Warm reminder: Click the blue text above “FMCG Distributor Professional Consulting” to learn more about marketing and distributor internal management. From developing a new market with a new product to forming a stable market, roughly three stages are needed:
Stage 1: Single-Product Breakthrough Generally, in the early stage of market development, manufacturers and distributors cannot simultaneously promote multiple products, so they must rely on the momentum of a single product to make a good start. The following aspects are essential for a single-product breakthrough:
Select a mass product that can achieve high sales volume. The purpose of a single-product breakthrough is twofold: first, to form a sales network, as only high-volume products can build a comprehensive network; second, to build brand awareness, as only high-volume products have brand influence.
Explosive distribution to achieve market coverage. Explosive distribution requires speed, large quantities, and high market coverage. It can achieve the following: first, catch competitors off guard by completing distribution before they can react; second, rapid terminal distribution creates momentum, giving confidence to secondary distributors, terminals, and consumers.
Stable high-profit incentives for secondary distributors. In markets dominated by secondary distributors, especially in townships and below, secondary distributors play a crucial role. Their only motivation to promote unknown new products is profit margin. If the new product does not offer higher profit margins than other products, it will not pass through the secondary distributors, and thus will not reach the terminals, losing the chance to meet consumers.
Strong terminal merchandising. Old and well-known products can "sell themselves," and consumers often buy habitually. How can new products that consumers are unfamiliar with be sold? Mainly through strong recommendations at the terminal. If retail terminal staff do not recommend, the manufacturer or distributor must send personnel to the terminal for merchandising.
Short-term high-density advertising in regional markets (e.g., county-level markets). A common strategy for second- and third-tier brands is to become a strong brand in a regional market, giving consumers the image of a first-tier brand. Since advertising costs in regional markets (e.g., county-level) are extremely low, a few tens of thousands of yuan can launch a market. Therefore, while distributing, high-density advertising should be used to "push" and "pull" the market simultaneously.
Conduct at least three waves of strong promotional activities within six months. Do not expect a single large-scale promotion to fully launch the market. Many new markets fail due to insufficient push. Therefore, three consecutive waves of strong promotion are essential.
Stage 2: Forming a Product Group
Extend new products around the main brand that has achieved a single-product breakthrough, to share the pressure of the dominant product's high proportion. A single product is vulnerable to competitor attacks, and when attacked, it cannot effectively counter—if ignored, the market suffers; if countered, profit margins drop. After forming a product group, you can use it for strategic counterattacks. For example, use one product to compete with competitors while others generate profit.
New products should enter the market with a "high-open, low-go" approach. Remember, if you follow the typical requests of salespeople and distributors (higher quality, better packaging, lower price, better policies), new product promotion is doomed to fail. To extend the product lifecycle, you must leave enough room—price space. Therefore, new products should enter the market with a higher price.
Through a "product group," form a "well-known brand" rather than a "well-known variety." If a single product is too strong, it can lead to "brand equals variety," which is an obstacle to promoting new products. Multiple varieties under one brand umbrella can enjoy the brand's protection while offering consumers choices—if they are not satisfied with one variety, they can choose another.
A "product group" also makes it difficult for competitors to launch targeted policies. Competitors usually do not attack the entire product line; they typically target the highest-volume or most threatening variety. If the product is single, all attack power is concentrated on one product, which may become a sacrifice. Under a "product group," the sacrifice of any product will not lead to a total collapse.
Stage 3: Forming a Product Structure
A "product group" is usually an extension of products at the same price level, while a "product structure" is an extension across price levels. Although many companies have succeeded by sticking to a single price level, especially for high-end products like luxury clothing, this strategy may be effective. However, in the mass consumer goods field, a single-price-level product structure is problematic.
Only with a structure can there be a strategy. Companies should regularly combine products strategically to meet the needs of different consumer levels. Low-end products can achieve high volume but have limited profitability; their roles are: first, to open up the network and achieve market coverage; second, to build brand influence because low-end products have many consumers; third, to share sales expenses; fourth, to create economies of scale; fifth, to support personnel. Mid-end products have both sales volume and profit, forming stable cash flow and stable profits. High-end products have limited sales volume but high profit margins, shaping the corporate image.
A market with a single product or product group is unstable. The outcome of single-product competition is either losing money or exiting the market.
The key to winning price wars (policy wars) is an effective product structure. In the Chinese market, price wars in low-end products are inevitable, determined by consumer demand characteristics and market competition—unless you exit the low-end competition. Companies must not avoid price; they should proactively initiate or accept price wars. At the same time, they must defeat competitors in price wars and make money. The only way to achieve both goals is to use profits from mid- and high-end products to support low-end products in price wars.
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