Brand, from the circle to the masses

After many new brands came to the market, they faced a question: Why can't they become big? If you want to become a big brand, you need management, marketing, technology, capital and other knowledge, as well as many soul-searching questions. So, why can't your brand become big? The author of the following article gives us the answer, let's take a look.

01

The popular application of mobile Internet and machine algorithms has led to the rise of numerous information platforms: Douyin, Kuaishou, Xiaohongshu, Bilibili, etc. Relying on the advantages of circle algorithms based on interests, attitudes, hobbies, values, behaviors, habits and other dimensions, ByteDance has successfully created two super apps, Toutiao and Douyin. In order to go public, ByteDance was officially renamed Douyin Group and became the world's highest valued super unicorn company.

The rise of these platforms has greatly promoted the development and evolution of circle businesses. The business world has entered an era of niche entry and strong growth beyond the circle from the era of mass brands. If today, you run a high-end restaurant, and you do not operate review platforms and note platforms such as Xiaohongshu, then no matter how good your products and taste are, they will not become popular.

In 2016, I published "Circle Business - Finding the Way Out for the Future of Enterprises". This book was first released at the celebration meeting of the third anniversary of the establishment of the Island Neighbor Organization on Zhenghe Island with thousands of people. More than 1,500 entrepreneurs who attended the event were the first to read this book. After the first release, with the hot sales of "Circle Business" across the country, the concepts of circleization, circle business and circle marketing were also heated up. Both Luo Zhenyu of Luoji Siwei and Wu Xiaobo of Wu Xiaobo Channel have been constantly promoting circle culture.

In recent years, supernova brands such as Yuanqi Forest, Wang Baobao, Santonban, and Zhongxuegao have emerged strongly. They have also seized the opportunity of consumers' increasingly personalized and segmented needs, and quickly achieved their rise through the loyalty of segmented people. The giants are also expanding their product lines and actively incubating segmented brands to drive business growth under the new thinking of creating segmented brands. For example, Procter & Gamble has Metamucil, a segmented brand that specializes in weight loss meal replacement products.

02

In the past 10 years, many new brands have been facing a problem after they came to market: Why can’t they grow bigger? For example, why can “Muwu BBQ” open thousands of stores across the country, while many BBQ restaurants can never open beyond the back streets? Why can “Huaxizi” rise so quickly, while the products of some brands are still piled up in the hands of distributors?

To become a small brand, you may only need an opportunity and a little ingenuity, but if you want to become a big brand, you also need management, marketing, technology, capital and other knowledge, as well as more soul-searching. So, why can't your brand become big?

03

The core reason why "brands have never grown" is that companies have not used "new cost thinking" to manage brands. What is "new cost thinking"? It means that not only money is considered a cost, but also your time, energy, innovation, management, etc. Let's take a closer look at this issue. "Not growing" means that something is limiting your development. There are at least three reasons that can limit the development of a brand: market form, competitive relationship, and self-operation. These three factors will generate corresponding operating "costs", and each cost will restrict the company's sustainable development: market form = opportunity cost, competitive relationship = competitive cost, and self-operation = replication cost.

04

Many people have heard of the term "market capacity". The size of your market capacity will determine your market size. For example, if you are a foreign beverage brand and you position your core market in China, you will have a market of several hundred million people. But if you position your market in Sweden, your maximum market size will be 10.18 million people. However, "market capacity" is only a basic factor and cannot be used as the only criterion for measurement. "Market capacity" is only one of the dimensions. Let's add five more dimensions to examine your market.

05

1. Market size

Is the market a 100 billion-level market or a 10 billion-level market? Are there any unmet demands?

2. Speed ​​issue: market growth rate

Is your current market close to saturation? Or is it still growing steadily? Is the growth rate 3% or 30%? For example, China's first- and second-tier markets are saturated for most brands, while third- and fourth-tier markets are still profitable. Another example is that China's pet economy and silver-haired economy will have strong growth in the future, but the kitchen appliance industry and mobile phone industry have been saturated in the past two years.

3. Duration issue: Is it a necessity?

"Just need" refers to whether we always need a certain product and it will not become outdated easily. For example, in consumer goods, milk is a just need consumer product, and a certain flavor of beverage may become outdated after a few years; in Internet applications, instant messaging software such as WeChat is just need, but expert question-and-answer software such as Xing is not just need;

4. Frequency issue: Is it high frequency?

"High frequency" refers to whether we consume products frequently enough. For example, facial tissue is a high-frequency consumption product, but the wedding photography industry is a typical low-frequency consumption product. A normal person will only get married 1-2 times in his life; Distribution issue: market concentration, "concentration" means whether the industry is controlled by a few giants or divided up by a group of "ants"? For example, China's dairy industry is controlled by giants such as Yili and Mengniu, and the industry concentration is high. However, the catering industry is affected by its geographical location, which is a typical industry with low concentration. It is impossible for it to be divided up by a few big brands;

5. User stickiness issue

The aggregation effect of users. The market where your brand is located should be active, and users should stick together, so it is easy to aggregate users together.

