Booth school presentation

Branded Entry into the U.S. Market for Chinese Companies

Presented to Booth School AlumniThe Monogram GroupFebruary 17, 2011

Copyright 2011 The Monogram Group, Inc.

First, a bit of background on our agency.

Monogram is a branding & advertising agency that specializes in boldly creating and repositioning brands.

Founded in 1990, we serve divisions of the Fortune 500, leading middle-market private companies, civic organizations and entrepreneurial startups.

For clients facing substantial growth opportunities or wanting to change the game in a commoditized environment, we offer a powerful blend of high-level strategic thinking and creative execution.

We often act as the quarterback for our client’s brand, delivering measurable results.

Our clients include many leading consumer and B2B brands, many of them global.

™

We also serve many of Chicago’s most respected civic institutions and retailers.

Our Chinese client list includes companies in a diverse array of sectors and revenue.

Scott Markman, Founder and PresidentThe Monogram Group

29 years in branding building and corporate design.

Media coverage: ARD German TV, Wall Street Journal, Xinhua (China’s Press Agency), China Daily USA, Ad Age Global, Industry Week, China Business Network, Chicago Tribune, Chicago Sun-Times, Crain’s Chicago Business

Speaking engagements: US-China Global Brand Summit, Asia-Pacific Chamber (Shanghai), National Venture Capital Assn., The Smithsonian, the British-American Business Council and Commercial Investment Real Estate Institute.

Now, let’s do a quick exercise together:1) What is a brand?

2) What Chinese brands can you name?

And, here they are:

Why Chinese brands?Are we crazy?

What could possibly be in it for a relatively small Chicago agency?

So how did we get started?

What did we do to establish credibility, make contacts, set up meetings and sell our services?

We started with quantitative market research, querying 1,100 US consumers 2x on their attitudes towards China and Chinese brands.

Optimal Position

Even the biggest Chinese brands were virtually unknown to American consumers, scoring the same awareness levels as brands we fabricated.

% Americans Aware of the Brand

And that low awareness (along with a poor overall image of Chinese quality) correlated to low scores on quality perception.

% Americans Believe Brand is High Quality Based on Name

However, Americans were not shutting the door to Chinese brands in many categories...especially those they already associate with China.

% Americans Open to Purchasing from a Chinese Brand

The same branding fundamentals that all US/Western companies must follow were identified as precursors for Chinese companies as well.

67% of Americans say it is important that a Chinese company wanting to sell its products in the US has an English language web site written in excellent English.

45% of Americans say it is important that they purchase Chinese goods from a brand with which they are familiar.

36% of Americans say it is important that they have seen ads for a Chinese brand before they buy their products.

A relationship map for our branded entry service offering.

Our services reflect an integrated approach for a Chinese company’s branded entry needs.

Entry StrategyAdvisory

Category/MarketAnalysis

Consumer/BuyerInsights

Product Positioning

Product Innovations

SupportingEntry Services

Accounting

Legal Counsel

M&A

Banking

Warehouse & Logistics

Sales andDistribution

Human Resources

Brand Building

Naming &Brand Identity

Product Packaging

Brand Concept & Messaging

Sales Presentation& Brochures

Trade Show Booth

Website

Trade Shows

Go to MarketPrograms

Event Marketing& Sponsorships

Advertising

Direct/Email

Social Media

Public Relations

PHASE I PHASE II PHASE III PHASE IV

And once we got there, what did we find?

(or, Scott’s excellent adventure into exploring China, Chinese culture, values, beliefs and business practices)

Scott Markman’s Top Ten perceptions of Chinese business people.

#10: Very, very, very risk averse

#9: Assume they can’t trust you until proven otherwise

#8: Follow relationship, not expertise

#7: Reticent to pay for professional service and advice

#6: Hyperfocused on distribution and sales

Scott Markman’s Top Ten perceptions of Chinese business people.

#5: Very short-term in their thinking

#4: Understand “brand” simplistically

#3: Slow to embrace the American Way of business

#2: Won’t say no to your face

#1: Assume a lower price solves all problems

What have we learned from our experiences so far?

How has our approach evolved? What do we look for in seeking out clients?

Distribution is very different in the US vs. China, and because that is top of mind for every prospect, we have to start there.

National Retailers

Branded Products

Innovative Products

• Dominates products competing on low price (not

available anymore)

• A strong brand gives retailer reason to stock

the product (Chinese companies’ best choice)

• Creates its own category, highest

chance to gain distribution

Private Label Products

The Five Prerequisites every Chinese company needs to have to consider the US market.

Excellent product quality (ideally, innovative products)

Clear, realistic business objectives

An international talent team

Appropriate financial resources

Patience (minimum 2 year time commitment)

...which lead to The Five Factors every Chinese company needs to master for success in the US market.

