In extraordinary times, are there new opportunities for Chinese brands to grow bigger and stronger?

Introduction

A few days ago, an article titled "It's time to talk about the economy" went viral, expressing people's anxiety and hope about China's economy as the epidemic extends.

Subsequently, I saw more and more similar reports. But these reports have one characteristic, that is, most of them are studied from the perspective of the industry, exploring which areas may face difficulties and which areas may usher in new opportunities.

This article attempts to analyze, from the perspective of brand building, what macro and micro changes will occur in China's brand building with the addition of new variables such as the epidemic, and how Chinese brands can strive for the greatest certainty in the changing situation.

01 As the epidemic spreads, money will be spent on brands with greater certainty

The impact of the epidemic on the economy depends largely on the scope of the spread of the epidemic and the length of time it takes to subside. It is too early to draw conclusions, but for Chinese companies, it is never too early to be prepared.

The most direct result is that businesses will be in trouble, residents' disposable income and savings will decline, and people will be more cautious in consumption.

This will directly lead to a result that people will delay making decisions on some non-essential expenses, and for necessary expenses, people will spend money on more stable, more certain and more trustworthy products. To put it simply, it refers to those products with better brand building.

02 International high-end brands still have great bargaining advantages

In recent years, with the emergence of media fragmentation, many companies have begun to pursue new ways of brand building. Video live streaming, Internet celebrity recommendations on Douyin, Kuaishou, and Xiaohongshu, and writing articles on public accounts to attract fans have become the legendary "magic drugs". People are having so much fun playing with them that we have a certain illusion - we feel that some international brands have become outdated and we are full of confidence in the rise of emerging Chinese brands.

However, if we observe this epidemic, we will find that the above conclusions are not accurate.

First, the potential energy of traditional international brands is still very strong. When people’s demand for “certainty” and “security” rises, this brand potential energy will change from invisible to explicit.

For example, the 3M brand N95 standard mask, which attracted widespread attention during the SARS epidemic in 2003, has occupied the mental cognition of the brand category due to its outstanding performance in multiple epidemic prevention efforts, and has become synonymous with high-level medical protective masks in the minds of the people.

Therefore, when the epidemic broke out, 3M became a specific target. The author used 3M, another international brand Honeywell, and a well-known domestic mask Baidu index search to analyze and found that the difference in consumers' attention to the first, second and third place in the category that has entered their mental cognition is between dozens of times and infinity (not targeting third parties).

This shows, to some extent, how great an impact the centralized shaping of a brand, making it the "default option" in the minds of consumers, turning it into a standard, common sense, and an unthinking choice in the subconscious, has on consumer decisions.

Second, while we acknowledge that international brands still firmly occupy some areas in the mid-to-high-end mental perception, we cannot assume that all international brands are right in brand building.

Take Adidas, which caused an earthquake in the brand field last year. The brand publicly admitted that due to its excessive emphasis on so-called "performance advertising" (i.e., fragmented, traffic-based advertising that pays per click) in its market work over the past few years, Adidas has paid a huge price in core brand building, that is, consumers' awareness of the Adidas brand has declined. The author also made a data comparison (not targeting third parties):

03 The polarization of new Chinese brands

We have to admit that with the development of supply chain e-commerce, some suppliers have begun to develop along the lines of Pinduoduo and Yunji, focusing on low-tier markets and achieving valuable growth. But they are not yet true brands.

There is no growth without a price. The price of this de-branded growth is to further compress or even abandon the investment in brand building, entering an era of pure cost-price war, and relying on compressing costs and lowering prices to exchange for volume. As we all know, this is not a long road. At the very least, it's a riskier path. The charts cited above show that when uncertainty increases, brands that occupy mental cognition have a significant advantage over products without brand cognition. Therefore, we see that supply chain e-commerce has even started a large number of new brand incubation plans.

For Chinese companies, another option is to carry out product innovation and quality upgrades, relying on brands to obtain higher premiums and longer-term competitiveness. This is the right way, but also a more difficult way. We will analyze why later.

