---
title: "Building a Model Market: Without Strategic Thinking, Even the Best Tactics Are Useless"
description: "The selection of a model market is also a process of tactical implementation, requiring brand managers to think deeply. This article discusses the strategic importance of model markets, how to choose model regions and markets, and key factors for success."
author: "高级研究员 海游"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2023-02-17"
language: "en"
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# Building a Model Market: Without Strategic Thinking, Even the Best Tactics Are Useless

> The selection of a model market is also a process of tactical implementation, requiring brand managers to think deeply. This article discusses the strategic importance of model markets, how to choose model regions and markets, and key factors for success.

**Introduction: The selection of a model market is also a process of tactical implementation, requiring brand managers to think deeply.**
Recently, I communicated with several regional managers of brand companies about building model markets. The feedback I received was: every year there are plans, every year we build, but in the end, it fizzles out. Money is spent, energy is invested, but nothing is accomplished. My suggestion is: the middle and senior managers of enterprises are veterans in the FMCG industry, and they have no problem with the tactical aspects of building model markets, but they do not fully understand the strategic level, which leads to problems in the subsequent selection of model markets. First, we need to answer three questions: What is the purpose of a model market? How to choose a model region? How to determine a model market? If these three questions are not answered, even if the model market succeeds, it is meaningless—just selling a bit more goods, with no cost-effectiveness. Next, let's explore these three questions.

**Model markets are more about strategic planning and implementation**
I think this issue should be elevated to the corporate strategic level. Let's first talk about the Battle of Tashan. "I don't want casualty numbers, I only want Tashan"—this is the shocking and historic military order issued by Lin Biao, commander of the Northeast Field Army, during the Battle of Tashan in the epic film "Decisive Battle: Liaoshen Campaign." The Battle of Tashan was a battle between the Nationalist forces and the Northeast Field Army during the Liaoshen Campaign of the Chinese Civil War. Tashan is short for Tashan Fort, meaning a soldier's fort with a tower and a mountain, but Tashan has neither a tower nor a mountain. It is just a small village of about 100 households east of Jinxi, 15 kilometers from Jinzhou and 4 kilometers from Jinxi. Its only importance is that the road to Jinzhou passes directly through Tashan. To the east of Tashan is Dayushan Island, and to the west, Baitai Mountain is the commanding height of the Tashan area. To ensure the victory of the Battle of Jinzhou, the Northeast Field Army hastily established defensive positions here to repel the Nationalist Eastern Advance Corps coming to relieve Jinzhou. In the end, the Northeast Field Army blocked the Nationalist forces and won. The Battle of Tashan directly determined the outcome of the Battle of Jinzhou and even influenced the outcome of the Liaoshen Campaign.

Some often say: The key to the Liaoshen Campaign was the Battle of Jinzhou, and the Battle of Jinzhou also had a key move—the Battle of Tashan. Sometimes, the model market we build is equivalent to Tashan in the Liaoshen Campaign. What are its strategic goals? I have summarized a few points for your consideration.

1. **Base: Source of sales and profits**
The three years of the pandemic tested all enterprises. Those with poor "physical fitness" may have been eliminated. Especially for small and medium-sized enterprises, the model market is not just a few image streets or a few model stores, but more importantly, the "granary" of the enterprise. With grain in hand, the heart is not flustered.

2. **Recruitment ground: Let blank areas see a successful image**
Still influenced by the pandemic, coupled with the increasingly tense competition in the stock market, distributors' profits are being squeezed again and again, which means the "trial and error cost" of product selection cannot be borne as before. Even the recruitment of first-line brands is not satisfactory. Distributors are starting to reduce their product structure. What about non-first-line brands? So the purpose of the model market is to let surrounding blank areas see a successful image. Most distributors "believe because they see," feeling that this brand and this product can be operated. After all, with a successful market, the probability of failure is greatly reduced.

3. **Make a model: Commonality, replicability, convenient for future layout**
Most enterprises encourage innovation, but innovation cannot be done all at once, staking everything on it. This is also a consensus. So we need to set up several model markets as pilots to explore the feasibility of the model and seek the development pattern of the model. At this time, the focus of the model is replicability. If you choose a very special market as a model, even if the model succeeds, it is meaningless.

4. **Learning base: Saying ten times is not as good as visiting once**
Enterprises need a "training base." The value of on-site teaching is far greater than indoor PPT presentations. So some enterprises will build several model markets and then lead surrounding distributors to study tours, thereby accelerating the capacity building of the distributor team. At the same time, it also plays a positive role in improving the comprehensive capabilities of the brand's internal team.

