China Food

Fate of new consumer brands: trapped offline and threatened by street warfare?

The fragmented content of
people, the homogeneous competition of goods and the global linkage of the market are great challenges for everyone. How to keep up with the rapidly changing market trend, maintain the existing competitive advantage and establish an iterative incremental model is a big problem in front of everyone.

Instructor: Lu Xiuqiong; Editor: Chaos business research team   

Source: Chaos Academy (ID: hundun University)


New consumption growth path: how to “run fast”?
The strategic cultivation through the cycle should start from the growth side. The problem to be solved in the growth side is how fast to run. The whole growth path has three clear stages:
  • Zero to one breaking period, focusing on breaking;
  • The growth period from one to ten focuses on expanding and breaking the circle;
  • In the differentiation stage, the focus is on intensive cultivation and breaking the boundary.

1. 0-1 breaking period  

In the zero to one breaking period, we need to have a soul. Four questions: first, meaningful. China is not short of good products. Entrepreneurship may need to do 100 things. The first thing is to find a sense of existence and find your meaning and value. Second, if there are goods, whether there are core large items and penetrate the core channels. Third, if there is money, has it created a business model with positive returns, Fourth, if there is surplus, is there additional resources to expand, so that we can cultivate new capabilities and expand from the core channels.

1) Choose the right track with 13 words

Choosing the right track is more important than hard work. I summed up 13 words “real demand, race track, small incision and high added value”. It seems easy to do, but it is difficult to do.
Really need. It’s “need”, not “want” , it must start from customers, which is often a very strong hidden demand. For example, the entrepreneur of miaolando is an old player in the dairy industry. How to sell cheese in the Chinese market? The founder saw the potential real demand of consumers from a very clear scene – when picking up the children at three or four o’clock in the afternoon, he had to supplement healthy snacks for the children, so he They made cheese sticks and won the first place in the cheese track in four years.
Competition track. The market scale should be large and the trend should be red. The track must be driven by consumer demand. It depends not on the size of the current category, but on the size of the track with potential demand. The innovation of small brands can not save a large track. Choosing a track with a high ceiling often has a high return on efforts.
Small incision. There should be obvious demand, low penetration and rapid growth. For example, functional skin care products belong to this kind of track. In 2019, the industry accounted for only 5.5%, but 35% of consumers said that there were many scenes that needed functional medical beauty and skin care products, and CAGR (compound annual growth rate) was as high as 20%.
High added value. This means that the core population has iterative demands and is willing to pay a high premium.

2) Why is “core big item” more important?

Building a core large single product is an important task in the breaking period. Only when the core large single product is hatched can you go through the breaking period of zero to one. The so-called core large single product is a product with the potential of one billion yuan in the long run. Less than this order of magnitude, you can’t even shop well, and you can’t even find the supply chain. It also has the characteristics of high popularity, high dynamic sales and high channel gross profit 。
Core large items can play three roles and are the stepping stones to enter the terminal and open the whole channel.
First, the recruitment camp for consumers. The mind of consumers is limited. They can only remember a few things. The core large single products attract them to enter your private domain, and it is possible to further operate in the future and let them see other products.
Second, the leverage point of the channel. When you want to enter a channel to sell products, especially offline channels, the shelves are limited. You must see whether the mobile sales are good or not and whether someone takes the initiative to find this product.
Third, the benefit pool of growth. The cost of promoting a new product is very expensive. In order to continuously promote new products, we must guard the rear. What do we rely on? Core large single products.

