Why did OPPO and VIVO win?

The reason why OPPO and VIVO attract so much attention is, of course, because they have achieved remarkable results in recent years. In 2016, OPPO and vivo ranked second and third in China's smartphone market. The first place is Huawei. But the combined share of the two brands, OPPO and vivo, ranks first. Why can these two brands be added together? Because their historical origins can be extended together to BBK. BBK is a very famous brand of consumer electronics founded by Mr. Duan Yongping. In the past, it has made some electronic products that are not very popular but not very niche, such as telephones, DVD players, language repeaters, children's learning machines, electronic dictionaries, etc. The founder later went to the United States to invest for various reasons, but two independent yet related trees grew from the roots of BBK, one is OPPO and the other is vivo.

The second reason why Oppo and Vivo are so eye-catching is that their competitors are some of the world's giants. Huawei is also a world-class company, not to mention Samsung and Apple. It is amazing that they have been able to stand out and maintain rapid growth in a field of oligopolistic competition.

The third reason why these two brands attract attention is that their models seem to have little to do with the Internet model and social network model that have been popular in recent years. Of course, it cannot be said that there is no relationship at all, but they do not seem to be operated using the so-called Internet model. Xiaomi mobile phone is also very successful, achieving a brand leap in a relatively short period of time. It adopts a typical Internet model, such as multiple iterations of software; building communities and interacting with fans with professional capabilities; direct sales through the Internet, etc.

Oppo and vivo have adopted a relatively traditional marketing model. This model has been in the Chinese market for a long time and was once the mainstream model for consumer product marketing, which is the so-called deep distribution. The concept of distribution is sometimes easily misunderstood because international distribution practices are quite similar to wholesale in China. Distribution in a broad sense actually means sales, which also includes retail. Some industries also refer to distribution as retail. Deep distribution has now evolved into deep marketing, because deep distribution emphasizes channels and terminals. In fact, deep marketing has made further progress. It is a three-dimensional marketing that not only focuses on channels and terminals, but also includes a series of overall practices such as brand promotion and product positioning.

Recently I have been writing a book on marketing, summarizing some successful models in the Chinese market over the past few decades. Discovering the deep marketing model is an important contribution of us Chinese to world marketing. It is an effective market development method based on the characteristics of the Chinese market. What are the main characteristics of the Chinese market? We can summarize it in one sentence: a multi-level three-dimensional market.

In such a huge market as China, there are great differences among the six levels, from first-tier cities, provincial capitals, prefecture-level cities, to county towns, townships and villages. First, it is reflected in the differences in customer groups. That is to say, for the same product, such as mobile phones or color TVs, the six levels of customer characteristics are different. Customers in big cities are more knowledgeable, have less information asymmetry with brands, are more autonomous, and are less affected by channels.

In general, the lower the market level, the more easily consumers are influenced by channels and the weaker their ability to make independent decisions. This is not to belittle these consumers, it's just a characteristic. This also involves the transfer of knowledge and some other special demands of consumers. For example, the lower the level of the market, the more consumers rely on channel services. If your mobile phone is broken, you can only go to the channel, unlike in big cities, where there may be independent service providers.

From the perspective of channels (mainly retail), the more you go to the secondary market, the more dispersed the channels become. Traditional business formats (store formats) that are rarely seen in Beijing and Shanghai, such as independent mobile phone stores or small chain mobile phone stores, are still the main force of the channel, or an important part of the channel, in some not-so-developed prefecture-level cities and county towns, despite years of integration.

Another feature of the third and fourth-tier markets is that their communication efficiency is relatively higher than that of the first and second-tier markets. To operate a brand, if you want to invest in advertising in Beijing or Shanghai, it usually requires an astronomical figure because the cities are too big and the media are highly fragmented. There are so many public transportation lines in Beijing that advertising on one or two bus routes is unlikely to attract widespread attention. However, county towns (including some smaller prefecture-level cities) are different. They do not have many streets, and there are relatively few spaces or squares with concentrated traffic. By seizing some commanding heights and key resources in communication, they can quickly create a dense, three-dimensional information environment that customers repeatedly come into contact with.

