, and through several breakthrough marketing practices, have emerged as the leader in Industrial Marketing in China in 5 years. Emerson’s business model: Emerson makes compressors that are sold to Original Equipment Manufacturers (OEMs) who assemble the compressors in a/c machines and sell to end users - residential and commercial. While an end user would see the OEMs brand on the machine (like Carrier, Blue Star or Voltas), they would not have any strong visibility to the heart of the system (the compressor, made by Emerson). Emerson’s traditional model has been to engage with OEMs only and not go beyond to the OEM’s customer. This business model pushed Emerson a step away from the end user and the model perfectly suited the Chinese OEMs as it kept the compressor supplier’s product superiority away from end user visibility. This shielding allowed the cost conscious Chinese OEMs to cherry pick among multiple compressor suppliers based on price and gain leverage on procurement. Emerson’s Customers & Market Size: Emerson’s compressors are used by major Chinese OEMs, like Midea, Gree, Haier etc (these are large white goods manufacturers). On a matter of scale, Midea makes 10 million a/c machines annually while the total Indian market for A/C is 3 million machines. While most of these 10 million pieces are small air-conditioners with low cost (Emerson does not compete in this price conscious segment), the economic prosperity in China has been creating a higher value segment of home central a/c. Emerson engaged a consulting firm1 to look at the macro economics of China, estimate the number of households that enter the income group that can buy high value home central a/c systems and estimate the market potential. Following charts shows some macroeconomic data that estimated the size of the high end home central a/c market in China. 1 Market Research: Blue Canyon & Sinotrust
  3. 3. China Market Situation: The major customers of the Chinese OEMs’ are real estate developers, who are investing and constructing large residential and commercial properties. While the estate developers are the . buyers of a/c, there are many other parties who participate in the buying decision process. When , a developer acquires a piece of land, he first approaches a consulting company to get advise on type of property that will generate the best ROI – residential (villa or apartments), commercial apartme etc. Once there is agreement on the type of construction, the project is given to a Design Institute (these are full service firms that provide architectural, civil, mechanical services in ser China). While the architects and consulting engineers are drawing up the building plan, they are approached by the OEMs/dealers to consider the various a/c options. The OEMs/dealers in dealers China are not focused and tend to offer the entire basket of products they have and prefer to let the design institute make the choice2. This is a major challenge for Emerson – OEMs are not marketing savvy and tend to offer everything. So they would end up of offering Emerson based home central a/c products (at a higher price/higher value proposition) and a competitive product at ) 2 Market Research: Blue Canyon & Sinotrust
  4. 4. (lower price) but would not be able to explain to customer the higher value proposition. Emerson looked at the market structure and analyzed the imperatives to sell higher value system (shown in the chart below). Emerson did an assessment of each OEM’s capability (shown below). The assessment showed the gap between what was required to sell high value systems and OEMs capability3. This is where Emerson had to bridge the gap. 3 Market Research: Blue Canyon & Sinotrust
  5. 5. Emerson’s objectives: Emerson realized that the people to be influenced influenced/educated through the channel were: 1. OEMs: 8 OEMs who use Emerson’s technology and over 10,000 sales people nationwide 2. Design Institute engineers: over 70,000 registered a/c engineers in China engineers 3. Foreign architectural firms: There are several large foreign architectural firm that have established presence in China to design high rises and other buildings 4. Real Estate developers: Over 1,000 large real estate developers throughout China. e China They need to understand the “life cycle cost” and value of Emerson’s technology 5. Dealers & Installers: over 1,000 companies who install a/c equipments and sometimes through their local relationships have a say on the product/technology product/technology 6. Government (National Development & Reform Council – the nodal agency in China) who creates energy standards and labeling for home appliances 7. Industry experts (for every government project bidding – experts from various fields have to provide opinion) – there are 100 of them all across China 8. University professors: There are several influential universities like Jiatong University, Tsinghua University whose professors are thought leaders in the industry on air-
  6. 6. conditioning. It was important for these academicians to understand and positively endorse Emerson’s technologies 9. Print Media: There are thousands of local print media and Emerson needed to filter and leverage these media to reach the value messages to the end user 10. End user: There is a large growing group of home owners in China who are active in decision making on the types of homes and accessories they should buy. These are the people who needed to be educated on the true values of an energy efficient and reliable home central a/c system and the differences between various technologies offered by OEMs. The task: segment the target groups by importance/decision making capability/information needs, and develop strategies to effectively reach them, explain technology, and build relationship – and achieve this at the lowest cost. Challenges Several events in the past have created a deep distrust in the mind of the Chinese consumers on what they buy. Chinese consumers have long been mistrustful of products as the quality and “value” has always been in question. So the challenge for Emerson was to build a messaging platform that was credible and ensure that it was reinforced over a period of several years to build this credibility. Messaging Evolution The communication strategy was developed and articulated through an elaborate matrix that identified the target audience: OEMs, OEMs sales channel, design institutes, estate developers CEO, estate developers’ technical managers, architects, end users, government, academia and media. For each of these target audience, a list was made of: What are their roles, what are their main concerns, what are their emotional drivers (many a times we do not emphasize enough what drives people to excel and perform), what is the desired action Emerson wants from these people, what rewards will they get if they buy Emerson’s technology, what support Emerson can give them and finally what is the brand personality of Emerson. This detailed matrix led the