3) “Product incubation Trilogy”

Most of the brand entrepreneurship stories in the industrial era are about supply advantages or channels. Today’s new brands focus on finding the pain points of consumers. Through the new product concept with obvious differentiation and the brand value proposition as the fulcrum, the first round of core user pool is established. In summary, the zero to one breaking period can be called the “trilogy”.
First, we need to have the value proposition of the brand and polish the products repeatedly. For example, in the underwear brand jiaonei, the selected track (basic underwear) may be the least sexy, but they found the potential needs of consumers, redesigned the basic model with industrial design and body feeling technology, and redefined the cost performance of the category.  
Second, when you start to build products, you need a small-scale test to determine the main products. All new consumer brands do a very good job in online private domain and offline face-to-face, collect data and consumer feedback, find consumers’ hidden needs in a more agile way, and iterate products faster.
Third, combined with new channels, focus on resources and invest heavily to create explosive products. The so-called explosive products are the top three of tmall’s subdivided categories. Perfect diary is a particularly good example. It chooses to launch new products from March to April and August to October every year, and then creates one or two popular models on the public domain platform led by xiaohongshu. It takes one and a half months from the early momentum to the later maintenance, and then pushes it to the highest level with the potential energy of “618” and double 11, and then starts offline promotion.
Fourth, the most difficult point is to break through the core channels, establish word-of-mouth repurchase, and pry up a new round of rapid growth and precipitation. For example, Yuanqi forest will use convenience stores as channels, requiring its PSD (i.e. sales of single stores, single products and single day) to be two to three times that of the main competitive products, and the repurchase rate of the core population will reach more than 50%. Through such a test, we began to extrapolate products.

2. 1-10 growth period

1) Why is the growth period so difficult?

The problem faced by new consumption is that it is difficult to break the circle and it is not easy to grow red. First, the underlying logic of offline and online “people and goods yards” is different. The online logic is unlimited virtual shelves, unlimited products and nearly unlimited passenger flow. The “people and goods yard” realizes niche matching through the accurate promotion of big data. Even long tail products can find their most suitable consumers. Offline logic is limited shelf position, which is a public configuration.
On the other hand, it is because consumers have limited mental memory. How many brands can a consumer remember? No more than ten. This is also the most difficult point for all products to leap from one to ten, because its leap is not only a problem of ability, but also a complete change at the cognitive level.
You will find that the most difficult point is how to resume strategy, continue iteration, get rid of homogeneous competition, and how to shape the brand comprehensively.

2) How to comprehensively launch and shape the brand?

The first point is the expansion of mainstream channels. In the growth period from one to ten, we need to move from online popularity to mainstream, establish omni-channel capacity, expand and sink the market. When oatly oat milk entered China, it was found that it would never be good to start from soybean milk, so it chose focus, crowd focus, scene focus and channel focus. For the white-collar class in Xiaohong book, go to oatly and the whole boutique cafe in Shanghai, so as to form the mental occupation and premium of brand focus. On this basis, tmall will enter tmall and cooperate with plant dairy products to create new plant-based products.
The second point is to occupy the mind. There is no other way to occupy the mind except to throw money. This money is not necessarily real gold and silver, but can be a resource exchange formed through the premium of the brand. The psychology of being safe with a small fortune is not good. Whether or not we dare to break the game depends on two points. First, whether or not we can get through the small channel. Second, whether or not we dare to press the whole people and join the game with heavy troops. There is no shortcut.
The third point is to accumulate brand assets. Selling goods can’t make a brand. Only a person with ideals, organization, innovation and digital ability can become a brand asset. What is the potential asset of category brand? The potential asset of a brand is the precipitated value of the brand (including the valuation of the consumer market and the capital market), multiplied by the endogenous growth force plus the exogenous growth force. What is the endogenous growth force? It is what the brand itself can change through management, including innovation, organization, digital ability and brand ideal. Exogenous growth power is determined externally. The growth rate of the industry multiplied by the competitiveness of the mind, plus the competitiveness of digital shares, plus the unique competitiveness of the brand.
The fourth point is to establish a product matrix. Can you copy the products polished from zero to one. This is the replicability of core competence. Making a product can rely on luck, and making a product continuously depends on the ability system.

3) How to do the strategic recovery in the growth period?

