Smartphone Wannabes In Global Endorsement Frenzy
A trio of Chinese tech firms with global dreams is taking a page from the western marketing playbook, signing a recent series of celebrity and sports team endorsements aimed at winning over US and European consumers. Such a strategy looks smart, and could help ZTE (HKEx: 763; Shenzhen: 000063), Lenovo (HKEx: 992) and Huawei shed their image as Chinese firms and look more international as they try to sell their smartphones to the west.
While such strategies look good, that trio and other Chinese firms with similar aims also need to look beyond this kind of superficial marketing tactic to succeed on the world stage. Specifically, they need to include more substantive research and development investments in their global drives, to ensure their products are suited to local tastes in these lucrative but competitive markets.
ZTE was first out of the gate in the recent drive into big-name endorsements, with its announcement last month of a deal to become the official smartphone of the Houston Rockets, a popular team in the US National Basketball Association (NBA) and also home to former Chinese superstar Yao Ming. (previous post)
The tie-up launched ZTE’s first major drive into the US under its own brand, as it tries to diversify beyond its traditional networking equipment business that is rapidly slowing. The company has previously sold cellphones in the US branded under the names of local wireless carriers, but rightly realizes that profit margins could be much higher for models bearing its own name.
Shortly after the ZTE tie-up, Lenovo announced its own similar deal last week with Ashton Kutcher, a major US celebrity and star of the recent film “Jobs”, about the life of Apple co-founder Steve Jobs. (English article) In an interesting twist, Lenovo formally introduced Kutcher as its new “product engineer,” saying the actor would provide input on how to improve the company’s products for US consumers.
The Kutcher deal comes as Lenovo aims to raise its global profile and also boost its newer smartphone business. Despite its status as one of the world’s top PC makers, Lenovo still relies heavily on its home China market for nearly half of its sales. Its brand also remains relatively low-end and unknown outside of its home market.
One day after Lenovo announced its deal, Huawei launched its own major new tie-up with Italy’s AC Milan, one of Europe’s best known soccer teams and a name known around the world. (English article) That tie-up will see Huawei become a premium sponsor and also the official mobile partner of AC Milan as part of a 3 year sponsorship deal.
Huawei’s tie-up comes as it launches a major marketing campaign in Italy for its smartphones. Like ZTE, the company is making a major push into the smartphone arena as it tries to diversify beyond its older networking equipment products whose growth has slowed sharply in the last 2 years.
These tie-ups all look well conceived, as the Houston Rockets, Ashton Kutcher and AC Milan are all well-known, respected names in their local markets. Huawei and ZTE have both suffered in the US and Europe over the last 2 years due to negative publicity over security concerns about their networking equipment business. That publicity has not only hurt their brands, but also positioned the pair as distinctly Chinese companies in the minds of western consumers rather than international brands.
Lenovo hasn’t suffered the same kind of negative publicity, but is still perceived by many as a Chinese seller of low-end products following its landmark acquisition of IBM’s PC assets in 2005. Thus its use of Kutcher as spokesman could help to upgrade its product image, and also reposition the company as a more global brand.
While all 3 endorsement deals look well-conceived, Lenovo, Huawei and ZTE need to make sure they accompany their efforts with concurrent investments in the development labs to ensure they create products suited to local tastes. Huawei has made recent moves in that direction with its announcement of several major new investments in Britain this year, and Lenovo already has strong product development capabilities in the US through assets acquired from its IBM purchase.
This kind of concurrent marketing and product development effort to localize a global brand has been used by western firms in China for years, and is a major factor behind the success of multinationals like Procter & Gamble (NYSE: PG), KFC (NYSE: YUM) and Volkswagen (Frankfurt: VOWG). Lenovo, Huawei, ZTE and other Chinese global aspirants would be wise to follow this formula for similar success, as they seek to shed their image as Asian makers of low-end products and position themselves as true world-class companies.
Bottom line: A new series of global endorsement deals by Huawei, ZTE and Lenovo looks smart, but needs to be followed by concurrent efforts in product development.
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