How to find a “host to promote products” so as not to lose money?

In my opinion, all businesses in China can be roughly divided into two types: technological innovation and model innovation.

What is the root of innovation? Technology-driven development is about meeting "unsolved needs" or "solving problems that have not been solved with a lot of manpower investment in the past" ; model-driven development increases the transaction costs between people.

Technology generally appears in the 2B field, and the model is mostly 2C; from the perspective of TOC, almost all business models are trying to seize the minds and time of users.

When the growth rate of the entire Internet slows down, the competition for users will intensify, and more brands will suffer from "traffic anxiety" . What should we do? We often say "where the users are, the brand should go."

In the past two years, short videos and live streaming e-commerce have been unquestionably popular and have become a traffic base. Many bigwigs have also entered the market, including Luo Yonghao and Dong Mingzhu, and later Yu Minhong and Li Guoqing. Traffic has also spawned opportunities for KOLs, MCNs, guilds, and other parties.

Many brands are eager to get into the " live streaming sales field" and try every possible way to make a fortune from it. If you don't believe it, you can research a few fast-moving consumer goods brands. In the communication process, words such as "live streaming influencer recommendation" will always appear.

But is the reality really as ideal as everyone imagines, a win-win situation for all four parties (consumers, KOLs, merchants, and MCNs)? No; it only leaps towards the cruel side.

For example: a blogger with millions of followers has single-digit sales, but the sales volume is growing curve at the moment, and the refund rate is increasing exponentially the next day . He is happy and sad at the same time; it is really a toast to the morning sun and a toast to the moonlight.

Therefore, it is particularly important to effectively avoid the gray operations behind the industry and stay away from the label of "being cheated" . Let us stand from the perspective of merchants and talk about the issues in cooperation and development starting from the essence of e-commerce live streaming.

1. Relationship between anchors and MCNs

Many people believe that TV shopping in the early years was also a form of live streaming sales, allowing people to buy goods without leaving their homes, satisfying the need for convenience to a certain extent. It is undeniable that "it is true" ; but due to false propaganda and the development of e-commerce, this earliest form of live streaming shopping is heading for extinction.

At this stage, live streaming with goods is a new retail model extended from the "e-commerce scenario", so it also conforms to the basic laws of retail. So what is retail?

Wikipedia definition: A commercial activity that sells goods or services to "end consumers" for personal or family use, thereby increasing the value of products and services; therefore, video platforms conform to the current development laws and divide current anchors into three types:

1. endorsement;
2. KOL anchor;
3. Expert, star.

The former start by making their own "products" or "supply chains" and expand sales through live streaming. Most of these live streaming businesses are run by "husband-and-wife teams", with the woman in charge of live streaming and the man in charge of production or operations . They are individual entrepreneurs with independent brands.

Secondly, as everyone is more familiar with it, I summarize it as an amateur starting out by using personal skills or "certain qualities" to quickly achieve "original fan accumulation" through platform activities, and then monetize it through live streaming; the familiar "Li Jiaqi, Wei Ya" all started out as individual anchors.

The latter, intellectual scholars, film and television actors, frequently appear in major occasions through IP, become public figures based on their influence in the entertainment industry, and form an "idol-fan" relationship . Their development is inseparable from the three structures of capital, works, and media platforms.

Based on this, we know that if a "brand company" wants to cooperate with an "anchor", there are many details involved, such as scheduling, contracts, inquiries, and each link is a headache. What should we do?

So a new product "MCN" emerged. What does it mainly do? Operate internet celebrities (KOL, experts) and stars and look for ways to "monetize" them.

Furthermore, in the era of pictures and texts, e-commerce platforms are self-service supermarkets with shelves, where merchants can open stores and consumers can choose what they want; with the emergence of internet celebrities, there are "shopping guides" similar to supermarkets, who mainly carry out the links of goods and services.

The product selection, negotiation, and supply chain of the incremental section are left to the MCN. Some MCNs will even build their own supply chain systems when they grow large enough. However, from the market perspective, this is an idealistic route. Why?

It is difficult to run out of this track without "rich supply chain genes" or "mastering information rights" at the upstream top level. There are two reasons for this: brand power and heavy assets.

