Amid China’s competitive e-commerce market, Emma Liu, general manager of marketing, and Louise Lv, head of digital center – both of Philips Greater China’s healthy living business group – speak to WARC’s Jenny Chan for the Marketer’s Toolkit 2022 about the multinational company’s branding, marketing and product strategies.
This interview is part of WARC's Marketer's Toolkit 2022. Read more.
- Performance marketing, digital platforms and big consumer data are solid foundations, on top of which a brand has to find a way to differentiate itself from the competition.
- Marketing traditionally focuses on content, crowd, channel, reach and frequency but in the digital environment, the relationship between all these has shifted.
- Consumers are now shopping to meet entertainment needs, interact with others and relieve stress, which leads to buying products that resonate with them in those contexts.
As a major brand with over a century in history, why did Philips reposition itself as a medical technology company? What changes will Philips make in relation to its audience as a result?
Emma Liu: The key element in our assessment underpinning this transformation is Philips' highly competitive technology. Philips Group has two major business segments, B2B and B2C. B2B has long been focused on the medical area, providing hospitals with large ultrasound machines, MRI machines and medical data. Although people may feel that medical technology is a long way away from daily life, if Philips combines its B2B and B2C businesses at the group level, and given that consumers are very familiar with Philips small home appliances, we find that Philips’ core competitiveness in medical technology can become a key differentiator when we’re compared to Xiaomi, Dyson and other small home appliance competitors.
The second point to consider is that when people think of Philips products, they naturally associate them with small appliances, which is obviously a good thing and reflects the high level of awareness of the brand. The next step is that we want consumers to remember not just what Philips sells, but what Philips embodies, how its products are different from those of other brands, and what it actually provides to consumers. So what we want to highlight is the benefits that Philips small appliances can bring to consumers and the value we can create from a consumer perspective. These considerations triggered the transition from Philips Small Appliances to Philips HealthTech. We’re also hoping that when consumers hear or think of the Philips brand, they will think that "Philips is a brand that cares about healthy living". If we can create such a shift in perception, then we’re getting to where we want to be.
It's quite hard to make the shift because consumer perceptions of the brand are so deeply ingrained, which means we need to work very hard to reach our goal of transformation.
WARC: How does Philips stand out in the competitive e-commerce world and how can you improve product effectiveness from the perspective of integrating the message, the experience and the operational aspects?
Emma Liu: Philips is launching its integrated platform "Healthy Living Lab" in the first half of 2021. Its offline experience centres are not for selling goods but for introducing consumers to healthy lifestyle-related content and product experiences; online content, e-commerce and social media approaches promote healthy lifestyle-related content. So the lab is a way to flesh out the transformation we want to achieve, while introducing collaborations with other brands.
We talk a lot about performance marketing, digital platforms and big consumer data, and these are very solid foundations that are at the core of everything that works well for us. Then, on top of this foundation, the brand has to find a way to differentiate itself. For example, if you think of Xiaomi, you think of the smart home; mention Dyson and you think of advanced technology. For Philips, the focus on "healthy living" is the starting point of our differentiation. We hope to create a point of difference between the Philips brand and other brands in the same category through the Healthy Living Lab, and then combine consumer insights with product innovation and marketing platforms, followed by arranging e-commerce and platform setups.
Louise Lv: In marketing, we usually focus on a few points: content, crowd, channel, reach and frequency. But in the digital environment, the relationship between all these has shifted. Originally, brands were more likely to lead the output of core content and then choose media on which to do a large, multiple-reach campaign. Now, we have completely changed our mindset to look first at who and where our consumers are. With the prevalence of niche culture nowadays, especially among young consumers, it is crucial to find the right digital media to start with. Then we have to produce relevant content based on the characteristics of the specific medium, do crowd targeting by means of big data and provide more diversified representations of the impact of the content. This, in fact, is the process of finding people through content.
E-commerce, which is now a crucial sales channel for Philips, has grown at an annual rate of 30% over the past 10 years, with its share increasing further as a result of the pandemic. The penetration and sales share of e-commerce in the electronics category is greater than almost all other consumer goods categories. In the past, we viewed e-commerce platforms as a means of providing consumers with a large and comprehensive variety of goods, highlighting low prices and speed of delivery to meet the basic needs of consumers for quality and low cost. But now, when we talk about e-commerce, it is actually more like a large integrated shopping centre. Consumers are increasingly also shopping to meet their needs for entertainment, interacting with others and relieving stress, which leads to them buying products that resonate with them in those contexts.
So we can see that in the past two years, the “interest e-commerce” of which Douyin is representative, the “content e-commerce” for women as represented by Little Red Book, the “circular interconnected culture” of Gen Z young people as represented by bilibili, and the “private domain e-commerce” for acquaintances as represented by WeChat, etc., all impact on the e-commerce field from different angles and expand the whole field of e-commerce with their unique approaches. E-commerce has become not only a sales channel but also a very effective brand communication channel.