The first question is why, what kind of consumers are we targeting? Has the bottom demand of consumers changed? Does the brand’s mental position need to be changed?
Second, what’s the problem? What’s the essence of business? What is my image of success? There are a lot of homework copying in the back. Do I want to fight a defensive war or an attack war?
Where to play? How to choose strategy and suffer from enemies everywhere? Who is the nearest opponent? In fact, none. The real competitor is the second in the industry. As long as I can beat him, all other competitors are not a problem.
How to win? How are key campaigns linked? What are the most unique core advantages? What is the core battle? The hardest part of this problem is subtraction. I only fight one war, 80% of the resources are covered in one war, and the principle of 28.
The fifth what if, deep repeat, multi hand preparation and timely adjustment. What are the KPI indicators? What is my backup plan? What is my system arrangement? I know what kind of link I have to change direction. This one is easy to be ignored.
The growth period from one to ten is a process that needs self-discipline. Each step may be a process of making up for weaknesses. The difficulty lies in adhering to one’s own strong board on the one hand and making up one’s own weaknesses on the other, which need to be polished step by step for the camp.

3. Differentiation stage

The third stage, differentiation stage. The difficulty is not only to refine the core single products of the first engine, but also to start considering whether to crack the second engine. One of the biggest pain points is growing anxiety, the ceiling is getting lower and lower, and how to break through the stall point. Second, strategic determination, do not make easy choices, do not take fast shortcuts, can also be called to keep the original heart and endure loneliness. Some growth is really slow work out fine work, which is also the biggest problem in the differentiation period.

1) Stall

Stall is very common in the growth of large single products, and the problems we see are generally in these steps.
First, how to continue product iteration. Selling goods can only bring short-term growth, and brand equity is the long-term moat.
Second, the management and control of channels. It can be said that the biggest difficulty of all products lies in whether the product power is still there and whether the channel network has basic control power.
Third, improve the efficiency of the supply chain. Many smart entrepreneurs underestimate the complexity and value of the supply chain and simplify the product into concept and packaging design, which is only the manifestation of internal value rather than substitution. Light innovation can only please the moment, and refining the supply chain is the sustainability of innovation.
Fourth, optimize founder energy management. Once you become a net red, how to resist the temptation, see more business, go to the front line, and don’t think you can do everything is a particularly difficult thing.
Fifth, ask yourself if you want to start the second engine in time. The growth space of the first curve is longer than everyone thought, and there is still a great opportunity. If Coca Cola can maintain double-digit growth after 130 years. What is the reason for new consumer brands to easily give up the first curve?

2) Limit point

Many people have asked me how to judge the limit point. Here are five questions for you: does the recruitment speed slow down (this speed is not only the speed of the brand itself, but also compared with that of the platform)? Is the media volume beginning to decline? Slow growth of product repurchase rate? Is the offline price stable? Does the marginal return on marketing investment begin to decline?
If two of the five questions appear, it means that you have begun to approach the limit point. At this time, first ask yourself where the first curve has potential to be tapped. The layout of the second curve must be based on the core strength of the first curve. It requires the overflow of internal capabilities and the reuse of external resources.
For example, Paopao Mart has built an amusement park in Beijing from a trendy game that sells psychological companionship. This is a new mode of play. In other words, the practice of the second engine is not only to open a new category, but also a method. Whether it is new products, new models or new fields, it must be done on the basis that the core business has been established.
The most difficult thing in the differentiation period is to master the strategic rhythm. Stall prevention is needed to build and polish the core and layout increment. This requires all founders, all brand people and product people to keep awake at any time, constantly ask themselves and make a strategic reply.