In terms of sales promotion, secondary markets such as the third and fourth tier markets are also more convenient. For example, you can build an arch at the entrance of the store, organize some activities, beat drums and gongs, play music... This is easier to do in a county town, and of course it is even easier to do in towns and villages. But this is not feasible in Beijing, Shanghai, Guangzhou and Shenzhen, and the urban management department does not allow it.

We have just made a brief introduction to the particularities of China's secondary market (secondary is a broad concept, including the third, fourth and fifth levels) from the three aspects of customers, channels and communication environment. In this context, the deep marketing model mentioned above came into being for the third, fourth and fifth-tier markets and has remained popular for a long time.

What is the connection between the two brands, Oppo and Vivo, and the characteristics of the third, fourth and fifth tier markets? How do they develop such a three-dimensional market? I think that the practices and marketing strategy combinations of OPPO and vivo basically conform to the norms of marketing textbooks, conform to the general laws of marketing, and are also in line with China's market conditions. The marketing characteristics of these two brands can be summarized in one sentence: integrated marketing based on precise target market positioning and in-depth marketing based on China's multi-level market.

Let’s first take a look at the target market positioning. Judging from the brand tone, OPPO and vivo are younger, more oriental, and fresher. The tone of a brand reflects the customers it faces. The target customers of these two brands are obviously young people. It can be extended downward to students, such as high school students and college students, and upward to white-collar workers (white-collar workers in the city who are twenty-five, twenty-six, twenty-seven or twenty-eight years old). Among young white-collar workers, the positioning of these two brands is more female. It cannot be said that it is completely aimed at women, but it is an indisputable fact that it is more popular with girls; it is also an indisputable fact that the tone is more feminine.

This positioning is somewhat different from Xiaomi. Because Xiaomi is more professional, it emphasizes in-depth communication with knowledgeable customers, including communication on technology and software. However, female customers (including male customers) in the third, fourth and fifth tier markets do not know much about technology and are non-professional. At the same time, although OPPO and vivo are positioned for young people, they give people a higher feeling than Xiaomi, which means that the prices are not that low. Xiaomi's prices were relatively low at the beginning, and its target market was young people with low incomes. Of course, Xiaomi has also made some efforts recently to change this situation.

As we all know, most domestic mobile phone brands cannot be said to have any special core technologies. However, at the application technology level and application function level, making some customer-oriented innovations is actually very effective. In recent times, OPPO and vivo have been focusing on the value dimension of photography, with SLR, dual cameras, 16-megapixel, soft light selfie, "capture your beauty", and so on. Using such value appeals and value propositions, it is very simple to attract a large number of young, beauty-conscious, somewhat narcissistic and life-loving consumers.

Faced with such a customer base, the two brands also have a systematic and integrated consideration in terms of promotion and publicity, for example, trying to seize the attention resources (celebrity resources) that are of great concern to the target population. There isn’t that much to worry about when competing for celebrity resources. Young people nowadays, especially girls, will date whoever they like, whoever is popular, or whoever is the national husband. So they used to date Song Joong-ki and now date Eddie Peng, both of whom are international, young, and more Western-style. Sometimes we look for not just one, but a group, such as Yang Mi, Li Yifeng, TFBOYS, including Neymar from abroad, and so on. This is actually a strong promotion strategy, which contains some fan marketing and Internet marketing elements.

I personally find it very interesting how some brands choose their spokespeople: Why do they choose like that? For example, choose Tony Leung Chiu-wai. Tony Leung Chiu-wai is already an older uncle and has not had any special works recently, especially TV dramas. He only appears on the big screen occasionally. Which group of people does Tony Leung Chiu-wai connect with? It doesn’t connect with young people, and it’s not particularly easy to connect with middle-aged customers either - middle-aged ladies also like young handsome men. So a strategy like this, I find very confusing.

From the way OPPO and vivo select celebrities, we can see that their way of thinking is accurate and simple. Some other brands, including those that select international superstars, actually have very little impact on specific groups of people in the country. Of course, this also involves the allocation of resources. The model of Oppo and Vivo is a cycle of high gross profit, high brand investment, and high customer perceived value.

