Growth in the Era of Shrinking Volume
The term "era of shrinking volume" was coined by me during a chat in Teacher Fang Gang's [New Beer] group. Because it accurately describes the current characteristics of the times, it was quickly accepted by everyone.
However, I think this term is not good; it carries negative connotations and conveys negative information. It can easily be used by those who want to shift blame. Because of shrinking volume, there's nothing I can do. Non-growth suddenly seems normal.
Recently, during frontline research, I found that structural growth still exists in the era of shrinking volume. This excites me. We can completely use this to re-lay out our marketing.
Where is Growth?
Before 2013, the FMCG industry as a whole was growing rapidly. So, which areas grew the fastest?
The answer is mass consumer goods.
What are mass consumers?
It means everyone is a target consumer, and all terminals sell the product. For example, Coca-Cola.
The reason leading FMCG brands became industry leaders is that they seized mass consumer goods. The big single products of leading brands are all mass products.
Deep distribution became the most influential and longest-lasting marketing method in China because it suits full-channel coverage of mass products. The phrase "distribution rate" encapsulates the characteristics of mass products.
From 2013 to 2020, the industry was already shrinking, but leading brands were still growing. That is, leading brands used their strong position to successfully squeeze out marginal brands. Pressuring inventory, buying end-cap displays, and arranging shelves made it impossible for small and medium enterprises to survive, and they collectively disappeared.
Because small and medium enterprises collectively disappeared or moved online, involution became involution among giants. In fact, involution was already severe after 2013, but involution between leading brands and marginal brands is different from involution among giants. Involution between different scales is big eating small. Involution among giants is mutual destruction.
In the past two years, a new phenomenon has emerged. The industry has not declined, but giants are declining. So, there must be some areas and some enterprises that are growing, but we have overlooked them.
Our investigation found that what is growing are segmented (niche) products, and segmented products are not within the vision of leading brands.
In the past, we classified enterprises as first-line brands, second-line brands, third- and fourth-line brands, or as high-end, mid-range, and low-end. With the popularization of mass products, the disappearance of second- and third-line brands, or the sinking of first-line brands leading to the disappearance of mid- and low-end, industry segmentation has begun to change.
Mass, segmented, and niche have become the new segmentation logic.
Mass is shrinking, niche is too small, and segmented has become the new growth point.
The five major beer giants are shrinking, but craft beer is growing. For example, Jinxing Craft Beer has annual sales of 2 billion.
The two dairy giants are shrinking, but new supply chain channels are growing.
In the snack food industry, instant noodles are declining, but river snail rice noodles, hot and sour noodles, self-heating hot pot, self-heating rice, instant pasta, instant vermicelli/rice noodles, instant porridge/soup, noodles with vegetables and eggs, flat noodles, sour soup noodle leaves, etc., are all growing. Each category champion in a segmented field has sales of over 1 billion.
In the shrinking mass field, involution is inevitable; in the growing segmented field, sales will inevitably grow.
Growth in the era of shrinking volume is structural growth. Every industry has several or dozens of growing segmented segments. It is their existence that accelerates the shrinking of mass products.
Many distributors have given up first-line brands, even clearing out big brands. But they tightly grasp small category champions. Because segmented products are growing, and channels have profits.
However, first-line brands are powerless against growing segmented products. The scale of segmented products is small, not comparable to mass products. But there are many segmented products, and the total volume is not small. The deep distribution system of first-line brands is designed for mass products, and it is difficult to switch tracks to enter the segmented field.
What is the Lever?
For mass products, the lever is very clear: deep distribution. The goal of deep distribution is high coverage, so KPI assessment must assess distribution rate. Salesmen clocking in and making routine visits are all to ensure distribution rate.
But this lever cannot grasp segmented products. The reason segmented products are segmented is that they do not have distribution rate, only precise distribution. We call it "precision rate." And even if it is precise, it may not sell through. Because segmented products lack brand awareness, and without brand-driven channels, distribution does not lead to sell-through.
There are two levers for segmented products: first, high-energy channels; second, high-energy scenarios.
High-energy channels include supermarket renovation stores, snack collection stores, brand flagship stores, instant retail, etc. These channels are now collectively called new supply chain channels. Because they have the endorsement of strong retail brands behind them, even if the product's own brand awareness is insufficient, they can still sell well.
The advantage of supermarket renovation stores is that once you enter a large store, someone will "copy the homework," and then you can enter more stores. There is no need for distribution; a company with a few people can handle it.
Supermarket renovation stores generally adopt a "wide category, narrow product" strategy, which is tailor-made for segmented products. Therefore, enterprises with a higher proportion of segmented products benefit.
Retail collection stores have headquarters purchase uniformly, then simultaneously distribute to thousands of stores nationwide. Similarly, they do not need distribution rate.
