The traps of live streaming sales and the skills of live streaming sales by celebrities!

Recently, whenever someone talks about new consumption or brand marketing, “influencers bringing products to the market” is almost certain to be the topic of conversation. Indeed, there have been many landmark events since the beginning of the year:

• Luo Yonghao, the first-generation celebrity, chose to make his debut live streaming show on the evening of April Fools' Day, which attracted several circles and tens of thousands of viewers, and eventually achieved a cumulative number of 48 million viewers and a transaction volume of 110 million.
• Gree’s popular CEO Dong Mingzhu made her debut on Douyin with a live broadcast to sell goods, achieving an embarrassing sales performance of 200,000 yuan. Soon after, she switched to Kuaishou and achieved sales of over 300 million yuan in 3 hours. The purchasing power of “old irons” refreshed everyone’s cognition and made her presence felt throughout the entire network.
• In many cities such as Shenzhen, Guangzhou, Wuhan, Heze, etc., mayors, district heads (as well as officials at different levels) have personally appeared in the historical event of live streaming to sell goods. The Guangzhou local government even directly issued the "Guangzhou Live Streaming E-Commerce Development Action Plan (2020-2022)".

For a long time, celebrities’ live streaming sales have faced a “69 yuan rule”, that is, as long as the product price exceeds 69 yuan, sales will drop sharply. In the past, live streaming sales were seen as a kind of "lipstick effect", where consumers repeatedly bought "cheap, non-essential items" in order to seek the pleasure of spending money.

However, the situation has changed this year. High-value consumer goods such as luxury goods, real estate, and automobiles have also entered the track of live streaming by celebrities.

OK, does this mean that the growth potential of the celebrity economy is unimpeded? Once you find this marketing trick, can you sit back and relax?

I would like to emphasize that "The Art of War" said, "He who does not fully understand the harm of using troops does not fully understand the advantages of using troops." Brand marketing is ultimately an ups and downs of the intellectual game that tests a company's comprehensive quality and ability to manage resources.

If you simply think that influencers can win by relying on tricks, you will most likely end up wandering between heaven and hell.

“Re-centralization” is the current trap of live streaming sales

Don’t simply think that influencer marketing is all about sales myths such as “selling goods worth millions of yuan in 3 or 5 minutes” or “attracting hundreds of thousands of people to buy in one live broadcast”.

If we only look at the influencer economy from the perspective of "product-bringing power", this may just be a carnival for a small group of people. Viewing the live streaming e-commerce market as a huge fleet, Li Jiaqi, Xin Youzhi (Simba), and Viya have almost become the flagships among the celebrities and big Vs. However, the outside world only sees the flagships, where are the other warships?

Brand companies generally regard celebrities as "super shopping guides" or even as an optional sales channel, no different from Tmall and JD.com. Once the top celebrities are regarded as "super shopping guides", they will fall into a "re-centralization" trap.

New economic innovations in recent years have emphasized "decentralization", which means not allowing a few celebrities to monopolize users' vision, or a few platforms to monopolize network traffic.

In the past, whether it was WeChat, Taobao Tmall, or the entertainment industry, they all served as a centralized traffic portal, empowering and driving a complete business ecosystem. This is “centralized” business.

In recent years, with the rapid rise of the celebrity economy, every corner can shine, and every segment that affects your and my lifestyle has celebrities who create high-quality content, accumulate loyal fans, and release commercial energy. This is “decentralized” business.

Originally, the influencer economy represented a “decentralized” business with a wider impact. However, because the energy for bringing products is concentrated in a few top influencers, there has been a trend of "re-centralization" of resources and traffic.

What does it mean? That is, a handful of top celebrities are like commercial black holes, sucking away all the dividends of the development of the celebrity economy, making it difficult for the vast number of celebrity resources outside the top to participate, and brand companies will also bear extremely expensive marketing costs.

I think there are two issues worth paying attention to:

1) Why do celebrities other than the top ones enjoy very limited benefits from bringing in products?

Powerful consumer brands often favor top celebrities because of their high certainty. Consumer brands with average strength would rather the CEO sell products live or train celebrities to guide shopping internally, rather than cooperate with celebrities other than the top ones.

Last year, a startup wanted to promote its products on social media, so it found a popular influencer and paid him to post a video ad. However, although it seemed that millions of fans watched the advertisement, in reality there was almost no traffic entering the store and zero sales. The startup company cried out that it had been cheated, and in anger it started to "fight against counterfeiting" and file a lawsuit.

