---
title: "Deep Dive: What Exactly Ails New Consumption?"
description: "New consumption has fallen from grace almost overnight, but the real issue lies not in the hype but in the fundamental misunderstanding of consumer businesses. Most new consumer companies are doomed from Day 1 because they chase fleeting dividends like new media and channels, ignoring the true driver of success: brand, built on a deep understanding of user value."
author: "JerryHou"
publisher: "New Distribution"
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published: "2022-03-21"
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# Deep Dive: What Exactly Ails New Consumption?

> New consumption has fallen from grace almost overnight, but the real issue lies not in the hype but in the fundamental misunderstanding of consumer businesses. Most new consumer companies are doomed from Day 1 because they chase fleeting dividends like new media and channels, ignoring the true driver of success: brand, built on a deep understanding of user value.

It seems that overnight, new consumption has fallen from its pedestal of "being the center of attention" to becoming "a target of public criticism." Just a moment ago, it was the "hot potato" that investment circles scrambled to grab, and the next, it became a "poison" that everyone avoided.

But "being hot or not" is merely a phenomenon, and phenomena never matter: a thing does not become valuable because it is "hot," nor does it lose value because it is "not hot." What truly matters is understanding the essence behind the phenomenon.

However, whether in the past when new consumption was the darling of capital, or now when it has rapidly cooled down, amidst the noisy revelry, the vast majority of people have never truly understood consumption. The market is in a strange state: **a group of analysts who don't understand consumption are commenting on startups founded by entrepreneurs who don't understand consumption, funded by investors who don't understand consumption.**

What is even more shocking about all of this is: **consumption is an extremely ancient industry, occupying a crucial position in over a century of business history, with countless great companies as models; yet a host of new consumption entrepreneurs and investors have displayed immense ignorance and arrogance.**

Even in the recent analyses of why it's cooling down, few have truly explained what the problems with new consumption are:

It's not about the disappearance of traffic dividends; it's not about shifting from traffic advertising to offline advertising; it's not about focusing on moving from public to private domains; and it's not even about returning to making good products and supply chains.

Image source: Unsplash

Through this article, we attempt to help you understand: why has new consumption come to this? Where does the "illness" of new consumption lie? Why do we say that 99% of new consumer companies were wrong from Day 1? And what is the core of consumption?

**The wave of new consumption was likely "wrong" from the moment it appeared**

When did the wave of new consumption begin?

It's hard to pinpoint an exact date.

But many would agree that it likely started in August 2019 when Diao Ye published an article on his public account titled "Don't Doubt It, the 'New Consumption' Wave Is Coming!" The classic line, "Every consumer product is worth redoing," became a "bible-like" slogan repeatedly cited in the subsequent new consumption movement.

The formula proposed in the article: "New media (Douyin, Kuaishou, Xiaohongshu) + New channels (social/live commerce) + New products (extreme cost-performance) = New brands" also became the universal law that new consumer companies later followed.

But just two days after Diao Ye's article, Yu Ge, former general manager of new media at Harper's Bazaar, published a "cold water" article on his personal account titled "What Do Internet Old-Timers Know About New Consumption? First Distinguish Between Brand and Factory Brand." Although this article also reached 100k+ reads, it clearly didn't receive enough attention.

Yu Ge's article was somewhat sentimental: his criticism focused more on the idea that "according to Diao Ye's formula, there may be some brands that can grow big, but there's still a huge gap between brands that can grow big and great brands, roughly like 'Luckin is still a thousand Starbucks away from greatness.'"

However, Yu Ge was still too optimistic. Little did he expect that new consumer companies not only failed to become great but were still far from even growing big.

In fact, regardless of whether a brand is great, the important thing is: **relying on the above formula is destined not to create any successful consumer company. Because this seemingly correct formula has fundamental commercial flaws, violates the essence of business, and ignores the core of consumption.**

And the entrepreneurs and investors in new consumption easily bought into all of this: "Xiaohongshu for emotional planting, Zhihu for rational endorsement, Douyin and Kuaishou for live commerce, Tmall for traffic conversion."