04 ROI is not what you see

The rapid development of e-commerce in the past 20 years has given Internet traffic advertising a head start in development. This is because brand owners believe that since the underlying channel changes have already taken place and the voice of offline sales has gradually decreased, online advertising, which is a closed loop of "click-to-purchase", can be achieved. This is not only suitable for the transfer of consumer platforms, but also more direct and measurable in promoting consumer behavior.

To put it bluntly, in the minds of many advertisers, "see-click-order" is a perfect closed loop.

But is consumption really that simple?

Perhaps it is because traffic advertising is becoming more and more expensive and its effect is becoming worse and worse, forcing advertisers to conduct in-depth research on the ROI of traffic advertising. This study is not important, but one result is surprising - a research report shows that before the user finally makes a consumption behavior, the user interacts and is touched by the brand as many as 20 times.

In simple terms, the reason why ROI is eye-catching in the early stage but fails in the later stage is because there is a problem with the statistical method. Most statistical models calculate cost-effectiveness based on the last click before consumption, but they fail to account for the fact that before the “last click,” consumers may have had many interactions with the brand through word of mouth from friends, television, elevator media, etc.

The revelation to us from this conclusion is that it is a deeper wisdom to re-examine the path of brand rise rather than one-sidedly believe in the ROI conclusion of performance advertising.

05 Why are some old brands rising?

A careful look at China's mid-to-high-end brand market in recent years reveals two driving variables.

The first is the self-upgrade of the consumer group. Whether it is the rise in consumption power of young users, the booming national trend movement, or the incubation of new brands, they all reflect the user group's pursuit of higher consumption quality. This provides an opportunity for Chinese brands and international brands to compete in the high-end market.

So we continue with the question raised in the previous article, that is, how should we embark on this "more difficult road"?

The author believes that the most macro-level choice is to choose differentiation.

We can see that as international brands are increasingly turning to the internet, pursuing a diversified combination of communication channels and becoming obsessed with social media, Chinese brands that choose to do the opposite have achieved success to a certain extent.

The core approach of these successful brands is anti-fragmentation and center detonation. They do not abandon online channels and fragmented communication methods (no one can abandon them in this era), but make more reasonable arrangements and resource allocations in the energy ratio of the entire brand explosion.

For example, Feihe Milk Powder, a company that was once shorted at the end of last year, quickly defeated the short-selling structure. The share price of Feihe Milk Powder broke through HK$10 per share, and its market value has exceeded HK$90 billion, which means that the short-selling institution was completely defeated.

The reason why Feihe Milk Powder was able to defeat short-selling institutions is that its performance was able to maintain a high-speed growth trend, and its sales volume has ranked first in the industry and surpassed all foreign brands.

"Feihe milk powder has surpassed all foreign brands to become the best-selling brand in China's infant milk powder market." Last year's Nielsen report showed that Feihe's offline market share reached 13.9%, and its overall market share was 11.9%, far exceeding the second brand in the market, and continued to show an upward trend.

The author believes that there are two reasons why Feihe has achieved such results. First, in terms of "technological content", which was previously emphasized by foreign brands, foreign brands have shown a posture of direct competition, such as actively undertaking national scientific research projects such as the National 863 Project and the Ministry of Science and Technology's 12th Five-Year Plan Project. For example, at the end of 2018, China's first academician workstation for dairy engineering was established in Feihe, laying a solid foundation for achieving independent control of the raw ingredients of infant formula. This will help to get rid of the situation where the supply of dairy raw materials is restricted by foreign companies, and will strongly empower the sustainable development of China's dairy industry.

While improving its own technological competitiveness, Feihe has also adopted a centralized detonation strategy, forming a series of strategies based on craftsmanship and quality, with the strategy of "more suitable for the physique of Chinese babies", and centralized detonation facilities such as Focus Media. It has established an image of a mind refresher that detonates among the mainstream groups, and has enabled the brand to embark on an important track towards sales of 20 billion and 30 billion. It is worth mentioning that during this epidemic, Feihe’s efforts in public welfare are also remarkable.