From the perspective of commodities, according to Nielsen, a report released by Guojin Securities Research Institute pointed out that for consumers, the "baby, OMG" said by the anchor in the live broadcast room is certainly important, but the lowest price on the entire network is human nature and a symbol of status, which means that fans can follow the anchor more wholeheartedly.

In other words, only when the anchor or celebrity has the trust of fans will the sales increase and merchants will flock to it, thus completing the MCN task. If the MCN company builds its own supply side, it means having to create a "private brand" or POP system.

What is a free brand? The exclusive brands created by wholesalers or MCNs themselves, in simple terms, are commissioned processing, or OEM, or even self-built factories, and products shipped on a drop-shipping basis.

There are many "private label" products on the market; we see many celebrities or internet celebrities often say "baby, this is my own or my company's brand" in the live broadcast room, which all belong to this type.

What is POP? It is divided into four types: SOP mode, LBP mode; SOPL mode, FBP mode.

SOP means that brand merchants have the greatest autonomy in management. Goods do not need to be stored in MCN warehouses. Consumers place orders through the live broadcast room, and the goods are sent to customers through third-party logistics. You can issue invoices to customers if they ask for them. After-sales, customer service, and operations are similar to those on e-commerce platforms. This model is currently the mainstream with low operating costs, mainly relying on deductions and promotion fees.

LBP means that when consumers place an order, the brand must send the goods to the MCN warehouse closest to the customer. This is obviously more difficult, right? Of course, MCN will not do this . Generally speaking, platforms with forward warehouses or logistics will do it, such as "JD.com or grocery shopping business."

The SOPL model is the same as the LBP model, the difference is that you do not need to issue a VAT invoice to the platform for settlement, but you must issue it if the customer requests it. The FBP model means that the brand has an independent backend, the goods are first put into warehouse and sold, and then directly delivered by the platform. From warehousing to customer service, everything is owned by the platform.

Therefore, knowing so much, you will find that MCN companies will not cooperate with SOPL, LBP, and FBP models. The reasons can be derived from business logic, such as:

The anchors are worried that there are not enough products to sell so they try their best to lock in inventory. As a result, the upstream factories in the brand supply chain produce a lot of goods. In the end, the sales rate is low and all the goods are stuck in their hands. All this energy and transit costs are squeezed on the operation of MCN. Isn't it "asking for trouble" for MCN to do the supply chain?

From the perspective of information rights , how should we understand information? We might as well change the name to "short video platform"; from PC to mobile Internet to the mobile phone screen era, building a platform is actually a support of technical capabilities, which are difficult for small MCNs to do.

According to the results of market research, MCN companies once thought that they could build a platform if they had a group of video creators (Internet celebrities), but ultimately gave up considering the high probability of falling into a trap. There are two reasons for this: capital is not optimistic and the ceiling is obvious.

Firstly , technology requires a lot of manpower cost investment, and MCN and media companies tend to develop in the direction of "entertainment film and television".

Although some MCNs have received financing in the past few years, such as Alibaba-invested New Film Studio, Sequoia's Erka Media, Huaying Capital and Qianhai Fund's investments in Kuaimeizhuang, these are sporadic layouts, mainly focusing on the three logics of content, consumption and marketing.

Secondly , there is still a lot of controversy in the investment circle about whether MCN agencies are worth investing in. Some people believe that they have good cash flow but are not easy to invest in.

The reason is that from Weibo to WeChat and then to Douyin and Kuaishou, the content platforms are iterating rapidly and the benefits of internet celebrities are gradually becoming equalized, so the KOL business model is not easy to replicate.

Therefore, the best way for MCN to operate is to create its own brand, slowly build a supply chain over the long term, or develop into a content marketing company; and then sign more Internet celebrities to cooperate with brands.

Then, in the middle, we need to solve the problems of topic selection, conception, shooting, editing, copywriting, design, public relations and promotion for influencers. Isn’t it the best route to focus on helping influencers to better market themselves and obtain brand cooperation? Then, what details should brands pay attention to when cooperating?

