A company that made 2 billion this year often sets next year's performance target by adding to that 2 billion. 10% growth means 2.2 billion, 20% means 2.4 billion, and with bolder steps, they might dare to set 3 or 4 billion. The reasoning: last year we did 2 billion, this year we'll work harder, strengthen promotion, expand channels, improve efficiency, optimize products—surely we'll grow somehow?
There are also conservative companies: the environment is bad now, we didn't grow much this year, next year we'll control costs, and if we can just break even, that's fine; a slight decline is acceptable.
It is said that a leading dairy company saw a significant decline in performance in 2024, and for 2025 they directly set a target of a 10% decline. 10% is over 10 billion, right? This caused an uproar in the industry: it turns out that even big companies can lower their performance targets.
When a company sets targets, whether increasing by 20% or 30%, or decreasing by 10%, there is a basic anchor: the previous year's performance. For a long time, most companies have done this. Few people think about whether this anchor is problematic and what its basis is. If it is problematic, does that mean everything else is wrong?
Many people have this feeling: business development is like climbing steps. When you reach 1 billion, you feel you've reached the 1 billion step; when you reach 2 billion, you're on the 2 billion step. Next year, if the environment is good and the company wants to invest, you climb a few more steps; if conditions are poor, you stay on this step or go down a couple of steps.
Here there is a delusion: the belief that last year's 2 billion already belongs to you, and this year's development is based on that 2 billion. But the real market situation is that whether you do 1 billion or 100 billion, it is the result of consumers' repeated purchasing behaviors. Every consumer choice is a new choice, a re-vote for you. Theoretically, last year you got 10,000 votes, this year you might get none, or last year none, this year 10,000.
As I've said before, as consumers, everyone is a "player" (海王). In the business world, there is no brand loyalty; it only depends on whether the temptation you offer is enough.
So in recent years, it often happens that the targets companies set are wildly different from actual performance.
Recently, the most shocking news in the industry is that Wahaha's performance in 2024 returned to over 70 billion, an increase of more than 40% from the previous year, a growth of over 20 billion. Of course, not all companies are so fortunate; many are declining. I know of companies with performance declines of 10%, 20%, 30%, or even halved. The most frightening is the decline in profits: a 30% or 50% drop is common, 80-90% drops are not rare, and some have turned from profit to loss, watching money drain daily.
And as far as I know, none of these companies with declining performance and profits set targets lower than the previous year at the beginning of the year.
Is this a problem? Of course, and it's serious.
First, operationally. Whatever targets you set, you allocate resources accordingly. If resources are in place but targets are not met, profits suffer and morale drops. If resources are not in place and targets are not met, there is resentment and disloyalty. When targets are not met, marketing personnel are the first to suffer: income drops, they are held accountable. Bosses and marketing staff are dissatisfied with each other, leading to resignations or moonlighting.
As the saying goes: growth cures all ills. Conversely, decline breeds all ills. Once performance targets are not met and profits decline, all sorts of problems emerge, even where there were none.
But this is not the most serious. The most serious is that your understanding of your business logic may be fundamentally wrong, meaning your operational direction and all countermeasures may be wrong.
Let's first look at why we used to use the previous year's performance as the anchor for next year's targets, and why it was instructive.
The logic was: last year we did 2 billion, with 1,000 distributors, 600,000 terminals, 500 salespeople, 100 SKUs, of which 10 key products did 1.5 billion. We invested 500 million in market expenses, a fee ratio of 25%. We bought a certain amount of traffic and had a certain conversion rate.
This year, the number of distributors, terminals, products, and salespeople are adjusted based on last year, further optimized and made more efficient. Investment in expenses is also more efficient. So based on these adjustments and upgrades, adding 20-30% seems reasonable, right?
Yes, it was reasonable before. Because although we have shouted "market orientation" for many years, we have actually been in an era of enterprise resource orientation. The company's inherent resources and investments—how many channels and terminals you have, how much advertising you invest, how many product categories—have a high degree of certainty and causal relationship with your final sales performance and profits. Consumers' acceptance, on the other hand, did not play a decisive role.
In the past, there was an empirical saying in deep distribution: every time channel coverage goes down one level, sales scale grows more than 2 times. Unlike general companies that are secretive about "advertising," Niu Gensheng always openly admitted that advertising is the most important factor affecting sales. This big shot once invested 48.8 billion in advertising over ten years, "making a cow run at rocket speed," turning a small local company into a dairy giant.
At that time, consumers' active choices were not the decisive factor in the market. Using corporate resources and investments to judge market results had a high degree of certainty. A consumer would likely only shop at malls, supermarkets, specialty stores, convenience stores, and wet markets within their living circle. Although seemingly free choice, the range was very limited. What they finally bought depended on what those terminals sold and what you saw. So "display is the life of a product," "location, location, location," and entry fees, SKU fees, and display fees were charged sky-high.
Moreover, consumers in the past had very little knowledge about products. A rumor like "MSG causes hair loss and cancer" could destroy the industry; the pseudoscience of "weak alkaline water improves constitution" could make a water company an industry leader. At that time, advertising had a very certain impact on sales performance. In the 2000s, those who dared to advertise on TV basically succeeded; in the 2010s, many who dared to buy traffic also succeeded.
