Channel intensive cultivation, or deep distribution, is undoubtedly the most successful distribution model for FMCG in the Chinese market over the past two decades. Companies like Master Kong have adopted this approach, using thousands of sales offices, over ten thousand distributors, and tens of thousands of DSRs to directly cover and serve millions of retail terminals. This has supported sales scale of tens of billions, bringing products closer to consumers and shortening the time to market.

Brand owners can use this model to have their sales representatives reach terminals directly, gaining stronger control over channels and timely access to market information.

In addition to channel intensive cultivation, many brand owners now choose another model: instead of investing heavily in sales forces to manage the market and terminals, they use fees and incentive mechanisms to empower distributors to operate the market and terminals.

This model is also known as co-cultivation between manufacturer and distributor. As the name suggests, the "manufacturer" refers to the brand owner, and the "distributor" refers to the distributor. Both parties jointly operate the market, with the brand owner using fees to incentivize distributors and their sales staff, achieving a point-to-area effect through terminal operations.

In response to these two models, the New Distribution team invited industry professionals to discuss in the first live stream of the "Seize Opportunities, Stabilize Market" series on June 8: How do we understand their respective advantages and disadvantages in the new era? How can we leverage strengths and avoid weaknesses for effective implementation? And what is the relationship and development of these two models?

Channel Intensive Cultivation and Co-cultivation: Each Has Pros and Cons

From an operational difficulty perspective, deep distribution has many challenges. The two main difficulties are: First, deep distribution means intensive market development and operations, which inevitably increases the management difficulty of the marketing team and places extremely high demands on labor costs.

The deeper the distribution, the more personnel are needed. In other words, only companies that can build, manage, and control a large marketing team can implement deep distribution.

Second, deep distribution requires significant resource investment, but if the investment does not bring corresponding returns, it loses its meaning. Moreover, traditional enterprises lacking effective remote employee management systems face uncontrollable employees, leading to frequent gray marketing incidents.

The deep distribution model determines that it must be a large-scale, systematic project. In essence, the above two difficulties can be summarized into two points:

1. How to improve the input-output ratio? 2. How to improve cost efficiency and ensure terminal expenses are truly implemented?

Deep distribution has high costs and operational difficulty, and due to the above two challenges, few have successfully implemented it.

(Figure: Channel intensive cultivation model diagram)

Due to constraints, many brands choose the easier-to-operate co-cultivation model. In this model, for manufacturers, the resource investment in market cultivation is relatively lower. At the same time, distributors not only provide delivery services to terminals but also take on regional market operations. Distributors' regional resources and channels help brand owners cover a broader and more complete business market.

Distributors have more freedom, but they also need to be closer to the front line, adopting market strategies that better fit local conditions according to different market needs.

When terminal and market operations are handed over to distributors, people become the biggest uncertainty. Distributors' capabilities determine execution effectiveness, and since terminal and market operations are mainly handled by distributors, execution results are difficult to evaluate and guarantee. Moreover, distributors may not be fully enthusiastic about market operations because they often handle multiple brands. Additionally, in the co-cultivation model, the loss of a distributor means the loss of the market.

For brands, choosing the co-cultivation model does not mean they can be hands-off; there are still several issues:

1. How to evaluate distributors' execution effectiveness? 2. How to empower distributors and stimulate their operational enthusiasm? 3. How to make distributors' DSRs efficiently help brand owners carry out business work?

(Figure: Co-cultivation model diagram)

Wang Junfa, General Manager of Baixiang Food Group's Shandong Region, said in the live stream: "Whether it is channel intensive cultivation or co-cultivation, the most important point is not to use a one-size-fits-all approach. Different enterprises cannot use the same model. We cannot use mathematical thinking to make a one-size-fits-all decision. Only the model that suits you is the best."

(Figure: Comparison of advantages and disadvantages of the two models)

Digital Empowerment for Marketing: Adapt to Local Conditions to Fill Shortcomings

Freeing people from natural labor has always been the original intention of technological progress. In the current boom of industrial internet, no enterprise can isolate itself from the wave of digital transformation and upgrading. People hope that technological progress can solve problems that human power could not solve in the past.

But just as there is no marketing model applicable to all enterprises, there is no technical system that can solve all problems. Under the two models of channel intensive cultivation and co-cultivation, the problems are different, and the solutions naturally differ.

In this live stream, Xuanwu Technology shared how they, as a professional CRM service provider, solve the challenges under the "co-cultivation" and "channel intensive cultivation" models.

For the co-cultivation model, flexibility and freedom are the biggest characteristics. One key point is whether distributors have enough freedom to adjust market strategies according to local conditions, such as personnel management, inventory management, brand activities, and funds.

Seizing the market is about seizing time. From making a choice to implementing it, the timeliness of communication between distributors and brand owners determines the speed of progress.

The key factor in this process is authorization. Manufacturers need to delegate market operation authority, including applications, activity execution reviews, DSR behavior management, and distributor inventory management.

In the past, the typical process was for distributors to draft plans, create project proposals, then connect with the next-level contact, and go through layers of processes to reach the decision-maker. By the time the project is approved, the optimal timing and market environment may have passed, missing growth opportunities.

Therefore, Xuanwu Technology's Xunxun brand provides brand owners with a "one-stop super entrance" through its smart CRM product, facilitating brand owners to authorize distributors to manage and operate downstream markets, including activity applications, activity execution reviews, and DSR personnel business behavior management.

