Is Attacking the Lower-Tier Market a False Proposition for New Consumer Brands?

In 2023, the most discussed topic in FMCG is offline terminal construction, and the hottest point within that is the lower-tier market. Many have recognized that the lower-tier market will be a new channel and sales growth opportunity in the future, and they are fully expanding into it. But despite the buzz, results are minimal. The author does not believe that the development of the lower-tier market is a false proposition; the strategic trend is clear. If we cannot achieve the desired results, then there must be a deviation in strategy management—that is, a lack of precise marketing and operational capabilities for the lower-tier market. The so-called lower-tier market refers to what we commonly call the third-, fourth-, and fifth-tier market channel distribution business, which includes ordinary prefecture-level cities and county/township networks. In daily chemical FMCG, this type of channel is mainly dominated by medium-sized supermarkets and regional CS (cosmetic stores), with its own unique market characteristics and relatively practical and efficient operational efficiency. To succeed in the lower-tier market, brands must establish a strategic "Eightfold Path" and find their precise and rapid growth path through eight strategies.

Establish clear consumer awareness and analysis of the lower-tier market. We should not simply think of the lower-tier market as a low-price and low-end market; it is not a marketing sewer. With the improvement of living standards, the popularity of smartphones, and the rapid penetration of new media information, consumer understanding and awareness in the lower-tier market have greatly improved, leading to relative consumption stratification. Gradually, a product structure of fashion, premium, and mass products has formed, with increasing awareness of branded and internet-famous products. Therefore, facing the product structure changes in the lower-tier market, we need to analyze how to adapt and find our business direction there.

Classify and tier the construction of channels based on the lower-tier market's channel structure. The lower-tier market has a multi-dimensional channel business framework, including large-scale medium-sized supermarket chains, regional medium-sized supermarkets, community supermarkets, township and even village-level supermarkets, regional CS chains, county-level CS monopoly stores, convenience stores everywhere, and various mother-and-baby stores. These channels form different tracks. Consumer brands must not spread their channel construction like a pancake; they must combine their category characteristics to establish a relatively precise lower-tier channel structure. Only by classifying channels and confirming their channel structure positioning can they be targeted, focus marketing, and achieve efficient results. At the same time, each type of channel structure has different scales and priorities. Brands should form a tiering of these channels based on their business capabilities. Tiering can clarify the priority of channel development, do practical cooperative management, and avoid disorderly management like scattering flowers.

Establish market matching through "tailoring to the channel" and "resonating at the same frequency." Tailoring to the channel means providing marketing support according to the characteristics and requirements of the lower-tier market, not imposing our own ideas. Resonating at the same frequency means integrating and advancing with the channel, standing from the perspective of channel needs and channel marketing integration to cooperate in promotion and form a joint force. Through these, we achieve a fit of people, goods, and venues in the lower-tier market.

Finding the right customers and providing precise support is the kingly way. Only customers who operate in the lower-tier market understand its flavor. Therefore, we cannot take things for granted or base cooperation on major or familiar customers. To succeed in the lower-tier market, the first reliance is on distributors, the second is on distributors, and the third is still on distributors. Those distributors who have operated in the lower-tier market for years, continuously reforming and upgrading, are the masters of the lower-tier market. We must establish strategic alliances with them to ensure sustainable development. After entering the circle of lower-tier market customers, we must respect their rules and formulate corresponding support policies. Market support often lies in a mutually satisfactory scale—that is, we do not do one-time cooperation through excessive support, nor do we lack support capability by calculating small accounts everywhere. Support and policies must form cooperation stability through win-win sharing and reasonable consideration.

Terminal sales promotion is the key to sustainable operation. Doing business is essentially about buying and selling: one is willing to sell, the other is willing to buy. For long-term transactions, besides channel merchants being willing to sell, consumers must also be willing to buy. Therefore, the sustainable development of the lower-tier market also lies in having strong terminal sales promotion plans. Consumers often learn about products through hearing, knowing, thinking, and then buying. They often convert sales based on seeing and being able to afford, and good use leads to repeat purchases. Brand sales promotion in the lower-tier market relies on "three dependences": first, good display; second, good publicity and promotion; third, good product quality. How to do display standards and support well, how to design promotional activities well, and how to ensure more obvious product use effects are all things that must be considered before entering the lower-tier market. The results of thinking should be simple, clear, direct, effective, and executable. Sales promotion requires methods and strategies, and it must also combine distributor suggestions to achieve one policy per location and efficient implementation.

Controllable price system is the guarantee for continuous progress. Each level of channel cooperation, besides ensuring sales, reducing risks, and stable returns, must also pay attention to the exclusivity of channel interests—that is, channels are also more concerned about inequality than poverty. We must have a strong price system specification and management system in the lower-tier market, achieving price balance while maintaining relative advantages, so that channels can feel the stability of corporate cooperation. Controllable price system does not mean the same price, but under unified daily prices, there should be no vicious price impact during promotions in the same region. When conducting promotional activities in the lower-tier market, we should form different characteristics for different channels, either launching the same product and promotion at the same stage, or using different products in different channels to carry out their own advantageous promotions. Channels need their own unique competition and consumer recognition of their operational capabilities. Once the price system is chaotic, it not only affects channel operating profits but also harms consumer trust, causing channels to become angry at the brand and product, or even abandon it. This will undo all our efforts in the lower-tier market.

The business in the lower-tier market requires corresponding organizational system support. Different marketing tactics, different marketing systems, and different organizational teams and management methods. Therefore, when we establish business in the lower-tier market, we must also build a corresponding management structure, from business job responsibilities to business process design, business performance and incentives, and efficient coordination of the entire business system, all requiring corresponding management. Of course, this management must effectively adapt to the distributor's organizational system.

Financial budgeting for the lower-tier market must have long-term plans. Forewarned is forearmed. Since we are going to do the lower-tier market, we must have a clear expense budget while making detailed plans. This budget can guarantee business tactics and management, providing sufficient support and assistance for the lower-tier market. Therefore, doing the lower-tier market requires an investment and cultivation mindset, with a 1-3 year long-term budget capability and plan. While intensively cultivating the market, we must also carefully nurture it, which requires us to have sufficient confidence, patience, and perseverance in building the lower-tier market.

The above is Mr. Cheng Yingqi's "Eightfold Path" strategy for the lower-tier market. As the founder and CEO of Guangzhou Bingquan Toothpaste, Mr. Cheng has operated multiple top brands in the lower-tier market and has years of management experience and insights. These strategies are more inspirational and guiding; the real lower-tier market plan requires each enterprise to find strategies in actual market operations, adapt to changes over time and circumstances, continuously practice and summarize, and constantly improve and break through.

At the same time, from October 9 to 11, at the 5th China FMCG Conference, Chen Hongwei, co-founder and deputy general manager of marketing at Guangzhou Bingquan Cosmetics Technology Co., Ltd., will share "New Changes after Traffic Reorganization" at the New World and New Consumer Forum. Interested friends should not miss it!