FMCG companies' channel digitalization has reached a critical stage, but actual implementation results are not ideal. First, from the perspective of channel digitalization outcomes, it has not effectively generated performance growth or organizational efficiency, nor are there corresponding evaluation standards. Second, in the execution process, most companies emphasize management over empowerment, using digital system tools to increase supervision of channel execution roles such as distributors and salespeople, stripping them of reasonable control space. At the same time, they fail to use digital tools to provide sufficient empowerment, leading to intensified game-playing among manufacturers, distributors, and teams, increased internal friction, and channel digitalization hovering on the brink of failure. Today, focusing on the empowerment aspect of channel digitalization, we offer some suggestions for FMCG manufacturers and distributors based on seven marketing strategies along the channel chain. Product Strategy Considerations Essentially, budget sales targets and expense investment plans are all business strategies based on product dimensions. If the product strategy is unclear, other strategies cannot be precisely implemented. There are seven dimensions that require deep thought in product strategy. 1. Product Labeling: Ideal products have "three high" attributes: high coverage, high gross margin, and high turnover. Based on these "three high" dimensions, you can divide your products into eight quadrants, each matched with different product layer strategies. 2. Product Sell-Through Logic: Without deep thought on product sell-through logic, all product strategies are hollow. What is sell-through logic? It is finding, reshaping, or communicating product selling points based on product differentiation to give consumers a reason to buy. 3. Product Channel Chain Grading System: The length of the channel chain determines product profit margins and service efficiency. The longer the channel chain, the thinner the profit margins at each level, and the lower the brand's control over outlet service links, and vice versa. But it is not necessarily better to be shorter; it needs to match reality. 4. Product Channel Chain Pricing System: The channel pricing system is key to ensuring channel profits. Here, you need to collect information on major competitors' channel profit structures, design the price chain from a competitive standpoint, strictly adhere to price bottom lines, and penalize violations. 5. 2022 Category Achievement and Opportunity Forecast: What is the basis for setting tasks and allocating targets? The boss can make decisions by intuition because the purpose of hiring a team is to achieve his desired targets, which is natural. But others cannot. How to make accurate sales forecasts for the coming year based on product dimensions requires detailed analysis. 6. Is the First Engine Product Complete, and Is It Necessary to Start a Second Engine Product? Generally, I suggest brand owners divide products into four types:
1 Strategic products (winning the future) 2 Traffic products (winning the present) 3 Profit products (foundation for survival and growth)
4 Disruptive products (improving market competition landscape) Each product has its unique mission. If you try to grasp everything, making all products key products, then next year's marketing will inevitably be chaotic. 7. How to Standardize Channel Product Age Management? In the future, fresh product age will definitely be the first competitive advantage for FMCG companies. The three years of pandemic have taught consumers that physical health is the primary need. At this point, companies should establish a channel product age management system that suits their own product characteristics. Companies with conditions should set up dedicated teams for inspection and supervision to ensure better product age experience for consumers at the outlet level. Channel Strategy Considerations Channel competitiveness is one of the core strengths of a company. FMCG companies should continuously improve and adjust channel strategies to optimize channel operation structures, making them more aligned with product supply chain needs. There are ten considerations in channel strategy. 1. Match the Company's Channel Definition and Required SKUs: The purpose of channel definition is to accurately describe channel characteristics. Business teams can classify their outlets based on common features, thereby more precisely matching required SKUs and allocating related resources. 2. Channel Breakthroughs Should Have Priorities: For brand owners, you cannot try to grasp everything. After a period of accumulation, brands are endowed with certain consumption scenarios by consumers. The channel matching the scenario is the strategic channel, and you must strive for the first in numeric distribution rate, weighted distribution rate, and display distribution rate. 3. Set Channel Outlet Coverage Targets: When growth hits a bottleneck, consider distribution indicators for different channels. Besides looking outward, also study internal data, such as coverage rates of different channels in subordinate institutions. Through internal comparison, you can discover growth opportunities and the paths to achieve them. 4. Develop Channel Execution Standards: What are execution standards? Simply having display requirements, case-cutting requirements, shelf and floor stack requirements is far from enough. Here, we need to achieve two points: first, basic brand image building; second, consumption scenario building. 5. Determine Business Area Planning Guidelines: Many companies overlook this, making many unified standard rules that are essentially impossible to implement. The market is not a regular shape, area division is not geometric area, and outlets are not evenly distributed. Fully consider the working conditions of frontline staff. 