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In recent months, Y Company's sales meetings have always discussed the same topic: market weakness. Customers' attitudes are frightening: "Take it or leave it, I don't care." This echoes what the sales director often says in training: "The most powerful move in negotiation is to have no desires." Salespeople say that customers are now using this move against us, and we are helpless.

This is the feedback from almost all markets, and monthly sales collections are getting worse.

In fact, the general manager, Mr. Xu, knows the problem best. He has been promoting the "factory-store strategic cooperation model" for three years. This model, which bypasses channels and goes directly to terminals, helped the company reach its peak, but then problems emerged and momentum declined sharply.

Direct-to-Terminal: Trading for Rapid Expansion

Three years ago, Y Company began to cut off distributors and adopt a direct-supply store strategic cooperation model, with rock-bottom prices and low-price impact, quickly seizing market share. At that time, the thinking was forward-looking: as a latecomer brand, to win, you must defeat your opponents strategically. In the county-level market, competitors had already optimized their distributors two or three times. If we develop distributors again, we can only pick up the sesame seeds others have discarded. How can you surpass them? If others do addition, we must do multiplication. We must use speed to impact scale, build production capacity and volume, and squeeze out competitors.

How did the "factory-store strategic cooperation" work? Y Company directly cut off the previous distributor channel, saving 20% profit margin; it also cut most of the profits of maternal and child stores, from the original 40% to 15%, freeing up another 25%. Together, the two links squeezed out 45% of the space. Who gets it? Directly benefit consumers!

Cutting off distributors and cutting most of the profits of maternal and child stores—can this business still be done? Yes, not only do it, but also break industry rules by collecting deposits from stores! Terminal customers were initially shocked: "Are you crazy!" Can terminal stores really accept this? Can this approach really achieve the expected rapid development?

The results proved that the market accepted it. Here are the reasons salespeople used to make store owners comply:

Customer: "Do you know how much profit I need from a product? 40%. Without that margin, let's not talk." The salesperson's response:

  1. "Previously, there was only one store in this area. In less than two years, eight stores have opened. Too many monks, too little porridge. Everyone is hungry and fighting price wars, profits are getting thinner. How can you beat other stores?"
  2. "In maternal and child stores, the largest food category is milk powder, where consumers have strong brand awareness. The largest non-food category is diapers. Do consumers have strong brand awareness? A single trial pack can win a customer. Consumer needs are simple: good quality and low price. Consumers in our third- and fourth-tier cities have no brand loyalty; price determines purchase, and brands are chaotic. At least you never have to doubt the quality of our products!"
  3. "Our company faces the same problems as your store. Without better profit ideas or competitive strategies, it's almost impossible to grow bigger and stronger. So we adopted the 'factory strategic store cooperation model.' In one month, we developed 300 direct-supply stores in Henan. Some stores sold over 400,000 yuan in a single month for a single brand—dozens of times your current sales." How did we do it? The logic is simple: our quality is acceptable, and prices are low. Products selling for 25 yuan a pack outside, we sell for 12.5 yuan. With 12 packs per case, consumers save 150 yuan.
  4. "How much profit do you make? You earn 15%. But high-quality, ultra-low-priced products can quickly build foot traffic for partner stores. These new members are your real valuable resources. Think about how many members you have now. Moreover, you are the exclusive agent in this town. As long as others still source from distributors, you can outcompete them. Also, after you take the goods, we will send promotion staff to assist. Buy two get one free, buy one get one free. Others can only do buy ten get one free. At that time, consumers from other stores will come to your store. You can easily calculate the additional sales they bring. Imagine if the store across from you carries our products and runs promotions at the door every day, buy two get one free, prices 40% lower than yours. Can your similar products still sell? Will your members go across to check it out, get a trial pack or buy a few packs, and maybe also buy some milk powder or other items?"