“Five forces”
of new consumption track

First, mode. The bottom of consumers has changed, and the business model has also changed greatly. The era of big market (including many low-line markets today) is a brand to consumer with weak relationship. The products produced from production, transportation, inventory and reaching dealers to help distribute. Every step of marketing work is to help brands reach the minds of consumers. Today’s new consumption era is more an era of strong empathy (consumer to brand), which can be described as the trinity of cognition, relationship and transaction.
The most typical case is live broadcasting. After learning about a brand in the live broadcasting room, oh my God starts “cutting hands” directly. This requires all brands to become C-end to create demand, empathy, innovation and expression to stimulate consumers’ implicit demand. The performance of end B organizes the performance efficiency in a net format to make it more effective to get home, arrival and store.
Second, products. Traditionally, the basic theory of marketing is STP theory – subdivide consumers, select target consumers and targeted market positioning. In fact, people do not subdivide labels according to people, but interests and scenes drive the changes of people’s behavior. This is a very low-level change, which has changed all the methods of our traditional marketing segments.
Third, marketing. The market can be divided into potential energy brand and kinetic energy system. Potential energy brand focuses on the premium power of empathic consumers and brands, and kinetic energy system focuses on the speed of product renewal. Nike is a potential brand. We buy Nike more because of its brand mission and fight for the bloody and sweaty sportsmanship. Adidas is a typical product update speed king, which is why Adidas traditionally has a lot of spokesmen every season and a lot of interesting new products come out every season.
Fourth, channels. In the second half of the Internet, offline experiential consumption has gradually become the mainstream. The future of offline consumption is Gamification, immersion and spiritualization. What must be provided is added value other than retail and commodities. On the one hand, it has an extreme distinction from online, on the other hand, it has to cooperate with online to form a global interaction of consumers. The biggest question is which way do you go? In addition to selling goods, how to provide offline experience and how to become the entrance of a new channel for equity interaction are the core of the correct KPI and problem.
Fifth, organization. In today’s new organization, more attention is paid to the flexible small team of rapid decision-making. Now compare the fire of the two companies, Yuanqi forest and KKV. They have all established standardized digital systems, which are consumer oriented and socialized to listen to consumers’ weekly feedback. Yuanqi forest has established a digital sales system and pushed smart refrigerators to collect data and set sales goals through big data analysis. KKV has established a standardized product selection system, and new products account for more than 1 / 3 of the sales volume in a year. From the top ten product selection standardization systems, it starts the buyer primary selection, to the third screening meeting, and then to the internal evaluation, to the formal renewal, a complete digital system. The business boundary of the consumer goods industry was determined by the supply chain and channels in the past, and may be determined by the technical ability and organizational ability in the future.

What is a real moat?

High quality products, high market share, effective execution and excellent management are common false moats.
High quality products and services can bring gratifying short-term performance to enterprises, but they can also be easily imitated; If a high market share does not form absolute leadership, it may be replaced by new competitors in the face of a rapidly changing market. New consumer brands that seize the first mover advantage need to be vigilant: if large companies enter the game, can you still maintain the advantage? Effective execution and excellent management can be regarded as additional items, but it is not enough to form a long-term moat. Because individual managers are full of uncertainty, the founder’s personal management and learning ability to keep pace with the times are a big problem.
Moat refers to the structural feature that enterprises can maintain competitive advantage for a long time. The core problem is how well they keep it and how to establish long-term competitiveness. Building, strengthening and consolidating their own moat is the key for new consumer brands to resist competition, maintain market advantages and realize continuous iteration from “online Red” to “mainstream”.
The real moat is actually four s: special know how, switching cost, scalability and system rigidity.