06

When we find that a brand has not been able to grow, the first step is to do a self-examination of the market situation to see what is happening in the market we are in. For example, if you find that the market associated with your product is close to saturation, you may need to open up a new category market to obtain greater benefits at a lower opportunity cost. The market itself is only an objective constraint. If a brand has not been able to grow, most of the reasons are still due to competition and its own operations.

07

"If a company can grow big, it must have eliminated competition to some extent." This sentence tells us how to correctly view competition, that is, competition is not about two people chasing each other in a race, but about trying not to compete with your opponent on the same track. All the brands that have grown big in recent years have met this basic competition logic.

Let's take Luckin Coffee, which is the most familiar to everyone, as an example. Luckin Coffee went public in 18 months and eroded the market share of the giant Starbucks in China. Although both Luckin Coffee and Starbucks sell coffee, their business models are completely different. What is the biggest difference? Luckin Coffee's customer acquisition method is completely different from Starbucks. The customer acquisition scenario of traditional coffee shops is offline. They open stores in places with suitable traffic and consumer groups through reasonable site selection, thereby converting coffee people within a few kilometers around the store into consumers.

For example, they generally like to choose shopping malls, office buildings, and office areas like SOHO to open stores. Affected by multiple factors such as financial fraud, delisting, and the re-emergence of the epidemic in 2022, Luckin Coffee still survived and regained profitability, which is enough to show the strength of Luckin Coffee's brand operation capabilities.

08

Product: The best competition is to eliminate competition from the product level. If you develop a product that many people need and other competitors do not have, this is the best business. Unfortunately, there are very few such products, and they generally only exist in some high-tech enterprises. The most common practice in the industry is brand positioning, and the most common positioning method in brand positioning is "category innovation", which is to make a slight adjustment to the original product, add or upgrade certain elements, so that this product becomes a new product that no one has ever seen.

09

Channel: How much does it cost to build your empire? The so-called channel refers to who sells the product and where it is sold. Because China is vast, for many years, the scope of channel distribution is often equivalent to the sales volume of the product. If the product is the emperor, then the channel is the product's "kingdom". Wahaha, Nongfu Spring, Jiaduobao in the beverage industry, Dali in the food industry, Niulanshan in the liquor industry, Yili Mengniu in the dairy industry... There are many companies in China that are famous for their strong channel power, or it can be said that the biggest factor in their growth may not be the brand, but the channel power.

Back then, the Wahaha Group could launch a new product this month, and the next month this product would appear on the shelves of major supermarkets, mom-and-pop stores, and even newsstands across the country. Therefore, among the four factors of marketing, the channel moat is the highest. As a new product, the cost of competing with giants in this field is the most expensive. What you pay may not be a price, but a price of life and death. We can see that many new brands have been rising in recent years, and their success is largely due to bypassing the channel war and reducing the cost of building a kingdom to the lowest.

10

Price: Pricing is not about profits, but about competitive costs. Many people think that pricing is about finding a number that consumers can accept and that can earn the most. This understanding is too superficial. In fact, pricing is the ultimate embodiment of your company's marketing model. Is a low price just for the sake of "small profits but quick turnover"? More than that. When Procter & Gamble and Unilever entered China, their shampoo brands such as Rejoice and Pantene were set at super low prices. When Chinese consumers saw that foreign brands endorsed by celebrities were cheaper than domestic brands, they naturally chose foreign brands.

Nowadays, the market of domestic cleaning brands has been suppressed by Procter & Gamble and Unilever and is shrinking. This pricing strategy is to first occupy the market with low prices to form a monopoly effect, and then find ways to increase prices to harvest the market, or develop other high-profit brands to harvest the market. Is the "competitive cost" brought by this pricing strategy high or low? Why do Jiaduobao and Red Bull define high prices in beverages as fast-moving consumer goods? High prices can bring more profits and high prices can also target high-spending groups, but the meaning of high prices is more than that.

The high profits brought by such high prices can support their huge advertising investment every year. They can suppress other competitors with overwhelming advertising. Even if competitors have price advantages in the market, they will always be weaker than them in brand power. Therefore, such high prices also lower the "competitive cost". In marketing, the price will directly affect the final sales volume of the product, but the price is not the lower the better. The pricing also depends on the specific consumers, the category they are in, etc.

How to fight a price war is an enduring topic in the competition between enterprises and competitors. Moreover, price war must be fought, but it needs to be fought skillfully. Apple also fights price wars, but its price war is fought skillfully. Anyone who does not fight price war skillfully will end up like "Luo Yonghao". When Luo Yonghao T1 was launched, he insisted on pricing his mobile phone at 3,000 yuan, and criticized that 1,999 yuan was a monkey trick. In the end, he had to face the cruel reality, reduce the price, and set the price according to the principles of psychology.

Pricing is not simply cost plus profit, but requires product category positioning and product positioning first, and then pricing based on the different values ​​generated by the product category. For example, if a new beverage costs 6 yuan and the company wants to make a profit of 4 yuan, then pricing it at 10 yuan seems to be a reasonable choice, but it is not the case from the consumer's perspective. This highlights the importance of positioning. When this beverage is positioned in a high price range, the manufacturer will gain more profits.