People who smelled wealth rushed in, copying the model to churn out a bunch of so-called "new consumption" companies. Starting in 2020, over 300 new consumer companies received funding, an average of one per day.

It's important to understand: **whether it's new media, new channels, or the extreme cost-performance advantage from supply chain, none of these are fundamental factors determining the success of a consumer company; the huge opportunities in the consumer industry absolutely do not depend on these factors.**

Because **new media, new channels, and the extreme cost-performance from new supply chain advantages are, for any excellent consumer company in the world, merely carriers of information dissemination, carriers of product sales, and carriers of meeting user needs.**

**Being able to use these carriers well: knowing how to do media placement, channel sales, and product production, are just the most basic fundamentals for an excellent consumer company.**

If anyone thinks that a company can succeed, or even defeat giants, just by doing these fundamentals well and seizing these dividends, it's like saying that P&G, Coca-Cola, Unilever, or L'Oréal can succeed with any product they make, which is obviously absurd.

Because reality tells us that these world-class companies, which are best at marketing, channels, and products, have used nearly the same methodologies that made their most famous brands successful to create too many failed products over the past century.

Amazon founder Jeff Bezos once said something we find very valuable and particularly apt here:

**"People often ask me: What's going to change in the next 10 years? I find that's a very interesting question, but it's also a very common one. Nobody ever asks me: What's not going to change in the next 10 years? But that second question is actually the more important one."**

What are we trying to convey with this quote?

**Exploring the invariants is far more important than focusing on the variables.**

**If a consumer company thinks that changes in information channels—from "TV ads" to "video sites," to "social media," "short videos"—or changes in sales channels—from "hypermarkets" to "convenience stores," "integrated e-commerce," to "vertical e-commerce," "social commerce," "live commerce"—can shake its foundation, then it is definitely not a qualified consumer company.**

In other words, dividends like new media and new channels are called dividends because they exist equally for all industries and categories from Day 1. So if any company's core competitiveness comes from exploiting external dividends, it is destined not to be a long-term successful company.

A truly excellent consumer company's core competitiveness must come from within; with or without these dividends, it is destined to succeed.

Numerous business cases in the global consumer market show that almost none succeeded by relying on dividends:

Lululemon, with a market cap of over $50 billion, grew under giants like Nike and Adidas, not by relying on any dividend;

Olaplex, with a market cap of over $15 billion, grew under giants like P&G, L'Oréal, and Henkel, not by relying on any dividend;

White Claw, which sold over $3 billion in 2020, took market share from giants like Budweiser and Pernod Ricard, not by relying on any dividend;

Not to mention the world's most well-known first-tier brands today, which did not all appear in the same period; their founding dates span over a century of business history. In the past 100 years, almost every year saw the founding of brands that are considered successful today. This continuity in time tells us that the success of consumer companies never depends on external dividends.

Even looking at the Chinese market: Blue Moon, founded in 1992, started making laundry detergent in 2008; it took market share from P&G and Unilever during their most dominant period in China, not by relying on media/channel dividends;

Jiangxiaobai, founded in 2012, broke out in the extremely stable baijiu market, not even relying on the early Taobao dividend, but by fighting offline.

Zhou Hei Ya and Liangpin Shop, both founded in 2006, used traditional channels as their foundation for success from 0 to 1 and from 1 to 100.

These few Chinese consumer companies that have truly stood the test of time did not succeed by relying on media and channel dividends. The concept of "Douyin brands" touted since last year actually provides a negative reference: the once-popular "Taobao brands" that exploited the previous wave of dividends have rarely grown into successful brands today.

Some explain that this time is different because our supply chain is better, or we have this or that. But no consumer company in the world has ever succeeded because its core was a better supply chain; supply chain is merely a guarantee of success, not a driver of success.

**Every time someone thinks it's different; this time is different; but the result is often the same: there is nothing new under the sun.** A similar story has already played out across the ocean: starting in 2012, over 500 consumer companies with the DTC concept received funding in the US; today, less than one-tenth have made it.

And the key to the success of that less than one-tenth was not even DTC.

But such an obvious fact, almost common business sense, is ignored. Whenever new consumption is mentioned, people always talk about new media and new channels.