In this way, starting with easy targets and expanding from points to areas, Y Company expanded to over 1,000 stores in less than two years. At that time, while other companies were still developing distributors everywhere, Y Company's salespeople were secretly laughing because they had completely intercepted at the terminal. Y Company's retail price was basically the same as other companies' distributor purchase price. With low-price impact, they stunned the market wherever they went. Many companies' channel sales declined. In two years, Y Company achieved several-fold growth, with strong market position, quickly reaching its peak.

But now?

You Intercept at the Terminal? Opponents Play Counter-Interception

Back to reality. More than two years have passed. Consumers are changing, and the market has changed. Store owners developed by Y Company found that although they benefited from Y products, they didn't "beat the store across the street" as Y Company promised. Moreover, Y Company quickly became a target. Competitors repeatedly brainwashed store owners. For example: "You only make 15% profit selling Y products? You're just a porter for Y Company. Don't you pay rent? Don't you pay employees? We give you 45% profit. If you sell 1,000 yuan a day, you earn 450 yuan. To earn that with Y products, you'd need to sell 3,000 yuan." Another example: "Y products can attract attention, but you open a store to serve high-end consumers. It's easier to make money from the wealthy. So, for cheap items, choose Y; for quality items, choose mine." ... Store owners' defenses quickly collapsed. Small stores that turn their backs are common: when customers enter, they push high-margin products. Y products are only sold if specifically requested, used mainly to drive sales of other items. When a product relies solely on repeat purchases by existing customers, its position becomes increasingly precarious. Now, as problems become more apparent and difficulties accumulate, the model's shortcomings become clearer: because Y prices are rock-bottom, there's no profit margin for salesperson commissions, no room for continuous buy-one-get-one promotions, and no space for prize-based displays... You can't afford these, but competitors can. You initially went direct-to-terminal, thinking you successfully intercepted all competitors outside the terminal. Now you find that competitors can counter-intercept, keeping you off the shelves and away from sales guidance. It's like diving: others dive from the ten-meter platform and execute beautiful somersaults. We dive from the one-meter platform and don't even have room to twist. How can we compete?

Back to Y Company's recent monthly sales meetings. Each monthly sales meeting includes training on "thought occupation for sales." The training content is clear: Why are some markets weak while others are still growing? The core reason is that your customers' minds have been occupied by competitors! The training is lively and interesting: standardized scripts for customers, routinized actions, and diverse tactics of coercion and inducement. But frontline salespeople repeatedly go to the market and return disappointed. Market weakness persists. Some experienced salespeople and sales supervisors generally doubt: Is it really because we haven't occupied customers' minds? Is the growth in other markets really due to our superior mind occupation compared to competitors?

Small-Step, Fast-Iteration Improvement

Three months later, a higher-level sales strategy meeting was held. Several executives talked late into the night, hoping to find a breakthrough through reflection. The general manager himself is well aware of the current market situation, as it is the result of the strategy set three years ago. The initial market positioning found a blue ocean strategy. The company expanded rapidly with great fanfare, but the speed-first approach led to a one-sided pursuit of speed, shallow roots, and supporting maintenance and management not keeping pace with the market rhythm. Haste makes waste. For example, market control against cross-region selling was not strictly enforced. After a surge in team members, control weakened. Market promotion and maintenance work lagged, leading to a high death rate of old customers. Another example: cutting off distributors did create a price advantage, but we lost distributors' services to terminal outlets, shelf stocking, and inventory hoarding, resulting in the current market situation. Once our pace of opening new outlets slows, the market loses momentum. Brand growth takes time, building consumer trust takes time, and market cultivation takes time. After reflecting and summarizing, Y Company proposed new measures for strategic correction: consolidate the foundation.

