Trademark Attorney | "Lessons In Growing A Brand: The Chinese Are Coming"

By : Cheryl Conner
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Category : Trademark Attorney

A prominent trademark attorney in Salt Lake City, Nicholas D. Wells, provided me with some interesting information recently about the power of brands. Economists can argue about when China’s GDP will surpass the U.S.  But for marketing types, Wells points out, the clearest indication of China’s growing economic power is not its raw GDP or import figures.  It is the strength of the brands Chinese companies are building.

Developing countries follow a pattern, Wells says.  They start out making products for others who outsource to take advantage of low-cost labor.  Those products are branded with the names of the outsourcing companies.  Familiar names like Reebok and Apple move their production from place to place to benefit from low costs: First Korea and Singapore, then China; now Vietnam.

When Reebok makes a shoe in Vietnam for $1 and sells it for $75, for example, the difference in value can nearly entirely be summed up as the “brand.”  Customers pay for the perceived value of the intellectual property Reebok has created. People don’t want shoes; they want Reeboks.  Or Nikes or Pumas or Adidas.

For companies like Apple, part of their value is created by technology (think patents).  But even for these companies, much of the perceived value is the brand.  (Remember, patents last 20 years, but brands last forever.)

Commodities must compete on price.  Strong brands yield higher profits.  Those profits, when reinvested, create new technologies, new products, and higher standards of living in the countries where the brands are owned.

Korea is no longer a capital of low-cost labor.  Now it’s the capital of Samsung and Hyundai.  The profits from selling Samsung-branded smartphones and tablets and microwaves stay in Korea, where they lead to new technologies, new products, and higher standards of living.

For several decades, China’s billion-plus population was a premier source of cheap labor.  Now that’s changing.  Why?  It’s simple — because China is developing its own brands.  Chinese companies reap higher profits, keep them in-country, and use them to create higher levels of technological innovation, education, industrial productivity, and economic power.

In every economy, this pattern starts with the major infrastructure players.  Major brands like China Mobile, Baidu, Wu Liang Ye, Suning, Pingan, and Bank of China are each valued at billions of dollars, yet most Americans have never heard of them.  But the next stage of this pattern continues as a huge number of smaller businesses develop loyal customer followings based on their brands and eventually become market leaders.  These small companies contribute to an economy’s strength and resilience.

Interestingly, in virtually every country Wells has studied, the number of applications for U.S. trademarks by companies from a given country tracks the volume of U.S. imports from that country.

U.S. imports from South Korea and U.S. trademark applications from South Korean companies both started near zero in 1970.  Both have followed a steady track upwards since then.

Singapore, another of the “Asian Tigers,” followed a similar track.

Brazil is interesting because a doubling of the number of annual U.S. trademark applications in 2000 anticipated a sharp five-year rise in U.S. imports from Brazil.

But the most interesting findings are from China.  U.S. imports from China have been growing steadily for decades.  But in the last 10 years, both U.S. imports from China and trademark applications from Chinese companies have turned sharply upward, with the number of trademark applications filed each year increasing ten-fold—1000%—between 2002 and 2011, while imports in 2012 will exceed $400 billion.

Thousands of smaller Chinese companies understand the power of brands.  They protect their brands in the U.S. in anticipation of reaping the profits and growth that used to be reserved for U.S. companies alone.

Entrepreneurs and brand-builders, be aware: The day is fast approaching that many Chinese brands will be as well-known to American consumers as Toyota, Samsung, Philips, and Gucci today.

Smart marketers are fully aware of the degree to which strong brands can influence strong profits. For example, America’s NASCAR is one of North America’s most highly regarded and widely recognized brands, even for consumers who have never watched or attended a NASCAR-sponsored event. More than 400 U.S. companies currently increase their profitability through formal affiliation with the NASCAR brand. Strong brands are worth big dollars.

The U.S. clearly “gets it”. And clearly, China is also now coming on strong.

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