Therefore, unless the influencer is a top celebrity, consumer brands often find it difficult to be sure of the commercial effect. Even if the top celebrities fail to bring good profits to consumer brands, at least they have won high-density exposure, and brand companies can still use the various topics during the live broadcast for secondary dissemination.

If influencers and brands fall into this logical cycle, except for the influencers at the top of the pyramid, most other influencers will enjoy very limited benefits from live streaming sales.

2) Why are the fees charged by top celebrities so high that they are almost as high as those for CCTV advertisements?

Consumer brands see and believe that Li Jiaqi can sell 15,000 lipsticks in 15 seconds and that Viya can bring in over 100 million yuan in one live broadcast. If consumer brands want to get involved, they have to do cost accounting.

Any marketing expenditure is an investment, and all investments involve risks, with both wins and losses.

The sales volume of top celebrities is increasing. On "Double 11" in 2018, the sales volume of Li Jiaqi and Viya was 300 million, and on "Double 11" in 2019, it was 1 billion. If brand companies want to put their products in their live broadcast rooms, the price they have to pay is no less than the advertising fees charged by CCTV back then.

If this continues for a long time, the majority of small and medium-sized brand companies and businesses will be excluded from the benefits of live streaming sales.

The real breakthrough of live streaming sales is the repurchase rate

A few top celebrities occupy the C position and dominate consumer traffic, which goes against the general trend of the new economic era.

Today, China has entered a super cycle of the new economy. New technological drivers including AI intelligence, blockchain, nanotechnology, and genetic technology have gradually entered the commercialization stage. The celebrity economy has begun to transform and integrate the traditional consumer market from one vertical industry to another. Anything related to brands and consumption will be introduced with new elements by celebrities.

However, "decentralization" is an important theme of the new economic changes.

The Guangzhou local government has even issued the "Guangzhou Live Streaming E-Commerce Development Action Plan (2020-2022)" to build Guangzhou into a nationally renowned live streaming e-commerce capital. Cultivate 100 influential MCN agencies, incubate 1,000 Internet celebrity brands (corporate brands, origin brands, product brands, new products, etc.), and train 10,000 influencers. The government has already regarded influencers and big Vs as an important resource and element in the new economic era. It has focused on incubating the market and expects the influencer economy to flourish everywhere, rather than having only a few top influencers and big Vs dominate the fan traffic.

From a brand perspective, the influencer economy has driven the transformation of consumer brands from “virtual personality” to “real personality”:

In the past, brands were viewed as a kind of virtual personality. Celebrity endorsements and advertising bombardment could continuously strengthen people’s memory of the brand, so that when consumer demand arises, they can instantly imagine you.

Nowadays, brand has become a real personality, and celebrities have penetrated deeply into the core of brand strategy to solve specific problems in specific scenarios. However, to truly achieve this conversion efficiency, it is still necessary to fully consider product characteristics and repurchase rates.

In terms of specific operations, products are king and repurchase rate is the foundation. I divide the repurchase rates of different product categories into four levels:

For example, home appliances and cars can be used for several years, and the demand for "repeat purchase" will not be very high. There is no need to have several televisions or cars at home. After all, space and parking spaces also have costs. Therefore, consumers are relatively cautious when buying such products and are not easily influenced by celebrities. Probably only the top celebrities can instantly release the purchasing power of consumers, and this is only a short-term strategy.

The prices range from a few hundred to a few thousand yuan, such as mobile phones, wearable electronic devices, and electric toothbrushes. They can be used for one or two years, and the speed of innovation and iteration is not slow, but they are not fast-moving consumer goods. There is a certain room for influencers to promote products, and the actual effect is similar to that of celebrity endorsements, and the cost may not be very low.

Consumers may not go shopping every day, but when there are holidays, or moments like the World Cup, China Voice, etc., they need to relax. For example, Zhou Hei Ya and Three Squirrels, you can’t eat these every day, but you will buy them every once in a while. This represents a kind of "lifestyle refinement" of consumers, and the price is not expensive. This is a consumption area where celebrities and big Vs can fully play their role because they can act as taste spokespersons for consumers (fans).

