In recent work with companies, I keep hitting a stumbling block—model market construction. For model market construction, companies spare no expense in investing manpower and resources to cultivate market atmosphere and heat. I fully understand the mindset of entrepreneurs building model markets: every new product embodies the company's hard work, and everyone hopes to quickly succeed in the market.
One shining category after another falls into the pit of model markets But the market is bloody. In 2013–2014, a company we served was led by a professional manager team with a model market construction mindset, investing over 60% of market expenses in a year to build model markets and model terminal promotion. This drove a new category that still had potential in 2014 and a ten-year cultivation period into a dead end. The company later spent three years trying to emerge from the market's shadow. Another promising new brand fell into the model market trap again in 2016, investing substantial human, material, and financial resources, building model markets with several times the market investment, but not only did the market fail to meet expectations, it also left behind large inventories and redundant staff. Clients tell me: "We want to build model markets, so we don't fear market investment and expenses. We'll use several times the manpower of competitors to beat them and achieve advantages in these regions." But most companies I encounter end up collapsing during this grand model market construction. The successful ones leave behind a few base areas; the failures reap almost nothing. So whenever companies, especially those promoting new products, talk to me about building model markets, I am very cautious and advise them to be careful, because there are many bloody cases around me, and I don't want companies to fall into this big pit again. Even if partner companies can't accept it, we must maintain this moral integrity—better to lose a customer than to let someone lose a fortune. Theoretically, building model markets should follow the ARS strategy—concentrating effective resources and manpower to achieve first place in a selected region, then expanding that local first place to larger areas. But in China, the ARS strategy has been interpreted by local marketers as model market construction, making many entrepreneurs obsessed with it. Remember, the ARS strategy is defined as an effective strategy and method to achieve comprehensive competitive advantage in a regional market by organizing efforts, controlling terminals, enhancing customer relationship value, cultivating and developing regional markets, and concentrating forces to become first in the entire regional market. Please note that the core of the ARS regional first strategy is to concentrate forces to achieve comprehensive competitive advantage in the regional market, not to pour the entire company's strength into it; the essence of the ARS strategy is to win through service, using improved service to defeat competitors, not a strategy of resource investment; moreover, a market and product without any foundation cannot undergo the ARS strategy. But the model market construction, hyped by media and the market, has led companies astray, becoming a quick-fix or reassurance for new product promotion. A misguided marketing concept not worth corporate obsession How should we understand model markets? First, we need to understand the definition of a model market. In marketing theory, there is no definition of a model market. According to Baidu Baike, a model market is an exemplary market, an operating model for franchisees to reference and imitate. It can be said this is a marketing concept with Chinese characteristics, originating from socialist politics with Chinese characteristics, from various model operas, model projects, and model special zones. Please note: a model market is an exemplary market, absolutely not a company's internal operating model. Simply put, it is the replication of a successful model, not the creation of a successful model. First, model markets are not planned but accumulated. When many companies talk about model markets, they mostly discuss model market planning, especially those promoting new products. However, mature products and mature companies have many exemplary markets but no so-called model market plans or programs. For example, Wahaha Nutrition Express sells well in Henan, but there is absolutely no so-called Wahaha Nutrition Express Henan model market. Model markets, as exemplary markets accumulated by the company, are the result of continuous operation. Currently, new product promotion companies are obsessed with model markets, mainly hoping that through model building, they can push the market to maturity, masking the fact that their new products are still immature with many shortcomings. Having a model makes it easier to convince distributors. But in the long run, in the internet age, information transparency and penetration have exceeded our ability to package ourselves through models. So for a good new product, companies should not try to hide their weaknesses; doing so only makes capable people despise your narrow-mindedness. Second, model markets should not be a corporate strategy but a corporate window. The current popular model market construction has been blown up to the strategic height of enterprises, which invisibly increases the risk of new product cultivation. If the pace is wrong, it is like cutting off the foundation. Introducing a new product to the market, if the model market becomes a strategy, is like giving a three-year-old baby thousand-year ginseng—not only does it do no good, but it can kill the baby. As a window for the company, model markets can boost market confidence. A company with many exemplary markets has many cash cows and market stabilizers, playing a vital role in growth and expansion. But this is just a window, not a strategy. Companies need significant strategic depth and foundation to create true model windows. Like China's reform and opening-up, starting from Shenzhen and gradually advancing nationwide, because of continuous support from the whole country and vast land as a backing, the special zone construction could become a window for China to show the world. Furthermore, model markets should not be the starting point for new products but the goal. Currently, many model markets are built mainly by new product companies or regional expansion companies. Most companies set model market construction as the starting point for new product market building, as if without model market construction, new product success is impossible. The media also vigorously promotes new product companies building model markets; consulting firms, to create performance, also advocate building model markets; professional managers, to bind companies, try every means to make companies invest in model market construction. Everyone, for their own interests, makes companies invest money in the market, but ignores the necessary market introduction process that new product cultivation must go through. This strategy of treating model markets as the starting point for new product cultivation consumes the company's internal strength. Without sufficient market supply capability, companies quickly run out of resources and cannot sustain. A company's model markets should be the goal of continuous construction. During new product cultivation, different model market patterns are formed, from which effective marketing methods are summarized and replicated to other regions. In fact, for a new category, basically, recruitment determines life or death. Company talent will also be precipitated during recruitment, market grabbing, and territory grabbing. Such repeatedly cultivated markets become mature. The Communist Party also established base areas by developing points in various places. Initially, they did not follow a single model; they each found places to survive according to communist ideals, which later formed the real base areas. So model market construction itself is a misguided marketing concept. From the experience of corporate market operations, it is not worth corporate obsession or marketing professionals' advocacy. Unfortunately, the Chinese market is too large, and the specter of model market construction can survive on this vast land, continuously reincarnating, attaching to various entrepreneurs and companies eager for success. After each bloodsucking, it can turn around gracefully and enter another company in a grand manner. The above is some experience about model market construction. There may be some shortcomings in understanding. Welcome to exchange via private messages. But the cases mentioned in the article are real painful experiences. I remind those companies in the process of new product development to treat the inevitable pain and setbacks of the introduction period rationally. Any counterproductive practice is like cutting your own flesh. A good product will have its development trajectory; do not try to change it artificially. Otherwise, you may end up like the company mentioned at the beginning, needing years to eliminate the internal injuries left by model market construction. 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