1. Intangible assets

Intangible assets (special know how), the first is the patent standard. We see many new brands, which are constantly promoting patents. The second is brand value. If we only pay attention to communication extension and do not have a very profound brand connotation, the essence is traffic operation. Traffic operation can not really become the core of the brand.
The connotation of the brand is the latest real magic of cola, the inspiration and innovation for athelets of Nike, and the thinking differently of apple. A good brand connotation is to make users deeply feel the same. It may not bring short-term sales, but it will become a beacon to let enterprises go in the right direction.
A good brand represents values. I summarize the five dimensions of a brand: value height, human design temperature, scene intensity, memory depth and relationship thickness.
The height of value, that is, the meaning of existence just mentioned. For personal temperature, such as pet food, you can choose the perspective of cat owner or the most professional pet doctor. Two completely different personal temperatures will lead your brand to a completely different route. Scene intensity means under what circumstances consumers will think of you for the first time. What is the depth of memory? Nike’s hook and Coca Cola curved bottle can feel the cool feeling of Coca Cola in the dark.
What is the relationship thickness? We have repeatedly said that the core and index of consumer goods lies in re purchase. If you have 100 million consumers who buy once and don’t come again, it’s called selling goods, not brand. A good brand must be a product that interacts, empathizes and re purchases with the brand repeatedly. What consumers need is not a product, but the lifestyle, emotional premium and social network brought by the brand.

2. Habit effect

The second point is switching cost, which means that when we are used to something, it is difficult to change. For consumer goods, it is to cultivate consumers’ habits. Habits can help build barriers to competition, ensure premium ability and take the lead in purchasing behavior. The highest level of consumer goods is to replace the habit of the old scene with new habits.
Qiaqia can be called the “king of Chinese melon seeds”. From 2015 to 2017, they realized that eating melon seeds was a leisure thing for consumers, such as eating melon seeds while watching TV. Today, a very practical problem is that now you have to watch TV while playing with your mobile phone, kill people in your category, and even have nothing to do with homogeneous competitors in this category.
But there is a new scene: consumers, especially white-collar workers, need to supplement nutrition anytime and anywhere, so they launched daily nuts to create a daily need for nuts. One small package per day and combined packaging per month. Through the strong offline distribution capability and the gradual establishment of online e-commerce, it has become the invisible champion of new consumption, with each single product exceeding 1 billion yuan, which is a new concept created by good scene habits.

3. Network scale

The third point is network scalability. The core lies in the replicable mode and large-scale network.
The first stage of Ruixing’s old model is to hold high, that is, quickly open stores all over the office buildings, and obtain a large number of new customers through advertising screens and large-scale subsidies for coffee vouchers. The goal is to transform enough people, large enough and fast enough. However, at this stage, the retention rate of users is very low, which excessively expands the scale of stores, and a single store also lacks value-added operation, resulting in difficulty in maintaining and direct fraud.
After the storm, they began to rationally pursue the number of stores, close stores with relatively low performance level, focus on the main track of coffee, and Xiaolu tea entered Ruixing to create excellent explosive products. Only one of the 22 products developed was introduced to the market, creating a number of products leading the coffee market in recent years, such as thick milk coffee, raw Coconut Coffee, velvet coffee and so on.
At the same time, they connect the offline and operate the private domain in a refined way. In the past, they mainly focused on innovation and fission. At present, they mainly do frequency improvement and retention. Through the establishment of hundreds of user decision-making link strategies, they carry out different operations according to different member groups and different scenarios. At present, they have accumulated more than 10 million members, with a net increase of 50000 + per day, and the retention rate of the next month is much higher than 50%, It began to form a replicable model, which is a deduction of the moat from the old model and the new model.

4. Cost advantage

Today’s cost advantage (system rigidity) largely depends on the design of new business models, resulting in head effect and the advantage of large-scale promotion of the supply chain.
For example, Helen’s taverns seize the opportunity of young people’s offline social and night economy, insist on the ultimate cost performance, use simple feelings, like friends but not friends’ services, do not let guests produce any subtle psychological pressure, and let Chinese young people drink good and cheap wine.
Why can we achieve cost advantage?
The first is the art of site selection. Hellens is good at filling the business with the worst location in the best location. A good location can ensure that the target customers in the region have at least a certain density and a certain consumption desire. The strength of the poor location is that their operation methodology is not based on random consumption, but based on the reputation needs of consumers.
The second point is the attentive employees. Hellens has been trying to make every little partner work with dignity, freedom and happiness, and carry out process and standardized full link digital marketing in chain stores.
Third, scale effect. There are 528 stores and standardized SKUs. Although there are only 41 products in total, there are a large number of self operated products. Helen’s 70% of its turnover comes from its own products, which creates an obvious cost advantage. Starting from the original intention of the founder, the company redesigned the whole business model, created an offline store with a sense of experience, and used the network scale to create a cost advantage.

