---
title: "Though Mind-Bending, This May Be the Most Thorough Article on New Marketing"
description: "To understand the essence of new retail, one must discard flashy business phenomena and explore the underlying business logic of the new environment. In the internet era, customer connection models have evolved, leading to the integration of cognition, transaction, and relationship, which constitutes the new marketing paradigm."
author: "施炜"
publisher: "New Distribution"
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published: "2018-10-26"
language: "en"
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# Though Mind-Bending, This May Be the Most Thorough Article on New Marketing

> To understand the essence of new retail, one must discard flashy business phenomena and explore the underlying business logic of the new environment. In the internet era, customer connection models have evolved, leading to the integration of cognition, transaction, and relationship, which constitutes the new marketing paradigm.

**Only by tracing to the source can we rectify the fundamentals. To understand the essence of new retail, we must discard the dazzling business phenomena and explore the underlying business logic of the new environment from the most fundamental level.**
**Customer Connection Models in the Internet Era**
Whether manufacturing or retail enterprises, marketing strategies include five modules or links: target customers, demand identification, value positioning, value creation, and customer connection. See Figure (1).
"Target customers" refers to the segmentation and positioning of customers. Here, customers include both the objects of enterprise transactions (often called clients) and the users and consumers of the enterprise's products (services). In most cases, these two are unified. "Demand identification" refers to the analysis, recognition, and summarization of the demand characteristics of target customers. "Value positioning" is the design of value propositions and value forms for target customers. "Value creation" is the internal mechanism for generating and creating customer value, usually referring to the enterprise's value stream (such as R&D, manufacturing, and sales in manufacturing enterprises). "Customer connection" refers to the intermediary and bridge that connects the demand on the left with the value on the right: first, the communication chain that makes customers aware; second, the channel chain that delivers value.
Now, let's focus on customer connection models. In the traditional model, the basic feature of the communication chain is mass communication. It has two characteristics: first, it does not distinguish the audience, sending the same content to all; second, the information transmission between the communicator and the receiver is one-way, with no interaction or feedback. The main media for mass communication are familiar TV ads, billboards, etc.
The channel chain in the traditional model is a vertical distribution system composed of various business forms—wholesale (distribution) and retail. This system not only has many links but is also mostly controlled by manufacturers. In other words, manufacturers (brand owners) built a vertically controllable channel network. Deep distribution with terminal control is the most effective measure for manufacturers (brand owners) to penetrate the retail sector.
Before the popularization of mobile internet, the communication bridge and the distribution bridge were basically separate except for the overlap at retail terminal scenarios: customer awareness and purchase did not occur simultaneously; they often did not occur at the same location. In the mobile internet era, because customers use various intermediaries such as WeChat, apps, and e-commerce websites, awareness and purchase (from the supply side, communication and transaction) can occur in the same time and space (no time lag, no spatial difference), thus the communication chain and distribution chain have merged. The original mass communication chain and distribution value chain have merged into a customer interaction chain; the logistics elements in the distribution value chain have become independent as a logistics service chain. See Figure (2).
Customer interaction refers to communication, exchange, and interaction with specific customers. Its purpose is to make customers aware of the value and characteristics of products (services) and brands, to achieve transactions (sales realization), and to build long-term cooperative partnerships.
In the internet context, the spaces (scenes) for enterprise-customer interaction have expanded from traditional retail terminals to three: first, the virtual world of the internet and mobile internet; second, communities composed of target customers (including old and potential customers); third, the physical "sites" where customers actually experience (including retail terminals, as well as terminals and other sites). From the perspective of customer traffic, the cyberspace is the broadest, followed by community space, and the site space is the smallest. They range from virtual to real, from macro to micro, interrelated and interlocked, forming a structured "field" of customer interaction. See Figure (3).
