Let me start with a story of foresight: In 2009, the current general manager of Uni-President's mainland China operations took three actions when he took charge of the instant noodle business. First, he vigorously promoted the well-known Laotan Sauerkraut Flavor. Second, a move few knew about: he cut products with gross margins below the breakeven point, totaling about 500 million yuan (over 20% of total sales). Third, he gradually cultivated upgrade products like Tang Daren.
In the past, we only saw the success of Laotan Sauerkraut, but few noticed the other two aspects. In fact, Uni-President did ahead of time what everyone should have done. So we see in the 2016 half-year report that Uni-President's sales volume was less than half of its main competitor's, yet its profits were higher.
Uni-President is a visionary. Even now, many people still don't understand it. I think compared with other FMCG companies, most have a relatively single marketing goal: "volume growth." But Uni-President has two goals: "volume and structure." The difference in goals determines the different driving forces of the marketing system. It can be said that Uni-President rebuilt its marketing system earlier than most FMCG companies.
Some may question: Isn't it just a shift from volume growth to structural adjustment? Isn't it just moving from selling "low-price, low-margin products" to mainstream upgrades? The recent failures of many companies promoting mainstream upgrade products have proven that the problem is not that simple. This is a change in marketing goals and direction, an adjustment in marketing methods and management approaches, requiring a series of changes, even a generational shift among marketers.
In short, the marketing system needs to be rebuilt.
China's Market Is Maturing, Marketing Direction Is Changing
If I were to make a simple conclusion about China's current market changes, it would be: China's market is transitioning from a "growth-oriented market focused on volume increments" to a "mature market focused on structure."
From the perspective of marketing goals and direction changes, I divide China's marketing into three stages:
- 2013 and before: The marketing goal was sales growth.
- 2014 to 2016: The marketing goal was to maintain existing volume.
- After 2017: The new marketing goal is to seize new mainstream price bands (structural adjustment).
Before 2013, the FMCG industry was growing in total volume, with annual differences being growth rates, and differences between companies being growth volumes. Sometimes even 20% sales growth was considered low.
Growth was once an unquestioned goal for marketers, and assessments were always centered on sales growth.
From 2014 to 2015, sales of leading FMCG companies declined, and in 2016 some companies resumed growth. At that time, the natural goal became "maintaining existing volume." "Maintaining existing volume" was only a transitional phase.
After 2017, most industries are expected to stop declining, and the "maintaining existing volume" phase will end. However, due to mainstream upgrades and product structure adjustments, the goal will shift to adjusting product structure and ensuring profit growth. At that point, corporate goals and directions will change again.
The Evolution of the Marketing System
A marketing system includes organizational structure, marketing team composition, marketing goals, assessment systems, and corresponding marketing methods. These elements constitute a company's marketing system.
In the volume growth stage, the marketing goal is primarily volume growth, and performance assessment is also based on volume growth. Corresponding marketing methods, such as deep distribution, distribution, and promotional activities, are all aimed at volume growth. The indicator systems for these methods also become process assessment targets for the company.
In other words, the entire marketing system is designed to ensure sales growth. Methods, goals, and results are aligned.
In the recent "maintaining existing volume" stage, companies have basically abandoned deep distribution, distribution, and terminal promotion, replacing them with emergency methods like promotions and warehouse filling. Marketing goals and methods are also aligned.
Now, if the current goal is mainstream upgrade and structural adjustment, will the above marketing system still be suitable? Some might say, isn't it just changing the assessment goals? I believe the entire marketing system needs to be rebuilt; otherwise, merely changing goals is useless.
Rebuilding the Marketing System
Recently, many companies have failed in promoting new products (mainstream upgrade products), and one important reason is using old systems and methods to promote new products. So I wrote an article titled "Mainstream Upgrade May Die on Traditional Paths."
In another recent article, "Which Marketing Terms Will Disappear from China's Marketing Dictionary," I predicted that deep distribution, distribution, terminal promotion, terminal interception, warehouse filling, and shelf management—once mainstream marketing methods in China—will become obsolete and gradually disappear from China's marketing dictionary. This also declares that companies must rebuild their marketing systems to cope with the transition from volume growth to structural adjustment.
In the new marketing system, I believe there will be two modules: one for maintaining existing volume of old mainstream products at low cost, and another for promoting mainstream upgrade new products.
It should be noted that even for maintaining volume of old mainstream products, traditional marketing methods are no longer applicable. Because traditional marketing methods have an implicit premise: the human wave tactic. For example, deep distribution, distribution, and shelf management are all based on the human wave tactic. However, due to rising costs, the human wave tactic is certainly no longer applicable, so "maintaining volume" also requires new methods.