2. 6 major pitfalls in negotiation

Brand merchants do not have professional MCN resources and will find anchors to sell products through intermediaries and other channels. In fact, many intermediaries are just trying to get something for nothing. They either use other people's anchor resources to negotiate with you, but the actual schedule is not guaranteed or they require a relatively high commission.

The first thing brands need to know is that there are two ways to work with MCNs to promote products: pure commission-based promotion and a slot fee plus commission.

The latter is common in the industry. What is the pit fee? You can think of it as an "appearance fee", which means that brands have to pay a fixed fee to internet celebrities, ranging from several thousand to tens of thousands.

For example, top anchors Luo Yonghao and Li Jiaqi both have it; except for the top anchors who are relatively expensive, the quotes of big anchors who generally have no experience in selling goods are mostly inflated.

Therefore, in cooperation, we first need to understand the "slot fee", and then examine the other party's main product categories, the number of fans; as well as the order data and return data of the previous few shows, and then look at the data and calculate the ROI during the broadcast. There are many shell companies here that will defraud the slot fee, which is also common in the industry.

In addition to the pit position, the issue of commission cannot be ignored. What is commission? The remuneration collected by MCN as a result of introducing cooperation is generally 15-30% based on the single product or the entire site.

In order to attract more brand cooperation, some agencies will reduce the "commission fee" to a very low level, but the pit fee is very high; some agencies have low pit fees and high commissions.

In short, commission is an indispensable part; what needs to be noted here is that many agencies will say when communicating with the brand manager, "I don't know if the product can be mailed to the company" and then finalize it after checking.

At this time, there is a high probability that MCN may calculate the commission based on the product's supply chain price, selling price, profit, anchor promotion fees, etc.

In addition, when the process reaches this point, the brand owner often thinks, I have invested so much in the pit fee, but I don’t know how your sales are going? If the final result is not good, I will suffer a loss if I lose money; therefore, MCN will have "sales guarantee" type of cooperation.

What does it mean? If you invest 100,000 in the slot fee, I guarantee to help you sell a certain number of copies/turnover, isn’t that great?

But we often overlook one point. Many small agencies negotiate with brands for "high commissions". For example: I guarantee to sell 5,000 orders for you, but I want a 10% commission.

What to do in the end? The agency pretends to place orders during the live broadcast using the slot fee, but in fact it earns "commission for goods" and then returns part of the goods in the end, so it does not suffer any loss; however, the contract for the returned goods does not indicate that "commissions must be refunded", so in the end they find themselves still trapped.

Therefore, research on MCN before cooperation and whether the anchor is directly signed by MCN or an agent is a very critical step, which determines the credibility. Apart from this, are there any "uncontrollable factors" that we have not thought of? ;certainly.

For example, after many brands and MCNs have signed a contract, they proposed to replace the cooperating anchor with the same level because the anchor had no schedule or temporary issues; although it sounds like there is no big problem, there is actually a big difference.

Some anchors may have similar influence but may not be suitable for brand products. Therefore, the so-called same-level final efficiency is very bleak. This always leaves the question of "ROI". What is ROI?

The calculation formula is: ROI=GMV➗(slot fee+commission) . For example, if a brand invests 10,000 yuan and the sales revenue reaches 20,000 yuan, the ROI is 2. If the sales can reach 50,000 yuan, the ROI is 5.

Currently, most MCNs do not include commissions in their ROI calculations, so there may be deviations in the calculation method in different scenarios; brands all hope that the ROI is as high as possible, but the reality is cruel, it can be as low as there is no lower limit.

According to the report of the First Financial Industry Data Center, in the field of beauty and skin care, an ROI of 3 (input 1, output 3) is already quite good data, and it is the result of mature brands finding matching internet celebrities for investment; in the food category, an ROI of 1.5 is a good level, and beverages are quite satisfactory in the range of 1-2.

There are two main pitfalls regarding ROI:

First , GMV is calculated based on the transaction volume on the day of the live broadcast. As a result, the 7-day return rate is extremely high, and the actual transaction volume may be very small.

Secondly , the ROI is promised verbally but not stated in the contract. In the end, the actual ROI is far from what was agreed upon, and the brand can only swallow its bitterness without anyone to complain. So what are the ways to avoid this pitfall?