6. Design Scientific Outlet Visit Planning: Outlet visit frequency relates to precise use of human resources. For grassroots salespeople, they earn compensation through outlet visits and performance. Daily working hours are limited, so companies must balance the contradiction between the number of outlet visits and visit frequency. More visits mean lower frequency, so a balance is needed. 7. Outlet Management: Rating System. Enterprise resources and costs are limited, and salespeople's service energy is limited, so outlet investment will inevitably be graded. The purpose of rating is precise and differentiated management of outlets. If such a management mechanism cannot be achieved, rating is meaningless. 8. Clear Regional Battle Map: If you are unclear about your market, only focusing on details and improvements without a market-wide view, how can you effectively control the market? Therefore, it is recommended to create a market regional battle map, planning sub-areas, population at each administrative level, number of outlets, key accounts, coverage rates, and other related indicators, so that next steps are targeted. 9. Channel Achievement and Opportunity Forecast: Why do channel achievement and opportunity forecasting? The two common dimensions for annual budgeting are product dimension (growth space of each product) and channel dimension (growth space of each channel). Channel achievement and forecasting are the best methods for self-reflection on business growth, generally done through horizontal and vertical comparisons. 10. Distributor Safety Stock & Product Age Management: In channel strategy, first pay attention to distributors' reasonable inventory, then care about the product age of distributor inventory. This is not just talk; there must be mechanisms in place. Distributor Strategy Considerations Distributors flow among various brand owners, seeking the most suitable brand, while brand owners also select the most suitable distributors in the market. The best state of manufacturer-distributor cooperation is a high degree of matching, with core items being: willingness to do well and ability to do well. Here are a few simple indicators of distributor capability and willingness: 1. Distributor Supply Chain Capability (Warehouse Area & Logistics Vehicles): Warehouse is not necessarily better if larger; it just needs to be sufficient. Logistics is not necessarily better if faster; next-day delivery is sufficient. "Sufficient" and "next-day" also have standards, determined by the brand's product attributes, peak and off-peak sales and safety stock, order volume, and service radius. Of course, I have seen some distributors with excellent supply chain capabilities: intelligent warehouse location management, accurate knowledge of each SKU's quantity and freshness, using automated or semi-automated systems for storage management to improve warehouse efficiency. 2. Financial Capability (Capital Strength & Capital Utilization): Capital strength is hard power, referring to self-owned funds. Several distributors I have served had to repay debts at year-end, causing severe sales losses due to capital shortages. Second is capital utilization capability. Capital turnover rate is the standard for measuring profitability. Inefficient capital turnover leads to profit loss. If distributors don't make money, cooperation cannot continue. 3. Channel Coverage Capability (Quantity and Quality of Outlets): Each distributor has a unique channel coverage model, some directly serving outlets, some through sub-distributors, and some using third-party services. These are all service processes. From result indicators, distributor outlet coverage rates must meet standards, and outlet quality (in-store SKU count, merchandising layout) must meet standards. Excellent distributors, in addition to fixed result and process indicators, also set phased task indicators, such as new product distribution, product display, high-profit single-item sharing, and set corresponding reward amounts. 4. Operational Efficiency (Operational Capability and Efficiency): This needs to be treated differently. If the brand defines the distributor as a logistics and service provider, then the distributor's operational efficiency is mainly reflected in delivery service quality. If defined as a business partner, then the distributor must have its own operational efficiency to complete various indicators assigned by the brand on time, with quality and quantity. 5. Organizational Capability (Team Size & Management Capability & Cohesion): FMCG offline operations cannot escape the human-wave tactic in the short term. The core value of distributors lies here. Team building, management capability, etc., are important indicators for measuring distributor value. 6. Digital Capability: Brand owners should objectively view the importance of digital transformation, especially traditional senior executives. They must first maintain an open mindset, not rely on past empiricism and departmentalism, and embrace digitalization. Only then can they see and evaluate distributors' digital capabilities. Organization Strategy Considerations Marketing team organization strategy involves several dimensions: FMCG manufacturer and distributor manpower allocation plans, team ownership issues, recruitment and training, salary and assessment. The core sharing point is how to achieve the best market service through effective collaboration under the current situation of rising labor costs. 1. Precise Allocation of Team Size: Must satisfy both finance and service. a. Finance satisfied, service satisfied: this is the best configuration, but beware of human resource waste; b. Finance satisfied, service not satisfied: at this time, the company should supplement personnel; c. Finance not satisfied, service satisfied: at this time, distributors need to recruit personnel and negotiate how to bear labor costs; d. Neither satisfied: at this time, the market foundation is weak, so focus manpower on key regions, channels, and outlets for breakthroughs. 