On the whole, the repurchase rate characteristics of A- and B-grade product categories are particularly suitable for promotion by top anchors such as Luo Yonghao and celebrities, while the repurchase rate characteristics of C- and D-grade product categories require celebrity resources at different levels to establish a communication matrix suitable for different brand tones, and celebrities will have more opportunities to participate in this combined strategy.

Since it is a strategy combination, it is a decentralized free combination. For live streaming by influencers to truly be effective, a decentralized approach and minimal rules are needed. If brand companies only regard live streaming by celebrities as an option in their marketing toolbox, or even as a stopgap measure, they will not be able to tap into the true potential of this new economic model.

Just like when e-commerce first came out 10 years ago, you just treated it as a new marketing channel, or just put it under the IT department. How could you operate it well?

In the long run, the real value of live streaming lies in stable user stickiness and repurchase rate. It is necessary to adopt a celebrity communication matrix with appropriate tone and precise targeting for products with different repurchase rate levels.

“U disk-like”: the long-term strategy for celebrities to sell goods through live streaming

Why has live streaming by celebrities become a paradise for many consumer brands while also pushing some brands into hell? I think there are mainly two influencing factors - the sales commission rules are more inclined towards top celebrities, and celebrities will spare no effort to please their fans.

At the current stage, when brand companies look for influencers to sell products through live streaming, the revenue share is heavily biased towards the influencers. For example, many top influencers can earn dozens of percentage points of sales commission by live streaming to sell brand products. The commission for some big influencers may not be high, but they will also charge a service fee ranging from tens of thousands to hundreds of thousands.

The good news is that if you are selling cosmetics or health products, OK, with such a high commission from influencers, you can still make a profit. After all, the gross profit margin of the products is high enough (some exceed 90%). Considering the brand’s live broadcast display and traffic benefits, you won’t suffer too much.

The bad news is, if you are selling snacks or daily necessities, it’s terrible. The gross profit margin of the product is about 10%. How can you pay the high commission paid by influencers? You can only lose money on advertising.

Even if the influencers’ income comes from brand companies, they are very clear that brand companies are willing to pay the price because of the influencers’ strong influence on fans (consumers). Therefore, between fan emotions and brand interests, they obviously tend to favor the former, and the interests of the brand companies are often greatly sacrificed.

Once, Li Jiaqi sold 87% of Estee Lauder's "Double 11" eye cream products at the lowest price on the entire Internet. For the brand company, this was more of a excitement with very limited actual benefits.

So, what is the long-term plan for celebrities to sell goods through live streaming?

I believe that the real long-term strategy for influencers to sell products is to "survive like a USB flash drive." Every influencer is a USB flash drive. In their respective niche areas of life, they have different degrees of appeal and influence on fan groups. With the help of a "super interface," they can be plugged into the marketing strategies of various brands anytime and anywhere.

What does it mean? A well-known KOL (opinion leader) can be a U disk, a top celebrity can be a U disk, a mid-level celebrity can be a U disk, a junior celebrity and an amateur can all be a U disk. These marketing resources at different levels can be freely combined and inserted into a set of interfaces to form a unique communication matrix for a consumer brand.

Why do we need to establish a communication matrix among multiple celebrities (U disk) at different levels?

Looking back at Facebook and the “disappearing messages” app Snapchat, how did they grow from products for a small group of people to world-class ones? It is nothing more than the application of the 1:9:90 rule, where 1 refers to the top celebrities, 9 refers to the mid-level celebrities, and 90 refers to the junior celebrities and amateurs. They start with the people around them, make “people around them” like to use it, and then use the human nature of imitation to achieve popularity. Perfect Diary and Heytea in China also rose rapidly by adopting similar strategies.

We are building IMS into a super interface company in the new economy of influencers. By integrating massive influencer resources to conduct scientific data value assessment, we will "decentralize" rather than "recentralize" influencers, and provide USB-based (plug-and-play) business services based on the specific needs of small and medium-sized businesses and brand customers. The goal is to help brands establish an efficient communication matrix at a low cost.

I believe that only "decentralization" can improve a company's marketing efficiency and reduce production costs. Live streaming is not a brand's lifeline. You should first improve your repurchase rate before doing live streaming. The value of "decentralization" in the era of celebrity economy must be the reasonable pricing of resources, which will bring long-term (rather than temporary) high repurchase rates and benefit multiple parties in the long run, becoming the most popular enabling factor for the upstream and downstream of the industrial chain.

Author: Li Meng

Source: Li Meng (imslimeng)