At the 2023 (8th) China FMCG Innovation Conference held in Chengdu on April 6, Cao Hu, Global Partner of Kotler Consulting Group and President of Greater China and Singapore, attended the main forum as a distinguished guest. He is a Global Partner of Kotler Consulting Group, President of Greater China and Singapore, and a council member of the China International Friendship Liaison Association. He holds a bachelor's degree in biochemistry, an MBA, and a PhD, and studied under Professor Philip Kotler. He specializes in growth strategy, marketing strategy, brand strategy, international market strategy, and city marketing strategy. He previously served as a senior manager at a Fortune 500 company and a senior consultant at a renowned international strategic consulting firm. At the conference, Mr. Cao Hu delivered a speech titled "New Thinking on Brand Strategy in the AI+ESG Era," introducing marketing development trends for the next decade and comprehensively elaborating on marketing models in the new world. __The following is an excerpt from Cao Hu's speech (partially abridged):Three Characteristics of Marketing Trends in the Next Decade I want to share some thoughts on the underlying logic, hoping these ideas can help FMCG entrepreneurs and practitioners understand the underlying logic of the new world from a different dimension. What is the essence of what we do from a long-term and medium-term perspective? In a true value creation cycle, from now to the future, how do we grasp the way of innovation and customer value creation in both large and small cycles? So, today's theme is "New Thinking on Brand Strategy in the AI+ESG Era." This is a panoramic map of global marketing trends for the next decade that we created in 2020. This map is highly abstract. What opportunities does the information it contains bring you? From a global perspective, in the next decade, our marketing will exhibit three characteristics. The first characteristic is a slow, long-term, low-growth climb , with fluctuations in between, but growth is certain, albeit extremely slow. Excluding inflation, growth may be in the range of one, two, or three percent. This means that for many Chinese companies, especially those accustomed to high growth in the past—whether driven by national dividends, market dividends, first-mover advantages, or platform advantages—the low-growth era presents a significant challenge. Your organizational capabilities, cost structure, and cost behavior may no longer be suitable for the low-growth era. The good news is that truly great companies and brands are born in low-growth eras, because in high-growth eras, you might not need to do anything; just choosing the right track ensures growth, and you end up with excess fat. In low-growth eras, you have the opportunity to build muscle. Companies that have not experienced low growth and cycles are not excellent companies. Second, with changes in technology, consumers, and social trends, our marketing methods are shifting from professional marketing to entrepreneurial marketing that emphasizes rapid response and iteration, and then to sustainable marketing. This will impact our marketing focus and basic models. Third, by 2030, we will experience deep aging. Generation Z, which is making various trial choices and has not yet formed fixed brand preferences, will by then have become the mainstream of our middle class. Such changes will bring about deep adjustments, affecting consumer preferences for categories and brands, as well as fundamental changes in product choices. In the broader context, we have already felt the impact. As Mr. Kotler proposed in his new book "Marketing 5.0" (written three years ago), artificial intelligence—at that time primarily decision-oriented AI such as intelligent recommendations and autonomous driving—combined with IoT and various data technologies across cloud, edge, and terminal, will greatly enhance marketers' ability to create customer value. That is, Marketing 5.0's human-machine integration does not replace our work but gives us new tools and possibilities to solve customer problems, requiring marketers to be more creative. Today, we have seen that ChatGPT is a term every guest mentions. I also mention it because AI+WEB3.0 has deeply integrated into the full-chain customer operation. An important goal of our marketing is to enhance customers' perceived value through full-chain operations. In the past, we focused more on the front chain, referring to customer acquisition and first-order conversion. But today, in the full chain, we focus more on the back chain—how customers use, dispose of, repurchase, and recommend your product after actually purchasing it. The back chain is key to enhancing customer lifetime value, while the front chain is the beginning of everything. To summarize, in marketing, you will feel the huge impact of three forces. The first impact is the aftermath of the global pandemic , which to this day brings great uncertainty to the global economy. Consumers' self-perception and confidence in the future affect current purchasing behavior; this is short-term. The medium-term impact comes from artificial intelligence. The shift from PGC to UGC to AIGC brings a paradigm shift in marketing content. Can companies embrace these new technologies and tools faster? You will find that in such a major technological dividend cycle, the disruptors who stand out and overturn the giants are characterized by their ability to quickly use and embrace new tools. So, AI tests whether we have new tools. The third impact is long-term , arising from