The Age of Value Marketing Has Arrived
The sales and profits of Taiwan's top 1,000 companies hit three-year highs in 2010. The secret to their success? Winning customers' hearts in an age when consumers are pricklier than ever.
The Age of Value Marketing Has ArrivedBy Elaine Huang
From CommonWealth Magazine (vol. 471 )
"Abundance" and "capriciousness."
Taiwan's top 1,000 companies have experienced both sensations in a relatively short period of time.
In 2010, financial statements were full of record highs. Looking through the results of the top 1,000 manufacturers, 500 services companies, and 100 financial institutions in this year's CommonWealth Magazine survey, total net profit and profit margins were at three-year highs.
But for many, the first quarter of 2011 was a struggle.
During "super" investor conference week in April, benchmark companies such as Acer Inc., Compal Electronics Inc. and Pegatron Corp. all reported disappointing numbers that left retail and institutional investors frowning.
When asked to describe the outlook for the new year, the only word Wistron Corporation chairman Simon Lin could spit out was "capricious." Lin should be full of confidence, because Wistron, ranked sixth in CommonWealth Magazine's top 1,000 manufacturers, reported a record-high earnings per share of NT$6.0 in 2010. But he is concerned about unpredictable forces, such as the impact of Japan's devastating earthquake and tsunami and the consumer revolution being led by Apple Computer.
At the end of March, Wei Ing-chou, the chairman of Tingyi (Cayman Islands) Holdings Corp. and founder of the Master Kong instant noodle brand, made a rare appearance in Taipei at the company's investor conference. He told the packed house, "What used to be a 10-year cycle of exchange rate, oil price and commodity price volatility has now been shortened to four or five years."
In 2010, the Ting Hsin International Group, which owns and operates the Master Kong brand, displaced Coca-Cola as China's biggest non-alcoholic beverage producer, but in facing such a volatile economic environment, Wei has a far greater sense of danger than of contentment.
Coping with major economic changes is not the only major challenge faced by enterprises. An even bigger one is the changing nature of consumers.
The Age of the Prickly Consumer
Enterprises face a serious challenge in trying to read consumers' minds. Philip Kotler, the "father of modern marketing," recently observed that the days when companies can rely simply on advertising slogans to win favor with potential customers are over. Today's relatively turbulent environment has made consumers more conservative and far less trusting of vendors than of their own social networks.
The rise of social media has pulled together consumers with similar interests and shaped them into a magnifying glass that keeps close watch on a business's practices.
"Companies are facing the strictest, fastest-reacting, most powerful consumers in history," says Shenan Chuang, CEO of Ogilvy Mather Greater China. She even uses the term "naked world" when describing the current environment to corporate audiences, reminding them that when facing this group of prickly consumers, they have nowhere to hide.
In his book Marketing 3.0, Kotler contends that marketing practices have evolved over time. Companies have moved from product-centric "marketing 1.0" to consumer-centric "marketing 2.0" and now must make the leap to the values-driven "marketing 3.0" era. In this new age, organizations need to appeal to consumers through their internal and external behavior and satisfy deeper needs for participation, creativity, community, and idealism.
When Henry Ford introduced his Model T, he said, "Customers can buy cars in any color they like, provided it's black." His thinking was typical of the product-centric 1.0 marketing era.
Today's information age has been branded the consumer-oriented marketing 2.0 era because consumers can easily interact with the help of technology and quickly discern differences among products. In fact, most Taiwanese enterprises remain stuck in this mind-set, relying heavily on customer relationship management tools.
But at a time of rapid social, economic and environmental changes that are increasingly affecting people's lives, consumers have become more pro-active, hoping to convey their attitudes and opinions through participation.
"Consumers search for companies that meet their deepest needs for social, economic, and environmental justice in their mission, vision and values," Kotler wrote.
The perceptive consumers of the Marketing 3.0 era are no longer the simpletons of the past, but rather complex, multi-dimensional human beings with minds, hearts and spirits, and more mobility than ever. In this environment, the new killer applications brandished by companies will involve a commercial model that puts a premium on values. Only by conveying values that can resonate with and inspire customers can companies find success.
Key No. 1: A Mission that Changes Lifestyles
In Taipei City's Minsheng Community, a 7-Eleven convenience store that has been there for more than 10 years recently shut down for three weeks for remodeling.
"Mom, when is the 7-Eleven going to open?" cried a young girl being pulled along by the hand of her mother, who answered, "Soon. Soon."
Next to them, a couple stopped for a peek inside the store while walking by to see how far work has progressed. "Lately, buying a newspaper hasn't been very convenient," one of them complained.
Few companies have succeeded in building consumer dependence to the extent of President Chain Store Corp., which owns and runs the 7-Eleven chain. And the company remains relentless in trying to maximize the "convenience value" of convenience stores to ensure that consumers cannot live without them.
The company's success can be traced back to when President Chain Store president Hsu Chung-jen positioned 7-Eleven as a vendor of daily necessities and fresh foods.
Today, Hsu's mission is to convert the convenience store from a place that sells goods into a community service center that enables consumers to experience the pinnacle of convenience. The chain has offered services such as collecting payments on behalf of other organizations and selling high-speed rail and movie tickets, and recently it has begun expanding the space inside its stores to sell goods usually reserved for supermarkets. It has also added seating for customers to relax and have a coffee, eat a simple meal and talk business.
In effect, 7-Eleven is moving consumers' refrigerators, dinner tables and meeting rooms into its stores.
7-Eleven's development path has closely followed the Kotler model, going from focusing on selling products to launching value marketing that has driven changes in consumer's lives.
