---
title: "The Value of Marketing Digitalization for Brand Owners"
description: "Digitalization offers four key values to traditional enterprises: improving efficiency, reducing costs, achieving business breakthroughs, and managing risks. From a channel perspective, digital transformation occurs at three levels: efficiency systems, incremental systems, and new business platforms, each representing different depths of channel reform."
author: "刘春雄"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2021-03-26"
language: "en"
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---

# The Value of Marketing Digitalization for Brand Owners

> Digitalization offers four key values to traditional enterprises: improving efficiency, reducing costs, achieving business breakthroughs, and managing risks. From a channel perspective, digital transformation occurs at three levels: efficiency systems, incremental systems, and new business platforms, each representing different depths of channel reform.

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**-01-**
Digitalization offers four key values to traditional enterprises: 1. Improving efficiency; 2. Reducing costs; 3. Achieving business breakthroughs; 4. Managing risks.
**Not all digital systems can achieve all four values simultaneously; some only achieve one aspect. From the channel perspective of traditional enterprises, digitalization changes channels at three levels.**
**Level 1: Efficiency systems—the original channel structure remains unchanged, and the original chain (F2B2b) is digitalized—the main role of digitalization is to improve channel efficiency.**
**Level 2: Incremental systems—the B-end channel structure remains unchanged, but the chain extends to the C-end, forming full-chain digitalization (F2B2b2C). By not reaching the C-end, BC integration creates an incremental channel system.**
**Level 3: New channel business platforms—the functions of channel members (agents) undergo major changes, from full-function agents to a symbiotic system of multiple specialized third parties—third-party warehousing and distribution, third-party finance, and third-party online ordering platforms.**
The three levels of channel digitalization represent the shallow, middle, and deep layers of channel transformation through digitalization.
Although it is not advocated to achieve digitalization in one step, the digital transformation of the channel system will eventually be completed.
**Original distribution system + digital tools = efficiency improvement**
**BC integration = incremental system (marketing breakthrough)**
**Channel restructuring + digital tools = new business system (future mainstream system)**
**-02-**
**Level 1: Digital efficiency systems**
Digital efficiency systems do not change the channel model; they only use digitalization as a marketing tool, i.e., digitalization in the traditional deep distribution environment. Deep distribution is the basic pattern of many industries in China, and the first level of channel digitalization is digitalization based on the deep distribution pattern.
**The channel chain in the deep distribution pattern is manufacturer (F) → agent (B) → store (b), and the path of deep distribution digitalization is also F2B2b.**
**The deep distribution structure remains unchanged, but digital tools are added.**
There are two types of deep distribution digital tools: **SFA and RTM digitalization.** Some people regard these two tools as one category, but I believe their digital logic is different and they should be considered two different systems.
SFA (Sales Force Automation) is mainly a management system based on frontline salespeople, so many people call it a field service system. Many companies treat SFA as a "clock-in" system.
With a large number of offline salespeople who are difficult to manage, and widely distributed offline customers who are hard to control, SFA products help companies manage people more effectively, control customer resources more strongly, and manage the interaction between salespeople and customers in a refined manner.
**Although SFA functions are now infinitely extended, they are basically channel management centered on people.** The problem SFA encounters is precisely the soft resistance of frontline personnel. After all, who would want a system to manage themselves without "free space"?
**As long as frontline salespeople "work together," it is normal for SFA to fail.** Therefore, although SFA has been promoted in China for many years, there are not many companies that have implemented the "four-in-one" model as successfully as Jinmailang.
**It is not that the system has problems, but human nature.** SFA obtains information (data) through frontline salespeople, and then "proves guilt by oneself," which is problematic in management logic.
**The three elements of people, goods, and place are the basic framework of retail analysis.** **SFA starts with "people," while RTM digitalization starts with "goods" and "place" at the terminal.**
Currently, it is still impossible to obtain real-time sell-out status at the terminal, even with BC integration. However, as long as terminal purchase information is continuously obtained, it can be "estimated" through algorithms. Through sell-out data, the status of salespeople can be inferred, and "algorithms" can also be used to rank single-store and single-person efficiency.
