Insight

At the recent ROI Awards, we observed two types of marketing approaches among the winning entries: the technology-centric marketing automation, and customer-centric demand insight approach.

The former, technology-centric marketing automation, views marketing as a sequence of digital procedures, optimizing overall efficiency through data deployment and feedback adjustment. The latter, customer-centric demand insight approach, believes the core of marketing lies in understanding human needs. This approach uses digitalized content (including all online expressions and interactions such as likes, bookmarks, favorites, comments, etc.) to discover human needs and preferences. Consequently, it conducts targeted marketing campaigns aimed at precision and effectiveness from the start.

This post will focus on the latter approach, as we find it to be a good fit with Philip Kotler’s latest research.

Mr. Philip Kotler, the father of modern marketing and the principal consultant of Kotler Marketing Group (KMG), has released his latest book “H2H Marketing” in 2021. The Chinese edition is set to debut in the Chinese market soon. The global publication and popularity of this book reveals a major marketing trend – the return of marketing to the core of value, such as prioritizing people. Kotler believes that interpersonal marketing will enable businesses to break free from marketing inefficiencies and achieve a mutual beneficial relationship between enterprise and consumer value.

1 – From Circulating Traffic to Focusing on People: The Necessary Prerequisite for Long-Term Healthy Business Growth

Budget waste is the nightmare of every advertising marketer. The reason for this “waste” is that ads are delivered without knowing who the buyers will be. Before the advent of digital advertising, we didn’t even know who the ads were reaching, let alone targeting them to drive awareness and conversions.

After the emergence of digital advertising, we can finally track the reach and engagement of ads through technological means, which is also the background for Mr. Kotler's "5A Customer Journey" framework (see the book "Marketing Revolution 4.0" for details). However, as the number of domestic internet users reaches its peak, it is becoming increasingly difficult for marketers to acquire more new users and customers.

·       The middle stages of the funnel-style delivery model consistently fail to reduce the level of waste.

·       Re-engaging the audience becomes challenging after multiple rounds of “cleaning”.

·       Despite increasing traffic costs, the growth impact remains limited.

Marketers are starting to recognize the constraints of the traffic investment approach and are shifting towards exploring marketing methods with more long-term value.

In such context, Mr. Kotler proposed the “H2H” (Human to Human) marketing framework.

“There are 3 types of marketing you don’t want: Wasteful Marketing, Unethical Marketing, and Inane Marketing. What you want is H2H Marketing, which I define as ‘Human to Human’ marketing, to build relationships and connections with people.”

—      Philip Kotler (as published in eWMS – Kotler World Marketing Conference 2021)

In the era of digitalization, advertising marketers often view users as "target audiences" or "traffic." However, Mr. Kotler emphasizes that users are human beings. In marketing, the focus should be on "building connections with people."

This statement might seem obvious to those who already know that users are human, but in the practice of marketing, many marketers overlook the fact that users have their own unique needs and preferences. Instead, they often reduce users to a set of data points.

However, times have changed. This is an era where users have significant empowerment. Ignoring this perspective can lead to costly mistakes.

Today, users have access to a wealth of information across multiple platforms, and they actively engage in creating and sharing content. The content they generate has the power to significantly impact a company's marketing effectiveness. During crises, companies face challenges because users no longer rely solely on information provided by the company. Instead, they place more trust in personal experiences shared by other customers, finding them more persuasive than company-generated content.

They no longer just seek products or services to fulfill functional needs and address problems; they also consider cost-effectiveness and whether the offerings align with their lifestyle and values. As a result, consumer demand has become highly segmented. If marketers attempt to target the entire audience indiscriminately, the conversion rate is likely to be poor. It's not that the audience targeting is inaccurate, but rather that the conveyance of content fails to resonate with their specific demands, resulting in lower conversion rates.

Hence, in an era characterized by the peak of demographic dividends and empowered users, companies must shift their focus from traffic to people and their diverse needs if they aim to foster sustainable long-term business growth.

2 – From Transactional Spaces to Decision-Making Arenas:

How H2H Interpersonal Marketing Can Assist Businesses in Long-Term Growth

We often observe that some consumers, whether standing in front of store shelves or browsing product pages online, hesitate to make a purchase immediately. Instead, they turn to search engines to gather more information about the product, such as user experiences and reviews, before deciding to buy.

Alternatively, even before reaching the purchase site, consumers browse social media platforms to seek out reviews and user experiences from others. This initial interaction can be seen as planting the seed for future purchases of that or similar products.

As a result, Mr. Kotler emphasizes in his book “the consumer's decision-making process relies heavily on detailed product information, additional test reports, and product evaluations provided by other customers. The point of decision and the point of sale have become separate.”

It's the decision that drives the sales transaction, and its human needs that influence the decision. By prioritizing user needs and engaging in human-to-human marketing activities, businesses can effectively engage in people marketing.

In his book, Mr. Kotler elaborates on the three essential components of people marketing: Human-Centered Design Thinking, Value Co-Creation Service Orientation, and Digital Marketing (or "digital connectivity"). Human-centeredness revolves around prioritizing customer needs. Value co-creation involves encouraging users to collaborate with the company in creating value. Digital marketing primarily entails leveraging digitalization and content marketing strategies.