So "media is a strategic resource for enterprises," "traffic is the essence of business," and "10,000 notes + 2,000 short videos + 3 top influencer live streams + flagship store bestsellers = a new consumer brand."
This reveals a frustrating truth: we have been shouting "customer orientation," "market orientation," and "consumer orientation" for many years, but in fact, the conditions were not there before.
—Note: Modern marketing comes from the West. In developed mature markets, "customer orientation" is the most mature and efficient concept and tool. But in the domestic market, twenty years of land grabbing and over ten years of mobile internet commercial infrastructure have led to "customer orientation" not being very efficient in practice, often just "politically correct" talk.
Now that the true "consumer sovereignty" era has arrived, due to fear of uncertainty, people are like "Lord Ye professing love for dragons," panicking and shouting "bad environment," "consumption downgrade," and "the most important thing is to survive."
"Consumer sovereignty" means consumers dominate the market and are the most critical element. There are two key prerequisites for the "consumer sovereignty era":
First, consumers have freedom of choice. With freedom of choice and enough options, they can have the final say. If there are only a few products to choose from, then whoever provides the shelf has the say.
Second, consumers must have a certain level of product awareness. To vote for me, you need to have at least some understanding of me. If you know nothing, you'll vote for whoever is loudest. So without cognitive foundation, volume decides sales.
Thanks to the comprehensive construction of new commercial facilities represented by mobile internet.
Consumers' freedom of choice comes from the increasing diversification of products, the fragmentation of channels, and the infinite shelf characteristics of e-commerce. If I want to choose a category of products, I have countless options and many substitutable categories. Not only substitutable categories, but also other solutions. If I want to buy a pair of sports shoes, a quick search gives me dozens of screens of options, from price priority to review priority to sales priority—you can choose whichever you want.
If I buy melatonin online, it will recommend "magnesium tablets," jujube seed oil, high-concentration B vitamins, earplugs, and eye masks. Other platforms will recommend sleep music and meditation tutorials.
The improvement in consumer information symmetry comes from various self-media platforms, as well as "big V" and "micro-influencers" around you. Foodies all know how to read food labels, down jacket buyers know filling weight, moviegoers check Douban ratings, diners check Dianping. On Xiaohongshu, thousands of bloggers share their consumption experiences; any short video platform has countless travel guides.
You find that there are more and more "experts" around you, whether you drink, tea, fish, play ball, read, watch dramas, makeup, or dress. There is always someone who can give professional, or at least plausible, advice. Even if you have a headache or fever, someone can "prescribe" a suggestion.
At this point, as consumers, we feel "we have truly stood up." Instead of being controlled by channels, terminals, advertising, and promotional routines.
From advertising sovereignty to channel sovereignty, from channel sovereignty to platform sovereignty, and from platform sovereignty to consumer sovereignty. The alternation of sovereignty has caused structural restructuring of the consumer market, a complete upheaval.
Many people misinterpret this as "consumption downgrade," but China's consumer market is still growing. People are "riding a bike to a bar, saving where they can and spending where they should." Consumers have become smarter and have voting power; they don't have to pay for things they don't care about.
Many interpret it as a "stock market" or "shrinking market," believing that China has bid farewell to high-speed growth, and with slow economic growth, consumption growth will also be slow. This is fine for judging macro changes in total consumption, but if applied to specific enterprise operations—thinking that because economic growth slows, enterprises have no chance for high growth—that is mechanically applying macro narratives to micro individuals, typical bookishness.
In the era of consumer sovereignty, specific consumption behaviors—consumers voting with real money again and again—are the key to determining a company's success or failure. Although the total volume may not change much, in today's market sovereignty iteration, the structure is changing dramatically, and individual changes may be the greatest.
Most products and brands have no accumulation in consumers' minds, neither mind share nor emotional share. They will be washed away in the re-vote, declining sharply, with little hope of recovery. Those products and brands that manage customers or have a higher status in customers' hearts can break through previous channel or promotional limitations and bring more surprises, such as Wahaha's 20 billion growth or Dongpeng Special Drink's excellent market performance.
When you make a basic misjudgment about the nature of the times, all your subsequent judgments and responses will be wrong, with almost no chance of being right. When you know that the biggest source of all changes now is the shift in market sovereignty, you know to make market moves around consumer sovereignty.
Find ways to make yourself stand out in consumers' options. Find ways to fit into consumers' demand scenarios. Find ways to resonate with consumers' values. Find ways to influence those who influence other consumers. Find ways to launch topics, let customers influence customers, and trigger mass movements of consumer participation. Find ways to enter terminals and channels that better convey your value proposition.
You will cherish every touchpoint with users more, and you will pay more attention to Kotler's 5A consumer journey. Perhaps for most companies, accurately defining the current market environment is the most important thing, and understanding the era of consumer sovereignty is the most important thing. After all, tools can be mastered, but if you misjudge the era, everything is wrong.
[New Order · Symbiosis] The 10th China FMCG Innovation Conference Time: March 17-19, 2025 Location: Chengdu, China