Segmented product flagship stores differ from mass product stores that focus on sales volume; the value of brand flagship stores is to enhance momentum, not to assess sales. Segmented product flagship stores launch new products, do high-end, and do brand promotion, with commercial value different from ordinary e-commerce.
High-energy scenarios account for only about 1% of consumption scenarios, but they can play a 1990 role. 1% of high-energy scenarios activate 9% of momentum scenarios, driving 90% of kinetic scenarios.
When high-energy channels and high-energy scenarios are activated, offline distribution is no longer difficult because there is C-end pull, and there is no need to assess distribution rate; you only need to follow the logic of OBPPC, precise distribution, and product-channel matching.
What is the Organization?
Traditional marketing organizations include the marketing department (brand department) and the sales department. One is responsible for brand driving, the other for channel driving.
Now, both major organizations face the problem of losing driving force. Because mass media has lost power, the brand department is already useless, and the marketing department is in the process of becoming useless.
Because deep distribution has lost channel driving force, some sales departments are laying off employees on a large scale, but they find that layoffs only save costs and do not solve the growth problem at all.
In the process of serving segmented products, we found that as levers change, organizations must also change. The deep distribution organization that does mass products cannot do segmented products.
If the lever is in high-energy channels, then build a new organization specifically responsible for high-energy channels.
If the lever is in high-energy scenarios, then we build a new organization. For example, Mingren Soda Water established an organization called the Iron Triangle: scenario specialist + communication officer + city manager.
The scenario specialist is responsible for high-energy scenario operations; the communication officer is responsible for same-city communication and UGC communication; the city manager is responsible for distribution.
Since the brand department (marketing department) has lost brand driving force, we establish a scenario department responsible for online and offline UGC communication, building an internet brand or IP.
Enterprises certainly cannot use a 2b organization to undertake 2C functions. They certainly cannot use distribution rate to activate high-energy scenarios and high-energy channels. New levers for channels and scenarios can only be undertaken by new organizations with new functions.
What are the Core Actions?
First-line brands cover millions of stores nationwide, using tens of thousands of 2b salesmen. But consumption scenarios are certainly more numerous than terminals, so wouldn't that require more 2C personnel?
Wrong. bC integration should use fewer people to do more efficient things. High-energy scenarios have strong spillover effects, so scenario marketing is: take a step forward, enter the scenario, operate the C-end; take a half step back, activate the b-end. More efficient.
bC integration means the same person does both b-end distribution and C-end operations. But only 1% of high-energy scenarios meet the conditions for scenario operations. Scenarios activate the C-end, which naturally activates the b-end and B-end. The matching of b-end and C-end is best done by the same person.
Why can't the people doing 2b and 2C be separated? Because bC integration requires two-way activation of b-end and C-end. This is the inevitable result of rebuilding two-way driving force when brand driving force and channel driving force are lost.
Given that many 2b deep distribution personnel have formed deep distribution habits, transformation is very difficult. We suggest that enterprises establish a "coaching team" in the organization, responsible for accompanying transformation on the front line; otherwise, the failure rate of action transformation is high.
The core actions of scenario-based bC integration include the following aspects.
First, select high-energy scenarios. Typical high-energy scenarios are intervenable, interactive, and have strong scenario communication.
Second, interact with users in the scenario, co-create value in scenario experience, and co-communicate. Interaction and experience actions depend on the product and the scenario. There is no unified standard.
Third, discover KOCs in the scenario, activate KOCs, and trigger communication.
Fourth, when high-energy scenarios are activated, follow the spillover roadmap to activate more scenarios.
What to Assess in KPIs?
The logic of KPI assessment is: whatever you want employees to do, set that as the KPI. KPI is a reward and affirmation of employees' correct behavior.
Because deep distribution has been practiced for more than 20 years, the standardization and long-term nature of deep distribution KPIs have brought about serious consequences of rigidity. Except for performance indicators, the action indicators of different enterprises' KPIs are almost the same.
When the levers and core actions around segmented products change, KPI assessment must also change. Because the core actions of scenario activation for segmented products have the characteristic of rapid change, KPI assessment also has stages and rapid change. However, the principle of treating actions as KPIs based on what you want employees to do has not changed.
Future KPI assessment should consider stage goals, stage actions, and stage KPIs. It is sufficient to unify work arrangement, indicator assignment, and KPI assessment. Of course, this increases the complexity of KPI assessment and management difficulty.
When the Environment Changes, Everything Must Change
When winter comes, don't wear summer clothes. When the environment changes, everything must change.
The internet has replaced mass media. The communication environment has changed, and the brand environment has changed.
Segmented products are replacing mass products. Target users have changed, growth points have changed, and the deep distribution model must also change.
New growth, new levers, new actions, and new KPIs are the inevitable results of all the above changes.
If you don't break with the past, you cannot move toward a new world.
As times change, one generation of old people bows out, and a generation of new people enters. Metabolism is a historical necessity.
The greatest law of marketing is evolution. If you cannot adapt to environmental changes, you will be eliminated.