Find here the China Paradigm 68 and find more about developing B2B business on WeChat, it includes the techniques in building WeChat official account, how to attract potential customers interested in using WeChat to buy things, and what functions of WeChat do China’s semiconductor companies take into account when doing marketing on it.
Full transcript below:
Matthieu David: Today I’m with Larry Feng. Larry, you are the founder & owner of Icfrom & you have been specializing over the last years, over the last 2013 on solid conductors, so you know a lot about China’s semiconductor companies and you have started this business in this industry to help those companies to sell online with a B2B platform, especially WeChat.
Which I find so specific, so unique that I will have a lot of questions about How B2B business on WeChat can use digital tools, can use WeChat to create sales, create understanding, to create awareness? Thanks, for being with us today & my first question as always is about – what the size of your business? & what’s your business and what you do exactly?
Larry Feng: Thanks, Matthieu and hello everyone. I started since 2015 after I have worked for so many China’s semiconductor companies such as Motorola semiconductor & Analog Devices and also the distributor Element14. In the past, China’s semiconductor companies are just like you said – its B2B. China’s semiconductor companies they design and developed & assigned to our end-user like a computer or cell phone manufactures.
However, in now age, the industry & also technology improved really fast. Many designers, engineers, now they are working on their own projects & own applications. So, it is now a very diversified market and now we’re serving – we have found the chance that people are not only working for one big company, they have their own start-ups & they’re developing new applications for themselves – it is very diversified & it is now just like a B2C market. Such as in China there are so many new design houses being opened by the individuals & Massimo teams. So, we are spotting all these customers like a B2C style. In China, digital marketing has improved very fast & people are not only using the e-commerce site but now they are using WeChat to buy things.
Now, so many people they need – like a big company need right now – the receipt, they just pay you on the WeChat& get the semiconductor applications. So, we open the WeChat platform to supply to individual customers when they buy a small volume of semiconductors for design purposes.
So now we are serving around 200 individual customers, and we have a call center team based in Hangzhou, and this team is providing the technical services & also call center services to handle the setting & the processing of the goods & also solve the data engineer’s basic technical problems.
Matthieu David: I see. One thing I’m not sure about your business model. Who are your clients? Are they the companies that pay you to open the shop, to do marketing, to actually answer the questions of the individual users? Or is it also that users because actually you take a commission on the sales or it’s both of them?
Larry Feng: We have a tool format. As you said, one part we are a distributor. Some China’s semiconductor companies are asking us to handle the small volume sales on behalf of them, because originally, they are B2C, they don’t have so many like a labor incentive, handling the program like to selling or to support the small customers who buy only one part or two parts, that’s one – and the second one, we have inventory. We’re buying something like a consumer yearly standardized products as an inventory – so when people want to buy these, we can ship to them directly. So, we have these models.
Matthieu David: How do you get the clients – users? How do they find you? Because you are in a sector where it is very niche. So, I do believe that on Baidu, on Search & Write it’s very easy to rank actually or maybe you compete only with Alibaba & so on. But on the other hand, you are selling through WeChat. So how do you get your traffic? How do you get people to know you? Is it because you go to trade shows; is it because you do SEO on Baidu, or you pay an advertisement? How do you attract your clients?
Larry Feng: Yeah, thanks, Matthieu. This is a very good question. I think that no more China’s semiconductor companies will think about where are my customers & how we can serve them? We are worried directly in the past – My experiences in China’s semiconductor companies & also in my four years’ experience, running my own company we found that the Chinese culture is very different compared with the western culture. Chinese is a very high contact – the customers must know you first, then they trust you. In the virtual world if they’re only online, they may not trust you, because they may know the parts, what they buy will be the branded or produced by the company or is a fake product, especially like a semiconductor. So, we are running WeChat, which is a two-way communication tool – we can talk to the customer directly;
Secondly, we run offline seminars. Working with China’s semiconductor companies we go to different cities like if you try to do in some consumer market you have to go to Shenzhen. If you are doing like medical or others, you have to go to the Delta & if you want to do a lot of R&D to sell into that R&D, you need to go to Beijing. We do many offline seminars to have face-to-face communication with those physically.