Image source: Shetu.com

This flattens communication processes, shortens communication chains, and helps distributors improve overall business management and operational efficiency.

In the co-cultivation model, factors affecting the upper limit of marketing effectiveness include not only distributor freedom and flexibility but also distributor DSRs. The former can be activated by delegating authority, while the latter requires efficient sales tools and visible incentives.

A DSR may be responsible for multiple brands. How to incentivize DSRs to efficiently carry out business? Xunxun's solution is points + tool empowerment, using a clear action chain of "performance assessment - points quantification - business execution - benefit acquisition" to arm DSRs and enhance combat effectiveness.

On one hand, it provides DSRs with a one-click entry to upload all business data, improving business efficiency. On the other hand, DSRs earn points for each activity construction or regular display construction they execute. Brand owners can give bonuses based on points in addition to the salary paid by distributors, making incentives visible and making DSRs more proactive in executing brand market strategies.

Under co-cultivation, a persistent pain point for brand owners is the fear of spending money without seeing results. If additional costs and manpower are added to audit and verify distributor execution, it may backfire.

In this regard, Xunxun uses AI full-volume audit to free up manpower. Its working principle is based on photos of activity sites uploaded by DSRs, and according to corresponding activity standards, AI automatically determines whether the activity meets standards.

This significantly reduces the cost of manual audit work, achieving an average monthly recognition of over 1 million items, ensuring the authenticity of over 20 million in expenses, and saving at least 50 personnel in cost verification work each month.

In summary, Xunxun's response to the key points under the co-cultivation model is as follows:

1. "One-stop super entrance" gives distributors full authorization and incentive assessment 2. "Points + tool empowerment" arms DSRs to enhance combat effectiveness 3. AI full-volume audit significantly reduces manual audit work

Under the co-cultivation model, Xunxun shared a real case: a large beverage client, with their help, used a business team of only about 400 people to leverage a million-level terminal network, over 3,000 cooperative distributors, and over 7,000 distributor business personnel serving the brand.

Such success stories are not limited to the co-cultivation model. For enterprises choosing channel intensive cultivation, Xunxun also has corresponding empowerment solutions and growth strategies.

As mentioned earlier, one of the difficulties under the channel intensive cultivation model is how to improve the input-output ratio and increase salesperson efficiency, enabling them to visit more terminals and get more orders.

On this issue, Xunxun uses big data algorithms to change from "people finding stores" to "stores finding people," improving salespeople's store expansion efficiency. From Xunxun's own database, data is filtered based on store tags, intelligently pushing tens of thousands of stores selling the same type of products, allowing salespeople to make scientific store expansion decisions.

For brand owners, having the advantage of intensive cultivation means not only placing products in terminals but also occupying prime shelf positions. If there is a placement fee, is it actually spent on displays? In the past, the solution was to rely on manual methods, having people do the inventory work.

But for salespeople, store inventory work takes up considerable time, and the input-output ratio is not proportional. Letting AI empower salespeople is what Xunxun is doing. Display inventory time has been reduced from 20 minutes to 30 seconds, improving salespeople's in-store work efficiency.

Moreover, this data is fed back to management in real time, helping management truly grasp terminal market operation data, generate terminal profiles, assist decision-making, and drive business growth.

With their help, a leading beverage client can ensure that over 9,000 front-line sales personnel work truly and efficiently, standardize actions, and maximize output. At the terminal level, it can ensure that over a million terminal expenses are truly implemented, occupy "prime shelf positions," and conduct intelligent audits.

The Relationship and Development of Manufacturers and Distributors under the Co-cultivation Model

Whether it is intensive cultivation or co-cultivation, the most important thing is that someone "cultivates," and it must be refined cultivation. Intensive cultivation and co-cultivation are just different in terms of who does the cultivation. Whether it is the manufacturer or the distributor, the number of people needed and the amount of work cannot be saved in a sense.

This is the view of Tong Xuewei, co-founder of Jiang Xiaobai, in the live stream regarding the relationship between the two models.

Many brand owners, eager to save costs, see co-cultivation as a way to transfer costs and shift risks. But can costs really be saved?

When distributors take on more sales functions and roles, manufacturers need to empower distributors, including helping build sales teams, improving distributors' service capabilities to retail terminals and secondary wholesalers, and even distributors' company management capabilities.

These costs, which are not written on paper, are often unconsciously ignored.

From the results, if the co-cultivation model operates well, it can indeed save resources, but the premise is "operates well." Co-cultivation is a means, not an end.

Under the co-cultivation model, the key is whether partners can share the same firm belief as the brand owner and whether there is a reasonable mechanism for co-creation and co-sharing—creating together and sharing together.

According to Xunxun's data, in the current business model distribution of FMCG enterprises, 40.2% choose co-cultivation, 29.9% choose channel intensive cultivation, 15.0% choose a combination model, and 14.9% choose other models. Will co-cultivation become the only choice in the future?

The development of marketing models must be based on market changes, consumption habit changes, and marketing tool changes. We cannot assert whether a specific marketing model will become mainstream. Intensive cultivation and co-cultivation are ultimately about distribution. Even if distribution is done to the extreme, it only reaches the terminal, but distribution does not equal sell-through.

Innovation is an activity that gives resources new capabilities and makes resources create wealth. In fact, innovation itself creates resources. Channel digitalization aimed at connecting with the C-end and promoting sell-through may become a key tool for finding incremental growth in the stock market.

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