The marketing secrets behind Perfect Diary’s explosive success

Seizing the opportunity of the rise of domestic trends and the emerging social traffic dividend, a group of new consumer domestic brands have rapidly emerged.

Among many domestic brands, Perfect Diary is a legend in the beauty industry.

Founded in 2017, it became the first domestic brand to top Tmall’s “Double Eleven” cosmetics list in 2019. In less than two years, it became an all-round hit on the entire Internet, with annual sales reaching tens of billions of yuan; its parent company Yatsen E-Commerce received multiple rounds of financing in three years and was successfully listed on the U.S. stock market in November last year, becoming the "first Chinese beauty group stock" on the U.S. stock market.

However, as the traffic dividend fades, new consumer brands have encountered certain growth difficulties. In addition, affected by multiple factors such as the overall market, Yatsen E-Commerce’s market value has been declining for half a year. Has the marketing logic that it once prided itself on become invalid?

To this end, [Internet Brand Officer] interviewed Perfect Diary to explore its traffic logic and how to actively adjust itself in the future to break through the traffic growth dilemma.

01 The marketing code for a counterattack and explosion

The logic behind Perfect Diary’s sudden popularity: reaping the benefits of social traffic through precise product pricing strategy.

For a long time, domestic women have been crazy about foreign brands. In their view, luxury brands such as LV bags are a symbol of status and taste.

As the young post-95 generation is rising with amazing purchasing power, they are more interested in new brands, new products and new experiences. They are also very sensitive to prices, and the ultimate cost-effectiveness is more in line with their consumption needs.

Targeting new consumption trends, Perfect Diary starts from originality and binds itself to OEM factories of big brands to create products that are "high-quality, creative, and surprising" in the minds of young people, and embraces young people with the ultimate cost-effectiveness.

Perfect Diary became one of the earliest "beauty platforms that use KOLs on a large scale" in China . It built a matrix of top KOLs, mid-level KOLs and amateur notes on Xiaohongshu, creating an atmosphere where everyone can bring products. It has an exposure level that even big brands can hardly achieve, and has created one popular beauty product after another.

Then, we built a matrix on major social platforms, released product information and event preheating on Weibo, promoted preheating and displayed makeup on Douyin, directly opened up sales channels, conducted color trials, evaluations, and promotions on Bilibili to increase brand exposure. In addition, Perfect Diary has also collaborated with high-end IPs and found popular celebrities to endorse its products to enhance its brand tone.

In the social public domain matrix, we have fully ignited the momentum and created a closed loop of consumer ecology from marketing to sales.

Perfect Diary is also one of the earliest beauty brands to build private domain traffic, and has a rich social ecosystem including WeChat mini-programs, WeChat public accounts, WeChat groups, and video accounts.

After traditional brand e-commerce completes a transaction, it often "loses contact" with users. After Perfect Diary completes traffic and transactions on social e-commerce, it also uses various methods such as WeChat personal accounts and communities to maintain contact with users.

Unlike traditional big brands that mainly reach consumers through distributors, these private and public domain marketing strategies are directly aimed at consumers, which is the so-called DTC strategy.

02 Traffic logic failed?

As a domestic brand, Perfect Diary’s development speed and marketing methods are both excellent examples.

Now, Perfect Diary’s counterattack marketing logic is being questioned!

On the one hand, the share price of the parent company Yatsen E-Commerce has been declining since its listing, and on the other hand, it is being questioned whether the brand has excessive marketing.

In Q2 2021, Perfect Diary's revenue reached 1.53 billion yuan, a year-on-year increase of 53.5%, far higher than the industry average growth rate; not in accordance with US generally accepted accounting principles, its net loss was 194.9 million yuan (approximately US$30.2 million).

At the same time, the scale of DTC consumers of Yatsen E-Commerce in Q2 was approximately 10.2 million, a year-on-year increase of 13.3%; the quarterly average order value of DTC consumers was approximately RMB 116.7 per person, a year-on-year increase of 17.6%. In addition, the proportion of marketing expenses to sales of Yatsen E-Commerce in Q2 further declined to 63.8%.

Judging from the data, the growth in the number of Yatsen E-Commerce DTC customers is not as rapid as in the early days, so some people in the industry are wondering whether its traffic has reached its ceiling.

When Perfect Diary first entered Xiaohongshu, it just happened to be on the rise, and reaped the benefits of social traffic. At present, with more and more new domestic brands invading social platforms and even international beauty brands starting to get involved, the cost of social traffic is becoming increasingly expensive.

This means that Perfect Diary, the main brand of Yatsen E-Commerce, and the Internet brand camp it represents, need to pay rising marketing expenses, but the incremental traffic it can bring to the brand is becoming increasingly limited.

This is why Perfect Diary’s annual marketing investment continues to increase.

Is the marketing strategy that you once prided yourself on gradually becoming ineffective?