How far can new consumer brands go?

Let’s ask you two questions first: which is bigger, the business growth of Mengniu in one year, or the total number of online Red brands in the dairy track today? L’Oreal’s business growth in one year, compared with the head brand of the whole beauty track, which is greater?
The answer is: the growth of Mengniu in one year is greater than the sum of the business volume of all dairy online Red brands. Similarly, L’Oreal’s annual growth is greater than the business volume of the head brand of the beauty track. In this era, entrepreneurs must be in awe, because the evergreen power of many evergreen brands is worthy of our in-depth study. Evergreen brands are quietly making efforts, and they may be the invisible champions of this track.
So what can new consumption cultivation, evergreen brand and new online celebrities learn from each other? For the evergreen brand, what we really need to learn is the Internet thinking of the new online celebrity, the organizational structure of its innovative model and transformative empowerment, and the change of mental insight and cognition. What the new online celebrity brand needs to learn is the creation of basic disk, large-scale operation and complexity control.
Therefore, today’s market is not a war between evergreen enterprises or online Red brands. Our common enemy is the ever-changing consumer demand. No patience, no qualitative, anytime, anywhere, endless new desires. This era is an era of competition and cooperation. What is more needed is that no matter evergreen enterprises or online Red brands, they have nothing to do with winning or losing, achieve each other, and create a new species of people-oriented.
I like what a founder said very much. He said that the real difficulty is still ahead. Now we have just caught up with a wave of pulse. The most difficult thing is how to build a basic plate. The trouble of growth is the pit that every enterprise has to step on in the process of growth.
China’s ancient wisdom, soul, Tao, Dharma, art and instrument, is the most evergreen management thought. The soul is responsible, the Tao is clear, the law is based, the art is policy-making, the instrument is successful, and the essence of growth is still of guiding significance today.
Soul is not only the belief and heart of the founder, but also the soul and core of the enterprise. Harvard has an article called “level 5 leadership”, which tells that level 5 leaders have a strong sense of mission and determination to never give up, and have seemingly contradictory leadership characteristics: peaceful and persistent, modest and fearless.
Tao, social responsibility. In the era of industrialization, what is consumed is standardized products produced in batch, and brand represents trust. Today, excellent consumer brands should have a mindful consumption heart and use excellent products and services to help users define life and the world.
Method is a self driving organization. A successful enterprise must have its own unique organizational methodology. Establish self driven organization from two aspects of cultural view and digitization.
Art, the migration force of the whole thinking. The very successful innovations of the new consumption track are the thinking of Internet innovation such as growth hackers. Starting from MVP, try to make mistakes first and then find the right ones, so as to truly achieve user first, rapid iteration, gray-scale test and data speaking.
The most important thing is to produce true knowledge through actual combat and directly attack the strategic Reply of soul torture. It’s not just whether the double 11 is playing well, but after the double 11, how can I see the accumulation of consumer assets, how to see the conversion of the track, and how to see the polishing of the whole core single product.
Many people have asked me, as a person who has played the final game, how to treat evergreen power and whether the foundation evergreen is a false proposition in today’s era? My answer: No, it’s very difficult to make a lasting foundation, but it’s still the dream of all of us.
Source: official account @ chaos school. Chaos school helps everyone and every organization achieve extraordinary achievements with innovation. Based on philosophical thinking, chaos school has invited 300 top teachers in the world to build an innovative education system and help Chinese workplace elites cultivate innovation ability.
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