Case: Mr. Xu from Hebei is the general distributor of a well-known liquor brand in North China. After more than ten years of development and cultivation, his agency products have achieved a relatively stable market share in the region, and he has accumulated certain capital through agency operations. But in his own words, acting as an agent for a well-known product is like raising someone else's child; in the end, the product still belongs to others. Moreover, with intensified market competition, pressure from the manufacturer's market tasks, and reduced expenses, Mr. Xu has recently felt invisible pressure and crisis. He thought it would be better to raise his own child. So at the beginning of the year, Mr. Xu OEM-produced a self-branded liquor. However, after half a year of actual operation, he found the results far from his expectations. Mr. Xu summarized the main problems as follows:

  1. Low product awareness, consumers don't buy: With the channel network established through agency of well-known liquor, the distribution of the self-branded liquor achieved the expected goals smoothly, but at the terminal sales, the situation was awkward: wholesalers didn't sell, and consumers didn't buy.
  2. Simple pricing strategy led to insufficient market funds: Mr. Xu followed the pricing model used for agency products, setting a cost-plus-expected-profit price strategy. Although he considered profit distribution within the channel, he ignored the budget for market promotion and brand building, resulting in insufficient sales pull.
  3. Unclear product selling points and unattractive packaging: Due to inertial thinking from agency operations, he positioned the selling points and target audience within existing channels, resulting in unclear selling points and inaccurate differentiation. Additionally, the packaging (using the OEM manufacturer's existing packaging) was not attractive enough, which was also an important reason for failure to achieve terminal sales and consumer consumption. As above, experiences like Mr. Xu's are common problems troubling many distributors or agents. Currently, distributors and agents who, like Mr. Xu, have developed over several years or even a decade with certain financial strength and material foundation, find the market increasingly difficult. While adding product categories to compensate for declining profits of original products, operating OEM products has become a common choice for many distributors and agents. However, from actual results, truly successful OEM products are still rare. So what factors should distributors or agents consider to successfully operate OEM products? OEM is the abbreviation of Original Equipment Manufacturer. Its original meaning refers to companies that assemble products using components produced by other companies and sell them under their own brand. With economic development, the meaning of OEM has evolved to commissioned production or contract manufacturing. Now, OEM content has moved beyond the initial "original equipment manufacturing" and become richer and more diverse. In the OEM process, within the scope of this article, there are two cooperating parties: the brand owner (distributor or agent) and the supplier. The brand owner uses its own brand, sales channels, core technology, and other market resources to outsource production, which it is not good at, to other enterprises, concentrating limited resources on core business to enhance its core competitiveness. From the definition and evolution of OEM, for distributors to successfully operate OEM business or products, they must clarify their core competitiveness. Starting from this, they should conduct internal and external research and analysis, discover market opportunities, define products, and formulate marketing mix strategies. They should achieve thorough analysis, accurate extraction, realistic positioning, strong operability, and suitability to their own situation, laying a solid foundation for OEM product market operations. Based on this analysis, the following factors should be considered:
  4. Market Segmentation: Market segmentation is premised on extensive internal and external environment research, including demand nature, demand scope, competitive landscape, industry cost structure, product lifecycle, enterprise skills, funding sources, macro environment, and other factors. It is a system of systems, and these factors affect marketing success from different angles. However, if distributors or agents are to achieve the above market segmentation operations, there are still practical limitations such as lack of professionalism. But based on the market operations of their agency products, the following key points can be analyzed:
  1. Market situation of agency products: sales volume, annual sales growth rate, market share, expense investment, analysis of each expense ratio, input-output ratio, etc.
  2. Market situation of competitors: competitor growth trends, competitor marketing strategies, competitor product strategies, competitor market share, competitor market expense estimates, competitor sales estimates, competitor advantages, etc.