In short, the model market should more carry the development of corporate strategic goals, not be limited to immediate sales, immediate visualization, or immediate short-term success.

**The selection of model regions should carry strategic goals**
First, let me explain: here, a region refers to a regional market consisting of one or several prefecture-level cities (including subordinate counties), managed by a regional manager or office manager. That is, the model market should be selected from one of his markets. What is the relationship between a model region and a model market? Simply put, first there is a model market, then replicate nearby to create a model region. That is, first do a point, then a line, then a surface. So if the model region is not chosen correctly, building a model market has little value. I have 4 suggestions:

1. **GDP matches product positioning, with sufficient consumption potential:**
Last year's "preserved plum assassin" and "ice cream assassin" incidents have told us that many products in the FMCG industry have exceeded the consumption capacity of ordinary consumers, so the price positioning of products must match the consumption capacity of the regional market. It is recommended that the selected model region should not be lower than the average GDP of the province to which it belongs.

2. **Population base determines market capacity:**
The market capacity of FMCG largely depends on population size. China has 1.4 billion people and 293 prefecture-level cities, with an average population of 4.8 million. So it is recommended that the population of the model region should not be less than 4.8 million. Secondly, pay attention to whether the population structure matches the product characteristics, such as male-female ratio, age structure (young, middle-aged, elderly), etc.

3. **Convenient transportation, can drive and radiate to surrounding areas:**
The purpose of the model is replication, and the basis of replication is convenient transportation. It is best to have high-speed rail and highways for easy field visits and face-to-face talks. Also, pay attention to the evaluation of regional customer influence, including personal influence (such as heads of regional chambers of commerce, regional industry leaders, etc.).

4. **Regional indicator ranking:**
Annual per capita consumption, market share, distribution rate, competitive landscape, etc. These indicators are also basic data needs for later replication (this requires the brand to have certain data capabilities).

In short, from a strategic perspective, the selection of the model region should precede the model market. It is the region that determines the market, and the market influences the region. If you put the cart before the horse, the significance is greatly reduced.

**Determining the model market: Transformation from strategy to tactics**
I think there are three key elements in determining the model market: avoiding vicious competition, market expansion opportunities, and establishing absolute advantage. Next, I will briefly explain from 6 aspects.

1. **Annual per capita consumption & channel coverage rate:**
Not lower than the provincial average, with a certain channel coverage foundation, avoiding vicious competition markets. Let me talk about vicious competition markets. In stock and shrinking markets, intense competition is inevitable, but markets with excessive involution (killing yourself and your peers) must be avoided. It's not that you don't do it, but the timing is not ripe.

2. **Distributors:**
Capital, personnel, warehouse, vehicles, high cooperation (hard conditions, need to set indicators according to actual situation). The model market requires high cooperation from distributors (this is no problem for FMCG veterans; just set key indicators well). It is worth reminding to pay attention to improving the distributor's summary and expression abilities, otherwise it will be like boiling dumplings in a teapot—unable to pour out, and credibility will be discounted.

3. **Brand's direct management personnel have ideas and strong execution (evaluation criteria):**
The model is the result of cooperation between the manufacturer and the distributor, especially the brand. It must have the ability to actively promote, and this ability falls on the direct management personnel. So when selecting a model market, evaluate whether this person can be competent for this work.

4. **Product potential:**
TOP3 categories & TOP3 SKU sales share (compare with the province to judge product potential). Products are the cornerstone of the model. When selecting a model, match appropriate products, preferably achieving the "three highs": high coverage, high turnover, high gross profit.

5. **Channel potential:**
Modern, community, special channels, grocery, e-commerce, agricultural wholesale, etc. sales & coverage share (compare with the province to judge channel potential). Exploring the main channel is also key. The main channel of the model market must have four characteristics: must have, have advantages, easy to lock, easy to replicate, and create profits.

6. **Difficulty of establishing advantages:**
Product advantages, channel advantages, consumer advantages. The establishment of advantages in the model market should start from these three aspects, and the selection of the model market should also consider the difficulty of establishing these three advantages.

In short, the selection process of the model market is also the process of tactical implementation. Many brand managers often make the mistake of hastily selecting the model market, lacking the full consideration of "If you don't plan for all things, you can't plan for one thing; if you don't plan for the whole, you can't plan for one part." Coupled with the chaotic urging of headquarters management for information submission, the model eventually becomes a "coping" project, and nine times out of ten it will fail!

**About the author:** Hai You: Special contributor and senior researcher of New Distribution, practitioner of offline channel marketing, designer of enterprise channel coverage models. He has provided channel consulting for more than ten first-line brands and has gained a good reputation.

**Recommended reading**


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