  1. Implement the point-line-area strategic promotion model. Purchase 20 new promotion vehicles, add 100 market promotion staff, form several promotion teams, and directly engage in terminal warfare. Many stores can sell 60,000-70,000 yuan in a single event. Promotion teams not only sell goods but also proactively collect potential customer phone numbers in residential areas or towns, invite consumers to participate in lotteries, games, etc., and embed the brand in people's minds while selling. Many store owners, after a promotion event, happily report to salespeople: "We gained dozens of new members! It's amazing!" The effect of such activities also aligns with the executives' original vision: high-cost promotion investment is not about selling goods in one event, but about cultivating the market, promoting the brand, and acquiring new consumers. Promotion activities enhance store owners' loyalty. The logic is clear: if you can help me get rich, I'm willing to follow. At the same time, for customers who were previously half-hearted in some markets, Y Company also took remedial action: "If you don't seriously sell our products, we'll choose other stores to cooperate with, and we'll have three promotion vehicles here for a week to build the market before leaving! Do you want to taste the bitter fruit?"

  2. Add new products. New products supplement outlets and effectively restrain customers' counter-control over the company.

  3. In new markets or areas where promotion intensity has weakened, introduce the distributor model to make up for insufficient outlets and solve the problem of inconvenient consumer purchases. For the newly added distributor group, sales staff assist in going to the countryside to build outlets and do promotions. In just 3 months, the new distributor group contributed significantly to the company's sales growth. Introducing the distributor model and integrating it with the original direct-to-terminal model is both a correction and improvement of the current model and one of the key directions Y Company will explore in the future.

Y Company's reintroduction of the distributor model is also related to its competitor, B Company.

The Persistence of Channel Supremacy Also Faces the Pain of Small Cuts

Y Company's biggest competitor, B Company, has always adhered to the "channel supremacy" model. B Company allocates profits reasonably across all channel links, supports distributors and retailers to develop together with the manufacturer, and has a strict price maintenance system and customer control system. Whoever breaks the system is dealt with, no matter how big they are. At the same time, their channels are fully sunk to county towns, with outlets covering townships. Each strong distributor is accompanied by 1 to 3 manufacturer-resident sales representatives. In a county with a population of 1 million, they require no fewer than 100 outlets. Therefore, their products are visible and available everywhere. They carefully cultivate the market like an excellent gardener, carefully nurturing the growth of flowers and trees. Displays, posters, samples, promotion execution—they wholeheartedly do the basic market work. They have more market maintenance staff and strong terminal control capabilities. Their efforts have paid off. After two to three years of market cultivation, the number of distributors and retail outlets has continued to expand with the territory, and sales scale has rolled forward. Here is a comparison of Y and B companies: Y Company has no more than 20 customers with annual sales over 1 million yuan nationwide, and no more than 10 customers over 2 million yuan. B Company has over 100 customers with sales over 2 million yuan. There are many new competitors in the industry, but without distributors, they seem to have no foundation. When the tide recedes and the industry reshuffles, they are like duckweed, washed away. B Company, however, remains steadfast. B Company's advantage is also reflected in team execution. Newly launched products spread like spring breeze overnight, with posters covering the doors of retail outlets nationwide in one night. That's their speed.

But over time, as product homogenization intensifies and price wars become fiercer, they have also been strongly impacted. With the same product, if competitors are 30% lower, consumers still tend to choose the more affordable option; Some generic brands with high profits are slowly winning over their distributors and retail outlets. Their products, like Y's, are also facing the treatment of becoming "loss leaders" to drive sales of other items; Similar to Y products, B products find it harder to reduce prices, and the profit space they can squeeze out is limited. Lack of profit space also means lack of room for operational maneuvers. They are also struggling to hold on and find breakthroughs. Their buy-one-get-one promotions and promotional efforts are also increasing, and they are actively developing new products to block competitors, but the overall effect is not obvious. B Company insists on channel supremacy, but isn't it also facing the pain of small cuts? So Y Company decided not to abandon its direct-to-terminal model, nor to follow B Company's full distributor model, but to try to integrate the two.

Fast Running Needs Growth Structure Support!