The calculation method should be agreed upon in the contract. For example, if a product is returned or exchanged within 7 days, the ROI can be calculated based on the actual transaction amount on the 15th day after the product is sold (when receipt is confirmed).

Therefore, you may see that the GMV battle reports released by many MCNs or live broadcast officials show very high data, but the actual transaction volume may not be that much; the key point is here, high live broadcast sales do not mean high actual order total amount. When brands cooperate with MCNs, they must not be fooled by appearances.

In addition, for small and medium-sized brands with limited budgets, these parts are also worth noting. For example, in order to train new anchors, some organizations require media and merchants to communicate and say "new anchor trial broadcast", with no pit fee, only commission ratio, to see if they can give some samples by mailing them at a low price; but you would never expect that the samples sent out may not even arrive at the live broadcast room, and finally disappear.

You thought that after the samples were sent out, the host's schedule would be relatively stable; but when you were watching the live broadcast with great excitement, you found that the host's performance quickly switched to the next product before it lasted "5 minutes".

Although the sample is a small amount of money, it all depends on how much the "institution" values ​​it. The big institutions I have met often ask whether the samples will be returned after the trial broadcast.

Even how to explain the selling points of the product, what kind of people will use it, the details of the scene, etc. , actually reflects how strong the MCN's management ability is over the anchors and how much it values ​​the brand; and after signing contracts with many big MCN anchors, you also need to pay attention to the "length of the product's live broadcast" and "whether there are competing products" in a single game.

Some anchors may sign contracts with many brands for each live broadcast. If their own brand has homogeneous products, the effect of the broadcast can be imagined. In short, the above are some tips to avoid pitfalls. So how do we find high-quality anchors or MCNs?

3. Matching anchors and MCNs

There are many professional data platforms that analyze the sales of anchors, such as Zenmama, Xinbang, Juliang, 66bang, etc., where you can see the MCN rankings and anchor live broadcast data, and the average number of short video comments. If you are interested, the anchor can directly look for business cooperation.

From the perspective of both brand and MCN, how can we achieve cost-effective and win-win cooperation? It is important to note that:

1) From the brand perspective

Try to choose a formal or top-ranked agency. Secondly, some of the six details of the above negotiation need to be included in the contract, such as ROI issues, sales guarantee, replacement of anchors, and broadcast time. However, top anchors are not necessarily easy to talk to, so it is not best for brands to find top anchors and the negotiation cycle will take a long time.

Therefore, according to market research, many brands are willing to pay top prices to choose "second-tier celebrities". On the one hand , it is to endorse the brand, and on the other hand , celebrities also have a natural "fan base" so why not? By the way, they can also sign endorsement contracts.

Secondly, if the brand has a limited budget and does not want to go through an MCN company for daily operations, the team can also find small anchors to sell products on their own. Many of them will leave business methods, and commission cooperation should be chosen as much as possible.

Small and medium-sized anchors are generally "better" at speaking, and they have an obvious advantage: accurate user base and high stickiness.

The daily content output by small and medium-sized anchors who have the ability to sell goods is relatively focused and precise. Many of them are recommendations and promotions for niche brands. Therefore, the fans they attract have a clear purpose for following them, and this type of anchor values ​​their "fans" more.

Especially for special categories, such as maternal and infant products, imagine that a top anchor and a mother who has real experience with the product, a "key opinion consumer" (KOC), both recommend maternal and infant products to you. Who would you choose? I think most people would trust the latter more.

In short, when choosing a brand, don’t blindly follow the trend and the “head” law of success.

In addition, having many fans (high traffic) does not mean strong conversion ability. The ROI data of anchors who are strong in selling goods on different platforms are also different. Even for the same category, the output of different brands or even the same brand will be different.

In the field of beauty and skin care, if a brand wants to achieve relatively good ROI data, it needs the right time, place and people, good products and appropriate prices. In short , data analysis and market research should be done in the early stage, and long-term promotion and delivery plans should be formulated.

2) From the perspective of MCN

MCN has an upstream and downstream relationship between brands and anchors. The four most basic contracts for anchors are essential, namely labor contracts, service contracts, brokerage contracts and cooperation agreements; among them, it is best to sign brokerage contracts and cooperation agreements with Internet celebrities.

