Chucking Product Quality Promotions

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XIAN, China – In Chinas ultra-competitive lubricant market, every supplier looks for an edge – the thing that will convince buyers to choose their product instead of the next companys. As the overall quality level of products rises, many manufacturers and distributors are focusing their efforts on explaining lubricant performance and trying to convince buyers that their oils are better.

Some, however, claim to be finding success by deliberately avoiding such explanations.

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An example is Ren Fei, founder of Rongdong Trading, an oil and auto parts wholesale distributor in Erdos, Inner Mongolia. Rongdong carries big lubricant names such as ExxonMobil, Shell and Castrol, as well as a number of Chinese local brands. While many other distributors are struggling to survive amidst a downturn in the market, Ren says his lube business grows at double digit rates every year.

The key, he said, was to combine Rongdongs two business segments by launching campaigns that, for example, offer a free auto part with purchases engine oil. One such deal offered the combo for just 9.9 (U.S. $1.30), he said, without specifying the volume of oil or the auto parts that qualified.

Many people asked how this could be sustainable, but it actually is and works very well for us, Ren said here Aug. 18 on the sidelines of the Muchengyou Lubricant Marketing Forum, where he participated in a roundtable discussion. This strategy is not as simple as it sounds. According to Ren, he made many calculations in deciding the price tags for each combination for the campaign.

For example, 9.9 might be the price for a combo of API SL engine oil and highly profitable consumables like air filters, both supplied by small local Chinese companies.

The profits from auto parts can offset the profit we probably would lose on oils at such a low price, Ren said. There is also a 29.9 combo, which might include a big name SL oil and an accessory from a small Chinese supplier.

To maximize resources, Rongdong also carries its own oils under the Hlocii brand name, produced by Shanghai-based contract blender Dalian Petrochemical, whose clients include Castrol and Sinopec.

Having our own oils gives us more of a cost advantage to carry out the combo strategy, Ren said.

Ren never mentioned how important product knowledge is to his sales performance, and neither did Fang Wubin, general manager at Dun Jin Trading, a Xian-based distributor that supplies lubricants to repair shops. Fang, who also participated in the roundtable, said he now makes money mainly from selling products such as brake fluids and auto care solutions.

We used to make money from pricing oils based on their quality, but I dont think it works anymore, as the market is full of oils that claim to be good quality, he said.

Suppliers are trying to tell us what [API] SN oils are, what the specifications mean to performance, and how much they should be priced. But honestly we dont understand these things very well, Fang continued.

Chen Jun, founder at Yin Neng Technology, a distributor in Chengdu, Sichuan province, agreed. Another roundtable participant, he said training about detailed product knowledge in China helps very little on sales. The reason is the staff in repair shops are not like those in the West.

In the West, he said, people working at repair shops are either interested in the job or have certain knowledge about cars. But their Chinese counterparts usually have their jobs because they lack the type of education and training necessary to get other opportunities, he said.

Because they dont have the ability for self-learning, you cant expect them to learn about oils during some short-term training. The better training should be to tell them how to sell, he said.

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