Legendary Stories:

Pechoin grew from 200 million to 17.7 billion yuan in 8 years, surpassing L'Oreal and Olay to become China's leader; Wanglaoji surpassed Coca-Cola in 8 years to become 'China's No.1 beverage can', growing from 120 million to 36 billion yuan; Jiangzhong Jianwei Xiaoshi Pian has been the No.1 OTC drug in China for 12 consecutive years; Xiwang Corn Oil grew from 65 million to 2.6 billion yuan, surpassing Arawana to become the No.1 in the corn oil category... All these brands' successes are inseparable from positioning, and the positioning for these brands came from a master-level company: Chengmei. Today, let's talk about this legendary company (this article is compiled from Chengmei Marketing and Dealer Weekly, and is a bit long, so please read patiently). -01- To many in the business world, even to Chinese followers of positioning theory, Chengmei Marketing Consulting Company is not as famous as its peers like Ogilvy or McKinsey. However, it is one of the three most well-known marketing consulting companies in China that use positioning theory as their practical guide. What's more interesting is that the general managers of these three companies all come from this seemingly obscure company—except for Geng Yicheng, the current chairman of Chengmei Marketing Consulting Company, Deng Delong, the current general manager of Trout (China) Strategic Positioning Consulting Company, and Chen Qifeng, its director, are both founders of Chengmei. Zhang Yun, the current general manager of Ries Partners (China) Strategic Consulting Company, was once a client manager at Chengmei. Therefore, insiders call Chengmei the 'Whampoa Military Academy' for the Chinese practice of positioning theory. Geng Yicheng, Chairman of Chengmei Marketing Consulting Company In 2000, the boss of Kangfulai saw the potential in the domestic women's blood-tonic health market and selected a product with dual effects of blood-tonic and body-strengthening, naming it Xue'er Blood-tonic Chicken Essence. Kangfulai approached Chengmei Advertising Company with the initial intention of shooting a TV commercial with the appeal 'blood-tonic and body-strengthening'. However, Chengmei believed that 'blood-tonic and body-strengthening' was not a good concept, and based on the perception of the leading blood-tonic brand Hongtao K as 'fast blood-tonic', they proposed a contrasting positioning of 'lasting blood-tonic'. Chengmei's approach of 'positioning first, then advertising' has a major advantage: it enables the brand to differentiate from competitors, own a unique 'concept', and accumulate brand value. The market is the best proof of the effectiveness of positioning theory. After the concentrated launch of Xue'er's ads, sales quickly rose. Within just one year, Xue'er surpassed the original leader Hongtao K in many city markets, leading in sales. Subsequently, Xue'er quickly grew to become the second brand nationwide. The boss of Kangfulai later said that Xue'er was the 'smoothest and most successful' among the company's multiple product projects. Chengmei Advertising also earned more than making ordinary commercials—the price for this commercial was 2.5 times the average market price. Zhang Ting, partner and research director of Chengmei Marketing Consulting, recalls that during that period, the method of positioning was not scientific and was quite random, basically based on the personal experience of Chengmei staff, using 'brainstorming' and 'finding inspiration' to help clients find positioning, and using TV commercials to solve clients' sales problems. But even this primitive and rough approach made these advertising practices, guided by positioning theory, stand out among peers. Chengmei gradually became known in the industry as an advertising company 'known for strategy'. In the process of in-depth study and practice of positioning theory, Chengmei also proactively contacted Jack Trout and Al Ries, the 'fathers of positioning theory' in the United States, constantly seeking advice on questions about localization and practice. Over time, they hoped to obtain authorization to become their strategic partners in China. After repeated communication and evaluation, in 2001, they finally received authorization from Mr. Jack Trout, the world-renowned marketing strategist and founder of positioning theory, to become the strategic partner of Trout Consulting Company in Greater China. Thus, in 2001, Deng Delong and Chen Qifeng left Guangzhou Chengmei and went north to Shanghai to establish Trout (China) Strategic Positioning Consulting Company. Chengmei was taken over by Geng Yicheng as chairman. In this way, Chengmei split into two companies, one in the south and one in the north, practicing positioning theory in China separately. Chengmei Marketing Consulting's consulting building (front) and research building (back) After the 'split', the earlier representative case of the new Chengmei was the research on 'Jiangzhong Jianwei Xiaoshi Pian'. In 2002, Chengmei cooperated with Jiangzhong Pharmaceutical. After repeated market surveys and research, Chengmei rejected the company's long-held assumption: that the market for Jiangzhong Jianwei Xiaoshi Pian was saturated, and growth would mainly come from competing with other brands, with Motilium being a strong competitor. Ultimately, they established the brand positioning of 'Jiangzhong Jianwei Xiaoshi Pian' as 'daily digestive aid', thereby opening up this new category market, and recommended comedian and TV actor Guo Donglin as the spokesperson. Many consumers likely remember Guo Donglin's straightforward slogans: 