In addition to inviting celebrities, these two brands are basically present in all media, including major events, important celebrations, and important TV programs, and they are never absent. Choose some media and events that have a high degree of customer recognition and will definitely cause widespread response to place advertisements. Many people complicate marketing by talking about big data and so on. In fact, media selection like this basically does not require any big data analysis . The correct conclusion can be drawn based on experience, understanding and observation of the media.

As we said earlier, OPPO and vivo have a model of "three highs" (high gross profit, high advertising investment , and high customer perceived value), and they do not take the low-price route. Some brands particularly emphasize cost-effectiveness, saying that my products are very good and are sold at such a low price. Logically, they should be able to seize market share unstoppably, but the facts do not seem to be the case. The sales prices of Oppo and Vivo's main products are already between 2,000 and 3,000 yuan, which cannot be considered very cheap. Maybe a little lower than Huawei, but very close.

Mobile phones are quite interesting as they are used by consumers anytime and anywhere, in public places and on social networks. In addition to their practical functions, these products have strong psychological value. Generally speaking, products that have psychological value cannot be too cheap. For customers, if the product is too cheap, it will lose face; if it is too cheap, it will seem that their income is not very high. After this, it seems that only the more independent and marginalized people use cheaper mobile phones, or people with lower incomes use cheaper mobile phones. Once such a concept is formed in society, it is actually not very beneficial to brands that particularly emphasize cost-effectiveness. The value positioning of OPPO and vivo products emphasizes high-quality experience and social functions, which is very accurate.

We can also give a similar example, which is Uniqlo . This is Uniqlo’s second visit to China. Around 2000, Uniqlo came to China for the first time and positioned itself as a relatively cheap brand. Because they are relatively cheap, they cannot rent in particularly good locations such as stores in Class A core business districts. They can only be located in basements or on the second or third floors, and the decoration is not good either. The products are sold very cheaply, but Chinese consumers do not approve of this as it does not meet their expectations of foreign brands. They think this brand may be a copycat and is no different from very cheap domestic clothing. After 2000, UNIQLO re-entered the Chinese market. Prior to this, Uniqlo also carried out marketing or operational changes in Japan, no longer positioning itself as absolutely cheap, but positioning itself as having good products and good quality that are not too expensive and relatively affordable. As soon as we arrived in Shanghai, China, we rented a huge store of several thousand square meters on Huaihai Road. The decoration was not luxurious, but it was very beautiful, with bright lights and three-dimensional clothes hangers, giving people the feeling that this was a big brand, a relatively high-end brand, and the price was quite cheap. In fact, Uniqlo's positioning in the Chinese market is slightly higher than that in the Japanese market, targeting China's young middle class. The same product is a little more expensive than in Japan.

1. Winning terminal

Just now we talked about the target market, product value positioning, price, and promotion characteristics of the two brands, OPPO and vivo. Now we will talk about a very important pillar of their success: channels and terminals.

As we all know, the third, fourth and fifth-tier market channels are relatively scattered, and dispersion means weaker negotiating power. Let’s take a look back at the development of China’s mobile phone market in recent years. Online oligarchs such as JD.com and Tmall have emerged, as well as offline oligarchs such as Suning and Gome. Of course there are still some local oligarchs. These oligarchs are dominant when negotiating with upstream manufacturers and can cut into the manufacturers' added value. Manufacturers are actually in a dilemma when dealing with these oligarchs. If we don't deal with these oligarchs, there will be no efficient channel; but if we do, with transparent prices and constant promotional activities, the added value will be eliminated. So now, in the color TV industry, many manufacturers are suffering.

Online channels are similar. If we don’t enter the online channel, it seems that we will lose young people because young people like to buy things online. However, on e-commerce platforms, if the price is not low, the goods will not move; if some activities to attract traffic are not organized, not many people will pay attention. Once we start to attract traffic and offer low prices, the offline channel system will be greatly affected.

Since Oppo and Vivo are mainly positioned in the third, fourth and fifth-tier markets, the impact of retail oligopoly on them is relatively small. For small oligarchs who sell a lot of mobile phones in county towns, their impact is only regional. At the same time, small regional oligarchs and other mobile phone retailers are at a disadvantage when facing national oligarchs. They are in urgent need of support in the vertical value chain and hope to join hands with manufacturers and upstream manufacturing brands. In this context, OPPO and vivo used a model that originated from home appliances and developed further, which is called mastering the distribution value chain.