The three spaces—network, community, and site—have intersections: there are communities in cyberspace, and there are also communities in site space. When site space adopts virtual reality and augmented reality technologies, its boundary with virtual space becomes blurred. Obviously, customer traffic is distributed across these three spaces and flows among them. For different customer groups, the distribution ratio of traffic (visits, page views, interactions, purchases, etc.) across these three spaces is different: young customers' traffic is mainly concentrated in cyberspace; older customers' traffic still accumulates at terminal sites; and some middle-aged customers (especially female customers) retain traffic in communities. Based on their target customer positioning, competing for traffic within these three spaces will be the theme of enterprise marketing for a long time to come. That is why Alibaba and JD.com have begun to value, penetrate, and enter the offline retail sector.
**New Marketing Law: Integration of Cognition, Transaction, and Relationship**
The three spaces—network, community, and site—provide customers with cognitive and experiential environments of different content, forms, and characteristics. They complement and relate to each other, constituting for enterprises an omnichannel scenario and a three-dimensional medium. "Omnichannel" refers to all occasions and contexts of interaction with customers; "three-dimensional" refers to online and offline, inside and outside terminals (broadly defined sites).
In the interconnected era, omnichannel scenarios and three-dimensional media are also three-dimensional channels. They include online e-commerce channels, community direct sales channels, and offline retail channels. When media become channels, for customers, cognition and transaction will overlap—cognition is transaction. When customers have cognition and experience of the value of products (services), they often immediately generate the desire and impulse to purchase. When mobile phones are never far from hand, cognition and purchase basically do not experience time and space separation; in layman's terms, customers can submit orders and complete transactions anytime, anywhere.
It should be pointed out that transaction is not the ultimate purpose and end of customer interaction. On the contrary, transaction is the starting point for deepening customer relationships—transaction is relationship. The idea of relationship marketing has existed for a long time, but it was only in the internet era, with the help of community organizational mechanisms, that it became possible to operate on a larger scale and with higher efficiency.
Cognition is transaction, transaction is relationship, meaning the integration of cognition, transaction, and relationship. Logically, cognition is the starting point, and relationship is the destination. Some friends also believe that establishing a relationship first, then enabling customers to generate cognition. In practice, these three form a cycle that is connected end to end. See Figure (4).
The cycle shown in Figure (4) means that in long-term cooperation with customers, relationships continue to deepen, cognition continues to strengthen, and transactions naturally follow.
**Differences in Marketing Models**
Interacting with customers in three spaces while simultaneously realizing the three functions of cognition, transaction, and relationship is the general marketing model of the internet era (originally proposed by the author, see "Connection: Marketing Strategy in the Era of Customer Value," Beijing, Renmin University of China Press, January 2018, pages 162-177). See Figure (5).
But for different enterprises, they can combine these three spaces differently based on their target market positioning, product (service) value and form, enterprise life cycle, resource capabilities, and other factors. That is, they can choose only one space (e.g., pure online or pure offline—this situation will become increasingly rare); they can choose two spaces (e.g., network + site, community + site, network + community), or of course, they can choose three spaces—this is the practice of most enterprises.
With the customer interaction space determined, the three functions of cognition, transaction, and relationship can also be distributed differently within the given space. For example, not using the community as a transaction channel, only giving it the function of deepening relationships, and selling all products (services) only at terminal sites; and so on.
From real cases, Xiaomi uses a typical "three-dimensional space, trinity" model; while TCL TV in the rural market uses a "township terminal + rural community" model.
**What is New Marketing?**
In my view, "three-dimensional space, trinity" is new marketing. Here, I will further elaborate:
First, new marketing applies to both manufacturers (brand owners) and retailers. It is an innovation in marketing models in the internet era. Its core concept is to start from the customer's standpoint, take customer value as the guide, and aim to deepen customer relationships.
Second, new marketing values customer traffic but does not endorse the so-called traffic thinking. That is, it does not adopt the approach of investing huge resources to grab and aggregate traffic in a destructive way, forming a traffic monopoly and then seeking monetization. Unicorns that monopolize traffic, driven by capital markets, often destroy the industrial ecosystem and ultimately harm customer value.