**An important advantage of digitalization bringing visualized management and decision-making is that if you cannot manage the process, you can "deduce" the process from the results.**
The state of the terminal "place" is either obtained through resources, such as displays and freezers, or improved through personnel efforts, such as product displays. Terminal sell-out should be consistent with the resource investment in the terminal "place," and can also be ranked through "algorithms" to calculate the ROI of single stores and single people.
**Both SFA and RTM systems can improve efficiency. At the same time, they will also encounter soft resistance from frontline personnel. This is the first level of channel digitalization, and it is very difficult.**
**-03-**
**Level 2: Marketing breakthrough, incremental systems**
Improving efficiency can also lead to increments. The incremental system of channel digitalization is due to two reasons: First, reaching the C-end through digitalization. Reaching the C-end is important because it can convey C-end awareness and drive traffic; Second, by guiding the C-end, it can also activate the B-end inventory.
**Currently, there are two types of tools for reaching the C-end through channels: one is one-code-per-item; the other is social cloud stores.**
The application of one-code-per-item has now been upgraded to 4.0. 1.0 is traceability, such as anti-smuggling and anti-counterfeiting; 2.0 is inclusive red packets; 3.0 is traffic diversion; 4.0 is BC integration.
**One-code-per-item is particularly important for FMCG digitalization. Because FMCG products have low value, immediate consumption is more common, and online ordering is less frequent. Therefore, one-code-per-item, which can reach the C-end "with the product as the touchpoint," has almost become a standard for FMCG.**
Social cloud stores are basically attached to the channel system, while micro-malls can be independent of the channel system. Therefore, when discussing channel digitalization, we rarely mention micro-malls, but repeatedly emphasize social cloud stores.
Reaching the C-end through one-code-per-item and cloud stores is just the beginning; it will not naturally generate increments. A new marketing operating system is needed to generate increments, which we summarize as a three-piece combination: **scenario experience + KOC community + cloud store.**
**Scenario experience is offline activities, KOC community is community promotion, and cloud store is the online network. Therefore, we call this combination model "connecting the three-dimensional space."**
**-04-**
**Level 3: New business, future mainstream**
This is a complete subversion of channel structure and channel members through digitalization. Through digitalization, we see the disappearance of traditional Chinese channel models. In home appliance channels, FMCG channels, and the baby products industry, we have seen many successful cases.
**In the past, whether it was channel focus sinking or deep distribution, it was only a change in the focus of channel work, without major changes in channel structure. Channel digitalization will present a completely different channel form. The new form will be the mainstream channel form for a considerable period of time.**
**For example.**
This is a case of Midea Group's channel digitalization restructuring.
Midea Group's Midea Cloud Intelligence has been applied in more than 200 companies. Midea Cloud Intelligence removes channels, but it is not a complete network reproduction of traditional channels. For example, there can be F2b orders, which were impossible in traditional channels. Therefore, digitalization can completely bypass channel levels in logistics, information flow, and order flow.
**-05-**
In the past, agents were all-around, with four basic functions: **ordering, warehousing and distribution, capital, and promotion services**. Now, ordering, warehousing and distribution, and capital all have third-party professional platforms. These platforms have professional and scale advantages. Agents can only transform into operators and service providers. As operators, the only thing they cannot give up is promotion and service; even capital can be provided by third-party financial institutions.
Below is a case of channel restructuring in a consumer goods company.
**-06-**
From the case, we find that the original agent functions have been replaced by new third-party institutions, namely third-party ordering platforms, third-party logistics platforms, and third-party financial platforms.
How similar to Midea's channel restructuring case. Is this an isolated case or the beginning of a trend?