environmental changes and global geopolitical shifts, leading to a reconstruction of deep globalization and a reconstruction of consumers' long-term thinking. For example, climate warming and sustainable development. So, these three impacts are subtly and profoundly affecting every enterprise and every consumer. Some impacts are felt immediately, while others are slowly, deeply, and irreversibly reconstructing our industry and brands. Consumers Shift from a Passive Mindset to a Creator Mindset Behind these impacts, there is the most fundamental underlying logic. What exactly is being impacted? What kind of species is "human"? Allow me to distinguish between the old era and the new era. In our old-world marketing, all marketing work had a fundamental logic: we would try every means to make people believe that their primary identity is that of a consumer. We are born to consume; we are born to create, with constant desires and cravings. So, under the influence of various media and cultural paradigms, companies and brands in the past spared no effort to make us believe we were born as consumers. The logic of old marketing is that humans are passive consumers. We need brands to tell us how to live; we constantly upgrade your consumption, producing various products to satisfy different lifestyles. But today, you will find that after the pandemic cycle and in a society driven by rapid development and comparison, the source of our happiness and joy often does not lie in how much we own. In the past, it was assumed that the more material possessions you have, the more control you feel, and your sense of security comes from material ownership. But today, you will find that your material possessions do not reduce your anxiety about the world at all. You spend a lot of time every day thinking about what trends to follow and what to buy, which makes you feel irritable and depressed. In a comparative society, when material high ground defines social status, you find there is no end. After comparison, you realize that no matter how much you own or how hard you try, there is always someone better, richer, or faster. At this point, we become confused. Today, facing the triple impacts, consumers begin to reflect, and this is the logic of new marketing. Today, materialism has reached its end. When all brands emphasize faster, higher, stronger, and enhanced innovation, our premiumization is absolutely not just about using more expensive materials, higher technology, or scarcer and more beautiful packaging. That is one path, but not the only one. Why? Because consumers are changing. We do not exclude that many consumers remain materialistic, but today, those consumers who are primarily creators are becoming the mainstream. This is the underlying logic of new marketing: the awakening of humanity's creator identity. That is, people no longer think of themselves merely as recipients of products; their decisions are influenced by ads and those around them. They want to become creators. What is a creator? I can freely choose who I want to become. Once humans begin to think about who they want to become, your consumption choices, brand preferences, and the relationship between brand and you will all change. When we choose who we become, we become creators. This is the most fundamental logic of new marketing. The main source of people's happiness is not material goods and consumption; people's primary identity is that of active creators. This change in mindset is very important. Every one of you, at every moment in life, is making choices. For example, you can choose to wake up at 7 a.m. and sleep at 11 p.m., living a healthy, sustainable life; that is your choice. You can also choose to stay up the latest, use the most expensive cosmetics, and call the most expensive ambulance—a punk health choice. These affect your brand preferences and resonance. The awakening of the creator population means that in today's market, there are many new segmented consumers. We have listed a total of 28 types of segmented consumers, and here are five examples. For instance, there are minimalists who simplify their lives, following a 3R principle: I don't buy excessive items; I invest limited money in the best products that suit me best; my life follows the 3R principle, reducing unnecessary purchases. There are minimalists, anti-growth advocates, and rational food choosers. I choose to be a rational food chooser, eating less animal protein, especially less beef. Why? Because I care about the planet. I cannot change the fact of global warming, but I hope to have a positive impact through my consumption. I don't eat beef because cows fart; cow flatulence is a major greenhouse gas. So, through my dietary adjustments, I participate in building a better Earth. If you are not in this group, you might think their ideas are strange. For such groups, their expectations of brands differ from ordinary people. For example, they expect brands not to make money quietly; they hope our FMCG brands—especially FMCG, which has the greatest environmental impact among consumer goods because of long life cycles and long supply chains from planting, production, transportation to consumer use and disposal—will have an attitude and build relationships, bringing a new trust relationship. The Triple Bottom Line in the New Marketing World In this context, long-term sustainable value and lifestyle choices become important factors in consumer purchasing. This requires brands to deeply interact with such target segments. To become their preferred brand and integrate into their lives, brands must take