Commentator: Duan Wenzhi How to grow? How to grow rapidly? This is the primary issue every marketing manager faces. Channel, promotion, and product are the three horses pulling growth. Among them, channel and promotion are most easily influenced by policy in the short term. But the increasingly obvious reality is that growth relying solely on channel and promotion, i.e., expansionary growth driven by resource investment, cannot be an endless engine for corporate growth. Channel operations, whether direct-to-terminal (Y Company) or channel supremacy (B Company), face two-sided pressure: First, channel profit distribution is increasingly difficult. As competition intensifies, prices are either undercut or transparent, and channel links swallow large amounts of real money. Once resources are scarce, supporting the channel and the company's large workforce becomes a problem. Second, making money is increasingly difficult because profits are thinner and competition is fierce. This inevitably means that in economic downturns, a company's growth model must be upgraded.

How to upgrade the growth model? Many companies prescribe increasing outlet development and promotion efforts, as well as channel infrastructure. But this is based on the expectation that there is still significant room in the channel. In fact, with the reduction of channel dividends, many brands are facing the problem of channel development approaching a bottleneck. Thus, the key to survival in many industries is to continuously find new customers, maintain usage rates among new customers, and rely on word-of-mouth from old customers. If customer experience is ignored and only prices are adjusted, it may drive away a large portion of customers. In the infant and child industry, consumers pay more attention to cost-performance, brand, experience, and word-of-mouth effects, rather than simple price discounts and relying on channels to shout. Over-reliance on "developing channels to ensure growth" only distorts the growth structure. A concentrated manifestation of this distortion is that growth is extremely dependent on resource competition; otherwise, it cannot be sustained. This is precisely the dilemma of Y and B companies. Rock-bottom prices, distributors and retail terminals not buying in, and to reverse the decline, they deploy promotion vehicles and teams. This not only leads to rapid expansion of promotion and service teams, but also gradually diminishes promotion effectiveness, quickly losing appeal in front of stores. The most frightening thing is that to grow, they must continuously strengthen this distorted growth model. It's conceivable that the day they can't compete on resources is the day they are eliminated.

Therefore, an upgraded growth structure should include: product structure adjustment, adjustment of channel member cooperation relationships, and efficient combination to strengthen customer brand stickiness. In short, it should be a direction that can bring sustained growth.

1. Product Structure Adjustment Should Have Layers

  1. Within the product group, define functional positioning: have high-margin products and rock-bottom price products. Select several high-margin products as strategic focuses, cultivate them as high-end products, and use commissions, rebates, etc., to incentivize channel members and frontline staff, supporting the channel and marketing personnel. Use low-margin products to snipe at competitors and impact the market, rather than operating at bottom prices across the board.
  2. Internal product promotion should have layers: which products can be discounted, which can be bundled but not price-reduced, which can be jointly promoted, etc.
  3. For example, sub-brands can be developed to effectively segment price, promotion, and channels.

2. Channel Adjustment: Change from "Distributor System" to "Joint Distribution" In today's world of many brands and severe product homogenization (in the Internet age, even industries with high brand concentration see new startups with new models suddenly appear), without control leverage, no matter how good the model or how many resources, in the end it won't be yours. It may be difficult to change the cooperation model across all channels, but implementing mutual shareholding in core stores in core regions is not impossible.

3. Strengthen Customer Stickiness Take the infant and child industry: choose some stores with good foundations, enhance customer experience through displays, product knowledge, parenting lectures, etc. Also, invite teachers to hold conference marketing, rather than directly undercutting prices. Terminals have a voice against companies, but who holds the terminal's voice? It's held by customers.

In the county-level market, competitors have already optimized their distributors two or three times. If we develop distributors again, we can only pick up the sesame seeds others have discarded. How can you surpass them? If others do addition, we must do multiplication. We must use speed to impact scale, build production capacity and volume, and squeeze out competitors. You initially went direct-to-terminal, thinking you successfully intercepted all competitors outside the terminal. Now you find that competitors can counter-intercept, keeping you off the shelves and away from sales guidance. But frontline salespeople repeatedly go to the market and return disappointed. Market weakness persists.