To master the distribution value chain, looking backwards from the downstream, we must first master the retail link and the terminal link. Judging from the practices of OPPO and Vivo, there are probably several actions or methods to control the terminal:

The first action is to refine the terminal layout. For example, how many mobile phone stores are there in a county? How many stores should be opened at the beginning? Which dealers and retailers should be selected to cooperate with? This requires strategic thinking. It does not mean that the wider the channel, the better. Because the space is wider, the sales willingness of each retail terminal decreases. At the retail terminal level, strategic layout is needed to maintain a good collaborative relationship between retail terminals and avoid horizontal conflicts, such as random pricing, slander, etc. This way, at the retail level, there is an optimal structure, and structure generates energy. When the brand is relatively small, the channel width can be narrower. As the brand status improves, the width can be gradually expanded.

The second action is the construction of the terminal. Including hardware construction and software construction. The construction of hardware, such as store fronts, shop signs, counters, arches in front of the door, balloons, etc., seizes the promotional resources of retail terminals. The construction of software is the construction of a team of promoters, sending a large number of strong and powerful promoters into the terminals. Of course, we can also train promoters of cooperative dealers. All in all, there was a group of people guarding the last gate of the channel like guards. When I wrote an article before, I compared the retail terminal to the last gate through which water flows to consumers. Guarding this gate means that the flow of other brands will be blocked. This is actually the tactic of building retail barriers.

After having the hardware and software, the third step is to activate the terminal, that is, to activate the terminal. Always keep the terminal temperature at a high level, with activities every day, a small event every 3 days, a big event every 7 days, and strong promotion and sales. In this way, as soon as consumers enter the store, they enter a "field" with highly concentrated information and very high temperature. Once you enter this "field", you will definitely consume.

In terms of software that determines the winning terminal, these two brands have basically achieved the pinnacle in China, including how to receive, how to speak, how to communicate with customers, how to introduce products, and so on. In this context, if other brands do not adopt the same approach as these two brands in the same store, their market share will be taken away little by little by OPPO and vivo. This tactic is called incremental retail tension.

2. Improve channel dynamics

To increase the motivation of the channel, it is necessary to make dealers (of course, retail dealers first) have a very strong desire to promote OPPO and vivo products. This corresponds to the logic we discussed earlier: consumers in the third, fourth and fifth-tier markets are more easily influenced by promotions and channel recommendations, and their independent decision-making is slightly less. The key to improving channel dynamics is to maintain a balance of interests in the value chain, that is, how much the manufacturer earns, how much the agent earns, and how much the retailer earns. There must be a reasonable division and definition.

In order to maintain retailers' willingness to sell, we particularly emphasize that we must maintain market order, and this market order is the price system. Once the price system is disrupted, the overall channel interest structure will be destroyed. First of all, there cannot be too many upstream supply points, that is, the water flowing to each retail terminal must flow out from one channel, such as from an agent in a region. Retailers cannot get goods everywhere. You can get goods at wholesale markets, from operators , and online. This is a mess. The most terrifying thing is multiple shipping outlets. For retailers, there are multiple sources of goods, but the price level of each shipping outlet is different, just like a dam with several holes at different heights, so the water flow must be turbulent.

This involves the issue of e-commerce . It’s not that e-commerce cannot be done, but it cannot become a benchmark for low prices. Once it becomes the benchmark for low prices, the offline channel system will not be able to survive. Therefore, new products can be sold online, and even at a higher price. If we think about the problem the other way around, using the online market as a price benchmark, and a relatively high benchmark at that, then the offline price system will be maintained.

The second key to maintaining retail sales willingness is the channel width issue mentioned earlier. If every mobile phone store in a county or a township sells them, the channel’s interest system cannot be maintained. After all, the market capacity is limited. When everyone is having a hard time selling and the task is heavy, some people will secretly lower prices. This will also bring about a catastrophe.