To summarise, this means serving consumers from three perspectives.
- Firstly, from both the media communication and sales channel points of view, use existing products to influence more consumers, whether through B2B, B2C or even B2B2C, which we’re looking in to in more.
- Secondly, we are targeting certain consumers and catering to them more from a product category perspective. In addition to innovative products, we’re bringing more international products to China. Philips already has an R&D centre in China and will also develop more new products based on the specific needs of Chinese consumers. We see opportunities in several areas, including sleep, beauty, medical and oral care.
- Thirdly, from a full lifecycle perspective, we will engage with consumers over a longer period of time.
WARC: Over half of Philips’ sales are done via digital channels. How are brand and marketing strategies keeping up with the ever-changing digital channels, especially e-commerce?
Emma Liu: I believe that for any brand, adapting to and leading in the evolution of digital channels as much as possible is both necessary and a test of the brand's internal strengths.
The brand needs to review itself and thoroughly reinvent itself from the inside out. As I said, we have done a lot of self-examination and re-positioning, creating a core lifestyle strategy of "Deep Healthy Living" relating to consumer needs in various areas such as oral health, respiratory health and sleep health. Once we fix the positioning, we set up the Philips Healthy Living Lab, a professional youth and ecology-focused platform aimed at creating new cross-category content and reshaping the definition of value, so that we can be closer to young consumers and be part of their life scenarios.
But I believe that with the transformation to digital, the brand must still be core. Digital must be a natural part of that.
Louise Lv: Digitalisation today is no longer simply a matter of internet+ but an all-round ecosystem covering new media, new channels and new content. Working out how to win over the mobile internet natives – Gen Z – is a new issue facing every company that wants to do some form of digital transformation.
Media channels and formats have become more diverse, and e-commerce is subdividing into platform categories, vertical categories, social categories, content types, interest categories, communities and just-in-time delivery to meet the shopping needs of different types of people at different times.
As people's lives become more digital, their attention span becomes more fragmented and their buying decisions more rushed, so brands have to change their marketing strategies and channels in line with the changes in people's lives and shopping habits.
Originally, we believed that "where there is traffic, there are consumers". But the traffic dividend has peaked over the past two years and we’re now in the “attention economy”, and consumers' time has become the key thing that you need to fight for. Brands have to embrace this change and be more flexible to meet consumers’ needs.
Therefore, as we consider how to digitalise our business, we should not only consider it from the perspective of marketing and e-commerce but also look at making the necessary changes in consumer insights, product development, supply chain and marketing channels, and customer service.
Philips started its digital transformation proactively and had already completed the digital transformation of its sales channels before the pandemic hit, with e-commerce becoming our single most important sales channel. Our digital transformation has followed the growth of e-commerce all the way to the top. In addition to traditional e-commerce platforms such as Tmall, Jingdong and Suning.com, we are this year also actively exploring new channels, such as Jitterbug, Little Red Book, Jindo and Racer, etc.
WARC: Philips has partnered with Tmall Innovation Center to develop the C2B (Consumer to Business) “Cyclone Z” clear razor, which was custom-built for Gen Z based on consumer insights from the e-commerce platform. What are the unique ways in which Philips is gaining new consumer insights?
Emma Liu: The “Cyclone Z” transparent razor is a great example of innovation in terms of the collaboration between Philips and the Tmall Innovation Center (TMIC). Historically, we used qualitative and quantitative consumer research as the basis for new product development, and TMIC has a lot of big data from the platform and can tell you what the current keyword search trends are for a certain category of products.
Louise Lv: Our R&D traditionally takes quite a long time and Philips' R&D centre is in Amsterdam in the Netherlands. It can take between eight months and two years from project start to product launch, and each stage requires a number of consumer trials. That is the standard model but we know that local Chinese brands are very fast at coming out with new stuff which very much meet the needs of consumers now.
For example, if we want to know what consumers are interested in or if we have a design concept, we can immediately go to the relevant project manager at Tmall to get feedback on what shapes and designs consumers like, and how they reflect how they wish to express themselves. That allows us to quickly make contact through the platform with a very precise audience.
WARC: Private domains and omnichannels are currently hot marketing topics. How does Philips achieve cross-channel impact, including in private domain operations, from one-off or short-term sales and traffic acquisition, to long-term loyal user acquisition and brand building?
Emma Liu: On the one hand, one of the advantages of Philips is that it has so many categories of products. If the categories were placed under a group like L’Oréal, each category would be a sub-brand but with us, everything is under the Philips brand. So in the private domain, we are able to do cross-category mass marketing. For example, a consumer who buys an electric toothbrush today can tomorrow also become a consumer of hair dryers and shavers, or mother and baby products. But of course, in order to do cross-category marketing, we need to know more about the real needs of each consumer and who they are.