Third, in the internet era, most customers' consumption value chains (including guidance, cognition, purchase, acquisition, and use activities) will traverse the three spaces of network, community, and site; enterprises design and arrange full interaction activities with customers based on their behavioral characteristics and habits. Whether customers browse online and purchase offline, or vice versa, or follow more complex routes across the three spaces, enterprises can integrate with customers and meet their requirements.
Fourth, network, community, and terminal are all traffic entrances. New marketing abandons the zero-sum distribution of traffic across the three spaces and strives to make the three spaces draw traffic to each other, complement each other, and amplify total customer traffic.
Fifth, new marketing is digital and intelligent marketing. First, it achieves IoT and datafication at the retail level; second, it designs the overall structure of data flows in the three spaces, connecting and aggregating online and offline data, and building a mechanism for data flow and sharing; third, it combines data flows with artificial intelligence technology for precise and humanized operations.
Sixth, new marketing values but does not blindly believe in data and AI technology. So-called precise profiling and intelligent interaction cannot replace real, sincere, and heartfelt human interaction; no machine reaction can compare to human care. New marketing is people-oriented marketing—here "people" represents both customers and the marketing personnel, service personnel, and other staff who create value for customers; new marketing is targeted marketing that satisfies and creates customer needs, and is emotional marketing committed to long-term partnerships.
Seventh, new marketing does not start from any concept and does not do things that are forced. Various methods and theories are only applicable to specific times, spaces, and situations. There are only universal principles, no panacea.
**Unification of Manufacturers (Brand Owners) and Retailers**
The leader of new marketing can be either a manufacturer (brand owner) or a retailer. Currently, some new retail enterprises founded on the internet are growing rapidly, mainly because traditional retailers are slow to transform and lack competitiveness. When manufacturers (brand owners) with a strong foundation attempt new retail, they may not necessarily be at a disadvantage. Internet giants' online data resources may provide some support for offline retail operations, but manufacturers (brand owners) also have their own data advantages (for example, products are the best data entry points).
The future trend in many industries will inevitably be the unification of manufacturers (brand owners) and retailers. For many excellent enterprises, they are both brand owners and retailers. The path to unification is either for manufacturers (brand owners) to extend into the retail sector (such as opening specialty stores) or for retailers to integrate manufacturing in reverse, making manufacturing internal or turning manufacturing enterprises into unbranded processors.
It is foreseeable that competition between manufacturers (brand owners) and retailers in many fields will intensify. Not to mention that new retailers' strategic intention to integrate upstream by holding the customer as a hostage is obvious; leading manufacturers (brand owners) in some industries will not tolerate the loss of discourse power and the obstruction of customer connections, and will inevitably extend to the front end of the industry chain in various ways to directly connect with customers. From another perspective, traditional retailers are unwilling to become platforms with a single function and will strive to expand their influence and weaken the discourse power of manufacturers (brand owners).
In different fields, the equilibrium position on the vertical industry chain between manufacturers (brand owners) and retailers varies. In fields such as fresh food, the equilibrium point is biased upward, meaning retailers have strong control over the manufacturing link and a high degree of backward integration. The main reason is that the upstream production sector is fragmented, lacks cognitive barriers (brand barriers), and has high supply elasticity. In fields such as mobile phones, home appliances, home furnishings, and fashion, the equilibrium point is biased downward, meaning manufacturers (brand owners) dominate the distribution value chain and have a high degree of forward integration. The stories of brands like Xiaomi and Casarte have proven this. In fields such as FMCG, the relationship between manufacturers (brand owners) and retailers is generally balanced, and the boundaries of division of labor are relatively clear. It should be pointed out that both manufacturers (brand owners) and retailers have professional capability boundaries and constraints, and cannot enter all fields without limit, nor can they completely replace each other.
The unification of manufacturers (brand owners) and retailers does not only mean mutual coverage and integration, but to a certain extent also mutual integration. Business entities can be independent of each other, but business activities are mutually coordinated.
Text / Shi Wei, Leading Expert of Huaxia Jishi, Famous Management Scientist, Chief Researcher of the Financial and Securities Research Institute of Renmin University of China
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