3. Market-oriented transactions and integrated management

One of the keys to mastering the channel value chain lies in the upstream guidance and support for retail terminals. Mainly from regional agents and manufacturers' marketing organizations. Given the national conditions of the Chinese market, we cannot blindly say that we need to flatten the market and eliminate intermediaries. These are all dogmatic statements. The Chinese market is so large, with so many counties and towns and a huge number of retail terminals. In order to de-intermediate, we still need to maintain stable cooperation with some regional agents. This tradition has been passed down from the days of BBK. For example, one's own employees can become agents, or they can have two-way shareholding with agents; they can form a community of interests with agents and deepen the long-term and stable cooperative relationship between the two parties.

I once summarized this kind of cooperation model in one sentence: market-oriented transactions and integrated management. That is, the transactions between manufacturers and agents are market-based, and only market-based transactions can determine the boundaries of their respective responsibilities and form rational trading behaviors. For example, if you want to stockpile goods without limit, I am an agent and I have my own interests, so I will resist. In this way, unlike the regional sales companies run by the manufacturers themselves, inventory will not become an unbearable burden.

The so-called integrated management means that manufacturers and agents are integrated in culture, process, information and operating model. Through market-oriented transactions and integrated management, agents are both manufacturers' and not manufacturers'. This is a bit like the Internet model. On the basis of integrated management, agents implement the manufacturer's intentions, strategies and propositions to serve and manage the terminals. In this way, manufacturers can avoid having regional marketing teams that are too large and agents can avoid having their capabilities decline.

4. Refined channel incentive policy

A very important point in terminal management is refined channel incentive policy. The main approach is: short cycle by product category - different products such as X9, R9 and other product series, short cycle such as one month or even shorter time, give tasks to retailers, if the tasks are completed, each unit will have both sales profit margin and additional incentives. Formulating an incentive policy for dealers in this way is very flexible and detailed, which is very effective in gradually expanding retail share.

The refined incentive policy is based on the mastery of data, such as the dynamic grasp of dealers' inventory data and the understanding of flow rate (product sales speed). Real-time data collection system is crucial for in-depth marketing.

5. The decisive battle of marketing takes place outside the store

The above are some of the practices we talked about for controlling the distribution value chain, which are based on channels and terminals. As I said before, deep distribution has now evolved into deep marketing, which means that market control and market development are no longer limited to retail terminals. Here I would like to propose a marketing concept, that is, the marketing battle takes place outside the store.

These two brands often use retail terminals as their base and position, and go out to residential areas, cinemas , squares, and other scenes where consumers appear to conduct proactive marketing, hold some themed promotional activities, and attract traffic outside the store. There is also a bit of Internet thinking here. We cannot think that traffic only occurs in the virtual space and online. In fact, traffic needs to be diverted offline as well. Customers and potential customers need to be tapped out. This will be like cutting off the source of financial support for other brands.

6. Teamwork is the fundamental guarantee of success

In each regional market of OPPO and VIVO, both the manufacturer's own business team (including the shopping guide team) and the dealer team (including the retailer team) are relatively large in scale and have very strong professionalism and passion. The deep marketing model is actually very people-intensive. In the past few years, many manufacturers always felt that people were difficult to manage, so they wanted to reduce the number of employees and cut sales expenses. In fact, this idea is not suitable for China's national conditions.

We need intensive development of personnel, but what should we do about the expenses? Intensive development itself will bring traffic , the product prices are relatively high, and it can also bring certain profit margins. This is also a strategy of pressure attack: in the regional market, more people are invested, but the corresponding market share and profit are relatively large, and the brand's added value can also be enhanced.

The ultimate combat effectiveness and guarantee of the deep marketing model lies in team management and team building. This is also where this model is not easy to be imitated and learned by others. Because it is very difficult to build such a team, interests must be shared widely and there must be a high degree of cultural consistency. The scope of employee shareholding of these two brands is relatively wide, and the income of salesmen is relatively high. Income alone is not enough, there must also be corresponding supporting measures, such as employee training, care for employees, etc.

From the practice of OPPO and vivo marketing team building, it is crucial to select outstanding college students and train them into educated, highly qualified, brave and combat-savvy marketing pioneers.

Are there any limitations to the deep marketing model? Are there any inherent problems and contradictions? It definitely exists. What is this inherent contradiction? That is, when the market share reaches a certain level, a share boundary will appear. I once wrote an article that was published in Sales & Marketing magazine called "The Curse of Share."