"Our lives have pretty much been taken over by 7-Eleven," says food writer Yeh Yi-lan vividly, summarizing the impact President Chain Store has had on the lifestyles of Taiwan's people.
Whenever companies successfully promote any form of transformation, consumers subconsciously accept the enterprise as a brand and make it a part of their lives.
At an even deeper level, a positive brand mission indicates that the company has discovered a completely new commercial viewpoint that is capable of changing consumers' lives.
Test Rite International Co., which ranked 33rd among service companies in the CommonWealth Magazine survey and was one of the top 50 in sales growth, is a prime example. Operating Taiwan's B&Q and Hola stores among others, the company has thrived on the clear corporate mission defined by Test Rite chairman Tony Ho when he saw potential in the home improvement market – to have Test Rite become the helping hand of consumers in their homes.
The highly creative Ho launched a major upheaval in the Test Rite Group in 2009, merging subsidiaries TLW Taiwan (B&Q), Hola, Homy and Freer along with their after-sales service operations.
"This was a huge undertaking, combining manufacturing, marketing and service, but it gave us an even stronger service support platform," Ho says. Unspoken was Ho's desire to meet each consumer's every home need – from products used in daily living to interior decoration and home improvement items – in a single step. In the future, a person in a Test Rite uniform will be just a phone call away, ready to make house calls to treat a myriad of home "illnesses."
Key No. 2: Helping Customers Find Self-fulfillment
Yi-chia Chiu, an associate professor in National Chengchi University's Graduate Institute of Intellectual Property, has re-examined the concept of "values" and found that corporate values should include both material and spiritual values. Only conveying economic values is insufficient when it comes to winning the hearts of today's difficult customers.
Some companies have already begun to make values-driven marketing a reality and earned the recognition of consumers. Franz Collection Inc., for example, sells more than just porcelain. It sells Chinese culture. Ta Chong Bank Ltd. doesn't only make loans, it helps you fulfill your dreams. Mos Burger Taiwan doesn't just sell fast food, it offers the core value of eating food made from fresh and locally sourced ingredients.
The value-driven approach of Ta Chong Bank, one of the top 100 financial service companies in the CommonWealth Magazine survey with the fastest growing sales, demonstrates that cultural and creative industries are not the only ones capable of engaging in such practices.
Ta Chong Bank presented its values through a "Dream Rangers" commercial that was run intensively on local television stations. The commercial, which featured a group of ailing old men who after learning of a friend's death decided to revisit their youth by riding their motorcycles around Taiwan, encouraged people to live for their dreams.
The commercial helped the small, relatively obscure financial institution leapfrog some of its bigger rivals and their product-oriented ads by appealing to viewers at a more emotional level and offering them a chance through the bank to pursue their "dreams."
As a result of the campaign, which scored a direct hit in consumers' hearts, Ta Chong Bank's brand recognition rose from 22nd place last year to ninth this year. The bank's president, Edmund Koh, said the bank's market share has risen from 0.7 percent to 1.6 percent and new mortgage business has exploded from NT$1.5 billion per month in the past to NT$5 billion today. Ta Chong Bank's ranking in the CommonWealth Magazine top 100 improved from 80th in 2010 to 71st this year.
Chiu says that companies today want consumers to feel they are getting the best value, not just economically but also emotionally.
"How can you make consumers feel they are getting the best emotional value? By making consumers feel that they will be able to find self-fulfillment through buying your products. Only then will consumers recognize your corporate culture," Chiu explains.
The New Corporate DNA
Enabling consumers to achieve self-fulfillment through the values conveyed by companies is the ultimate goal in this new value-driven marketing age. But taking the leap into this new era requires more than slick public relations campaigns. Companies must internalize their values in their corporate DNA.
One example: Salaried workers willing to line up at 8 a.m. at Mos Burger stores to wait for freshly made sandwiches that include chemical-free produce contracted from local farmers.
Huang Shang-jen, the 38-year-old vice president of Mos Burger Taiwan (known formally as An-Shin Food Services Co.) has scoured Taiwan for chemical-free sources of produce over the past three years to establish a production value that enables consumers to enjoy fresh and healthful food. But the initiative has extra value-added. Setting up contracts with local farmers has helped improve the farmers' lives and reduced their chances of being exploited by large wholesalers. For consumers, eating healthful produce means they are also indirectly participating in the movement to help farmers better their lives.
This move toward "green" procurement has saddled Mos Burger with operating costs that are higher than other fast-food rivals, but Huang's uncompromising attitude and philosophy is anything but a PR gimmick and has emerged as the company's unique corporate value that has added real value to the Mos Burger brand.
Today's choosy consumers have responded by buying into Mos Burger's value-driven approach. In 2010, the company turned a profit after losing money the year before, and reported record-high earnings per share of NT$7.0. It also made it into CommonWealth Magazine's Top 500 Service Companies for the first time, ranking 295th.
In this new "naked" world, companies cannot afford to present different faces. If consumers discover any inconsistencies between a company's actions and words or between internal and external behavior, the discrepancies will be quickly exposed through the media, the Internet or social networking websites. The result is often a public relations storm that appears out of nowhere and undermines customer loyalty.
Decoding Consumers' Souls
Kotler once described marketing as an exchange of values rather than a simple business transaction. In this highly connected era, companies must figure out the keys to satisfying the spiritual needs of today's savvy, engaged and mobile customers, and they must make those keys the focus of their corporate commitment and philosophy if they are to be successful.
Ultimately, the secret to becoming irreplaceable in the marketplace comes down to a simple formula: adopting values that people want to embrace.
Translated from the Chinese by Luke Sabatier