2. Establish Regional Market Organization Chart: Many companies easily overlook this, or only verbally promote it. This needs refinement. Manufacturer and distributor services must have a system, and an organization chart is indispensable. Its greatest role is the "hardware" guarantee of market services. 3. Business Salary and Sales Assessment Linkage Mechanism: Sales assessment determines salary treatment, and salary treatment determines organizational stability. The assessment of FMCG sales teams is slightly different from other industries, with more focus points and stronger stage-specificity. The ultimate goal is profitable sales. The assessment mechanism determines the stability of the marketing organization. There is no absolute right or wrong; it is necessary to match the times. 4. Recruitment and Training of Organization Members: Recruitment of grassroots execution and management teams can be placed at the distributor level, with pre-set indicators such as age, education, experience, and then support some costs. Distributors will be more diligent in recruitment because these personnel directly affect their own interests. However, new employee training must be completed by the company. New employee training first involves conveying and understanding corporate values, related products, and systems, followed by business skill training. Distributors find this difficult to do well. 5. Configuration of Marketing Management Team: Several dimensions can be considered: a. Management Perspective: From the FMCG industry perspective, a middle-level manager effectively manages 3-5 grassroots supervisors, and a grassroots supervisor effectively manages 6-9 salespeople. b. Business Perspective: A middle-level manager's responsible area should be at least a region, with a relatively large business volume. Companies can set based on business volume and workload.
c. Management Organization Setting: A middle-level manager is generally equipped with assistants, usually divided into three types: sales administration, sales planning (also called promotion specialist), and sales operations specialist. Mainly based on different sales volumes, gradually increase: first-level offices configure 3, second-level configure 2, third-level configure 1. In principle, the more management organization personnel, the more refined market operations and the stronger regional competitiveness. Expense Strategy Considerations 1. Plan Expense Categories Well: Many companies have complete expense processes, from expense budget--expense application--expense use--expense check--expense reimbursement--expense accounting, forming a complete closed loop. However, expense category planning is often missing or does not match the company's current operations. Marketing 4P is one dimension for dividing expense categories, and many brand owners plan this way. What needs attention is that the long-term development of manufacturers and distributors must focus on product competitiveness, channel competitiveness, and consumer competitiveness, so the focus of expense planning should be clear. 2. Sort Out Expense Management: FMCG companies have the following five characteristics in expense management: a. Fine Expense Classification: FMCG marketing expenses can be subdivided into hundreds of subcategories. Different expense categories affect the company's control intensity, control standards, and even payment results differently; b. High Product Refinement: FMCG products are highly homogeneous and easily replaced by other products. Companies need to conduct market segmentation management based on consumer object categories, geography, and capabilities, with higher product refinement; c. Large Regional Span: FMCG products target a broad consumer group, and due to low brand loyalty, consumers prefer convenient purchases, so FMCG regional terminal distribution requires breadth, depth, and detail; d. Many Channel Types: The FMCG industry has a saying: "Terminals are king, channels win." Channel construction becomes the winning formula for FMCG sales success; e. High Complexity: FMCG companies are often required to manage processes with both coarse and fine details, and different organizations, product lines, and even channels within the same company have vastly different requirements for expense management intensity, making actual expense management difficult. 3. Expense Sharing Ratio: Must be transparent and rule-based. Today's FMCG market cannot rely solely on brand owner expense investment. Distributors must also make necessary expense investments based on specific situations. In fact, many brand owners are already doing this, but what is lacking is transparency and rule-based sharing ratios, causing conflicts between manufacturers and distributors. Making the sharing ratio transparent and rule-based is an important principle of expense strategy, reflected in all aspects of expense investment, establishing rules based on the principle of win-win cooperation. 4. Common Problems in Expense Strategy: a. Unreasonable Expense Allocation Standards: Some companies allocate expenses based on a unified expense rate. It is not necessarily true that regions/customers with higher sales get more expenses; the key is to consider the value of expenses. b. Low Expense Use Efficiency: When conducting various promotional activities, companies generally focus on expense applications but lack activity planning and process management. Often, money is spent but results are hard to see. c. Untimely Expense Reimbursement: The current model where distributors advance market expenses has problems with long reimbursement cycles, affecting distributor enthusiasm. d. Lack of Evaluation of Expense Use Effects: Many companies lack effective evaluation of market expense use, so there is no guidance for the next activity. e. Expenses Become Gray Income. 