Bosideng's route is similar. On the one hand, it fully matches and even overwhelms international brands such as Canada Goose in hardware. On the other hand, it joins hands with international celebrities to change the brand's genes from functionality to fashion, and then instills it into consumers through centralized platforms such as Focus Media.

Some people may ask, why are it only the old brands that are breaking through? In fact, it is not just the old brands that have experienced a centralized explosion. There are also new brands like Luckin Coffee that have emerged in a very short period of time. Almost all of its budget has been placed on Focus Media. At the elevator entrances of office and apartment buildings, with Zhang Zhen and Tang Wei as the spokespeople, it has been constantly telling urban white-collar workers, "Who doesn't love the little blue cup?" It has sold more than 88 million cups of coffee in a single year, and was listed in the United States 18 months after its founding, with a market value of over US$8 billion. Whether new or old brands, are there anything in common between them?

Yes, that is to seize the dividends of new centralized brand-detonating facilities.

Back then, the strategy of international brands was to monopolize the benefits of hypermarkets in terms of channels, and to have a much larger communication budget than domestic brands, so they could monopolize the benefits of mainstream channels at the time, such as TV advertising, so their brand potential was much higher… However, these two benefits have disappeared now. However, the path dependence of international brands and the consumption of existing brand potential have made many international companies obsessed with micro-successes in marketing, feeling good about themselves and constantly following the fragmented and pulverized Internet. This has given these old and new domestic brands, which are suffering from brand slump, the opportunity to overtake in reverse.

Due to their high stock of brand potential, international brands have not shown any signs of decline in the high-end market in the short term, and may even see an explosive growth trend. For example, in Li Jiaqi’s sales statistics, international brands such as Estee Lauder contribute far more revenue than domestic brands. However, as traffic becomes more and more expensive, and even the larger the quantity purchased, the more expensive it is, international brands have to bear higher expenses while also carrying out "live streaming direct sales at the lowest price on the entire network" and "e-commerce promotions". The short-term splendor may make offline dealers, who are already suffering from frost and snow, even more unprofitable.

In an era of inventory game, both quantity and price are often killed together, and price wars are a dilemma for enterprises. The traffic dividend has ended and the traffic cost is getting higher and higher, which has prompted everyone to rethink how to build a brand, because the brand is the continuous free traffic, the brand power can improve the conversion rate of traffic, and the brand potential can bring premium ability to the product.

The wisdom of Chinese brands is to do the opposite and launch a centralized saturation attack.

We have used the term “centralized detonation” several times. This concept needs to be explained here. Centralized detonation is composed of centralization + detonation. Our centralized target is the 300 million urban middle class. Therefore, the prerequisite for centralization is to be able to reach this group at one time and let all target audiences be exposed to one thing. Another concept is detonation. Detonation can stimulate the attention of the group and remind them to "come and see the new advertisement". Even because of clever marketing methods, the detonation itself has topic attributes. There are too many successful cases of this. For example, Platinum Travel Photography, Boss Direct Recruitment, and the recent Yiche.com, which were detonated on elevator media last year, are all very prominent cases.

So, looking back at traffic advertising from this perspective, have you seen anyone discussing traffic advertising? How many traffic ads did you remember in the past month?

Advertising is only a part of brand building, but it is also the most important part because it is the step that ultimately reaches users and carries brand information.

Theoretically speaking, any advertising is like "a drug that you can't stop" and you have to keep doing it once you start. But the key is that traffic-based advertising can be compared to Western medicine that causes drug dependence. If you stop taking it, you will feel desperate immediately. However, brand advertising is a bit like the comprehensive conditioning of Chinese medicine. It helps you establish mental awareness of the brand. Once the awareness is established, the marginal cost of advertising will be lower. It is also a bit like what is said in "Huangdi Neijing" that "when righteousness is stored inside, evil cannot interfere". Its function is to help you have stronger and stronger brand potential, and this enhancement is semi-permanent and can play a long-term mechanism.

Many companies believe that branding is ineffective. In my opinion, this is because they have not found the switch in consumers' minds.

