Why do factories always make mistakes when building brands? Here are the 6 basic reasons!

This article shares six common pitfalls that factories often encounter when building brands, and offers some suggestions for the initial operations of new brands. Let’s take a look.

How can a factory make money and look like a brand?

In the process of serving new brands, we have met and talked with many factory owners and second-generation entrepreneurs who want to start brands. Most of them have lost money in the past. They have really used their financial resources and energy to step into the pit. There are food categories, health care products categories, maternal and child categories, small household appliances categories, etc. The categories are different, but the pits they stepped into are very similar.

Today, I will focus on why many factory owners cannot build their brands, and talk about some heartfelt truths about the results we get from serving factory brands.

01 Why do factory owners always fall into traps?

1. Overconfidence

100% of the factory owners I have met are people who are extremely confident in their products. If they get together, they will definitely fight.

There is a boss who sells air fryers. He is very confident in his product. He says he is an OEM for a big brand, and big brands sell for so high a price, so if he makes his product cheaper, it will definitely sell well.

They overlooked that big brands are expensive because of the brand, not because the product itself is really good. Without the logo, such products are not very competitive in the market.

But the factory owner doesn't think so, and is convinced that his products are good.

In fact, it is very difficult to brand such a product:

1. The products are too homogeneous, which means they have no competitive advantage in the market. In fact, they are just white-label standard products. There are too many merchants selling similar products, and you are facing hundreds or even thousands of competitors.

2. You can make money, but not a lot of money. If you offer the same quality at a lower price, the ultimate cost performance is also OK. It is just shipping, which is completely far from the so-called branding.

Mysteriously confident bosses all stand from the dimension of products, rather than the dimension of consumers or competitive environment.

2. Every investment must be rewarded

Factory owners, because they all come from the real economy and OEM is a sure win, they are very cautious about things that require investment, or even refuse to do it. It is with this mentality that they lose more money.

The factory has good products, the products are really good, but the marketing cannot keep up.

They also know that marketing costs money, so after asking around at marketing companies, they start to fall into traps:

Pitfall 1: Live streaming

I told the factory owner that Douyin has huge traffic now, so if you start live streaming with experts or stores, you can see the sales volume directly. The factory owner didn’t know the pitfalls of live streaming, he only knew that everyone around him and the general environment was talking about live streaming. So he started.

Good products have high costs, so what should we do if the price is high? The live broadcasting agency tells you that the price will be reduced, but after a few months of hard work, the anchor’s slot fee, streaming fee, and commission are paid out, and the brand does not make any money.

This is normal, and only a very small number of people can make money from live streaming.

Really, can't you think about it? The essence of live streaming is impulse consumption. How can you sell without price advantage? With price advantage, without profit, how can you go far?

Pitfall 2: Planting grass

Planting grass is actually a technical job. Good planting of grass will definitely attract traffic and help growth.

Most agencies cooperate with factory owners and arrange influencers to promote their products. They spend hundreds of thousands of dollars to find dozens of influencers to promote their products. The popularity rate and reading volume are very ideal, but the sales volume is not ideal. When the factory owners see this, they will definitely lose money and give up promoting their products.

Such operations may even cause them to have a general misunderstanding about planting grass, thinking that planting grass has no effect and is just exposure.

It's the era of mobile Internet, but we are still talking about traditional advertising.

The waters of influencers are quite complicated. Good data does not mean there will be a traffic-generating effect. After all, data brushing is now a mature industry.

Pitfall 3: Guaranteeing ROI

Because of the fear of uncertainty, people will trust institutions that guarantee ROI. After all, it is written in the contract, so even if the other party cannot do it, they can go through legal procedures.

The waters here of maintaining ROI are deeper. Either you cannot find the agency behind you, or the agency tells you that it will help you increase the volume to meet the requirements, but in fact it is more of a delay.

In fact, brands must remember that they can guarantee ROI even if no agency has invested. If they have this ability, they can directly migrate to high-gross-margin products such as health products and cosmetics. Why bother earning service fees?

3. Want to do everything yourself

Many bosses feel that they don’t understand the job, so they just find an operator and the job can be done.

Online games are more complicated and there are many ways to play. Blind imitation will only lead to failure. Have you ever seen a brand that the boss doesn't understand but can be built by the team alone?

Factory owners in particular are very afraid of losing money. They know that building a brand is good, but they are nervous about investing money. If they don’t see positive cash flow for a month, they start to get nervous.

It would be strange if this could be done.

Time cost, team trial and error cost, cognitive commission cost. In the current environment, it’s not that everyone doesn’t see the opportunity, but it depends on who is faster.

4. Focus on store operations

Over the past decade or so, e-commerce has been dominated by operations. As long as the site is operated well, making money is not difficult.

This idea has continued to this day and still affects many people. When people think of doing e-commerce, they still think of finding a great agency or a great operations director.

