How to define consumer goods? Why is the brand the core result of the company? How to evaluate the value of the brand?

Editor’s note: This article is from WeChat public No. “New consumption reference”(ID: cychuangye), author Xiao Hei. The original title “Tiantu Capital Feng Weidong: The core of consumer goods investment is the brand | New Consumer Investment Series III”.

Zhou Black Duck, Ganqi Food, Baiguoyuan, Tangcheng Kitchen, Nai Xue Tea… These well-known brands have the image of Tiantu Capital. As early as 2011, they focused on the consumer field. Figure Capital CEO Feng Weidong has his own unique insights into the consumer goods industry.

Redefining consumer products

After 2011, it was just in the era of the so-called “People’s PE (Private Equity)”. There was a bubble in the market. What project prices were all gone to the sky, especially a little profit. The whole industry is thinking, how to break through and avoid homogenization competition.

After combing the overall performance of the project in history, we found that the relatively stable and sustained growth is better for consumer goods companies. After careful thinking and positioning, the team decided to focus on consumer products. For the sky map, this is an important turning point.

However, our understanding of consumption in the early days was very shallow. At first we thought that as long as the companies that sell personal consumer goods are consumer goods companies. We have invested in agricultural products, telephones, etc., but later found that some consumer goods do not have the characteristics of consumer goods at all, and the periodicity is very obvious. For example, wireless fixed-line, it is actually not a consumer product, is for China Mobile OEM, the company’s brand can not control the choice of consumers. What kind of products does China Mobile use for customers? The company only sells its own production capacity, and there are bidding-type consumer goods.

Stepping through the pits and paying tuition fees, we redefine consumer goods: we must use our own brands to influence the products and services that consumers choose.

Brand is the core achievement of the company

After focusing on consumer goods, we are increasingly finding that the core of consumer goods investment is the brand.

The management master Drucker once said: The business results of the company are outside the enterprise, and there is only cost inside the enterprise.

Where does the company’s business results exist outside the company, and in what form? This question can be found in the brand positioning theory: the business results of the company are outside the company, and the customer’s mind is the product.brand.

Next, we will elaborate on the following three points:

1. The ultimate battlefield of competition is the customer’s mind.

The ultimate goal of business management is to get customers. If we don’t see the true key competition in the customer’s mind, then everything we do is internal and stays at cost.

What is a brand? It is the ability to achieve pre-sales in the minds of customers, and has chosen to choose you when customers have not seen them. This difference is called “named purchase”. If the customer does not choose you and does not realize the pre-sale in the mind, it is called “random purchase”.

2, the customer’s mind determines your market volume and channel cost.

The basic unit of competition is the brand.

Customers are buying brands, not businesses. Compared with the concept of products and brands, the concept of a company is much more complicated. Consumers do not have such a strong will to actively understand and accept. Why do you say this? When you take a thing, the customer will ask which brand or which company produces it, and definitely ask the brand first.

Clarifying this is very important for strategic level layout. Since the basic unit of competition is the brand, then the strategic unit is the brand, and the corporate strategy is equal to the sum of the brand strategy. The strategy must be split into corporate strategies and brand strategies to achieve its goals.

At present, many SMEs in China are basically single brands. It seems that your corporate strategy and brand strategy are similar. In fact, the thinking behind the two strategies is different. Brand strategy is that I have established this category and characteristics, to capture it; and as a thinker of corporate strategy, we must consider where the future is, whether this category will decline or not.

3. A brand is a representative of a category or feature.

The product itself does not enter the mind of the consumer. The concept of entering the mind must be the first, the first is the category, and the second is the characteristic. For example, mineral water is Nongfu Spring or Yibao, or safety is Volvo, and rejoice is supple.

Coca-Cola President Robert has such a sentence:

Even if Coca-Cola is burned in a factory in the world, we can get back to life overnight.

The meaning is that if the Coca-Cola factory in the world is burned by the fire, the bank will be willing to give Coca-Cola loans, suppliers and distributors will line up, consumers will look forward to it. The advantage of Coca-Cola is still its brand, everything else is cost, as long as you spend money to rebuild.