'Bloated stomach, indigestion? Use Jiangzhong Jianwei Xiaoshi Pian' and 'Child won't eat? Quickly use children's Jiangzhong Jianwei Xiaoshi Pian'. Jiangzhong Jianwei Xiaoshi Pian achieved great success. In 2001, annual sales were 170 million yuan; in 2002, the brand positioning was established, and after Guo Donglin's new commercial hit the market in June 2002, sales soared to 400 million yuan that year; in 2003, they jumped to 700 million yuan; and then rose year by year, reaching 1.7 billion yuan in 2012, ranking first in single-product sales among domestic OTC drugs for ten consecutive years. More importantly, through these multiple practices 'wrapped in advertising', Chengmei built confidence in the market effectiveness of positioning theory. This laid the foundation for its transformation into a specialized brand positioning consulting company. -02- Independent Brand Strategic Positioning Stage: Classic Case of Wanglaoji Herbal Tea The performance of 'Jiangzhong Jianwei Xiaoshi Pian' was quite excellent. However, in comparison, the other two products for which Chengmei did brand positioning—Pechoin Herbal Skincare and JDB Group's 'Red Can Wanglaoji'—were truly 'brilliant' or 'classic'. In 1995, the Hong Kong-funded company 'JDB' built a factory in Dongguan, Guangdong, and with the franchise from Guangzhou Pharmaceutical Group's Yangcheng Pharmaceutical, produced and operated Wanglaoji canned herbal tea (food-grade) in mainland China. Before 2003, Red Can Wanglaoji (referred to as 'Red Can Wanglaoji') was a regional brand doing well—with stable sales in Guangdong and southern Zhejiang, maintaining annual sales of over 100 million yuan for several consecutive years. In December 2002, JDB's management approached Chengmei to participate in an advertising pitch, wanting to shoot a commercial themed on sponsoring the Olympics to boost sales. After receiving the invitation, Zhang Ting, then research director of Chengmei, led a team to Dongguan and had thorough discussions with Yang Aixing, then head of JDB's marketing department, and Wang Yuegui, product manager. After preliminary research, both parties found that Red Can Wanglaoji's sales problem could not be solved simply by shooting commercials; the primary issue was brand positioning. Because although it had been sold for 7 years, the company could not answer what it was, and consumers were even more unclear about why they should buy it. Without solving this fundamental problem, no matter how 'creative' the commercials were, it would be futile. As advertising master David Ogilvy said: 'The effect of an advertising campaign depends more on the positioning of your product than on how you write the ad (creativity).' After in-depth communication, JDB finally accepted the suggestion and decided to suspend the commercial. On December 28, the two parties signed a one-year brand agency contract, entrusting Chengmei to first conduct brand positioning for Red Can Wanglaoji. Marked by this case, Chengmei began independent brand strategic positioning research. In China, for the first time, an agency could charge for brand positioning research. After more than a month of research, in February 2003, Chengmei's brand positioning research report was released—first clarifying that Red Can Wanglaoji was competing in the 'beverage' industry, with competitors being other beverages; its brand positioning was 'a beverage that prevents heatiness', with the unique value being 'drinking Red Can Wanglaoji can prevent heatiness'. The day before Chengmei formally submitted the positioning report, Yang Aixing, head of JDB's marketing department, was uneasy and specially traveled from Dongguan to Guangzhou to listen to a presentation by Chengmei's research director Zhang Ting, ensuring everything was fine before leaving. On the afternoon of February 17, 2003, in the meeting room at JDB's Dongguan headquarters, Geng Yicheng, Zhang Ting, and others spent over an hour presenting the brand positioning proposal to JDB's senior management. This was a proposal meeting that determined the future and fate of Red Can Wanglaoji. When the positioning of 'heatiness-preventing beverage' was presented, JDB's chairman Chen Hongdao led the applause. He slapped the table, stood up from his seat, and said, 'Good! I've been thinking about this for years! This is exactly what I wanted!' With his rich experience and keen market intuition in the beverage market, Chen Hongdao made the decision on the spot, accepting Chengmei's suggestion and immediately launching a comprehensive promotion of Red Can Wanglaoji based on the brand positioning. In the following months of 2003, JDB invested over 40 million yuan in advertising and vigorously pushed forward in channels and promotions. By the end of 2003, Red Can Wanglaoji's annual sales jumped from 100 million yuan the previous year to 600 million yuan. In the next two years, JDB pressed on, investing heavily in prime CCTV advertising slots for several consecutive years, making Red Can Wanglaoji quickly popular across the country. Red Can Wanglaoji brought tremendous benefits to JDB: in 2003, sales increased nearly 4 times compared to the same period last year, surging from over 100 million yuan to 600 million yuan, and breaking out of Guangdong and southern Zhejiang; in 2004, sales exceeded 1 billion yuan; then, with explosive growth every year, sales exceeded 8 billion yuan in 2007. In 2009, Wanglaoji's sales reached 16 billion yuan. After switching to the JDB brand in 2012, annual sales exceeded 20 billion yuan. A century-old brand was reborn under the packaging of new marketing ideas