5. Several Operational Suggestions for Expense Strategy: a. Expenses should have a budget; b. Strictly control expense application and execution; c. Establish expense use policies and review processes; d. Regularly audit and evaluate marketing expenses. Consumer Strategy Considerations The core of product strategy is simply three points: customer acquisition, repurchase, and average transaction value. In plain language: guide consumers to buy; drive consumers to buy again and repeatedly out of habit; find ways to increase the quantity or amount of consumer purchases. 1. Product Strategy Implementation Should First Do Market Profiling: Strictly speaking, these three basic actions of consumer strategy need to be done continuously, but in reality, company resources are limited, so there must be priorities. Usually, I suggest first completing market profiling. Two common division dimensions are: first, annual per capita consumption of the product (annual sales divided by regional population); second, the competitive landscape of the regional market (can be market share data obtained through third-party purchase, or comparison of the first competitor's annual sales volume or amount). 2. Consumer Strategy: How to Do Customer Acquisition Well: There are four core points for consumer acquisition: acquisition, retention, activation, and conversion. We will explain how to do customer acquisition well from three ports: product, market, and operations. a. Product Port. As the name implies, it is to achieve user acquisition goals based on product differentiation attributes or product development methods. b. Market Port. Refers to the marketing or sales department achieving acquisition targets through advertising, alliances, market activities, etc.
c. Operations Port. Refers to the operations department through promotion, activity planning, and other common methods. 3. Consumer Strategy: How to Do Repurchase Well: Repurchase, also called repeat purchase rate, refers to the number of times consumers repeatedly purchase the brand's product or service. The higher the repeat purchase rate, the higher the consumer's loyalty to the brand, and vice versa. a. The product itself must have repurchase attributes;
b. Find ways to increase consumer stickiness;
c. Seek new opportunities in channels and scenarios;
d. Continuously tell brand stories. 4. Consumer Strategy: How to Increase Average Transaction Value: Average transaction value is the total amount a customer pays for a one-time purchase. There are generally two ways to increase it: one is to make consumers buy more, and the other is to make consumers buy more expensive items. For a single product, there is a negative correlation between purchase quantity and price: the higher the price, the fewer units customers buy; the lower the price, the more units they buy. Therefore, pursuing appropriate prices (considering profits) and as high sales volume as possible become the main directions for increasing average transaction value. Time Advancement Strategy Considerations Time advancement strategy is a type of resource control strategy. It is about how to plan time to implement marketing operation strategies more quickly. People's time and energy are limited, and things have priorities. How to do the right things at the right time is worth thinking about for every marketer. 1. Review Problems Encountered in Last Year's Time Advancement: The new year's time advancement strategy must be based on corrections of last year's time advancement problems. Here, corrections include both internal shortcomings and external competitive changes. 2. Ensure Closed-Loop Work in Each Time Period: A marketing year consists of several marketing time periods. The focus here is to ensure that the marketing strategy in each time period forms an independent closed loop, and secondly, that each independent closed loop has links between them. 3. Ensure Goals Do Not Deviate from Stage to Year: The core of time advancement strategy is to ensure the annual marketing main line does not deviate. Many marketers unknowingly deviate from the main line during time advancement. Take product strategy as an example: the most common problem is that the main promoted product is inconsistent each quarter. Over a year, countless consumers are attracted by cognition, but few retain brand concept. 4. Make a Time Advancement Chart for Each Strategy, Mark Intersections: My suggestion is that every strategy formulated by the company should have a time advancement chart, ultimately aggregated into one operation chart. Why do this? The reason is simple: once the new year begins, the marketing team's trivial matters will flood in. The core work every day is either sales or distribution, day after day, month after month. People easily fall into their own alley thinking and cannot view the overall strategy of the year macroscopically. The result is often habitual work, with a big gap between planning and reality. Finally, we integrate the time axes of the six strategies onto one chart. Horizontally, we can clearly see what to do in each time period and what effects to achieve. Vertically, we can also see that when achieving a work goal in a certain time period, how other strategies coordinate, truly having a clear picture. This allows the team to both pull the cart and look up at the road, and also collaborate efficiently. This is the greatest value and significance of time advancement strategy. PS: Friends interested in the on-site speech content can follow the recent push of the "New Distribution" WeChat public account. We will organize and publish all guest speeches for readers. Click Read Original to see more of the 5th China FMCG Conference and the 1st China FMCG Distributor Conference...