Corporate annual budgets typically encompass six strategies, with product strategy being a crucial component. Essentially, budget sales targets and expense planning are all based on product dimensions. If product strategy is unclear, other strategies cannot be precisely implemented. Today, we discuss seven dimensions that require deep consideration in product strategy.

01 Product Labeling The ideal product possesses the "three highs" attributes: high coverage, high gross margin, and high turnover. But in reality, ideals are often far from reality. Few FMCG manufacturers achieve "three highs" products; typically only a few SKUs. However, this doesn't prevent us from making macro-level distinctions, at least providing a macro direction for each product. We can categorize products into eight quadrants based on the "three highs" dimensions, each matched with different product layer strategies. For example, low coverage requires increasing product distribution plans; low gross margin requires designing a scientific and reasonable channel price chain system; low turnover requires designing display standards for outlet sales momentum. Meanwhile, the focus of expense investment and channel target budgets will also adjust accordingly. Essentially, China's vast territory and significant north-south differences mean product development varies. In today's market conditions, without product labeling, all market actions are blind.

02

  1. Deep sales momentum #1: Category display, leveraging big brands, highlighting competitive advantages, and instilling new consumer perceptions.
  2. Deep sales momentum #2: Scenario setting, highlighting purchase intent, and shaping new consumer perceptions.
  3. Deep sales momentum #3: Atmosphere enhancement, closely integrating with festive atmospheres, and guiding new consumer perceptions.
  4. Deep sales momentum #4: Category association, cross-selling, and building a bridge for consumer category cognition.
  5. Deep sales momentum #5: Locking onto special high-volume outlets, implementing exclusive sales, and letting consumers choose within the brand.
  6. Deep sales momentum #6: First-tier brands, brand display, and strengthening consumer awareness.
  7. Deep sales momentum #7: If sales momentum is insufficient, use gifts to change consumer perceptions and compete on a different dimension.

03 Product Channel Chain Tier System The length of the channel chain determines product profit margins and service efficiency. The longer the chain, the thinner the profit margins at each tier, and the lower the brand's control over outlet service links; conversely, shorter chains increase control, but shorter is not always better—it must match reality. Common channel chain structures include:

  1. Brand—Distributor—Sub-distributor & Postman—Outlet—Consumer My suggestion is to adopt this model in first-tier cities, considering product channel profit margins. The main consideration is that outlet operating costs in these areas are high, and they won't stock large quantities, making the contradiction between direct delivery logistics costs and product gross margins irreconcilable. Thus, leveraging intermediaries for logistics and warehousing resource integration is a necessary evil.

  2. Brand—Distributor—Outlet—Consumer My suggestion is the optimal model for 3-5 tier business districts, optimizing distributor profit structures, improving outlet service efficiency, and enhancing product competitiveness.

  3. Brand—Distributor—Consumer This involves utilizing distributor resources for bulk group purchases or e-commerce platforms. The core focus is maintaining price stability; it must not be a loss-making endeavor.

04 Product Channel Chain Pricing System The channel pricing system is key to ensuring channel profits. This requires collecting channel profit structure information from major competitors, designing the price chain from a market competition perspective, strictly adhering to price bottom lines, and penalizing violations. It's worth emphasizing: in actual execution, under pressure from marketing teams and distributor sales targets, various promotional combinations often emerge, ultimately resulting in disguised price cuts. Guard against this kind of "killing the goose that lays the golden egg" sales growth.

05 2022 Category Performance and Opportunity Forecast What is the basis for setting tasks and allocating targets? The boss can make arbitrary decisions because his purpose in hiring a team is to achieve his desired targets, which is natural. But others cannot. How to make accurate sales forecasts from a product dimension requires detailed analysis. My suggestions are:

  1. Analyze this year's actual performance, focusing on each product's sales share, from top to bottom, down to the smallest team unit, then conduct horizontal and vertical comparisons. For example, horizontally compare sales shares of different offices within a province to identify growth space. If Office A's Product 1 sales share is 60% and Office B's is 40%, analyze the growth potential and improvement dimensions for Product 1 in Office B. Vertically compare sales shares between the province and its subordinate offices. If a province's Product 1 sales share is 75% and Office A's is 60%, below the provincial average, analyze the growth potential and improvement dimensions for Product 1 in Office A compared to the province.

  2. Analyze this year's actual performance, focusing on each product's channel share, from top to bottom, down to the smallest team unit, consistent with the above. The purpose is to identify product channel growth opportunities through intra-regional comparisons.

  3. Pay attention to product lifecycle management. Analyze from sales data and expense investment dimensions. For products entering decline, manage resources carefully and consider product upgrades or phase-outs.

06 Is the First Engine Product Complete? Do We Need to Launch a Second Engine Product? Generally, I recommend brand owners categorize 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 treat all products equally, making them all key products, next year's marketing will be chaotic. How to prioritize these products?

1. First Engine Product: First, it must be the regional core big SKU, which can be a combination of the above four types. For example, a product can be both a traffic product and a profit product, like Nongfu Spring's 550ml bottled water. The core big SKU serves three roles: it's the entry point to terminals and opens up the entire omni-channel.

  • Consumer private domain pool: Consumer mindshare is limited; they can only remember a few things. The core big SKU attracts them into your private domain, enabling further operations to introduce other products.
  • Channel outlet entry ticket: When entering a channel to sell products, especially offline, shelf space is limited. You must ensure good sales momentum and whether consumers actively seek the product. The core big SKU's fast turnover and high gross margin help brands quickly distribute.
  • Growth engine: Launching new products is costly. To sustain innovation, you must defend your rear. What defends it? The core big SKU.

What should brand owners do for the first engine product? What are the key questions for product strategy? My suggestion is to use "attack, press, surround" tactics to focus on three rates: numeric distribution rate, weighted distribution rate, and display distribution rate, continuously amplifying the "long board principle."

2. Second Engine Product: When is it time to develop a second engine product? When the first engine product shows signs of growth stagnation, common indicators include: a. Slowing recruitment of new customers; b. Declining media effectiveness; c. Slowing growth in repurchase rate and average order value; d. Increasing instability in offline price systems; e. Gradually declining marginal returns on marketing investment; f. Category market capacity and profit space reaching the ceiling.

If half of these issues are confirmed, it's time to launch a second engine product. At this point, consider how the second engine can leverage the first, and how to scale up product strategy. How should the first and second engines complement each other?

07 How to Standardize Channel Product Age Management? In the future, fresh product age will be the primary competitive advantage for FMCG companies. The three-year pandemic has taught consumers that health is the top priority. More people are paying attention to health factors closely related to themselves, and food and beverage health will inevitably be at the forefront. Consumers habitually check production batch numbers when purchasing; they care not only about whether the product is expired but more about whether the product age is fresh. Therefore, companies must strengthen channel age management. Unlike ten years ago, when products past half their shelf life could still be sold at deep discounts, companies should establish a channel age management system tailored to their product characteristics. Companies with conditions should set up dedicated teams for inspection and supervision to ensure better age experience for consumers at the outlet level.

Extended Reading: Hai You: New Distribution special contributor, senior researcher, offline channel marketing practitioner, and enterprise channel coverage model designer. He has provided channel consulting for over ten first-tier brands, earning a good reputation.