19/2019 – Building trust and integrity

Chinese male beauty blogger Austin Li Jiaqi

Over dinner on Nov 11, my daughter-in-law from China was eating quietly with her eyes and fingers glued to her new iPhone 11. Elsie was one of the six million shoppers watching a live streaming of Austin Li Jiaqi, a Key Opinion Leader (KOL) and a life streamer on Taobao Live, selling beauty products.

Austin Li also known as “lipstick brother” is hugely popular and trusted among female consumers and he sells a tremendous amount of beauty products in China.

However, the top ranked live streamer on Taobao is Viya who holds the sales record (non 11.11) for a single day – 353 million yuan (RM280mil) on Oct 10,2019. Her followers also known as “Women of Viya” absolutely believe in her as she demonstrates and highlights the quality of the products that she herself has tested on. When the promo offer came on the mobile screen, the women of Viya will click on the buy button and the seamless e-commerce infrastructure of Taobao will deliver the products to the buyers within 24 hours.

I have been in the cosmetic business for over 20 years and I have never seen such phenomenal sales. The “lipstick brother” earn his nickname by live streaming, selling 15,000 lipsticks in five minutes! Just 10 years ago, our industry was saying that online sales of colour cosmetics will be negligible as female consumers have a preference to feel and touch a physical product, even testing the colours on their hands, and this consumer experience will only be available at physical cosmetic counters.

In my time, brand trust with consumers was built over years of multi-million dollar advertising and promotion campaigns and product quality has to be consistent across the board. Nowadays, consumers in China do not trust brand advertising but instead trust the KOLs who recommend brands that they trust.

Viya built her trust with her fans because she will not feature a product unless her team of 200 staff has filtered and rigorously tested the it. Viya supposedly spends four hours a day testing and reviewing her products before approving it to be added to the lineups.

In her live streaming shows, she will not over-promise or make unnecessary claims on the featured products. As each individual reacts differently to a certain product, she is wise enough to be careful with what she says on what the product claims it can do. Trust once broken will take a long time to remedy.

Live streamers work extremely long hours, 300 days of eight hours daily streaming and this business is not for any lazy and pompous celebrities. Prime streaming hours are evening periods after dinner. Many top KOLs in China make in excess of 10 million yuan per annum in commissions. Superstar selling machine Viya must be raking in excess of 100 million yuan per annum in commissions but she has to feed 200 employees. Her last mile contact with her loyal and trusted fans have helped her built a sustainable business model at least until the next superstar comes along.

Trust and integrity are crucial virtues in any relationships whether in business or social communities.In the current media scenario where the millennial eyeballs have moved from traditional media of TV, magazines and newspapers to mobile phones and Internet, brand managers are forced to rethink about their previously proven marketing strategies in brand building. Add the booming e-commerce to the already complicated landscape, their job scope have become more demanding and stressful.

Going back to Marketing 1.01 of 4P’s, brand managers (eg consumer products) of MNC’s have to go through the following thought process:

Place: Distribution strategies. Brick and mortar stores. No problem. Should we engage in e commerce? Yes absolutely. Start now as it might be 30% of my future sales but how? Which marketplace? So fragmented, difficult to build brand equity, might dilute my brand image vs my retail merchandising concept.

Note: Amazon business built on direct selling to consumers based on low prices. Alibaba platform was built for SMEs to trade, brand building through KOLs – diversion from my strategic brand ambassadors. Big headache

Promotion: Worldwide advertising campaign and brand strategies to be adopted. Now include digital campaigns – but local KOLs getting to be more effective. How do we engage them to sync with my brand DNA? Advertising media mix? How much to spend on digital? How effective is it? Big headache.

Price: Retail price maintenance across all distribution channels including e-commerce but e-commerce sales primarily on price discounts – might disrupt retailers who in turn asks for more price off promotions. Long term impact resulting in lower value chain, lower margins and lower profitability. Big headache.

Product: Product mix same for retail and e commerce? Or different products for different distribution channels? Possibly result in inefficient production and higher inventories for the same business. Is e commerce the perfect distribution to clear my discontinued, over stock and near expiry goods? What will my retailers say? How will it affect my brand image and sales in retail outlets? Big headache.

For the SME’s the e-commerce platforms is a godsend innovation that has open up numerous opportunities to compete with the big brands.

Manufacturers and traders can now sell direct to consumers bypassing traditional brick and mortar establishments. SMEs do not have to follow basic 4P marketing protocols and the demands of a structured marketing company.

KOLs have disrupted the structured advertising ambassador protocols and many have gotten into direct business themselves. KOLs are now competing with established celebrities while the celebrities are rebranding themselves as KOLs.The consumer product landscape is getting so complicated that a new kind of brand manager is required. A brand manager that understands future business model, able to navigate through various distribution channels and understands the pricing and margin games. Hopefully a brand manager that is not allergic to paracetamols.As a KOL myself on SMEs and drug treatments, my dosage of advice to the new breed of brand managers – be brave in decision-making, be fast in implementation, take two aspirins every morning and have a glass of wine at the end of the day. Cheers.


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