For example, if the same beverage is placed on the shelf of a supermarket and compared with a bottle of cola that costs 3 yuan, then it is difficult for the price of 8 yuan to have an advantage; but if it is placed in a coffee shop, compared with a cup of coffee that costs 30 yuan, it may be priced at 15 yuan, which seems very cheap. This is why Yuanqi Forest must first make sugar-free beverages to succeed. Because it is a sugar-free beverage, it can be sold at 5 yuan per bottle at the terminal. If it is also a sugary soda, it is very difficult to sell it at 5 yuan per bottle.

The reason for the above situation is that consumers do not know how much a newly launched product is worth. The only way they think the price of this product is high or low is by comparing it with previous products. If a piece of fried chicken is sold at 5 yuan in a street shop, you will think it is expensive, but if it is sold in McDonald's, you will think it is so cheap. Therefore, when mature brand companies price new products, they must first position the product, or carry out category innovation, and then find products that match it, and then seize the consumer market through price advantages or other marketing activities in the same range.

The method to find an anchor product for yourself is: first, you need 1; second, think about which competitors can meet these needs. Let's take the beverage mentioned above as an example. If this beverage can meet the consumer's needs of refreshing, then what products on the market have the same needs? We may drink tea to refresh, or choose coffee, or functional drinks such as Red Bull, which will become competitors for this new beverage. After finding the approximate range of competitors, the brand will have a basic direction for pricing.

Finally, after considering the portability and taste of the beverage, the brand priced the beverage at 8 yuan and placed it next to the 12 yuan canned coffee on the shelf, so that consumers would try the newly launched beverage. This price was actually higher than the original expectation. After a period of sweetness for the new product, the price could be fine-tuned. Sales continued to grow steadily, and word of mouth and volume were also well promoted.

Generally, brands increase prices every year. The reasons for the price increase include raw material and labor costs, but the more important reason is that consumers hope that the products they buy are valuable.

11

Promotion: The lower the traffic cost, the better. When we develop good products, have sales channels, and set a good price, we will immediately encounter a traffic war. No matter what type of brand, you must acquire customers through traffic, occupy the minds of consumers through traffic, and consolidate your brand positioning. The trouble is that good traffic is very expensive. Which brand doesn't want to sponsor CCTV's Spring Festival Gala? But do you have hundreds of millions of advertising fees? In the past few years, why did many APP brands start to do offline promotion? Because it was found that offline head solicitation is cheaper than purchasing online traffic; the current hot private domain traffic is to use the Internet infrastructure such as WeChat communities to reach and retain as many users as possible so that the business can last for a long time.

12

Own operation: Have you considered the company's "replication cost"? From the perspective of business operations alone, if your development encounters a bottleneck, it is likely that your past business model is no longer effective. In other words, past successes cannot be "replicated". There are many such examples, such as Le Chun yogurt. Le Chun is a typical "user"-oriented company. Its organizational structure is designed around user operations and experience. For example, employees conduct user interviews every week, collect product suggestions, and then convey them to the back-end product research and development department.

For example, Le Chun's durian-flavored yogurt was called for by Le Chun's fans. In the early days, Le Chun mainly relied on content marketing on platforms such as WeChat and Weibo. Through some interactive story marketing and public recipe production, it gained a group of loyal yogurt fans. Focusing on users rather than competitors, focusing on product experience, community operation... It can be said that Le Chun is full of all the labels of "future marketing model". With these thinking and methods, Le Chun has become a very successful small brand.

But when it was no longer satisfied with its own weakness and wanted to enter the mass market, problems arose. Without its own production line, production capacity was insufficient. In order to expand sales, Le Chun expanded its distribution range from the Third Ring Road in Beijing to the whole country; but the nationwide distribution of low-temperature stored yogurt brought about the second problem: "cold chain logistics", so Le Chun spent most of its financing to build a cold chain system; because the cold chain system consumed a huge amount of funds, Le Chun could not invest more in offline channel operating expenses and marketing expenses, and offline supermarkets, convenience stores, and Tmall and JD.com all required human and financial investment.

It can be said that Le Chun's early competitiveness was due to the fact that it captured a large number of fans at a very low cost, but this successful model cannot be completely replicated in the future Le Chun, making Le Chun a big brand. The "replication cost" I am talking about is the "standardization" and "scale" of the business model. A business that cannot "standardize" will not have "scale", and a business without "scale" will always be a small business.

13

Why can't your brand grow? There may be many answers, but no matter what your answer is, companies can use "new cost thinking" to think about your answer again. Is your market opportunity cost too high? Is your competition cost too high? Is your company's replicability cost low enough? In movies and TV shows, business heroes are often portrayed as adventurers who dare to take big bets. But in the real world, business heroes have always been conservatives who always keep "cost" in mind.

Author: Liu Yichun

Source: WeChat public account "Liu Yichun's Brand Business Innovation (ID: shangyeyiguohui)"