On October 26, 2024, “The Power of Evolution: Liu Run’s Annual Speech” arrived as scheduled. In this four-hour speech, Liu Run centered around the core theme of “Flowers Will Always Bloom,” sequentially sharing critical challenges entrepreneurs face today, including customer challenges, pricing challenges, intense internal competition, aging population difficulties, smart technology dilemmas, and challenges in going overseas.
In Liu Run’s view, all problems have solutions. Whenever faced with difficulties, one should continuously try and explore to find the solution.
Which solving methods can be applied to the baby and maternity industry? CBME Insights has organized the following:
Question: What should one do when the number of customers decreases? Answer:
- Precision marketing.
- Make good use of platform-wide operations.
- Go the extra mile for customers.
Liu Run notes that this year, many entrepreneurs encountered a problem they had never faced in their years of business: a reduction in customers. For some, the drop was sudden and significant.
Liu Run cited an example from Tokyo Disneyland. In 2022, adults made up 73.9% of visitors to Tokyo Disneyland, and females, in particular, accounted for 79.4%. The main customer base of Tokyo Disneyland is “adult females.”
“Why isn’t it children? This is because Japan entered a state of low childbirth earlier than China. If Japan had 10,000 fewer newborns this year, next year, 10,000 fewer baby bottles would be bought for childcare centers. In three years, early education classes would have 10,000 empty stools. In five years, Disneyland would have 10,000 fewer children needing Mickey Mouse hugs.”
Tokyo Disneyland’s strategy was to “switch customer groups.” Many elements in the park, such as music, architecture, dining, and services, are designed for women.
“Why does Disney specifically design products for women? Because they want to shift their customers from ‘children’ to ‘adult females.’ How to make the shift? By helping them find that eternal ‘child’s heart.'”
Liu Run believes that are diaper users necessarily children? Are nutrition product users necessarily the elderly? Are game console users necessarily male? Are makeup product users necessarily female? Customer challenges are the 81 trials that every enterprise will face sooner or later. When your abilities are no longer needed, when users drift away, perhaps it’s time to rediscover those who really need you.
“Find them, and then, market precisely.”
Liu Run mentioned that in May this year, McKinsey released a report titled “Chinese Consumer Trends Survey.” In this report, McKinsey pointed out that there are five groups of Chinese consumers worth paying attention to.
The first group is the new middle class in the first and second-tier cities, aged approximately 26-41 years old, struggling in cities like Beijing, Shanghai, Guangzhou, Shenzhen, or Hangzhou and Wuhan.
The second group is the rural middle-aged and elderly, roughly between 40 to over 60 years old.
The third group is the affluent silver-haired group in the first-tier cities. They are about to retire or have already retired at around 60 to 65 years of age.
The fourth group is the affluent middle-aged and elderly in the third-tier cities.
The fifth group is the urban Generation Z, basically including all young people living in cities.
“The new middle class in the first and second-tier cities ‘seek relaxation,’ rural middle-aged and elderly ‘focus on health,’ affluent silver-haired in the first tier ‘enjoy life,’ affluent middle-aged and elderly in the third-tier ‘pursue quality,’ and urban Generation Z ‘love experiences.'”
For the second breakthrough path when the number of customers decreases, Liu Run mentioned the need to make good use of platforms. Engage with different customers on various platforms with diverse content. Be where the customers are. Then do well in: omnichannel operations.
“Omnichannel operations mean: use public domain benefits well; build private domain barriers. In the short term, rely on public domain benefits; in the long term, rely on private domain barriers. That’s the essence of omnichannel operations.”
For the third breakthrough path when the number of customers decreases, Liu Run mentioned the need to go the extra mile for customers and exceed expectations.
Liu Run gave an example where a stall owner in a Shenzhen farmers market helped customers by turning “a piece of meat” into “a dish.”
This owner created a WeChat group. For him, the farmers market was his public domain, while the WeChat group was his private domain. “In the WeChat group, there are ‘regular customers’ who often come to buy beef. Zhang San says, ‘I want a piece of streaky meat for grilling.’ Li Si says, ‘I want a pound of tenderloin for hot pot.’ Wang Wu says, ‘I want half a pound of fatty beef to stir-fry.’ Oh, and ‘fry it for me.’ Then, the owner would cut the meat, prepare the vegetables, and finally fry it all. Make customers take home a dish, not just a piece of meat.”
After introducing the “free stir-fry” service, this stall owner immediately became a top influencer in the farmers market. The entire market’s customer flow also doubled.