I once saw an interview with a popular new consumption founder saying, "All consumer products are born with channel dividends. P&G's rise back then was due to the dividend of Walmart's rise in the US."

Such a counter-intuitive fallacy, so easily falsifiable, is widely taken as a guideline by more new consumption companies to copy. As the representative of the world's most successful consumer company, P&G's success is definitely not due to Walmart's rise.

Here are a few simple numbers:

In 1980, P&G's sales had already exceeded $11 billion, while Walmart's retail sales had just crossed $1 billion;

In 1993, P&G's sales exceeded $30 billion, with international business accounting for over 50%, officially surpassing the US domestic market, becoming one of the largest multinational companies in the US. In 1994, Walmart just established its international division, and it wasn't until 1996 that it entered the Chinese market;

In 2004, only 8% of P&G's $51.4 billion in sales came from Walmart. And this was 17 years after the two had established a supply chain collaborative strategic management model.

**Misreading common business sense, lacking the most basic respect for the essence of business, trying to start with a speculative mindset of "seizing dividends," and having a shallow understanding of the essence of consumer products—99% of new consumer companies were doomed from the moment they were born.**

Don't focus on "great changes" over 5-10 years; instead, think in terms of hundreds of years of business history. Jack Ma once said something very apt: looking back, almost 99.99% of predictions about the future were wrong. Those who constantly think about seizing "great changes" die quickly; instead, those who focus on the invariants are better able to navigate change.

However, we still believe there are huge opportunities in the consumer industry. So perhaps the only conclusion we agree with is "all consumer products are worth redoing," but definitely not for any of the reasons mentioned above.

So what are the reasons we are optimistic?

First, over the past 20 years, the core driver of the entire Chinese internet industry has been the huge demographic dividend. So Google, Facebook, and Amazon are global companies, but BAT basically grew into behemoths by exploiting the dividend of China's 1.4 billion population.

Yet, facing the same 1.4 billion consumers with continuously improving purchasing power, our consumer industry has almost nothing to show for it, with only a handful of excellent consumer brands.

Second, the logic of the entire consumer industry has undergone fundamental changes globally, leading to one of the most important results: the possibility of super-large brands emerging has become extremely low. This has greatly increased the opportunities for small brands to grow into large ones.

**And this is the fundamental reason why we believe there are huge structural opportunities in the consumer industry.**

So how can one seize the opportunities in the consumer industry, and what is the key to success for consumer companies?

**The core driver of a consumer company has always been only one, and most new consumption companies are going against it**

What is the most core factor for a company's success?

We've mentioned before that we believe **the only moat for a company is its understanding of user value.**

Different understandings of user value determine that, whether in social networking, e-commerce, beverages, automobiles, hospitals, enterprise services, or beauty:

* **Different companies ultimately take completely different paths;**
* **This determines where the most critical inner differences lie among similar products with extremely similar external functions;**
* **This determines the efficiency of customer acquisition, product R&D, and capital utilization.**

This standard applies to any industry, and the consumer industry is no exception. In fact, consumption is the industry where this standard is most vividly demonstrated.

Globally, any consumer company we know well has succeeded because of precise insight into user needs. And the failed products launched by successful large consumer companies mostly stem from a deviation in understanding user value.

So, with precise user insight, it's possible to create a successful consumer company at any time, without external dividends. You can use the most traditional channels, whether online or offline; you can use the most mainstream strategies, whether high-profile or single-point breakthroughs; you can succeed. Without precise insight, sales driven by dividends are meaningless.

**Providing users with a more premium/better-looking/more cost-effective product is not understanding user value; it's just product design.** The nonsense you see in consumer reports like "more self-oriented, more appearance-focused, healthier, more self-pleasing" is not understanding user value either; many can't even be called correct nonsense.

**Understanding user value is the decisive factor, but it is not explicit; it cannot be directly presented to consumers.** It is ultimately presented to consumers through a series of specific external manifestations such as product function, image design, and advertising communication.

So at the explicit level, what truly drives consumption? The only correct answer is—brand.

Over a century of business history, no matter how the business environment has evolved, even today, the only core factor driving consumer companies has never changed: it must still be brand-driven.