Two Modules of the New Marketing System
1. Low-Cost Maintenance of Existing Volume for Old Mainstream Products
This system has two premises: first, familiarity with customer relationships; second, products do not need recommendation. Since volume growth is difficult, it is necessary to complete volume maintenance at low cost.
Completing "volume maintenance" at low cost does not rely on the human wave tactic, but rather on using internet tools and the backend systems they generate to achieve precise channel management. Specifically, it includes the following methods:
From vehicle sales to visit sales, then to self-ordering. Vehicle sales emerged when labor costs were low. Transitioning from vehicle sales to visit sales (whether via SaaS ordering systems or B2B e-commerce ordering systems, both can be considered visit sales systems) is an improvement in efficiency and cost reduction. Then moving to terminal self-ordering will be another cost reduction.
Use third-party centralized warehousing and distribution systems to reduce distribution costs. Outsourcing the distribution system is an inevitable trend that cannot be stopped. It can reduce distribution costs by at least half. When there is no volume growth, reducing costs becomes a necessary direction to consider.
Use B-end backend systems for precise channel management. With all ordering online, the big data from backend systems becomes key to channel management. Compared with current aimless visits and high-density visits, the big data provided by backend systems will enable precise channel management with fewer personnel, achieving better results than current deep distribution.
2. Internet-Based Promotion System for New Mainstream Products
First, let's discuss what new mainstream means. After the concept of mainstream upgrade was proposed, many thought it meant going mid-to-high-end or creating high-end niche products. I believe there are two criteria: first, the product must be upgraded; second, it must be the mainstream of the next stage. The so-called mainstream is the product with the largest sales volume in the industry, definitely not a niche product.
Take bottled water as an example: the current mainstream is 2 yuan per bottle, and the new mainstream should be 3-4 yuan per bottle. If it's above 5 yuan, it's not new mainstream.
For instant noodles, the current mainstream is below 5 yuan, and the new mainstream should be 5-8 yuan. If it's above 10 yuan, it's not new mainstream.
New mainstream products mean they are not yet mainstream and cannot be sold through all channels. Recently, some companies promoting new mainstream products still use original promotion methods, such as full-channel distribution followed by promotional activities. However, the market simply doesn't respond, and after distribution, there are large-scale returns. This may not be a product failure but a failure of promotion methods.
The promotion system for new mainstream products has four key points:
Significantly reduce the number of promotion personnel, no longer using the human wave tactic. This is also an inevitable result of rising labor costs.
No longer adopt full-channel promotion and large-scale sampling, but instead select terminals (those with the ability to promote new products) and KOLs (key opinion leaders), using targeted promotion.
Fully utilize internet communication methods. The biggest impact of the internet on marketing is not e-commerce but marketing communication. With internet communication, using selected terminals and KOLs as communication origins, precise communication can be achieved. Of course, since internet communication methods are constantly changing, marketing communication methods will also evolve.
For new mainstream product promotion, seizing the new price band is key. In the past, mainstream products were "low-price, low-margin products," and price bands were not differentiated. Starting with new mainstream, price bands will definitely be differentiated. However, price bands will gradually move upward. Whoever first occupies the new price band will have a say in that price band. It can be said that old mainstream products have little influence in new price bands.
From the envisioned new marketing system above, traditional deep distribution, distribution, promotion, and warehouse filling basically have no place.
Rebuilding the marketing system will bring about huge changes in personnel structure, organizational structure, main marketing methods, sales goals, and assessment methods. In this process, internet elements will naturally be integrated.
It can be said that mainstream upgrade has little to do with the internet. However, the rebuilding of the marketing system during mainstream upgrade will inevitably incorporate the internet as a basic tool.
Marketing Changes with Change
The characteristic of marketing is "adaptation," survival of the fittest. The so-called adaptation mainly means adapting to changes in the environment.
The three biggest changes in China's marketing are:
China is transitioning from a growth market to a mature market. This has little to do with the internet; it is an inevitable result of China's economic development reaching a certain stage.
The internet, whether as a tool or as a way of thinking, has had a significant impact on marketing. Marketing is based on information asymmetry and exacerbates it. The internet's biggest impact is on communication, so it inevitably affects marketing.
China's human resources are tight, labor costs are rising, and the entry of the post-90s generation into the workforce has an impact on the marketing system. Many of China's previous marketing methods were based on the human wave tactic.
The impact of the above three major factors determines that China's original marketing system is difficult to adapt to the current marketing environment. Rebuilding the marketing system is imperative and urgent.
-END-
[The rest of the original text appears to be promotional content for the publication, which is not part of the article body and has been omitted.]