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

Case Study: Leading the way in Industrial Marketing in China

Arup Majumdar

Global Program Director – A/C Modulation

Don Newlon

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

Email: [email protected]

P: +852 2860 6917

Email: [email protected]

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

China Market Situation:

The major customers of the Chinese OEMs’ are

constructing large residential and commercial

buyers of a/c, there are many other parties who participate in the buying decision process. When

a developer acquires a piece of land,

type of property that will generate

etc. Once there is agreement on the type of construction,

Institute (these are full service firms that provide architectural, civil, mechanical ser

China). While the architects and

approached by the OEMs/dealers to consider the various a/c options. The OEMs/dealers in

China are not focused and tend to offer the entire basket of

the design institute make the choice

marketing savvy and tend to offer everything.

home central a/c products (at a


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

, there are many other parties who participate in the buying decision process. When

acquires a piece of land, he first approaches a consulting company to

will generate the best ROI – residential (villa or 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 ser

China). While the architects and consulting engineers are drawing up the building plan, they are

dealers to consider the various a/c options. The OEMs/dealers in

China are not focused and tend to offer the entire basket of products they have and prefer to let

make the choice2. This is a major challenge for Emerson

marketing savvy and tend to offer everything. So they would end up of

at a higher price/higher value proposition) and a competitive product

Market Research: Blue Canyon & Sinotrust

real estate developers, who are investing and

. While the estate developers are the

, there are many other parties who participate in the buying decision process. When

first approaches a consulting company to get advise on

residential (villa or apartments), commercial

project is given to a Design

Institute (these are full service firms that provide architectural, civil, mechanical services in

engineers are drawing up the building plan, they are

dealers to consider the various a/c options. The OEMs/dealers in

products they have and prefer to let

Emerson – OEMs are not

So they would end up offering Emerson based

) and a competitive product

(lower price) but would not be able to explain to customer

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

the gap between what was required to sell high value systems and OEMs

where Emerson had to bridge the gap.


(lower price) but would not be able to explain to customer the higher value proposition.


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

where Emerson had to bridge the gap.

Market Research: Blue Canyon & Sinotrust

the higher value proposition.


(shown below). The assessment showed

the gap between what was required to sell high value systems and OEMs capability3. This is

Emerson’s objectives:

Emerson realized that the people to be influenced

1. OEMs: 8 OEMs who use Emerson’s technology

2. Design Institute 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:

They need to understand the “life cycle cost” and value of Emerson’s technology

5. Dealers & Installers:

through their local relationships have a say on the produc

6. Government (National

who creates energy standards and labeling for home appliances

7. Industry experts (for every government

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

Emerson realized that the people to be influenced/educated through the channel

who use Emerson’s technology and over 10,000 sales people

Design Institute engineers: over 70,000 registered a/c engineers in China

Foreign architectural firms: There are several large foreign architectural firm that have


Real Estate developers: Over 1,000 large real estate developers throughout China


Dealers & Installers: over 1,000 companies who install a/c equipments and sometimes

through their local relationships have a say on the product/technology

(National Development & Reform Council – the nodal agency in

energy standards and labeling for home appliances

(for every government project bidding – experts from various fields

there are 100 of them all across China

University professors: There are several influential universities like Jiatong University,

Tsinghua University whose professors are thought leaders in the industry

through the channel were:

sales people nationwide

70,000 registered a/c engineers in China

Foreign architectural firms: There are several large foreign architectural firm that have


e developers throughout China.


equipments and sometimes

t/technology

the nodal agency in China)

from various fields have

University professors: There are several influential universities like Jiatong University,

in the industry on air-

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

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


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

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

Sources of information (Reference)

1. China IOL

2. Market Research # 1: Blue Canyon

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.

(Reference):

Market Research # 1: Blue Canyon China

Market Research # 2: DDB China

Market Research # 3: Sinotrust China

Emerson’s interaction with Design institute engineers, real estate developers, dealers,

OEMs, regulatory agencies, university professors.

Emerson’s interaction with Design institute engineers, real estate developers, dealers,

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