**Sorry, it's not what many think: product strength.**

After new consumption cooled down, many came out saying that goods and supply chain are the most important. For example, Zhu Xiaomu, Luo Yonghao's business partner and former vice president of Smartisan, now at Jiaogepengyou, proposed that "the real core competitiveness of a new brand is the product. If the product is good and the price is good, even a dog can sell the goods. Although everyone talks about live commerce as people, goods, and scenes, the most important thing is actually the goods and supply chain."

Unfortunately, this is also not true. Products are indeed important, but making a good product is a basic requirement for a consumer company, not its core competitiveness.

All successful consumer companies in global business history are brand-driven. A simple example:

In blind taste tests between Pepsi and Coca-Cola, consumers generally found Pepsi tastier. Interestingly, if told before the test that they were drinking Coca-Cola, 49% preferred Coca-Cola; if not told, only 29% preferred Coca-Cola. **Yet Coca-Cola's sales have far exceeded Pepsi's for the past century.** In short, Coca-Cola is definitely not the best-tasting cola, and there are certainly many companies that can make better-tasting cola, but they cannot shake Coca-Cola's position.

Similarly, Starbucks is definitely not the best coffee company in the world, IKEA is not the best furniture company, Hermès is not the best bag maker, Head & Shoulders is not the best shampoo, and Budweiser is not the best beer...

This list could go on indefinitely. In almost every category, the top consumer company is not the one with the best product; product is just the basic skill.

And brand is not something that naturally appears as awareness increases; Coca-Cola is already one of the most well-known brands globally, yet it still spends billions of dollars on advertising every year.

It's hard to imagine that the core driver of the consumer industry is brand—such an ancient business common sense—yet it has not become a consensus in the current fervor of new consumption.

**If a consumer company cannot make building a brand its core strategy from Day 1, it is destined not to become a successful company.**

However, the reality is that most companies have extremely weak brand-building capabilities. What's even more unbelievable is that many new consumer companies' operations are going against brand building, making every possible mistake.

We also find a fact: even if people recognize the importance of brand, most interpretations of brand in the market are at two extremes: either too shallow, staying at the level of operational tactics, or too focused on art, aesthetics, values, and other things outside business logic.

We try to help you better understand the value of brand and what the key factors are for building a brand.

**What is a brand?**

It's hard to give a universally accurate answer. A brand is an extremely comprehensive concept, not a standard scientific definition.

If you look up Baidu Baike or flip through marketing textbooks, you'll get many definitions that are obscure, macro, or formal: a brand is the sum of all intangible assets of a company or brand entity; consumers' degree of recognition of a product and its product line; some will tell you that a brand is a projection of values; and so on.

The precise definition of a brand isn't that important; here, we try to give a more understandable definition: we believe **a brand is the expression of a product—the product's function, design, name, value proposition, etc., are all part of the brand.**

But more important than the precise definition of what a brand is, is understanding what the value of a brand is.

**What is the value of a brand?**

Many say the value of a brand is to sell at a premium, to sell psychological/emotional value beyond the functional value of the product. This is both right and wrong. A brand is the ability of a product to achieve a premium, but it's not the core of brand value; a brand can indeed present psychological/emotional value beyond functional value, but even looking purely at functional value, the value of a brand is still huge. So what is the most core value of a brand?

The answer is: **it is the most fundamental decisive factor in reducing users' decision-making costs.**

What does that mean? **To trigger a consumer's purchase behavior, the key is to influence the consumer's purchase decision.**

Therefore, most of a consumer company's efforts are aimed at achieving this: investing more in R&D; creating more aesthetically pleasing designs; hiring celebrity endorsements; placing large amounts of advertising; finding KOLs to plant seeds; finding experts to review; distributing across all channels; discounting and promoting; providing better service, etc. Almost every strategy you can think of is aimed at influencing consumer purchase decisions.

And you need to know that **99% of consumer purchase decisions are irrational decisions.** It's a process influenced by many different factors without fixed logic, which has even spawned many disciplines: consumer behavior, behavioral economics, consumer psychology, etc.