The myth of Coca-Cola, which can be revived overnight, reveals that brand is the core result of business management, and it also proves Drucker’s point of view.

How to evaluate the value of a brand

The same is true for consumer goods, but some brands can be bigger, some are not big, and the analysis is different.Categories have different economic characteristics. This is like saying that a man is afraid of entering the wrong line. The category is the characteristic of our consumer goods.

How do you define a “category”?

Category is the way customers classify a wide variety of products and services. In the minds of customers, this is a category or a category. For example, the duck neck category, Sichuan cuisine is a category, the supermarket is a category, and the fruit shop is a category. Different categories have different economic characteristics, and the category determines how long the brand will grow in the future. The so-called vent is actually an explosive growth of a category.

We evaluate the value of the brand, also from the perspective of the category.

First, the category value determines the ceiling of the brand value.

Mr. Rees, one of the world’s most famous marketing strategists, said in the book The Origins of Brands that the fundamental factor affecting the magnitude difference of brand value is the category – the value of the category determines the ceiling of the brand value; the brand value determines The ceiling of corporate value (if the business only operates one brand).

Now, many new products made by entrepreneurs are often in a weak category, and they are located in areas where the customer’s mind is not very concerned, so it is difficult to force a new brand to the customer.

For example, the category of fruit, there are more than 10,000 kinds of fruits in the world. Can you build a brand for every kind of fruit? Obviously not.

Customers have two possibilities for buying a weak category:

One is to accept the extension of a strong brand, for example, a brand of bananas is doing very well, so customers believe that the grapes they produce are also very good, because they come from a big brand, at least the quality is the pass.

Another, and more often, when buying a weak category, the customer recognizes the channel brand, such as the endorsement of Baiguoyuan. Customers feel that the Orchard will check the source and quality of those brands that have no brand.

The basis of these two purchases is to reduce the cost of customer selection. Therefore, in the process of establishing the brand value of the weak category, it is ok to extend the strong category to the weak category. It is also possible to use the channel brand. A big step forward in our investment philosophy.

Second, the status of the brand in the category determines the brand value.

In a market, the leading brand (first place) has unique value. The market share of the first place will be twice that of the second place, and the profit rate will be twice that of the second place. The value of the first place is four times that of the second place.

In the Internet field, because the economic characteristics of the category (such as network effects or strong economies of scale) can make the marginal cost close to zero, there will be a winner-take-all phenomenon. The difference between the first and second names may be ten times.

Most of the brands we choose when investing are leading brands in each category, or it has a clear opportunity to become a leading brand.

What kind of category is valuable?

Category is the main force behind the brand, and choosing the most valuable category is the most important prerequisite. The sky map has three main dimensions in category analysis: the first is the vitality of the category, the second is the potential of the category, and the last is the economic characteristics of the category.

  • The vitality of a category: to judge the vitality of a category depends on its combination with basic needs. For example, buns have existed for thousands of years, and the possibility of continuing to exist for thousands of years is relatively large; but mobile phones have existed for decades, so the probability that it may continue to exist for decades is like this.

  • The potential of the category: An important point in the assessment is to see which categories it can replace, how large the alternative category is, and the potential for this category. How big. For example, herbal tea, at the beginning of the national market may add less than one billion, but herbal tea can replace juice and water, replace Coca-Cola, can replace a lot, so the potential will be very large.

  • The economic characteristics of the category: mainly depends on whether the category contains two levels of simplicity.

The first is cognitive simplicity, that is, whether the customer is very easy to understand the new category. Many entrepreneurs will create something new, but he said it is not clear, this is very painful. If you don’t know for a long time, it is basically difficult for customers to accept you. If there is no association with the category that the customer should have, it is difficult to motivate or match the needs of the customer.

Second is the operation is simple. Because small businesses have insufficient operations and teams are insufficient, the supply chain and industry background are insufficient. If this is a complicated matter at first, it is very unfavorable for small businesses. This situation requires some way to cut the market through free or subsidized methods. This competition is very cruel.

Tiantu likes to find projects that do not need to rely on license monopoly or special resource supply. The low threshold means full market competition, and the brand value formed in market competition is the widest moat.

*This article is comprehensively organized from the notes, catchers,