Question: What should one do when prices are falling?
Answer:
- Reduce the “low cost” brought by waste;
- Increase sales prices by providing emotional value to customers;
- Improve user experience.
In Liu Run’s view, customers “always” want to buy better products at lower prices. It was the same 100 years ago and will definitely be the same 100 years from now. Thus, don’t fuss over this. It’s too early to say that China has entered a “low-desire society.”
When pricing becomes increasingly critical, Liu Run believes that “low prices” achieved by lowering quality and sacrificing profits have never been a real competitive advantage for businesses. It’s the “low cost” due to reduced waste that matters.
Liu Run mentioned a company that encourages employees to come up with suggestions to reduce waste. Whether useful or not, every suggestion earns 50 yuan, which has led to continuous improvements. “We now give out over 1 million yuan in bonuses a year. But the waste we’ve reduced in just 2023 alone has exceeded 10 million yuan.”
Moreover, the solution for falling prices points to continually increasing the “average sales price.” Liu Run referred to Miniso as an example; this company’s average sales price in 2021 was 11.5 yuan, which rose to 12.1 yuan in 2022, 13.3 yuan in 2023, and 14.6 yuan in 2024. Over three years, it increased by 26.96%.
How was it achieved? By providing emotional value to increase product prices.
Cai Yu, who was the first to use emotional value to explain business phenomena, mentioned that product value = functional value + emotional value + asset value. Nowadays, more and more users no longer pay just for functional value. So, to sell goods at higher prices, the key is to transmit “emotional value” to consumers.
An essential pathway to improve product emotional value points towards IP. Ye Guofu, the founder of Miniso, once mentioned one very important role of IP: pricing emotional value. Hence, in the Miniso case, Ye Guofu’s solution was interest consumption, not rolling functional value but rolling emotional value.
The third problem-solving approach for falling prices is to improve user experience. Regarding this approach, Liu Run mentioned the example of Pang Donglai. In Liu Run’s view, low prices may be momentarily tempting, but trust is a long-term commitment.
Question: How to address the decrease of newborns and the aging society?
Answer:
Focus on the “Pre-Elderly” and “Vital Elderly” as two blue ocean markets.
The aging dilemma is another significant issue raised by Liu Run. In the five primary schools he sponsored, four have declining enrollments, reflecting the decrease in newborns.
According to the latest statistics from the National Bureau of Statistics, China had 18.83 million newborns in 2016 and 17.65 million in 2017, decreasing yearly. By 2023, the number plummeted to 9.02 million, nearly halved. On the other hand, the number of elderly in China is growing. In 2016, there were approximately 233 million people aged 60 and over. By 2023, this number had increased to 297 million, averaging a yearly increase of about 9.42 million.
Liu Run pointed out that when a society ages, entrepreneurs focusing on the senior economy should not only pay attention to the “nursing elderly” but should not overlook the “pre-elderly” and “vital elderly” — two “blue ocean markets.”
“Pre-elderly” refers to people aged 50 to 65 who are “starting to lose power but still have plenty of battery left.” “Vital Elderly” refers to those aged 65 to 75 who have just retired and, despite their long use, still have no battery anxiety.
Liu Run illustrated how Japan values the “quasi-new elderly” as a blue ocean market by focusing on services for women over 50.
“What percentage of all financial assets in Japan is held by those over the age of 50? A staggering 81.7%. Therefore, Japan’s wealth is mainly in the hands of the elderly. And in most Japanese families, women hold the financial reins. Thus, to target the elderly market is, in fact, to target the female market.”
An entrepreneur in Japan has created a subscription-based magazine dedicated to teaching women how to bake cakes, apply makeup, and maintain their fitness, among other things, and they are also involved in product promotion. They told Liu Run that as society ages, their problem-solving approach is to focus on women. To help women over 50 live better lives.
“Note that we are focusing on women, not ‘silver-haired’ women,” this entrepreneur mentioned. Words like “silver-haired” and “elderly” will never appear in their magazine because nobody wants to admit that they are old. “So, we are not an elderly magazine. We are a women’s magazine.”
Therefore, in Liu Run’s view, whether they are ‘quasi-new elderly,’ ‘energetic elderly,’ or in need of care, giving them dignity implies a huge opportunity.
When faced with a challenge, there are always those who will fight at Heimuya and those who will retreat to Niu Beishan. Liu Run believes that the world is full of endless challenges. But if you have the will, you have not failed; as long as you remain at the gaming table, you still have a chance.
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