  3. Market situation of new products: sufficient understanding of similar new products or differentiated new products, focusing on their distribution status (distribution speed, current market share, distribution policies, expense investment, market activities, promotional strategies, etc.) and sales situation (sales policies, sales volume, monthly sales growth rate, etc.).
  4. Own natural conditions: capital situation, working capital, warehousing and logistics, personnel structure, focus, and attention to the marketing team's marketing ability and execution.
  1. Market Positioning: Without clear market positioning, product positioning cannot be established, and other content of product strategy cannot be developed. For distributors or agents, market positioning should be closely combined with their own situation. They should not be blindly optimistic nor overly cautious and conservative. They should focus on selecting a specific channel or customer group as their marketing target, concentrating resources and advantages for breakthrough. For example, when a trading company in Jinan operated OEM rice wine in the Jinan market, it positioned the catering channel as the key operation, focusing on A and B class restaurants mainly serving Zhejiang, Huainan, and Shanghai cuisine, supplemented by seafood restaurants. Through six months of cultivation and promotion, it became the first brand of rice wine in Jinan restaurants, and then operated mid-to-low-end new rice wine in retail terminals. Regardless of the final result, it can be seen that its market positioning was very reasonable and feasible.
  2. Product Strategy: Product strategy includes core benefit strategy, form strategy, added value strategy, quality strategy, packaging strategy, combination strategy, and even brand strategy, but these are all based on market positioning. At the same time, the formulation of product strategy plays a crucial role in the success of OEM products. Referring to the product strategies of some successful OEM trading companies in Guangdong and Hong Kong, the following points can be found: (1) Product Types: Formulate product strategy according to product natural attributes and sales model:
  3. Differentiated products: specification differentiation, function differentiation, packaging differentiation, benefit point differentiation, exclusive supply products, regional specialty products, etc.
  4. Special channel products: direct supply or exclusive supply products for special channels such as military regions, colleges and universities, party and government organs, state-owned enterprises, restaurants and nightclubs, chain stores, supermarket systems, etc.
  5. Gap-filling products: combination packs, specification differences (packaging, function, etc.), etc. (2) Product Nature: Formulate product strategy according to profit purpose and marketing purpose:
  6. Channel products: These products have certain special properties (price, sales policy, packaging) that can quickly achieve channel circulation and terminal sales, used to introduce the market and expand the network, and shorten the distance with consumers. Profit considerations are secondary.
  7. Niche products: These are key profit products, mainly considering their profitability and profit range. In specific cases, sales volume can be ignored to purely pursue profitability.
  8. Supplementary products: Products used to supplement or promote the sale of niche products according to channel or terminal requirements or market gaps. They are mainly used to maintain channel customer relationships, reduce competitive pressure on niche products, and highlight the advantages of niche products, but are not promoted as main products or for profit purposes.
  9. Pricing Strategy: Pricing strategy not only includes the space for product cost, own profit, channel profit distribution, promotion expenses, market expenses, and other related costs, but also should strictly follow the operation cycle of product introduction to the market for reasonable allocation and planning, ensuring healthy and orderly development of OEM products when entering the market. Generally, practical and popular pricing strategy processes include the following steps:
  10. Forward calculation: Based on market positioning and market reality, set profit distribution from production cost forward:
  11. Channel Strategy: Channel strategy should consider OEM product market positioning and product positioning, and add brand building factors when formulating channel strategy. Avoid pursuing full-channel product strategy due to the attraction of huge market demand. Focus on channels where you have core competitiveness and relatively strong control for initial promotion:
  12. Micro channel strategy: Limited to a single channel with commonality terminals as sales channels for OEM products, such as restaurants mainly serving Cantonese cuisine in the catering channel.
  13. Single channel strategy: Focus on a single channel such as special channels, supermarket channels, etc., concentrating advantages for breakthrough.
  14. Primary and secondary channel strategy: Take one channel as the main, and related channels as supplements or extensions, focusing on the implementation of channel strategy. For example, use key supermarket channels to achieve brand building and consumer awareness, while focusing on special channels for group purchase development and sales.
