NCHU E-Commerce Prof. T.R. Lee Shares Branding Insights

Taiwan-based makers of hand tools have, after devoting years to upgrading production capability and capacity, moved up from OEM (original equipment manufacturer) to ODM (original design manufacturer) in the global supply chain. Their current success-establishing an association between "made-in-Taiwan" with high-end hand tools globally-is attributable partly to consistent R&D and commitment to building trustworthiness.

In recent years, however, competition from emerging countries, mainly China and southeast Asia, has taken a toll on Taiwan hand tool makers, with their dumping of cheap, low-end products severely encroaching on global market shares. To survive, savvy Taiwan suppliers have been refocusing-moving further up the supply chain to become OBM (original brand manufacturer).

Branding is hardly new in marketing but has been an uphill battle for many Asian exporters and manufacturers for various reasons. A successful brand inevitably evokes in consumers' minds various desirable qualities in such brand. And ready examples from all market segments exist: Mercedes, Ferrari, IBM, Giant, Mont Blanc, Louis Vuitton, and Lee. One common factor among these brands seems to be history or breeding, which can mean they have stood the test of time. And the most valuable ingredient of a successful brand is arguably its taken-for-granted, virtually guaranteed marketability.

Surefire Profit-maker

Branding has been proven as a surefire way to help Taiwan hand tool makers generate higher margins than being OEM and ODM. One unscientific but real-world argument is the rampant counterfeiting in Asia. After all, would bottom-line-sensitive merchants bother to knock off designer brands without the potential for better profits? However, the road to successful branding is long and rocky for Taiwan hand tool makers, due partly to resource limitation and partly to long neglect of such marketing strategy caused by, among other factors, blinkered-vision, old-school mindset, and myopia.

Realizing the importance of branding, the Taiwan Regional Hand Tools Association (TRHTA) invited National Chung-Hsing University E-Commerce professor, T.R. Lee, to address the topic of branding in July, aiming to help the industry to sharpen its competitive edge.

As one of the branding consultants at the Taiwan External Trade Development Council (TAITRA), Lee is a high-profile marketing expert in Taiwan, whose strong background and practical experience in helping Taiwan suppliers set up brands made him named one of 2000 most outstanding intellectuals of the 21st century in marketing and logistics by the International Biographical Center, Cambridge, England in 2005.

The following sums up an interview with Lee about his views, feasibility of branding for Taiwan makers of hand tools.

Branding Illiterate

Lee says that inertia in branding is presently a common phenomenon in hand tool manufacturing in Taiwan. "Since OEM and ODM orders assure profitability, they widely think branding is costly, risky and seems less important a goal to budget for annually."

The biggest problem is that the longtime concentration on OEM, ODM has made Taiwan makers illiterate to OBM, specifically they are ignorant about marketing and branding. Lee says: "In many cases, they are initially revved up with OBM, spend money, blindly follow existing globally-leading brands, design featureless logos as brands, then flounder in marketing, and finally flop."

"Not merely labeling products with trademarks, branding is a series of procedures to differentiate a company and its brand in a segment, including decision-making, conveying corporate essence and ideas, production, quality and logistics management, marketing strategies, brand management and brand value creation," he says. "Hence, blind obedience is the worst branding strategy."

Also noteworthy is that quite a few Taiwan hand tool makers confuse registered trademarks with brands. A trademark is merely a distinctive sign or indicator used by companies to allow buyers to easily identify its unique name as a source of products or services. In comparison, a brand, which can be a name, logo, slogan, or design scheme, symbolizes corporate images, as well as associate it with specific products or services among consumers. In other words, a brand can create value for a company, but not a trademark, according to Lee.

Punctuating Valuable Elements

Failing to apply valuable, particular elements to effectively achieve explicit, implicit brand identities is another malady commonly plaguing Taiwanese hand tool makers, Lee says based on real-world experience.

Lee concedes that popularity of Asian cultures has profoundly changed Taiwanese' views toward styling, visual appeal, while hand tool designers and makers have widely applied Western elements in branding to attract Asian buyers. But, he says that such concepts are useless to differentiate their brands from globally-leading ones.

Religiously believing that Taiwan hand tool makers should focus on using symbolism in branding to differentiate from competitors, Lee says, "Applying Asian elements, like Buddha, in a brand or product is easier, more effective for Taiwan makers than Western elements, partly because such are cultural ingredients, and partly because they are mysterious, attractive to Asian consumers."

One real-world example is Taiwan's largest hammer maker Lucky-Brand Industrial Co., Ltd., who innovatively branded its series of hex key wrenches Tai Chi, an ancient and familiar Chinese cultural element denoting infinite potential. Such strategy has helped Lucky-Brand to achieve greater brand identity.

Lee adds that Taiwan makers who plan to develop successful private brands must try to redefine existing products with new elements to enhance marketability. Citing from personal experience, he saw a maker apply premium, classic exterior design in its saws and market them as not only hand tools but also household decorations. The strategy effectively helped the supplier to achieve differentiation by adding value to its brand in the segment.

Also, building personality into a brand is a good way to achieve brand differentiation, he says, because animating a brand can effectively help to associate specific products, services with a brand.

Adhere to Textbook Strategies

Lee suggests Taiwan hand tool makers to adhere to the six stages of brand development, including SPT (Segmentation, Targeting and Positioning) analysis, database construction, CRM (Customer Relationship Management), consumer demand analysis, consumer behavior research and product R&D, regardless of the considerable time and cost necessary.

Successful branding also hinges on good product quality and functionality as well as production capability and capacity, which are Taiwan hand tool makers' competitive advantage in the global market, Lee says. "The most valuable advantage working for Taiwan makers is the clustering in Taiwan's central counties of Taichung and Changhua." In fact, clustering enables them to form an integrated supply chain, with such close ties and easy access making collective marketing and branding feasible.

"Above all, collective marketing and branding is one way to integrate resources that help to offset resource and size limitations when competing against major global brands," Lee mentions.

Tap Official Resources

Lee also encourages Taiwan hand tool makers to minimize resource limitation, to take advantage of official resources and attend open seminars held by colleges on the island. "In fact, more resources are available than presumed," he adds. At the moment, Taiwan makers developing private brands can apply for annual subsidies from the government-funded TAITRA, National Science Council, National Association of Small and Medium Enterprises, and Industrial Development Bureau.

In addition, promoting own brands online is highly recommended for Taiwan makers, because such strategy is economical and e-commerce in Taiwan is well developed, according to Lee. For instance, Chewren Industry Co., Ltd., a local supplier of wrenches and handles, has teamed up with agencies and colleges to set up online marketing of its own-brand products.

Lee says that developing globally-competitive brands is not a myth for Taiwan hand tool makers, for Acer, Asustek, HTC and Giant are living proof. Having considerable OEM, ODM capability and experience will definitely help them to transform into OBMs in the future, Lee believes.