What does this “share curse” mean? Market share can be increased relatively quickly through proactive marketing, winning at the terminal, and intensive development. However, after reaching a certain limit, if it is increased further, the channel system may collapse. Because if we want to improve further, we need to expand the width of the channel. Originally there were 4 outlets in a county, but now there are 8 outlets. Once the width increases, the sales willingness of retail terminals will decrease and their behavior will be distorted.

In addition, if manufacturers have very strong demands for market share and sales, it is possible that wholesale channel behavior may get out of control. If the sales volume of agents does not meet the assessment requirements of the manufacturer, they will use various methods to sell the goods, such as selling them to wholesale markets or large retailers. Some large retailers clearly cannot sell so many goods, but if you offer them a low price, they will absorb them and sell them wholesale. Why do big retailers engage in wholesale? Because you can kill two birds with one stone. On the one hand, you can increase your traffic, sales, and turnover, and also make some profits and have a certain marginal contribution. At the same time, you can kill small retailers. Why not do it? At this time, these large retailers, including online oligarchs, were happy to accept the "cannonballs" sent by the manufacturers. So many brands back then were eventually ruined by their own hands.

To a certain extent, it’s all due to the assessment. The strong pressure will distort the actions of agents and regional marketing teams. I hope all manufacturers can learn from this lesson. Both OPPO and vivo have used this model to achieve their current status, so they should also guard against such signs. I'm not saying it already exists, but we must be on guard.

In general, the deep marketing model is a challenger model, suitable for brands in a market follower and challenger position. In this way, you can rise quickly by imitating products and following the pace of leaders without having to lead the market.

But to become a leader, this model may not be enough. We must find a model that adapts to big cities and enter a new marketing realm, such as real product competitiveness, real supply chain management capabilities, stronger brand influence, and control over large channels. At that time, the resources and marketing techniques required were different from the current third and fourth tier markets.

What everyone may be more interested in is whether Huawei can learn from OPPO and vivo? I think it will be difficult for Huawei to learn from OPPO and Vivo in the third and fourth tier markets in the short term. Why? We should not underestimate the ability to deal with dealers in counties and towns, because this ability cannot be cultivated in a short period of time. It requires long-term accumulation and cultural inheritance. It takes a process to make the team's culture, team style, and team behavioral characteristics more suitable for the third and fourth tier markets and more in line with the psychological motivations and expectations of dealers and consumers.

Huawei does not necessarily need to completely imitate Oppo and Vivo in its practices. Because Huawei has now become a market leader, it must innovate its model. These two brands are doing it in a challenger way, which is actually a focusing strategy. Huawei's target market is much broader, and its marketing model should be more three-dimensional and complex.

Huawei is a learning organization that often draws on experience from companies with lower market positions than it. So, what should Huawei learn from OPPO and vivo? I think we need to learn concise and accurate marketing thinking. Although Oppo and Vivo have the "three highs" model, their overall costs are still relatively low. In the paradigm or school of marketing, there is a type of marketing called radical marketing, which means not taking an extravagant or particularly process-oriented approach to marketing. What does it mean? There are some large international brands such as Procter & Gamble and Coca-Cola , whose traditional operating models are highly process-oriented and organized. However, some small and medium-sized enterprises, including the brands that have emerged in the daily necessities field in recent years, do not have such a long process and such a complex organization. Instead, a few people or a few teams often integrate with target customers to accurately understand their needs, extract the selling points of their products, and quickly create the so-called ultimate products. This way, the final result may be more accurate than having dozens or hundreds of people follow the process step by step. In other words, when doing marketing, you cannot just add things, you may also need to do subtraction.

In addition, the practices of OPPO and vivo are of reference and inspiration for how Huawei mobile phones can integrate into the third, fourth and fifth-tier markets and how to communicate with customers at the terminals.

I believe that the practices of OPPO and vivo will bring more confidence to those companies that adhere to the essence of marketing and the basic rules of marketing. We should not be attracted by some impetuous conceptual things. People often ask me, are there any new models? My answer is that selling things is the real hard work. Any model is a means, and forming a harmonious relationship with customers is the goal, so we cannot deviate from the goal to discuss the means.

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