Matthieu David: How do they find you for a seminar? How do you advertise about the seminar? Is it – You send e-mails, you add people on WeChat? How do you get to them, to know them, and to invite them?
Larry Feng: Yes. We are running Black hat News, a website. We promote the products & technologies, information & also we write personally & with my team to write the industry insights about the industry trends; new technologies – that is one, and we also have an E-Commerce site that people can purchase in, and now we move a lot to the WeChat to ask people to go – and to lure the people to go into the WeChat, we have to have a very good hotline support. They may ask questions about the pricing, about technical problems, so we give them real-time feedback. In China, people are introduced by friends in the moments – they promote us, help us promote us – to have a more designed and used, to follow our WeChat & communicate with us & we run the WeChat shop.
Matthieu David: I see. What I understand now is that you have a website where you talk about your products. And you have an E-Commerce website, that means In order to get first in touch with your potential members to the webinar – participants to the webinars or the clients – you first actually find them online through search – Baidu, Sogou & so on & then you may interact with them on a regular basis on WeChat & you may get repeat sales on WeChat because you are closer to them. Is it what’s happening? Is that in terms of getting new clients would be more the Search & Write like Baidu because you write about the products & you are very good at writing about it, very specific, very precise & then after to convert you will bring them to WeChat?
Larry Feng: You are right. Now we don’t do Baidu – actually, we didn’t do the Baidu as ICO -ICM. We are doing the WeChat ads.
Matthieu David: And you pay for it?
Larry Feng: And We pay.
Matthieu David: I see. Interesting, how do you target them then? How do you target your clients, because it’s very specific, on WeChat you can target male-female; which city & so on – But how do you target the people who weren’t using semiconductors?
Larry Feng: Good question again Matthieu. I do believe WeChat is developing & evolving right now. If you go to Baidu, they have very good segmentation in the industry or maybe in the automotive, medical & their age, and their position. But now WeChat is developing those functions. We can select – in WeChat we’re doing advertainment, we can select people’s age; their gender; their city; what they are focused on and even In WeChat data they can identify where are you from? if I’m living in Shanghai, they know which district you are living in so they can go to your directory. That’s one part. Like you said, doing business has two stages.
First is new customer acquisition – they know you & then you have your repeat orders. Once they use WeChat to buy things, they designed & they have customers to buy & they may have a bowline production. So, we follow all these customers’ needs when they bought our products have, they designed successfully? We call it the design wing. When they will mass products or products so we can follow up on the order. Even after the hi-fi mass production, they may have version 2, version 3, so we may have more repeat order opportunities that we can develop. We hope our customers are from – one small customer, in the beginning, they use WeChat to buy things for design & then they have a successful setting & have a market share. Then we are willing with our customers to gather.
Matthieu David: What I understand – in order to keep the relationship, you get the clients from the content you create, advertisement of WeChat or something that we will talk about again because I feel it’s not specific enough for us to target things and run this B2B business on WeChat. then you go to your clients and & you are going to grow with them but I feel the fact that you are offering is a very detailed, very sophisticated service, support, hotline helps to keep in touch with them. Otherwise, they would go elsewhere; they would go to Alibaba, they would always look at maybe cheaper or all the providers would get a different volume for cheaper because they are evolving. But because of your studies, you are keeping the relationships with them & you are able to follow up on their growth. Am I correct if I understand your business this way?
Larry Feng: Yeah, you are right Matthieu. And design engineers especially in the semiconductor or technology, their entrance levels are very high. Once they select your electronic semiconductor, they are doing the design. Their semiconductor maybe half upgrading in the hardware & software. In the product like Xiaomi, or iPhone of Huawei, they have new phones upgrading & all these need a learning curve. So, when the design engineers know these specific semiconductors & the functions & coding, it is not easy for them to switch to other products, that’s like a consumer product. They need – we provide them a lot of technical supporting, design supporting to solve the design problems that they have.
So, once you’re getting involved in the first level of the product design & if you have continuously supporting upgrading your products, the customer wants to laugh to your application, it is a little bit difficult. So, we are seeing not only design one product & we are seeing also the roadmap focus on the next two or three years, so they can improve their product quality, functions, a lot of features. So, this is a long-term business and a long-term partnership between the salers and customers.