New product development

Willingness to adapt business practices to US standards and methodologies

Insights about consumers who buy their products

An understanding of the wholesale and retail process

The differences between OEM and Branded business models and how to do both concurrently as a transitional stage

OEM Model

Good enough for client specs

Cheapest price

FOB only

Transactional focus

Trade shows, friends’ intros

Immediate sales

No consumer contact

Low margin, high volume financials

Branded Model

Excellent quality, own design

Competitive price

Entire logistics & customs continuum

Relationship with buyers and consumers

Marketing and sales support

Longer sales cycles with many factors

Understanding, serving consumers

Much higher margins and creation of brand value

The Old Reality vs. the Future Opportunity

Case Study:Changzhou Asian Endergonic Electronic Technology Co., Ltd.(Asianbag)

Asianbag is the leading manufacturer in dashboard mounts for portable GPS devices and smartphones.

This US$12 million company has been selling to four US importers for 2 years. They have 10% market share, and their products are sold at Best Buy and Radio Shack.

They own two US patents and several Chinese patents for their designs.

Monogram was hired in Sept. 2009 to create a US brand for Asianbag and build US distribution to grow sales and dramatically increase profit margin.

Steps in our process to date.

Conducted online market research with 55 US consumers.

Created the brand concept, value proposition, positioning and personality.

Created names for the brand and product line, trademark, package design, web site and sales materials to prepare for the brand launch in May 2010.

Coordinated the company’s setup in the US, including filing a trademark application.

Steps in our process to date.

Attended National Consumer Electronics Show, met potential sales reps, gathered feedback from retailers.

Set up warehousing, sales and merchant banking operation.

Developed e-commerce enabled website.

Created social media strategy including Facebook, Twitter.

Developed new product features.

Chinese OEM brand name

New US brandmark and tagline

Züuma Dashboard Mounts (Z4 and Z6)

moist towelette

Züuma packaging

Züuma Sales Collateral

Comes with an adjustable

bracket. Ideal for cell phones.

Perfect for larger

GPS devices.

Highly portable.

Road trip anyone?

Inner diameter : 90 mm

Outer diameter : 198 mm

Inner diameter : 55mm

Outer diameter : 140mm

Inner diameter : 85 mm

Outer diameter : 165mm

Please call us at

877-90-ZUUMA.

Or, you can email our North American

Sales & Distribution Manager,

Michael Zakkour, at:

michael.zakkour@myzuuma.com.

What have we accomplished?

Established a long-term partnership with Priceless Resource, a leading electronics distributor to reach all big box retailers.

Established a relationship with a Canadian distributor in to sell Züuma products in Canadian market.

Got Züuma listed on a leading loyalty reward service whose clients include Citibank.

Placing Züuma products in major retailers,both online and brick & mortar stores

Product innovations

Product innovations

Case Study:Yuzhou Green-Ship Garden Supplies Producing Co., Ltd.

Green-Ship is a $7.5 million manufacturer of unique flower pots and planters made from a patented composite material.

$5 million in sales in Europe and $2.5 million in the US, all under private label. They have no domestic market.

Founded in 1993, they own over 20 Chinese patents for their manufacturing of their products.

They are completing the construction of a new factory in Qingdao that will allow them to triple in sales.

Monogram was hired in January 2011 to create a US brand and build distribution to dramatically grow sales with independent garden centers.

Steps in our process to date.

Conducted online market research with US consumers.

Created the brand concept, value proposition, positioning and personality.

Conducting online research with buyers at independent garden centers nationwide.

Developing marketing communications materials.

Preparing list of distributors for factory, planning to attend 3 major trade shows in 2011.

Consumer Research Question #1Who in your family buys flower/vegetable pots?

Consumer Research Question #2When purchasing a flower/vegetable pot, what features are most important?

Consumer Research Question #3Are you more inclined to buy a pot at a national retailer, a garden specialty shop or online?

Consumer Research Question #4Where do you go for information about potting plants?

Consumer Research Question #5If flower pots were made of eco-friendly material, would that be an important factor in your purchasing decision?

Chinese OEM brandmark

Current China Green-Ship.com web site

Home Page

Introduction Page

Current China Green-Ship.com web site

Introduction Page

Current China Green-Ship.com web site

Product Page

Current China Green-Ship.com web site

Current China Green-Ship product catalog.

New US brandmark and tagline

New Product Catalog

New Product Catalog

New Product Catalog

Point of Sale Materials

Who’s next?What Chinese brands can you expect to see coming to a store or showroom near you?

And, here they are:

Thank you very much for your time tonight.Questions? Comments?

For more information, please contact:

The Monogram Group233 S. Wacker Drive, Suite 410

Chicago, Illinois 60606 USA

Tel: +1 312-726-4300Fax: +1 312-726-4308

www.monogramgroup.comwww.monogramgroup.com.cn

Scott Markman, Presidentsmarkman@monogramgroup.com

John Yang, AE/China Specialistjyang@monogramgroup.com

Direct: +1 312-268-6687