Many companies believe that branding is not as effective as promotions to attract traffic. Indeed, brand advertising has an inflection point from quantitative change to qualitative change. Before the inflection point is reached, the brand awareness will increase but the sales effect will not be obvious. After the inflection point is reached, there will be a clear sales spillover effect. Therefore, not every company can own a brand. Only those companies that have found a competitive strategy and positioning methodology, while focusing on centralized platforms for communication and continuously investing in optimization of channels and user operations can achieve a strategic turning point.

But the difficulty with this choice is that there are not many platforms in China that can be detonated in a centralized manner.

In the past, maybe it was a national TV station. However, as the TV power-on rate decreases, the viewing window that can be centrally detonated is becoming increasingly narrow. This is why Internet companies spend hundreds of millions of dollars every year to appear on CCTV's Spring Festival Gala. During the 2015 Spring Festival Gala, WeChat sent out 500 million yuan in red envelopes in 6 days from New Year's Eve to the fifth day of the first lunar month. In 2016, Alipay distributed 800 million red envelopes. In 2018, Baidu distributed 900 million red envelopes. In 2019, Kuaishou spent 1 billion yuan in marketing expenses... These are all typical Internet companies with strong fragmentation capabilities. For example, BAT is the only three Internet platforms in China with 1 billion users so far. Kuaishou and Douyin are the new media with the fastest growth and the highest daily activity in recent years. Alibaba is even China's largest advertiser...

These companies, which already possess extremely strong fragmentation capabilities and unparalleled Internet discourse power, are scrambling to choose centralized detonation methods to increase their own brand building. Shouldn't this make some brands that are too obsessed with "fragmented communication" think deeply?

Unfortunately, there is only one Spring Festival Gala and the Spring Festival only comes once a year, while there are thousands of Chinese brands hoping to explode. This brings us to the fact that, apart from the CCTV Spring Festival Gala, there is another facility in China that can be used to launch concentrated brands, and that is Focus Elevator Media.

In my opinion, there are two values ​​of Focus Media:

First, it is unavoidable . The basis for achieving centralized detonation is to seize the closed life scenes that 300 million urban mainstream audiences must go through every day, make a mental breakthrough with an extremely saturated attack, form a volume advantage in a limited space, use high-frequency concentrated detonation to deal with fragmented communication, and use saturated attacks in limited living spaces to deal with social communication in the infinite Internet world.

Second, the communication rules of Focus Media's elevator media are not simple mantra chanting and fatigue bombing. On the contrary, accompanying Focus Media's development over the past decade is a series of systematic brand explosion theories represented by positioning theory and competitive strategy, as well as the increasing maturity of professional service agencies based on this. This means that users’ advertising on Focus Media is not a brand adventure, but a well-prepared battle with rich theoretical support.

06 Has the VUCA era arrived for Chinese brands?

From milk powder to cheese, from clothing to coffee, from the battle between UBER and Didi to Bosideng versus Canada Goose, Chinese brands are rising in a unique way that is closer to China's reality.

At this time, a new variable emerged, that is, the epidemic. The epidemic is bound to have a huge impact on traditional brands that rely on offline channels. It is inevitable that the performance of e-commerce platforms will surge in the short term. The rise of new brands may also take advantage of this opportunity. Good brands may also decline under external forces. This brings up a new question - has the VUCA era of Chinese brands arrived?

The so-called VUCA era means that we are facing a world of volatility, uncertainty, complexity and ambiguity. Although such changes originate from the innovation, development and widespread application of science and technology, the speed of change and the impact it has on our lives, work and concepts are far beyond our imagination.

It's very simple. If the brand market structure before the epidemic was becoming increasingly clear, then the emergence of variables has made this field re-Uka-ized. The superposition of various variables cannot be summarized by the author's pen. But in the face of a more complex era, brand is the core immunity, and the core antibodies of the brand are certainty and centralization. Zooming in on the entire era, people are increasingly pursuing certainty in the cold wind of fragmentation, and centralized detonation has become the only chance for those with great ambitions. This conclusion is probably not easy to overturn.

Author: Lu Xingji

Source: Lu Xingji