On the other hand, we're also thinking about how we can do a better job of enhancing our long-term relationship with consumers. For example, after consumers buy an electric toothbrush, we’ll prompt them to change the brush head every three months, which is a logical way to extend the relationship between us and the consumer. Beyond that, the IoT project we are currently designing will let us add new technologies, such as mouth scanning, to our electric toothbrushes, which will let consumers record their brushing habits and inform them of any dental problems they might have when they brush their teeth. We can then prompt them on what sort of toothpaste, floss or mouthwash to use. So it acts as a kind of collateral sales process for us and for them, saving on mouth scanning at dental clinics because we can transfer their data from home to their dentist, assisting with oral modeling, among other things.
This will be hugely impactful, not just in terms of maintaining long-term relationships with customers through sales, but also being a fundamental long-term private domain operation builder.
WARC: In terms of measuring effectiveness, what else do you measure beyond just looking at sales?
Emma Liu: We have to look both internally and externally to get all the data we need. Internally, we obviously look at sales, traffic, conversion rates and media placement figures – these are the easiest and most immediately visible forms of data to use. At the same time, Philips, at a company level, will look at brand preference as the most important long-term indicator to assess marketing. We look every quarter at all markets on a continuous basis and China is a very important market. This doesn’t give us immediate results but it shows how what is being done now might feed through into future quarters. Brand preference as a metric needs a lot of lead time before you reach a critical mass of data but it then becomes incredibly useful.
To build it up as a useful indicator, you need to include a wide range of factors such as media volume of voice (are consumers aware of us?), media content (what kind of message are we actually giving consumers and does it work in making them like the brand more?), the speed of new product launches, the innovations being brought to the market and the overall arrangement of sales platforms, plus other such issues. Together, they combine to give us information on the extent to which the brand is preferred.
WARC: What is the impact of data privacy policies on marketing? What kind of adjustments will be made in terms of access to data and analysis?
Emma Liu: I think some of Philips’ previous practices, stemming from both the size of the company and the high levels of quality that we require in our decision-making, have put us in a good position to work under the new policies. For example, other companies might have been able to set up a consumer data centre in just a few months but we have to hold countless internal meetings about data privacy and meet a whole raft of specific internal requirements. This actually gets to the point where the level of control we set for consumer data security might actually be a bit higher than the policy threshold set by the government. These high standards might have felt like a drag in the past but it turns out we’ve actually just been preparing for this all along and now we’re in a great position to deal with the new regulations.
Louise Lv: With the increase in data scrutiny, I think companies will follow two main trends. Firstly, they’ll pay more attention to direct-to-consumer sales, where they can interact directly with consumers and conduct large volume direct sales while still progressing towards compliance.
Secondly, they’ll work on communication in the public domain, which needs to meet the new state requirements. We may turn out to be less stringent in terms of crowd classification or crowd media assets when it comes to advertising but in the future, we will adjust to the requirements and, for example, will allow consumers to turn off certain media placements or adverts, depending on their preferences.
Philips, as an international company, has always followed the strictest set of privacy standards defined by the countries in which it operates. So when the requirements get stricter in China, we’re actually in an advantageous position because we’ve previously not allowed ourselves to do things that our competitors have been doing. Now that they’re not allowed to do those things either, we’re on a much more even and competitive footing.
WARC: Does Philips plan to use more zero- and first-party data in the future?
Louise Lv: Like other local and foreign companies, Philips built a data centre last year, so it will still make use of one set of data. The data on one side, generated through consumer information collection and communication interactions, is all already compliant. At the same time, we will also continue to develop private domain traffic to generate more connections and interactions with our consumers and develop our DTC business with the idea of developing this market.
Emma Liu: The data we collected in the past was very granular but it would only really tell us who bought what. Now, with the help of the data centre, we can see a consumer’s whole lifecycle with us, whether that’s in a single category, cross-category or through repurchasing. Right now, we’re still developing what we can do with this, partly because we’ve not yet hit critical mass.
But in the short term, we've seen very interesting numbers in terms of cross-category analysis. For example, we’ve seen that the beauty appliances and toothbrush categories have a high rate of cross-category repurchasing.
Louise Lv: In order to better serve the Chinese consumer, we’re also preparing to establish a local R&D centre in the country. It will also help to shorten our R&D cycle.
Our competitors have a very short launch cycle for new products and the products they design not only meet but exceed consumers’ basic requirements for packaging, functionality and design.
In the past, many of our products were more focused on functional excellence, a bit like how Nokia’s phones had a reputation for not breaking when dropped. But in terms of value, packaging and considering gift-giving or meeting consumers’ personal desires, they might not have been close enough to China requirements. This is why we want to quickly establish an R&D centre in China to strengthen ourselves in these areas.
We have great respect for our Chinese competitors, who provide us with both pressure and motivation, and we will quickly bridge the gap, with a future that meets the demands of the younger generations and the requirements of a value economy, while still leveraging and maintaining our strengths in terms of product functionality.