and actions. Speaking of JDB's astonishing performance, Chengmei's chairman Geng Yicheng said with emotion, 'Creating a new category is always the first choice for brand positioning. If a brand can position itself as a different choice from strong competitors, the effect is often astonishing. Red Can Wanglaoji, as the first heatiness-preventing beverage introduced to the market, made people know and accept this new drink, and eventually it became the representative of heatiness-preventing beverages, naturally reaping the greatest benefits as the category grew.' For Chengmei, through Red Can Wanglaoji, it not only developed the long-term client JDB Group, but also, through client referrals and word-of-mouth, developed two major clients: JDB's parent company, Hong Kong Hongdao Group, and Guangzhou Pharmaceutical Group, which was then a partner of JDB Group (in subsequent years, Chengmei conducted brand strategy and corporate strategy positioning research for Guangzhou Pharmaceutical Group on boxed Wanglaoji, San Gongzai Xiao'er Qixing Cha, Baoji Wan, etc.). The most recent cooperation with JDB was to reposition Kunlun Mountain Mineral Water for the group. The reason for repositioning is that in 2015, the group had hired a consulting company to do brand positioning for Kunlun Mountain Mineral Water, but the implementation was ineffective, so they decided to hire Chengmei to reposition Kunlun Mountain Mineral Water. This is the 9th research project since Chengmei cooperated with JDB Group and Wanglaoji Pharmaceutical in 2003. More importantly, as Wanglaoji brand (including red can and boxed) sales climbed and the brand rapidly rose, Chengmei, one of the key promoters behind the scenes, established its expert status in brand positioning strategy, clarified its core value and direction for existence and development—positioning strategy services—and built a sufficiently wide 'moat'. In 2005, Chengmei completely cut its creative and media departments, renamed itself Chengmei Marketing Consulting Company, completely shedding the 'advertising company' cloak, making its business more focused and moving towards professional strategic positioning services. Subsequently, it formulated brand strategic positioning for various products in different industries, including Pechoin (herbal), Sequoia Capital China Fund, Giant Group's Gold Wine, Xianling Gubao, Kangmei Pharmaceutical, Harbin Pharmaceutical No.6 Factory, Xiwang Corn Oil, etc., and conducted extensive and in-depth cooperation with Sequoia Capital and KKR Investment. If Wanglaoji herbal tea is a dark horse in the herbal tea beverage industry, then Pechoin is a unicorn in China's cosmetics industry. In 2009, Miao Yaoyang, then marketing director of Pechoin Group (now general manager of Pechoin Group), was attracted by the Wanglaoji case and approached Chengmei. Unlike JDB's need for a commercial in 2003, this client's needs were clear and precise: At that time, Pechoin's products were mainly divided into two categories: one was the familiar blue series, called Pechoin Classic, with retail prices around 10 yuan, with annual sales of 150 million yuan; The other was the newly developed Pechoin Herbal series in 2008, with higher unit prices and annual sales of less than 50 million yuan. After several rounds of communication, Chengmei and Pechoin determined that the company's future main direction was the newly launched Pechoin Herbal series. The specific research topics for Chengmei were:

  1. Is herbal a positioning or a trend? 2) If it is a positioning, has Xiangyi Herbal, which first introduced the herbal concept, already occupied this positioning? (Note: Xiangyi Herbal was launched in 2002, with sales of about 600 million yuan in 2009.) Chengmei took one and a half months to complete the 'Pechoin Herbal Skincare Positioning Report', providing definitive answers. The report stated:

  1. Herbal skincare is a positioning (the core value consumers buy), and its positioning is: natural, non-irritating cosmetics. The positioning slogan is: Pechoin Herbal Skincare, Natural and Non-irritating.

  2. Nationwide, Xiangyi Herbal has not occupied this positioning; it only has strong mind-share resources in some cities in a few coastal provinces. Pechoin Group fully accepted Chengmei's positioning report and invested 100 million yuan in TV advertising (mainly for 'If You Are the One' and 'Happy Camp') to start promotion. Soon, performance grew rapidly. By 2016, Pechoin's skincare annual sales reached 14.5 billion yuan, ranking first in single-brand sales in mainland China's cosmetics market, surpassing Olay and L'Oreal Paris. In 2013, given Chengmei's excellent market performance, Trout & Partners in the United States extended an olive branch, intending to take a controlling stake in Chengmei and rename it Trout (Guangzhou) Company, on the condition that 'Chengmei' could not be retained. Geng Yicheng and his partners considered it repeatedly and politely declined Trout's offer. With the increasing prevalence of positioning theory in China, especially after Wanglaoji's great success, more and more Chinese companies have changed their old advertising game plans, shifting from 'shooting commercials to solve strategic problems' to 'first finding a professional strategic positioning service company to do positioning', and then cooperating with advertising companies. Chengmei has focused on positioning for 15 years, creating strong brands in China such as Red Can Wanglaoji, Jiangzhong Jianwei Xiaoshi Pian, and Pechoin. In the future, positioning will surely help Chinese companies create more strong brands.