  15. Composite channel strategy: Based on own strength and current channel control, consider a composite channel strategy with brand building as the main purpose. Here, own comprehensive strength and marketing ability become the key to the success of OEM products.
  16. Promotion Strategy: Promotion strategy plays a pivotal role in the market introduction of all products. Most failed OEM products often ignore the formulation and execution of promotion strategies, adopting a forced-push market operation model of product first, sales later, distributing through existing channel networks without introducing big marketing, resulting in incomplete and fragile product lifecycle during market operations. When encountering unfavorable starts or inability to continue as planned, OEM product owners simply increase promotional intensity and activities, but often with unsatisfactory results. Whether the promotion strategy of the product lifecycle can be introduced is another important factor for OEM product success.
  17. Product Lifecycle and Expense Investment: Paying attention to the product lifecycle from the formulation of product strategy is the key to healthy and benign market operations for OEM products and all products. With the development of the product lifecycle, the focus of expense investment should refer to the following points:
  18. Introduction stage: During this period, based on market positioning, focus on price design and expense use in the distribution stage, including channel expenses (channel price system, channel expenses, etc.) and terminal expenses (entry fees, barcode fees, customer relationship fees, etc.), to ensure rapid product introduction to the market.
  19. Cultivation stage: During this period, combined with the progress of the introduction stage, strengthen the investment in market expenses (media promotion expenses, promotional material production expenses, etc.) and promotion expenses (promotional personnel, promotional materials, activity expenses, etc.).
  20. Growth stage: During this period, focus on the stability of the market price system and the market's acceptance and digestion ability of the product. Timely respond to different key points and carry out corresponding sales promotion (SP) and public relations publicity and guidance (PR) for different channels or terminals, and summarize effective activity models in practice, systematically strengthening according to plan.
  21. Maturity stage: During this period, analyze product sales changes and input-output ratios, prepare strategies for new product development and use, and adopt differentiated promotion (product combination, disguised price promotion, product function expansion, etc.) to expand sales.
  22. Decline stage: During this period, focus on analyzing the established product channels and market positioning, launch enhanced differentiated products and moderately relax the price system, guide the promotion and sales of new products, and avoid more maintenance expense investment and channel overhead. The above content may not be all factors that distributor or agent friends must consider when operating OEM products, but it represents the common foundation of a class of products. Therefore, I hope that for bosses preparing to operate or currently operating OEM products, OEM products are not the brand incubator or profit growth point for all enterprises. If considered simply without systematic analysis and planning, successful OEM operation is not easy. Finally, a reminder: operating OEM products requires both keen market insight and systematic scientific market analysis and planning ability. Boldness and caution must be applied together. Reply with the following keywords to classify and query related professional articles: Sales Supervisor, Second-tier Management, Regional Manager, Distributor Management, New Channels, City Manager, Competition, 2015, Manufacturer-Dealer Game, Product Stagnation, Terminal Visit Management, Route Management, Deep Distribution, Internal Management, Sales Skills, Profit Improvement, Recruitment, Distribution, Daily Management, Team Motivation, Trade Promotion, Sales Misconceptions, New Product Launch, Township Market, New Product Pricing, Sales Target Achievement, Forcing Orders, Market Visit Inspection, Liquor, Beer, Sales Increase, Agency Products, Cross-region Sales, KA, Terminal Visualization, New Market, Market Operation, Learning, Book Recommendations, Inventory Management, Sales Novice, Consumer Promotion, Execution, Old Products, Expired Product Handling, Model Market, Investment Promotion, New Media, Distributor Development, Performance Appraisal, Assessment, Annual Planning, Shopping Guide, Morning Meeting, Display, Transformation, Stock Pressure, Holidays, Distributor Cost Control, Channel Operation, Marketing Theory and Laws, Brand Truth, Order Meeting, Team Management, Training, Debriefing, Debriefing Report.