In other words, consumers won't study your product technology, cost structure, artistic value, or calculate the model of functional utility versus price...

Among all factors influencing purchase decisions, brand is the most fundamental decisive factor. Compared to brand, the influence of other factors is extremely limited.

So whether you think a brand provides trust, a stable expectation of product quality, emotional projection, or social currency, it all ultimately serves to influence consumer purchase decisions.

So a brand brings about the consumer's active choice in purchase decisions, a spontaneous choice that doesn't need to be pushed, a reassuring choice that doesn't need thought: not the recommendation of internet celebrities, not the endorsement of expert reviews, not the comparison of extreme cost-performance, not the temptation of the lowest price online, not the impulse from the urgency of limited-time flash sales.

It's not that these strategies are wrong; it's just that they are not the core. These should be the part that brings incremental gains.

A brand's sales should consist of "basic plate" + "incremental gains." **The brand brings the "basic plate," and marketing tactics bring the "incremental gains."** This is the healthy state a consumer brand should be in.

For consumer companies, the core effort should be on improving the "basic plate," not putting 99% of energy into "incremental gains."

Most new consumption companies are putting the cart before the horse. Live streaming with top influencers is essentially no different from the self-media e-commerce that became popular with WeChat public accounts; consumers are buying the channel's own recognition; sales generated by Li Jiaqi are the same as those from Yitiao or Zuie Niang before; consumers are not buying your brand at all.

So what is the core of building a brand? We believe it includes the following points:

**First, clear brand positioning.**

Brand positioning is the core that determines the brand's essence. The first thing a brand must do is make trade-offs. A brand that wants to satisfy everyone is almost equivalent to having no brand.

First, clarify who your target users are. Note: saying something like "target users are young people aged 20-35" doesn't mean you have target users; such nonsense is worthless. **The difference between two 20-35-year-olds can be greater than the difference between a human and an animal.**

Second, what is the functional positioning of your product? "Positioning" is a very valuable book, **but if after reading it, all you remember is something operational like creating a new category, then I suggest you read it 10 times again. Don't talk about creating categories all the time.**

Many consumer companies can't even build a successful brand, so don't think about being first. The market space in many categories is large enough to accommodate n successful brands. The value of "Positioning" is far more than just creating a category.

**Second, a brand must have its own unique differentiation.**

**One of the keys to brand success is having its own unique differentiation, including differentiation at the function level and differentiation at the emotion level.** This is one of the core elements that distinguishes a brand from others. The world's successful consumer giants are all practitioners of successful multi-brand portfolio strategies. Each different brand in the same category has different product positioning and value propositions.

So Head & Shoulders is for dandruff, Pantene is for nourishment; Snickers is for hunger relief, Dove is for silkiness; Coca-Cola is happiness, Pepsi is trendiness; BMW is handling, Mercedes-Benz is comfort; OLAY is fearless of age, SK-II is independent women, changing destiny.

But many new consumer companies basically show no differentiated positioning.

Everyone says, "I'm targeting young people/Gen Z; I'm for consumption upgrade; I offer higher cost-performance; I'm a big-brand alternative." There's a saying, "fake it until you make it." New consumption companies don't even bother to fake it. It's astonishing to see **many new consumer brands using exactly the same templates when doing Douyin advertising.**

"The price has been changed, go buy it. Are you wronged? No. Where were you when I sold xxx? xxxxxx"

"- Boss, your xxx. - Hey, don't talk. - I want to ask you, - Don't talk. xxx"

"Maybe you're all too rich to care about something that costs only xxx; xxxx"

"The day before yesterday you didn't buy xxx, yesterday you didn't buy xxx, today it's only xxx" "......"

**This operation is simply breathtaking.** Every brand should have its own unique expression, but these new consumer companies' operations make you wonder how they made such decisions that violate common business sense. They basically **overturn all common sense about brand building**, and all their actions are going against building a brand.

The core of a brand must be differentiated unique expression; uniformity is not a brand, no matter how much exposure it gets. Many brands' advertising is obviously ineffective at a glance.

