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Jason Jiang: Corporate Marketing Strategy in the New Consumption Era

Volume 3, 2017

Founder, Chairman and CEO of Focus Media Holding Ltd Jason Jiang delivered a speech on “Popularity Outweighs Traffic” during the first CEIBS CMO Summit and Launching Ceremony of CEIBS Alumni Association CMO Club on September 2. Below is an excerpt from his speech in which he shared his thoughts on marketing in the new consumption era.

 

“In this era where only traffic counts, I’d like to share some of my views.

First of all, popularity outweighs traffic. The famous ancient Chinese military treatise The Art of War puts forward a theory: the victorious army seeks to do battle only after victory is assured, whereas the defeated army fights first and looks for victory afterwards. It means you should not wage war in haste and you should only dispatch troops when you are sure you are going to win. How can you ensure victory? The secret is in five words: Tao, Heaven, Earth, Commander, and Method. In the case of China’s business battlefield, “Heaven” refers to the business climate or Chinese companies’ so-called “window of opportunity”. “Earth” means distribution channels – the coverage available. “Commander” refers to the team. “Method” refers to the efficiency and incentive mechanisms used in operations management. These four aspects are very important, but there is an even more crucial element: “Tao”. Its definition is quite fluid. However, in the saying “one who owns Tao gets abundant support, while one who has no Tao gets little”, the word means popularity with people.

China’s business war of the past three decades can be divided into three phases. In the earliest phase of economic scarcity, the end product played a major role. More than a decade later, channels and advertisements became relatively important. At that stage it became vital to form an alliance with dealers, and set up a system at the end of distribution channels to facilitate products’ smooth penetration of the market. In today’s era where supply exceeds demand, Taobao and JD.com have reconstructed channels with e-commerce. The channels’ role is weakening, since it is not possible for consumers not to buy anything. Now the war is taking place in consumers’ minds: faced with so many rivals, how can suppliers concisely convey their uniqueness and explain why their products should be chosen instead of others? This is more important. If you cannot occupy a relatively advantageous position in consumers’ minds, basically you don’t stand a chance of succeeding.

Therefore, in my opinion, brand awareness is the main goal of business operations today and the biggest cost is the effort made to make customers aware of what is being offered. How can you surmount the habits and experiences people have long accumulated and establish new awareness? It is far from easy.

The biggest misunderstanding in business marketing is confusing the enterprises’ perspective and the customers’. From an enterprise’s perspective, every product is precious and companies hope to share all its advantages with customers. However, from the customer’s perspective, your existence is not at all essential – you are just a passer-by in his life and his world stays the same with or without you. Many enterprises tend to assess their rivals from their own point of view and find them clearly lacking. However, their customers may have a different view, seeing advantages in their rivals.

The way to overcome this hurdle is to briefly state what makes you unique and implant into consumers’ minds the reason why they should choose you instead of others. I suggest four approaches to attract customers: first, be the spokesperson for a product category; second, occupy a specific niche; third, focus on business; fourth, create new categories. When there is no leading brand in an industry, you will find it possible to monopolise a category. Then just become the spokesperson for that category. For example, Alibaba stands for e-commerce, Tencent instant messaging, Baidu Chinese search engine and Didi chauffeur-driven car-on-demand service. If someone is already a step ahead of you and you are not able to speak for any category, you can still monopolise a specific niche. For instance, E Le Me took the lead in establishing a take-away brand therefore Meituan Waimai could only promote itself as “a faster take-away brand”. Another example is the cell phone industry. OPPO has an advantage when it comes to photography, VIVO is strong in music, Gionee has super long battery life and Xiaomi is a brand with a high cost-performance ratio; meanwhile fashionistas use iPhone and businessmen choose Huawei. Every brand can be characterised by a very distinct phrase, and these brands are sure to make a good profit in the Chinese market.

In my view, the profit margin reflects the distinctiveness of the brand in customers’ minds and it depends on your ability to occupy a niche. When awareness of your brand is not distinct from your rivals in consumers’ mind, you will not be able to avoid a price or traffic war. Your profit margin will definitely be low.

The third approach is to focus on business. Once again, take e-commerce as an example. When there is no leading brand in the industry, you should monopolise the category: for instance, “Tmall is enough” (their slogan); or by highlighting your strengths alongside a competitor’s shortcomings as JD.com has done with its slogans “same low price, buy genuine” and “same low price, buy quick”.  What about brands that arrive later to the game, a third-comer? VIPshop’s slogan is “a website for special sales”. Its focus is vertical. What about a fourth-comer to the market? It can only open a We business (small online business based on WeChat Moments), to set up new categories.

The C2C used-car trading platform Guazi.com is one example of this. They use slogans such as “cars sold directly by owners, no broker fees” as well as “buyers spend less, owners earn more”. Such motivational words!

In China, I don’t think there is any technology that is safely in the lead or any model that cannot be emulated. Taking the lead in technology or invention of a business model can only provide you with an intellectual window of three to six months, at most, less than one year. The key is how to use this window of opportunity to saturate the market so customers see you as the equivalent/representative of a specific technology or model.

Companies that enjoyed exponential growth shared all the features listed above. As management guru Peter Drucker said, enterprises only have two basic functions: create unique products and services and, through marketing, make them customers’ first choice.

In recent years the Chinese consumption market has faced big challenges. Since 2012, first-tier brands have tended to be increasingly high-end. On the list of “The BrandZ™ Top 100 Most Valuable Chinese Brands 2016” launched by Beijing WPP Group and Millward Brown, 40% of those successful brands are super high price positioning and 24% are high price positioning. That means cost-performance ratio is no longer the key to success in China. Nowadays, in China it is the people with high education, high position and high income that are driving consumption. They prefer innovative and fashionable products and are willing to pay the premium. It is estimated that from 2020 to 2025, China will have a middle-class population of 500 million. What is their consumption psychology? It is to replace cheap things with high quality brand name products; to replace necessities with tasteful products that convey their identity, tastes and hobbies; to replace practical things with those that are able to evoke emotions and create a pleasing atmosphere. You will find commodities that are not only functional but, most importantly, are able to take care of consumers’ mental and emotional needs.

Two people have spoken extensively about this round of consumption upgrade. One is Luo Zhenyu, founder of a personal media and knowledge sharing show called “Logical Thinking” and Member of CEIBS China Entrepreneurial Leadership Camp.

The other person who has been vocal on this issue is Li Jiaoshou who believes that, for the middle class, purchasing luxuries is no longer a status symbol but a way to reward themselves for their hard work. This attitude is reflected in Didi’s advertisement: ‘If you work hard every day, at least rest in the car. You, the one that spares no effort, deserve a better ride today.’ It appears that China’s entire middle class, while struggling with the daily routine of work, are in need of psychological reward.”