Matthieu David: Can it be some conflict of interest because you present different brands and sometimes you’re going to push one brand to another brand because you feel it would be a better fit, but although the brands in some way pay you or are working with you, how do you deal with this aspect, or are you pushing yourself as an advisor who is free from advising one brand to another?
Larry Feng: Yeah, China’s semiconductor companies are separate, there are a lot of standardized products which means everybody does it, however, even a standardized product has featured a bit different. Some companies do more R&D and added new functions inside. So, for standard products, it is much like a price competition. Maybe a US company, and now there are China companies, using their labor or tests or everything and they can reduce the price, so they can get in more and they placed the other companies’ products. However, similar categories heavily rely on research and development. If the companies invest a lot in research and development and they improve their functions and they improve even the size of millimeters or centimeters, and they have the technology at one stage, then no one can replace you. So that’s one – different companies have their different strengths – they meet the customers’ different needs and maybe specific designs what different customers and no others can replace you.
Matthieu David: So basically, you feel there is no conflict because they are very different. So, you will be able to sell another one in another context.
Larry Feng: You’re right. The customer needs are different.
Matthieu David: In terms of semiconductor materials pricing in China, you are selling small quantities, so necessarily they are a bit more expensive than when you sell a big amount or a big volume. Is there also a way for you to increase your pricing and price higher level because you are providing advisory because you are following them up and is it – what you are selling a product plus service? Or product augmented by the service and the teaching, the learning you give – actually you’re following an engineer in his growth and supporting him in building a product. Is it a good understanding?
Larry Feng: Yeah. Actually, in R&D state the semmiconductor materials pricing in China is not very sensitive. In the R&D process, they may have a certain budget for the design team and to buy a lot of products, so they do not price sensitive. Mostly, they need the products and what they do prefer is your follow up actions like our technical training and technical supporting. That’s very important. Their R&D team must make its design successful. So that’s very important. So, I can tell you – if we’re selling the small volume business for the customers who use WeChat to buy things, the margin is very good comparing with your selling big volume. They have a lot of competition for semiconductor materials pricing in China.
Matthieu David: How did you realize that WeChat would be a good channel? How did it happen? Is it that engineers and people were talking through your WeChat, you thought – if they’re talking on WeChat, if they’re communicating on WeChat, certainly they will use WeChat to buy things? Could you explain the process of how you came up with the idea that WeChat would be the main platform?
Larry Feng: Yeah. I will give you an example like we did – for example, we set up a WeChat for a particular customer, these customers they have 300 parts of the different semiconductor and used in the WeChat, we can have like a news channel, to inform the followers what kind of new products they introduced. We can have a technical center, even video training center for them and we list all 300 products in a WeChat menu with the product specifics and with a link for the PBF unloading and once we used the WeChat, as a communication platform, they have questions about technical problems or they have a pricing issue, we can build in the WeChat maybe like a mini group to get the engineer, to get the customer a small group for the discussion. They can use in text and use in video or video call or conference call to solving their problems and once people solve all their problems, they can buy from WeChat directly. They go to the WeChat shop, pay via the WeChat pay and simultaneously get their order number, product number and WeChat will ship it to them. It happens within five minutes.
Matthieu David: I understand this aspect of how easy it is to use WeChat, but how did you realize WeChat would be a good proxy because few people do B2B business on WeChat. Most people would think about a website or with phone calls or emails to actually communicate in B2B. how did you think that it would be good to run B2B business on WeChat? In the west, in the US – people would say, I’m going to use WhatsApp, I’m going to use Instagram to sell online say in the B2B sector. Maybe in the future, you’re going to use Douyin or not – so what’s the limit? You can’t use Douyin to do B2B now, it doesn’t make sense, but what made you believe that WeChat would be the right platform?
Larry Feng: Okay. In the past, like a few years ago, for supporting a customer using a call center you can give them a call directly, but it is very difficult. You have hope the receiver will pick up your call in China. It is somewhere a call center is using a call to call a cell phone or desk phone is stopped significantly. Because people cannot trust you on that phone call. However, if the people go to your WeChat official account to use WeChat to buy things, they know you are from the company. You are the professional. So, it’s very easy to talk to you and they can trust you that you can solve their problems. We can say there is a lot of new applications in China, some like Douyin, they are very consumer-based and like WeChat – evolving is a very business style, in the future.