**Third, the information a brand conveys must maintain a high degree of continuity.**

**Building a brand is never easy; it requires long-term, continuous delivery of the same message to users.**

On one hand, because user cognition is a magical thing, leaving a mark in users' minds is very difficult, so it requires great effort, long-term and continuous. This is why Coca-Cola, Head & Shoulders, BMW, and other brands that are already household names still need to spend hundreds of millions on advertising every year.

On the other hand, **excellent brands convey highly consistent messages to consumers, because if you say something different every time, consumers will question what your brand's core really is.**

It's not about talking about whatever is hot or trendy; you must always understand that brand building is not about pursuing exposure or communication volume. Chasing trends and leveraging trends are two different things. Many people think that as long as the communication effect is good, it's enough, but that's wrong.

When Weibo first emerged in 2010, many brands embraced it for the first time. But how to do it became a problem: in the early days of Weibo, accounts with funny jokes, chicken soup for the soul, etc., were the most popular; so many brands started chasing hot topics.

But one of the most core issues is: think about an ordinary user, the most ordinary individual in the world, why would they follow your brand's Weibo? To see jokes?

This is also why brand extension strategies that give a single brand more than one functional positioning have almost no successful cases worldwide over the past 100 years, because once consumer cognition is formed, it's almost impossible to change.

This is also why companies that think they can build a brand after succeeding almost never succeed, because once consumer cognition is formed, it's almost impossible to change. So brand building must start from Day 1 of the brand's birth.

**Fourth, the importance of brand advertising is far higher than digital performance advertising.**

The development of the internet has brought many myths to marketing theory, and one of the biggest myths is the blind pursuit of digital performance advertising. The blind pursuit of precise targeting, the blind pursuit of conversion rates, and the blind pursuit of so-called "brand-effect integration" or "brand-sales integration." These actually have very little effect on building a brand.

Precise targeting is important, and brand communication that brings conversion is also important, but that doesn't mean the focus should be on performance advertising. **In brand communication strategy, there should be a perfect balance between the two elements of accuracy and coverage.**

The blind pursuit of these largely comes from the widely circulated saying, **"I know half of my advertising budget is wasted, but I don't know which half." But sorry, this statement itself is a great fallacy: advertising that doesn't bring conversion is not necessarily wasted:**

**The core of advertising is never to bring sales, but to bring brand awareness, and the establishment of brand awareness brings spontaneous purchases by users.**

Purchases brought by advertising with direct conversion, on one hand, are purchases driven by external forces. As we discussed in the first part, purchases driven by external forces are far less important than spontaneous purchases by consumers;

On the other hand, purchases brought by advertising are also very likely to come from brand awareness established earlier; the advertising only triggers the final step, just like being full from a meal is not because of the last bite.

At the same time, the target of brand communication should not only be buyers: why is Hermès good? Because all 7 billion people in the world know it's good, not just those who buy it. If a brand's awareness is limited to its buyers, then even the original buyers would stop buying.

Globally, there are many well-known cases illustrating this issue:

Adidas, the global sports brand giant, has already had a bloody lesson. In 2019, MarketingWeek published an interview with Adidas's Global Media Director Simon Peel, admitting that Adidas had **made a huge mistake over the years: over-investing in digital performance advertising that seemed to have higher ROI, while neglecting brand advertising.**

This led to serious consequences: **the seemingly more efficient advertising brought about a significant decline in brand value.** Between short-term interests and long-term value, Adidas chose short-term interests, which ultimately backfired on long-term value.

A similar story: P&G, the world's most famous consumer company, clearly realized this much earlier: in 2016, P&G, which had been the first to embrace digital marketing globally since 2011, proposed **to reduce the scale of precision marketing performance advertising without reducing overall digital marketing investment, and instead invest more in brand advertising.**

And this shouldn't be anything new:

In 2012, when we were still mainly reaching consumers through POS systems in chain supermarkets, we ran a campaign: when consumers checked out at the supermarket, by identifying their shopping list information, we decided whether to generate a coupon for a new product and send it to them.

Before the internet became prevalent, the most interesting part of this campaign was the high identifiability of consumers: I could clearly know whether the consumer had bought my brand's product, whether they had bought competitors' products, whether they had bought products in other categories with similar positioning, etc., to decide whether to send them a coupon.