**We believe this is the beginning of channel digitalization restructuring.**
**-07-**
**Channel digitalization restructuring: basic logic**
**China is vast, so Chinese channels are particularly long. After multiple rounds of channel sinking, it is now difficult to further remove intermediaries from the channel hierarchy.**
**Chinese channel members (agents, terminal stores) are highly fragmented, and leading Chinese brands have strong channel control capabilities.** Therefore, Chinese FMCG is driven by both brand and channel. With only brand drive and no channel drive, brands gradually disappear; with only channel drive and no brand drive, brands can grow slowly. Only with dual drive can they advance rapidly.
**China's channel form determines the basic characteristics of traditional Chinese channels: First, small scale, which facilitates brand owners' control over channels; Second, agents are all-around, combining the four channel functions (ordering, warehousing and distribution, capital, and promotion) in one. This is the "small but complete" state of Chinese agents.**
**It is necessary to neither reduce channel levels nor improve channel efficiency. This is the reality facing channel digitalization. Therefore, the full chain of channel digitalization is F2B2b2C. However, when it comes to the four channel functions, it is completely different.**
**1. Digital warehousing and distribution path**
In the past, agents purchased goods from manufacturers and then sold them to retail stores. It seemed natural and was done this way.
**Now, not only have third-party warehousing and distribution platforms emerged, but with digitalization, logistics can bypass agents, reducing the number of times goods are handled from the manufacturer to the terminal store or user.** For example, Midea's third-party warehousing and distribution platform "One Pallet of Goods" no longer goes through agents but directly reaches stores or users. This is called user direct reach.
**2. Digital ordering path**
Agents order from manufacturers, and stores order from agents. In the past, this was also natural, but now it is different.
**Through ordering platforms, any channel entity (such as a store) can bypass intermediate levels to place orders.** In the past, fragmented orders were not accepted by agents and manufacturers. Now, Midea's goal is to increase the proportion of "LTL orders."
**3. Capital platform**
In the past, it was difficult for agents to obtain loans. Agents' main assets were goods, which were in circulation. Bank loans either depended on company size (scale credit) or real estate.
**In the digital environment, agents can obtain the following sources of capital:** 1. Transaction credit. Recorded transactions can form credit, such as Alipay's Huabei; 2. Goods under supervision can be used for financing.
**-08-**
**From agents to operators**
**Agents are full-time and all-around, while operators focus on core channel functions.**
What are the core channel functions? Among promotion, ordering, warehousing and distribution, and capital, which is the core function of channel operators?
Some people now say that digitalization means being online. Being online means no longer needing offline personnel, operating users online, and completing everything online.
**This is a wrong perception, transferring the understanding of retail digitalization to brand owners' channel digitalization, simplifying marketing digitalization to direct e-commerce.**
In the channel digitalization environment, user touchpoints are either objects (one-code-per-item) or people (social cloud stores), both of which are super touchpoints.
Touchpoint connections, interpersonal relationships, customer relationships, and scenario experiences are very important. These tasks cannot be done without people.
**Of course, channel operations in the digital context will no longer be the human-sea tactic of deep distribution, but a "war commanded by squad leaders."**
**First, only successful promotion leads to orders.** Therefore, orders are the result of promotion. Whether orders are placed offline, online, or through third-party platforms is just a technical means of ordering, not a causal relationship. The causal relationship is: successful promotion leads to orders.
**Second, only with orders is there warehousing and distribution.** Warehousing and distribution exist to fulfill order delivery. Without orders, delivery is worthless.
**Third, only with orders is capital needed.** Without orders, capital is idle. With orders and profits, there is no worry about capital.
The causal relationship among the four channel functions is: **promotion → orders → capital → warehousing and distribution.**
**Orders, warehousing and distribution, and capital can all be handed over to third-party professional platforms. The only thing that cannot be handed over to third-party platforms is channel promotion.**
Years ago, when channel B2B was hot, B2B platforms promised to become promoters for all brand owners. This is not valid.
Brand owners must have their own brand and product promoters that they can control. Orders, warehousing and distribution, and capital can all be handed over to professional third-party platforms.
Warehousing and distribution and capital constitute the heavy-asset operations of agents. Operators focusing on promotion are light-asset operations, empowering terminal stores and operating the C-end.


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