1.       Insight to Customer Needs

How to gain insights into customer needs?

In the past, companies relied on methods like questionnaires and focus group interviews to conduct user research. However, in the digital era, users actively share their creations, experiences, and needs through extensive online interactions. These data, encompassing content and interaction behavior, hold significant value for company marketing efforts. For instance, they can be utilized to inform product innovation based on user demand insights, identify compelling communication selling points, and determine the most effective marketing channels.

Many companies have begun to use social media to gain insights into user needs, to feed product innovation and discover product selling points that resonate more with users.

For example, the international high-end home appliance brand Casarte has been addressing the challenge of matching product selling points with user recall points, particularly in low-frequency consumption categories like water heaters.

Casarte collaborated with Little Red Book (小红书) to delve into user data through Little Red Book data analytics platform. They discovered that, apart from core user groups like home decorators and parents, potential water heater customers also included a "skincare group". This demographic prioritized bathing water quality and was dissatisfied with the skin-unfriendly elements found in existing industry products. In response, Casarte launched the industry’s inaugural crystal liner water heater product to address this concern. They also coined an easily shareable nickname for the product that encapsulates its key selling points, user concerns, and scenarios, promoting the idea of "bringing the hot spring experience home".

Thereafter, Casarte broadened their target audience from the initial home décor demographic to include those interested in refined living and beauty. As a result, product searches on their website surged by 400%, leading to a significant increase in product sales as well.

2.       Co-Creation of Value with Users

In addition to collecting user needs and insights through platform data, companies can also collaborate with users to co-create and innovate products, validate market demand, and achieve mutual growth in consumer and company value. This mutually beneficial relationship results in users obtaining products that meet their needs while simultaneously increasing the company's product sales and brand value.

BeBeBus, a baby stroller brand that was awarded the Gold Award at the Golden Investment Awards, had already developed its own understanding of product definition, unique features, and usage scenarios prior to launching a new product. However, further validation was needed before formally introducing it to the market.

Therefore, BeBeBus collaborated with Little Red Book to identify 13 active mothers with diverse backgrounds from the platform's community of 50 million active moms for discussions.

Direct communication with these key customers brought two significant benefits to BeBeBus. Firstly, it confirmed the real demand and market gap for "newborn baby spine care". Secondly, one of the moms creatively coined a memorable nickname for the new product – "butterfly car".

BeBeBus incorporated many user suggestions, and the product quickly gained popularity upon its release, becoming the top-selling item in the "Baby Walking Magic Tools" category.

3.       Digital Marketing

By leveraging insights into user needs and collaborating with users, digital tools enable enterprises to understand and navigate the entire user decision-making journey, from awareness to engagement, action, and advocacy. This enhances the effectiveness of user engagement and conversion.

Opposite to the typical funnel approach in digital marketing, human-centered marketing starts with the most precise core audience, known as key value customers. These core customers offer several key benefits: understanding and confirming market needs, reducing marketing costs, gaining initial customers for conversion, leveraging word-of-mouth, and building a loyal customer base. Focusing on the core audience's decision-making journey is the initial step in effective marketing for businesses.

Based on precise targeting of the core audience, we then use techniques like lookalike modeling to discover more potential customers, allowing for continuous growth and expansion to reach a larger audience.

Little Red Book’s OAIPS model and reverse funnel model follow the basic logic of human-to-human marketing. In comparison with other platforms, they shift from "finding people based on characteristics" to "finding people based on needs," moving beyond demographic labels to achieve more precise targeting. By leveraging KFS (Key Opinion Leaders, Feeds, Search) effectively, they break free from the "curse of traffic" to reach the right audience effectively.

Chinese cosmetics brand Proya Cosmetics, based on insights into young consumers' skincare needs for anti-oxidation, anti-glycation, and anti-aging, and leveraging data from Little Red Book, created the "skincare CP" flagship set of double anti-serum and ruby serum. This continuously led to the skincare trend of "morning Vitamin C and evening Vitamin A" within Little Red Book. The recently launched new product, Double Anti-Serum 3.0, was simultaneously launched in four layers of Little Red Book’s "people's reverse funnel model," resulting in a 65% increase in target audience penetration. While achieving a significant increase in closed-loop transaction volume within the platform, the effect of planting seeds overflowed beyond the platform, with sales outside the platform exceeding 1 million pieces. The brand's seed planting on Little Red Book has achieved comprehensive conversion. (The "1 million+" data comes from a third-party e-commerce platform in June 2023.)

3 – The H2H era has arrived: It may drive changes in internal organizational structure within companies.

Human-centered interpersonal marketing emphasizes focusing on people's needs rather than competing based solely on products or categories. Mr. Kotler suggests in his book that companies should establish organizations that are more collaborative and establish processes to implement interpersonal marketing effectively. This involves promoting cooperation between departments, establish networks with key partners, coordinating resources and activities to promote value co-creation in all aspects, and setting up cost structures and financial feedback mechanisms to adapt to the H2H era strategically.