Many people are currently in the 2018 WeChat survey – people want 85% of users they are doing business via WeChat. 85%. They are sending the messages, they are building off their business networks, they are using WeChat to buy things and currently, there are already 200 million WeChat official accounts already set up in the WeChat and 20 million WeChat shops opened. So, it means the people – because the WeChat – it is customer and suppliers direct communication. There is no middle medium like a third party or distributor between you. So, all of the customers can get the lowest price, directly the technical services, so why wouldn’t they use WeChat to talk with you?
Matthieu David: I see – I’d like to go back on targeting on WeChat with an advertisement. Again, you are in a sector where it’s very precise. So, as you said, WeChat is not allowing yet to very precise targeting, am I correct?
Larry Feng: Yes.
Matthieu David: So, you said you use WeChat advertisement, then you waste a lot of money because you cannot target precisely, or have you found a way actually to work around this?
Larry Feng: Yeah, we know that this is always a huge concern in the – whether you can get your target audience on WeChat. We are doing a lot – like have direct communications. You know that WeChat is not only – that is WeChat advertisement but WeChat, they have the front sharing moment and they are helping you to grow your target audience. However, doing the WeChat advertisement is like some branding. You need to maintain yourself and building some brands like people to know you, such as this, and in WeChat they have – WeChat advertisement they have very good functions. For example, if you’re doing – like in the WeChat moment ads, only after five seconds the people notice you and contact you – if you’re not enough – like five seconds, the ad is free – no charge.
Matthieu David: So, you can waste a bit of money and you can target maybe cities which are more industrial or specific cities where fewer people – or a district actually where you have factories or you have people who build products.
Larry Feng: That’s right.
Matthieu David: I see, I understand. Could you share some cases of clients which began with you and then developed a product and then got more and more sales and so on – could you be more specific on one specific example to describe the product, to describe the client, to describe the story.
Larry Feng: Yeah. I can share with you a success story with a German company – this German company is focusing on motion control. Motion control means the motors and engines. All these products you’ll see a lot in robotic and you’ll see a lot in the automation in the factory and they are focusing on this and alternately the German company is providing the services to the Europeans. However, now from two years ago, they come to China because there is a lot of design house that can design the automation for the – like as you know, for Alibaba or Jindong warehouse. They are shipping products and robotics, always using their motors and they are doing B2B business on WeChat and they list all their products and once they promote their products, we encourage the design engineer to download their PDF for specific products.
And we collect their questions and then we run offline seminars, training seminars to teach them how to do the coding and using their semiconductors into the automation or robotic designs and then, now they have a lot of customers in China, they are already designing and they have small volume production and also this motion control, specifically using the 3D printers a lot and there are so many Chinese manufacturers who produce different label 3D printers like for the kids, for family and for industry.
So, this company is continuously invested in China and starting from this year they are going to a very famous semiconductor show which is called Electronica. It is held every March in shanghai. So, this is a very successful story, they are doing B2B business on WeChat – they had no employees in China, but now they have 3 employees and they will be building their Chinese companies.
Matthieu David: They are selling semiconductors, right?
Larry Feng: Yes.
Matthieu David: So that is success from the supply side, do you have an example of a successful case from demand side, an engineer, a small company which is doing a product and needs semiconductors and that you have helped to understand the semiconductor and you have step by step sold more and more semiconductors and kept the relationship as we described before?
Larry Feng: Yeah, we are supporting a local Chinese company and they are doing it on the micro electronical machine – we call it the MAPS. All these semiconductors used in positioning and given in the cell phone and used in – we can tell you; their current application is car parking. For the parking and how to – they put in all their systems in the car parking, once the car goes inside a parking lot, they park the car and they are MAPs products, knowing which parking lot auto park their car and which is linked.
Matthieu David: I see.
Larry Feng: Yeah, we’re supporting these companies to promoting their maps products and these products already are solutions, already being used in Hangzhou or in some like – car parks – like a people maybe in the living area, they are having in the parking lot in the supermarket. So, they design all these using their map products and following with the designs in other MCU’s together and design for the system. That’s it.
