Knocking Out Knock-Offs
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For many direct response marketers, the first thought that comes to mind when they hear the words “selling in Asia” is product knock-offs.
Few in the industry deny it’s a problem. “If you’re manufacturing in China, you’ll have knock-offs,” says Amir Tukulj, head of Thane Direct in Toronto. “It’s a big problem that faces all of us today. Asia is not immune, and it’s the source of most counterfeited products.”
David Smith, general manager of sales for Creative Nations Intl., a DRTV product supplier to several countries, says counterfeiting and knock-off problems are peaking. “It’s a whole sub-industry, and you can see it at trade shows. It’s even advertised through trade facilitators,” Smith says. “It always will be as long as there are unscrupulous traders willing to distribute fake product, and, globally, there are definitely plenty of them.”
However, some believe the problem isn’t big enough to actually keep marketers from selling there.
George Hung, CEO of GDSpectrum Inc. a DR distribution and consulting company in Henderson, Nev., admits knock-offs have frightened some western companies, but he says, “The truth is, if they have a better understanding of the Asian market, they would know how to position their products properly to avoid or make it more difficult for knock-offs to compete.”
So how can marketers position their products to avoid or make it difficult for knock-offs to compete?
Hung says strategies vary depending on the product category and how well protected the patent is. But he says, first and foremost, pricing plays a key role.
“You have to understand that an Asian marketer will need to mark up at least four-to-five times the wholesale cost to market in their country because they have to cover for shipping, duties and tariffs,” he says. “If a product is selling in the United States for $100, and the supplier gives distributors the cost of $40, the on-screen cost of this product in Asia would be around $180.”
So how is success possible at nearly double the cost? Hung says a successful household or fitness item has the potential to shift 500,000 units in Asia, but only if the price is reasonable.
“Some American infomercials have celebrities in the infomercial, and the product owners have agreed to pay them royalties for every unit sold,” Hung says. “However, most of these American-based celebrities aren’t known in other countries. So the product owner can cut down the product cost by not signing a worldwide royalty contract with the celebrity.”
Another often successful marketing strategy, according to Hung, is to work closely with each Asian distributor to implement “what is considered the most effective campaign” in each country.
“That may require a joint venture between the product owner and the local distributor to use a local celebrity, or to rework the existing infomercial with Asian diet or cooking products just to name a few,” Hung says.
Tukulj says the best strategy to fight counterfeiters is to take away the incentive for manufacturers by “legally attacking their customers in the developed markets of North America, Europe and Asia.”
“As an industry we need to do whatever we can to fight this problem,” Tukulj says.
Source: Response Magazine, November 2006, www.responsemagazine.com