responsibility for creating social value, which is what Michael Porter first called creating shared value, rather than short-term economic value. Brands must have responsibility. Moreover, in today's new marketing era, the brand's mission is not only to create customers but also to solve or influence some social problems through creating customers and economic value, that is, to achieve corresponding social goals. Think about which brands have these characteristics. To be more specific, in the context of the global consensus on SDGs, whether in the East or West, despite geopolitical differences, there is one commonality: the environment, climate change, and sustainable development are needed by any country. For example, Unilever, a very large enterprise group, proposes circular business. Each of its brands not only has a brand positioning and brand goals but also a purpose: how the brand's existence creates additional social sustainable value beyond economic value, with a very specific roadmap for realizing value. For example, YKK Group in Japan has a "Cycle of Goodness" that includes stakeholders, not just shareholders, in value creation and business model creation. A good sustainable century-old brand must have five goods that circulate with each other, from suppliers to employees to customers to communities to investors, all obtaining corresponding value. This is a basic principle of sustainable development. Patagonia is a very famous outdoor clothing brand. Traditional marketing thinking would profit by selling more goods at higher prices, making you buy more. But in the new marketing world, such a model is unsustainable, like outdoor sportswear. Outdoor sportswear uses a very important material for rain and waterproofing, which is extremely difficult to degrade naturally. Also, outdoor products are not bought daily like daily necessities; why? Because they are highly scenario-based and functional. So, it is very counterintuitive that this company advertises: "Don't buy if you can avoid it. Do you really need to buy?" They advocate circular use rather than innovative purchase, and they also oppose making outdoor clothing colorful to entice you to buy and pollute society. From this perspective, it seems to reduce consumption possibilities and lower enterprise growth potential, but in reality, this company's shareholder returns exceed those of similar companies. Why? Because it brings higher customer loyalty. It launched a circular business model and gained resonance from multiple parties. So, this company proposed the 4P principle: we focus on people, product, packaging, and planet. Its operations follow the triple bottom line to measure whether my enterprise is successful and whether my brand is successful. First, is it beneficial to people? Second, is it beneficial to the environment? Third, is profit growing? This is the triple bottom line. Today, ESG investment, represented by the triple bottom line, has become a very important principle for global financial institutions. Many institutions have signed ESG covenants, and only brands that meet the triple bottom line can obtain investment. Sustainability represented by ESG and brands centered on creating shared value are essential for today's new-generation brands to enter the global market. This is the common value of all market communication. Today, whether in new internet services, new consumption, new technology, or new B2B brands, sustainable brand development has become a must. Consequently, you will find that in today's organizations, to cope with the reality of new marketing—from passive consumers to active choosers, from single economic value to sustainable shared value—our marketing organizations and capabilities must develop; otherwise, it is all a mirage. So, in our organizations, there will be two types of marketers who collaborate and balance each other. One type is the growth marketer, which most of you are familiar with. Our goal is to sell more goods, sell at higher prices, sell more frequently, and bring many repurchases, leading to prosperity and economic growth. But at the same time, our organization also has a second type: the sustainable marketer. What does this type of marketer do? They stand at a higher value dimension, using social marketing tools to influence consumers, companies, and government policy-making. Using our marketing tools, they educate consumers and influence them to adopt a producer mindset, to be more sustainable. We don't necessarily need to own products; we need the capabilities that products bring, that is, shifting from product ownership to service. Both types of marketers are extremely important for our sustainable development. This is the new world of brands. Finally, I will end with a quote from Mr. Kotler: "What is right has long been written in books by sages, but people constantly learn and train themselves to gain the courage and ability to do the right thing." This is a very important reason we gather here today to exchange and learn. In today's new world of brands, in the historical trend of premiumization, I hope everyone can have a deeper understanding and a higher perspective to deeply understand premiumization and the new world, jumping out of the traditional mediocre perspective, and bringing innovative value to customers. PS: Friends interested in the on-site speech content can follow the recent posts on the WeChat official account of "New Distribution". We will compile and publish all guests' speeches for readers. Click Read Original to see more highlights of the 8th China FMCG Innovation Conference...