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China’s “Reverse Transformation” Marketing Method
China’s tobacco industry’s marketing model is changing.
By TobaccoChina Online
Cigarette marketing methods in China are undergoing what is called “reverse transformation” from the pattern of “promotion from the manufacturing, commercial, and retail sectors to the consumption sector” to the pattern of “promotion from the consumption, retail, and commercial sectors to the manufacturing sector."
On June 22, China National Tobacco Corporation (CNTC), which doubles as State Tobacco Monopoly Administration (STMA), issued a notice declaring that a cigarette marketing campaign (hereinafter referred to as thematic marketing campaign) would be officially launched nationwide from July 2016 to January 2017 under the theme of “We will be wherever there are consumers”.
In the notice, CNTC requires that the cigarette marketing campaign shall be in compliance with the “consumer-centric” theory. It also required that market orientation shall be adhered to, consumption shall be focused on, and that the core status of consumers shall be further defined, thus completing the process of reverse transformation mentioned above.
The questions that arise are: what are the motivating forces promoting reverse transformation? What will the reverse transformation of cigarette marketing methods focus on? And what will be the crucial approaches for implementation? In light of the impact from the ongoing general downturn of the Chinese economy as well as the many pressures and the backdrop of reform faced by the tobacco industry, these questions can be interpreted as follows:
China’s “Reverse Transformation” Marketing Method
The reverse transformation of cigarette marketing methods in China employs a “consumer-centric” concept.
“New normal” requires imperative marketing shift
The Chinese economy is in a “new normal” state featuring moderate but more stable economic growth in the medium-to-long term, following decades of double-digit rapid growth. Meanwhile, the economic situation both in China and abroad remains complicated and changing, as does the threat of a slowdown in economic growth. Moreover, the approaches adopted by the government to launch public health campaigns with tax increases and price readjustment are taking effect, which means yet another blow to the already struggling tobacco industry.
Recently, Euromonitor released data indicating that cigarette sales volume in 2015 declined by 2.4%, or 60 billion cigarettes, from the previous year, which was the first annual decline registered in 20 years. And since the beginning of 2016, this trent continues with weak growth, year-on-year declines in sales volume, cigarette inventories remain high, and the annual amount of taxes and profits down. The tobacco industry has entered an unprecedented downturn.
Facing pressure internally and externally, the industry stepped up its process of systemic transformation, adopting what it calls “reverse thinking” in cigarette marketing. In launching the thematic marketing campaign, it focuses on consumers shifting from sales promotion to driving sales through consumption stimulation. The campaign reflects the changing trend in the market, placing greater importance on consumer consumption to help balance the market supply.
Most fundamental requirement of supply-side structural reform
Supply-side structural reform is a priority for the industry. It is the combined efforts to powerfully promote, reform, and strengthen development potential by tobacco companies. The most fundamental requirement of this supply-side structural reform is to firmly establish a “consumer-centric” modern marketing concept and to supply consumers with cigarette products that they really need on the basis of understanding their real demand. Only by fully respecting the market can the real demand of consumers be met. The thematic marketing campaign is ultimately intended to realize a reverse transformation, supplying consumers with the most marketable cigarette products.
Effective strategic planning for thematic cigarette marketing
In a keynote speech delivered at a teleconference on improvement of quality and efficiency by the tobacco industry on April 12, STMA director-general Ling Chengxing put forward a “three-step” approach for improvement, thereof leading to fulfillment of the annual production quotas. First step: stop the sales decline and realization of sales growth. Second step: institute control over cigarette supply to realize balanced growth in sales growth. Third step: give priority to fulfilling the annual production quotas for 2016.
Accordingly, the thematic cigarette marketing campaign requires all parts of the industry to earnestly implement STMA’s plan to mobilize resources for innovation and reform, promote execution of the campaign and reform on a full scale, and sum up in a timely manner the decisions and plans adopted to fulfill the “three-step” approach. The theme of “We will be wherever there are consumers” will be running through the whole process of implementation of the cigarette marketing campaign.
Specifically speaking, the campaign requires that leaders of all parts of the tobacco industry take the lead in the reform, from conducting surveys and studies to creating a favorable atmosphere that encourages cooperation and involvement. The campaign also requires the launch of a systematic operation which optimizes marketing, as well as full-scale efforts to ensure that marketing methods shift to the new model. Tobacco manufacturing enterprises need to place importance on strengthening their brand management and marketing capacity, while commercial enterprises need to give preference to strengthening their market development and marketing innovation, employing reverse transformation.