The reason is:

First , from a legal perspective, brokerage contracts and cooperation agreements are not protected by the Labor Contract Law , so there is considerable room for negotiation between the two parties.

Secondly , if a labor contract is signed, it is not suitable for short-term labor because the two parties are engaged in medium- to long-term cooperation .

Third, when a labor contract is signed, because it is protected by the Labor Contract Law, the two parties are in a labor relationship.

All this means that internet celebrities can notify the MCN company 30 days in advance to terminate the contract, and the internet celebrities that the MCN has worked hard to create may suffer huge losses because of their resignation.

If an MCN dismisses an influencer, it needs to notify him 30 days in advance or pay him an additional month's salary, and if the company breaches the contract, it must also pay financial compensation.

However, from the perspective of the actual market, small MCN companies generally do not sign four-party agreements. At most, they will sign a three-party cooperation agreement among brand MCN anchors and a unilateral cooperation profit distribution agreement among MCN anchors.

The main issues involved are "ownership of one's own account", "IP operation content output", and income distribution of internet celebrities.

Generally speaking, after MCN (Party A) deducts various costs such as advertising fees, equipment rental, travel expenses, and personal image building incurred by Party B (Internet celebrity) in engaging in related business, it will be distributed according to the ratio negotiated by both parties; another thing to note is the "personality clause issue."

When the anchor commits fraud (such as fake academic qualifications) or malicious behavior (spreading bad information) that leads to various issues that damage the interests of the MCN platform, both parties will be liable for compensation, etc.;

In terms of brands, merchants prefer deeply vertical MCNs, such as segmenting food and maternal and child categories; this is not only professional but also deep enough, and there are three other points: KPI indicators, product terms, and trade secrets.

In the former case, in order to ensure that the GMV or ROI of the goods meets the merchant's expectations, the merchant will agree on the KPI indicators in the contract; in this case, the agency needs to complete multiple agreed data to be considered "fully fulfilled", which can easily lead to disputes.

Therefore, in order to reduce the possibility of disputes between the two parties, it is necessary to clarify the KPI (refund rate, sales) or the proportion and responsibilities of both parties when the ROI does not meet the standards as much as possible. This will have a positive effect on both parties.

Secondly, the product terms are mainly reflected in consumer rights, infringement issues, product qualifications, differences between delivery and actual delivery, etc. For institutions, this not only faces compensation liability, but also damages their reputation and may even be held accountable, which is very important for MCN.

When MCN signs an agreement with a merchant, one of the primary considerations is whether the price offered by the merchant is the lowest price in the market . If, after the agreed upon price, lower prices for similar products appear on the market or the merchant offers lower discounts to other anchors, the competitiveness of the MCN will be greatly reduced.

Finally, regarding trade secrets, in the live streaming industry, MCN agencies will ensure their "competitiveness" in the market by competing for more "high-quality sources" or "lower commodity" prices; therefore, protecting the trade secrets that the agencies know and obtain during their operations is the core.

It mainly includes five aspects: customer list, supplier list, product information, business plan, and cooperation status.

The key dimensions that anchors consider when signing with MCNs include "business type, industry reputation, and support policies" ; although the contracts of large companies may be more stringent, the share and business volume given by the company are relatively guaranteed.

Some affiliated companies that claim to have "no profit sharing, no constraints" are relatively meaningless and it is better to do it yourself. Therefore, no matter which company you cooperate with, the anchor must read the contract carefully to avoid unnecessary troubles. In the end, everything is subject to the contract.

4. Summary

Judging from the current development of short video platforms, it will take at least 1-2 years for the platform to complete the reform and management of the "supply side". Brands will have two bonuses in terms of user time allocation transfer:

1. A brief opportunity for substandard platform management;
2. There is a serious differentiation between the top and mid-level anchors.

Therefore, it is totally fine for brands to calculate the ROI and boldly carry out the "anchor sales" action. If they want to achieve the three-in-one "product, effect and sales", the promotion of products in other dimensions is also an integral part.

Author: Wang Zhiyuan

Source: Wang Zhiyuan