  7. 7. advertising agency to create the plans for a 6 year campaign4 in 3 waves (one campaign with one theme lasting 2 years). Framework for Integrated Communication With so many touch points in the market, it was important to ensure that all the messages were integrated. This would reinforce the communication and create a brand for Emerson that was built on credibility. The mix of vehicles used for communication included: advertising, advertorial, newsletter, enewsletters, seminars, road shows, events (various types of events segmented by value/content/audience: example – holding a national CEO roundtable to discuss energy responsibility for various stakeholders), SMS, dedicated websites and micro sites, establishment of a very successful “On Line University”, development of a “On Line Energy calculator”, participation and papers presented in industry trade shows, media interview, site visits/Emerson plant tour and press releases. Initial market entry While the strategy was being drawn up, Emerson also realized the challenge. Emerson had never done these activities before in any country and so it would be breaking new grounds. Added to the challenge was the fact that Emerson was a “technology provider and compressor supplier”. The people down the channel were more familiar with the OEMs name and not the Emerson name. The problem could be aptly summarized by a question asked by the real estate developer: “We use OEMs a/c equipment and we buy from the OEM. If we are not buying from Emerson directly, why should we invest our time in talking to Emerson? We would rather speak to the OEMs (who are the supplier)”. Emerson decided on a phased market approach. The strategy was to determine which of the target audience would have some interest in talking to Emerson and use that as a beachhead to enter the Chinese market. A market research5 across China established that dealers/installers needed most help as they were not getting enough support from the OEMs. Emerson took the 4 Market Research: DDB 5 Market Research: Blue Canyon & Sinotrust
  8. 8. plunge and hired the first technical resource to provide technical/installation training to dealers/installers. This technical education program was conducted nationwide and over 5,000 installers dealer/installer were trained on Emerson’s technology. Initial success The results soon became visible – relationship with dealers/installers were developed that led to further contacts with design institutes. The learning helped Emerson to refine the messages for design institute engineers and developers. After one year, Emerson progressively launched the programs for the other 9 target audience. Measuring the effectiveness of the marketing spend Emerson is a component supplier. The value of the Emerson compressor is about 10% of the end user selling price. This automatically drives a much lower marketing budget and it is important to understand the effectiveness of the marketing spend. Analysis was done on each activity done by Emerson and programs were expanded/pruned depending on the effectiveness. As an example: Emerson set up a very sophisticated system to measure the effectiveness of the enewsletters. When any enewletter was launched – Emerson could track how many were sent, how many delivered, how many and which one was opened and read , which articles were most read etc. It allowed Emerson to engage with service providers to improve delivery statistics and also fine-tune message delivery for the future. Emerson also measured the sales $ - and the growth in sales $ of Emerson in China confirmed the value of these marketing programs. Emerson also tracked every activity on the press/web about the company and the increased level of activity was a testimony of the success of the marketing activities. Taking the next step: Leveraging the web and social media Social media is rapidly emerging as the next wave of sharing information and the trend is fast catching up in China. Emerson is crafting a detailed strategy to establish the message of “Energy and Environment responsibility”. This would be achieved by 5 initiatives: 1. Energy and Environment content 2. Emerson Gurus 3. Expansion of Emerson Cup
  9. 9. 4. Championing Energy & environment cause 5. Leadership campaign These initiatives would be taken through the awareness, education and conversation path and several tools like targeted online ads, search engine optimization, interactive tools, websites, podcasts, iphone applications, downloadable brochures, social media, forums and e-newsletters would be used. Results achieved/Implication Emerson’s market share in central a/c has gone from zero to 20%6 in 5 years time in a market place that is fiercely price conscious and competitive. With all the activities done in China in the past 5 years, Emerson has now established relationships with over 20,000 targeted people in the influencer channel. This is a unique and significant competitive edge for Emerson. These are the same people who are important for all the other businesses of Emerson: commercial a/c, refrigeration, services & solution etc. This channel can be leveraged to spread the messages of the other segment too. Emerson is now looked upon as the industry steward – championing the cause of energy efficiency, and engaged at the very top level of Chinese leadership. The China learning and the experience in industrial marketing can be replicated in other emerging markets. Expansion to other emerging markets Emerson plans to expand to other emerging markets and replicate the same market building model as Asia. The following chart shows the target markets and Emerson’s current status. 6 China IOL
  10. 10. Sources of information (Reference) (Reference): 1. China IOL 2. Market Research # 1: Blue Canyon China 3. Market Research # 2: DDB China 4. Market Research # 3: Sinotrust China 5. Emerson’s interaction with Design institute engineers, real estate developers, dealers, OEMs, regulatory agencies, university professors.

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