Matthieu David: Very interesting and very inspiring. As we are coming to the end of the podcast, I have eight questions and we sent to you before the eight questions, you can answer as fast as you can and as you want – what books inspired you the most?
Larry Feng: The biography of Steve Jobs.
Matthieu David: Why?
Larry Feng: Because starting from 1995, I worked for Motorola and at that time the Motorola supplier power PC semiconductor to apple computer and once our CEO Chris – they have a meeting with the senior management of China’s semiconductor companies and they have a board meeting in China and he said – I need to pick a phone call with Steve Jobs, in a meeting – so I heard his name and we know his computer and majority Steve jobs they are working on in the semiconductor industry as well, so it is very related with my career and with my business and actually he’s a very inspiring people.
Matthieu David: What do you read to stay up to date in your industry and on marketing for B2B business on WeChat, what kind of sources do you have to learn about B2B business on WeChat in China and so on?
Larry Feng: Actually I grew up when the WeChat was developing, I grew up with it and I know that it is – at the beginning I found the WeChat strategy direction will go to PCs business, so I’m learning from four years ago and I’m growing with the WeChat and we found that the WeChat way is correct and will be the future. So that is why I’m still working in this area and it is a very optimistic future.
Matthieu David: So, it’s by using it that you learn about it right?
Larry Feng: Yes.
Matthieu David: Okay. What book on China would you recommend, are you reading a book on China or about China?
Larry Feng: I’m sorry, currently I’m reading a lot via WeChat. It is very – I wouldn’t have the time and I have difficulty in reading a book. I can tell you, in China, there is an idiom – I like to walk 10,000 miles and learn – it’s better than reading a book.
Matthieu David: Yeah, to practice.
Larry Feng: Yeah you practice and I can tell you, how I learn is I like to make friends and talk with smart people who are always entrepreneurs, always pioneers in different areas and I think that is much better than reading a book.
Matthieu David: You are talking about productivity and how you don’t have much time to read a book – so what productivity tool do you like the most? Do you use software to organize your time? To organize your task, to organize your work? What productivity tool would you suggest to use?
Larry Feng: Matthieu you’re very correct. The system is very important and the system – you know the problem is people’s communication, the batteries – is because the peoples’ communication is always inefficient. Once you are talking with more than 10 people, 100 people, 1000 people, but the system doesn’t have such obstacles. You send the instructions to the system; the system will work automatically. So that’s why – even like a Tesla – if you go to the Tesla factory, they are all robotics and very few workers are human – they are supporting this. So, I do believe in the future, as you said, the system – the AI and 5G will be the advanced technologies in the future, so you can see – in my company, strongly supporting the business is by the system. People put an order on WeChat and we receive it and only after this stage have a human interface. The shipment is delivered to you and you must meet with the people, but I don’t know if in the future if you maybe meet with robotics.
Matthieu David: Do you think WeChat is a very productive tool? I feel people spend a lot of time and waste a lot of time on WeChat because there is a lot of distraction. We have the moments, we have people talking about things which are not actually urgent, which are not that important to you but you still have to answer them. Don’t you feel that WeChat is wasting your time?
Larry Feng: No, we made it in eight customers – WeChat and especially from this year, from June to July – after spring festivals to July – all the WeChat traffic pitch view improved, it doubled or even tripled, because now all these companies trust their WeChat, talk directly to their end-users, they invest a lot to the their official accounts for B2B business on WeChat rather than media. So that’s why more and more people are to communicate with the company directly, via their WeChat platform. Or they get their information first handed.
Matthieu David: If you had some extra time, what idea would you like to work on? What other startup or business or idea, project you would like to work on?
Larry Feng: I’d like to travel globally. When I travel globally, I meet with different people and very smart and intelligent people in different areas. It’s part of business, but it’s also a part of fulfilling my life.
Matthieu David: Thanks Larry for your time. It was very inspiring, very detailed, very specific, very useful, thanks again and I hope you enjoyed it.
Larry Feng: Thanks, Matthieu. Thanks for inviting me.
Matthieu David: Thank you, everyone, for listening and hope everyone enjoyed the talk. Bye, everyone.
China paradigm is a China business podcast sponsored by Daxue Consulting where we interview successful entrepreneurs about their businesses in China. You can access all available episodes from the China paradigm Youtube page.
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