In fact, this is not the case. The value of Perfect Diary's traffic lies in the private domain. The contact points between the public domain traffic and users have evolved from a line into a spider web, and finally introduced into the private domain pool. Its underlying logic is to carry out refined operations on users and attract users through high-quality content output.

03 Two major chips for long-term success

From being an internet celebrity to being a long-term celebrity is a proposition that every internet celebrity brand has to think about, and Perfect Diary is no exception. Its parent company, Yatsen E-Commerce, also has more far-reaching plans.

If we say that Yatsen E-Commerce initially broke through by relying on the hit products of Perfect Diary, then its strategy to consolidate long-term success is to build a "multi-brand matrix" and replicate the next "Perfect Diary".

By 2021, through incubation and acquisition, Yatsen E-Commerce has already acquired cosmetics and skincare brands such as Wanzi Xinxuan, Little Autine, Pico Bear, Galénic, EVE LOM, DR.WU (mainland China business) and Yiantai.

In fact, the multi-brand strategy is not new. After many brands broke through with single products, they began to seek diversified brand growth paths. After all, it is difficult to achieve large-scale brand operations relying on a single star brand.

Shanghai Jahwa entered the cosmetics category with Herborist cosmetics as early as 2016, and announced last year that its skincare brand "Shuangmei" would also enter the cosmetics field; PROYA currently has two major cosmetics brands, Caitang and INSBAHA Original Color Bota...

Yatsen E-Commerce’s second entry point is to expand Perfect Diary’s offline experience stores, with the original intention of filling the gap in experience scenarios and offline traffic.

During the interview, Perfect Diary stated that for the beauty category, the new "look, smell, ask, and feel" approach is important - visible, touchable, easy to use, and beautiful to photograph. Offline is the important channel to reach consumers, communicate with consumers, and enhance consumer experience.

They emphasized that Perfect Diary's offline store is positioned as a "free and unrestrained space for beauty". It is not only a place to sell goods, but also has social interaction and "beauty-creating" attributes, creating a real fashion distribution center for women who love beauty.

It sounds like Perfect Diary also uses its offline stores as social platforms, just like the offline stores of Heytea and Nayuki.

This may be a breakthrough for Perfect Diary in offline channels. You know, the design of traditional single-brand stores is actually centered around sales and performance, so consumers' experience will be very poor.

04 Can Yixuan E-Commerce make a comeback?

Whether in terms of channels or marketing, traditional international brands and domestic brands have begun to compete head-on. In the future, competition in the beauty industry will only become more intense.

Can Yixuan E-Commerce make a comeback?

First, let’s look at the multi-brand replication strategy.

The private domain traffic that Yatsen E-Commerce built in the early stage can be fed back again when it copies the next "Perfect Diary", and circulated among multiple brands to maximize the value of the traffic.

Furthermore, when the window period is over, in the second half of the domestic beauty industry, brands will compete on product strength barriers.

Perfect Diary has been continuously making efforts in research and development for a long time. In June last year, Perfect Diary's R&D center was completed in Guangzhou, with a total laboratory area of ​​1,800 square meters. In December of the same year, the Innovative Color Joint Laboratory jointly established by Perfect Diary and Sensing Technology Group was also established simultaneously in Shanghai, Guangzhou and Singapore.

This is also reflected in the financial report. In Q2 2021, Yatsen's R&D investment accounted for 2.3% of its total revenue, an increase of 146.2% compared to the same period in 2020, and its R&D investment share ranks among the first echelon of domestic brands.

In terms of product strength, taking the main brand Perfect Diary as an example, it has created many classic products. For example, during the 618 period in 2021, over 300,000 pieces of high-heeled lipsticks were sold on Tmall, becoming the No. 1 in cumulative sales in the lipstick category on Tmall this year.

Recently, Perfect Diary launched a new red-brown palette called "Red Fox". As the protagonist of the new animal eyeshadow series, the Red Fox not only has a color scheme that is very suitable for autumn and winter, but more importantly, it hopes to use the "Red Fox" palette to interpret the female power of "no fear of color, beautiful and confident".

In terms of product innovation, in addition to highly restoring the brilliant color matching of the red fox and nature, relying on the strong R&D capabilities of Yatsen E-Commerce Open Lab, the texture of the original "Animal Eye Shadow" series has been upgraded to adapt to multiple scenes.

At the same time, it has upgraded the eyeshadow brush. One end is a customized multi-functional blade brush, which can be used with a special soft and glutinous ointment to outline smooth eyeliner in one stroke, and can also create makeup such as eye bags. The other end is oblate and can be used for spreading color or smudges. The small caliber is specially designed for Asian eye shapes, and the bristles are specially selected in brown and white gradient colors, echoing the color of the red fox tail.

Overall, Perfect Diary still has a long way to go in terms of product accumulation and brand operation, and we look forward to a more perfect future from Perfect Diary.

Author: Internet Brand Officer

Source: Internet Brand Official