But times have changed. Now the contribution of e-commerce operations in acquiring new brands’ traffic and building brands is getting lower and lower. With an old map in hand, we can’t find new continents.

All the brands of all sizes that have started in the past two years have done so through external channels, and only a handful of them rely solely on the site.

Of course, all agency operating companies still have success cases, where they deceive brand owners by claiming that a certain brand is the number one in a subcategory. However, these brand owners have spent more energy on traffic themselves, which is something these TP companies will not tell you.

Some bosses correct their own cognition through various consultations, while some bosses will still fall into the hands of the agency operation company and become leeks.

5. Being cut off by the TikTok organization

Those who work in e-commerce now feel like they are lagging behind the times if they don’t mention Douyin. Therefore, many e-commerce novices simply ignore Tmall and JD stores and start directly with Douyin stores.

Little did they know that they would fall into a trap at the first step.

Live streaming is fast, they look for anchors with great fanfare, and set up their own live streaming rooms. Anyway, when you ask why they do this, the reason is that their friends do this and they make money.

There was no in-depth research on the platform, and no study of the differences in strategies for different industries and products. As a result, a lot of money was spent on the platform fees, and the team was staffed with a few people, but sales did not increase.

For new brands, it is impossible to get free traffic on Douyin, unless they have the best cost-effectiveness, make less money, stabilize the basic market, and then cooperate with Dabo. Otherwise, they will lose money from the beginning, who can bear it?

6. Being cut off by professional managers

Nowadays, there are various traders on the market, and they often manage businesses with a scale of over 100 million. They have various talents and anchor resources, and they can talk very well, but there is no improvement after joining the job.

Why?

Some traders have never operated abroad, but they have learned it by observation and by appearance. They are also good at packaging, so they are more than capable of fooling bosses who don’t understand during interviews.

Some have indeed managed large-scale brands, but in addition to personal ability, there is also the support of brand power and budget. Managing a brand 1-100 and 0-1 are completely different strategies. Even experts and anchors are unwilling to cooperate with white-label brands, so the first path of cooperation is blocked.

The cross-category strategies are also different. Some categories have low education costs, such as snacks, personal care and household cleaning products, while some have high education costs, such as maternal and child care products and health care products. The live broadcast strategy has become a grass-planting strategy, and many traders are confused.

Therefore, the boss himself has to understand this. If he doesn’t understand, he won’t know what to ask during the interview and will be fooled.

02 What suggestions can you give for starting a new brand?

1. If you want to offer the best value for money, then follow the supply chain approach and don’t worry about the brand. Just ship whatever you can.

2. If you want to build a good brand, you need to have a clear brand positioning, what products to sell to what group of people. The so-called visuals and content are actually all based on this. Do you need to spend millions to find a so-called positioning company? Actually, it is not necessary.

Crowd: What kind of crowd should you sell to in the early stage? The more specific the better, and the fewer the better. Women, 18-30 years old, and first- and second-tier cities are all your target users. Such a crowd is meaningless. This is a physical attribute, and you can find a more precise crowd by segmenting by occupation, interest, scene, etc.

In this way, a relatively good conversion rate can be achieved within a limited budget. Then additional budget can be added to expand the audience circle.

3. Build your own team: Before this, the boss or the second generation must understand it themselves, otherwise the recruitment director will not know how to prevent being fooled.

4. Cooperation: Building awareness is a process. If it cannot be done in the short term, you must find a running-along agency to cooperate with, with the goal of increasing sales (here is an advertisement, if the product is good, you are welcome to communicate with us).

5. Sales must focus on profits, especially for new brands, it is meaningless to focus on scale.

6. Content seeding is the most cost-effective way to start. Don’t just look at the Douyin track. I have never seen anyone make money by starting with Douyin. Store live broadcasting, employee wages + investment and traffic costs + returns, basically do not make money. Live broadcasting by experts, pit fees + price reduction + commissions, do not make money either. Content seeding, expert fees are much more expensive than platforms such as Xiaohongshu.

7. Don’t be obsessed with so-called resources, such as talents and anchors. After all, you are the boss, and you must have a lot of resources around you. This one knows xx star, and that one knows xx big anchor, but to be honest, many relationships are just acquaintances. Stars and big anchors also have to consider the sales situation, and they are unwilling to cooperate with white-label products. If they really cooperate, it is nothing more than collecting pit fees, and then the brand side must keep the price low, but in the end it does not make money. The authorization of stars also needs to be charged separately. Unfortunately, many stars are actually out of fashion.

Summarize

People can never make money beyond their knowledge. Cooking is simple, but it requires long-term practice and actual experience. The same is true for starting a brand. It seems to be about products, packaging, design, placement, and channels, but details determine success or failure. Even if you have the Art of War, you can never become Sun Bin!

Author: Keny Wei; WeChat public account: Marketing Lao Wang (ID: wltx-2015)