Theoretically, the most precise approach would be to send coupons to users who had already bought my brand's products in their shopping carts; the final campaign review data indeed showed that among all users who received coupons, this group had the highest redemption rate.

But we still decided to expand the coupon recipients, because this was a brand promotion campaign for a new product launch, not a sales promotion. Our goal was to reach more potential target users, not to achieve this sale.

Overly pursuing conversion in performance advertising is essentially a strategic laziness; insisting on doing difficult but correct things will yield better returns. In other words, what cannot be measured is the true test of a company's strategic capability.

**Fifth, the purpose of a brand is to achieve product premium, not cost-performance.**

**The value of a brand should never be reflected through cost-performance.**

If the purpose is to sell at low prices, then there's no need to build a brand at all. Because brand building is a very long and difficult process, often requiring high gross margins for support.

The most successful brands globally, whether their products are high-priced or low-priced, have never used low prices as the core selling point to attract users. **Excellent brands rely on brand power and product strength.** Because if users come to you because of your low price, they will leave when your price isn't low enough, ultimately backfiring on yourself.

Different types of consumer brands are naturally at different price points. Every point on the price spectrum has corresponding successful brands; a brand's price should be determined by its market positioning.

The core pricing strategy should be consistent with market positioning. Trying to do "low price, high quality" is a more dangerous strategy than "high price, high quality" or "low price, low quality."**

**Because when you convey so-called "low price, high quality" to users, you are sending a confusing signal: in users' minds, they will automatically demand the standards of high-quality products on the market in terms of product quality; and at the same time, they will automatically compare your price with the standards of low-priced products on the market.**

Often the final state is that the quality isn't high enough compared to high-quality products, and the price isn't low enough compared to low-priced products, making it hard to stand out and even harder to form cognition. **"Low price, high quality" often means a mediocre choice, and the market is full of mediocre products.**

On the other hand, with already unimpressive gross margins, price management—such an important thing—seems to be of no concern to many new consumer companies.

If I remember correctly, one of the important principles in brand building is that discounting and promotion are strategies that need to be used very cautiously. **Because once consumers perceive a brand as one that is always promoting, it causes great harm to the brand.**

However, many new consumption companies are almost addicted to promotions and discounts. Buy one get three, buy one get five, buy one get ten, buy one get twenty; it seems there's no bottom line except giving things away for free.

On one hand, they advocate consumption upgrade, higher quality, higher aesthetics; on the other hand, all selling points are virtually useless, and promotions become the core driver of purchase behavior. **If a brand's only appeal to consumers is price, it is destined to be a complete failure.**

**Discounting and promotion are the simplest of all marketing strategies; burning money on traffic is the same.**

**Since the internet cash-burning wars at a certain point, China's business environment has become extremely distorted. Everyone thinks burning money is the most effective way, but no case can change the fact that burning money is the simplest and most low-level of all strategies.**

Let's look back at the most successful companies in China's internet industry: the success of QQ and WeChat was not because they gave you 10 yuan for registering an account; Taobao and JD.com's success was not because new users got free first orders; Baidu certainly didn't rely on "browse and earn money." **If a company's core growth strategy is only using the simplest means, then that company essentially has no core competitiveness.**

**From this perspective, Zuo Hui's saying "do difficult but correct things" is essentially not one of the options, but the only option. Too many correct decisions are difficult; the simple ones are mostly wrong.**

**Conclusion**

**Throughout our entire education system, from childhood to adulthood, there is a particular focus on operational methodologies:**

When we were young, the most popular was how to solve problems, how to apply formulas to various types, even for subjects like Chinese, there were templates for answering different types of reading comprehension questions;

When we grew up, what became most popular: detailed explanations of the seven steps of e-commerce operations; the six major steps of Douyin advertising; strategy guides for private domain traffic, and other practical methods;

**But we always hope that more and more people will pay less attention to the operational "tactics" level and focus more on the essence of things, so that they can truly find the right path.**

**Source: Human-Centered Business Review (ID: human-centeredfirm) Author: Jerry Hou**

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